This is the first time that shares in pre-IPO companies will be tokenized on Bitcoin.
Cover art/illustration via CryptoSlate
The Bitcoin (BTC) network is about to get more real-world use cases as two DeFi companies have partnered to bring tokenized equity to the world’s most valuable blockchain.
DeFi on Bitcoin solves the problem of pre-IPO equity
This partnership will increase the utility of the Bitcoin blockchain by helping bring liquidity to illiquid assets, the companies explained.
Dr. Chandra Duggirala, Portal’s executive chairman, told CryptoSlate that the company has been working on bringing real-world use cases to Bitcoin and called the partnership with HighCircleX an essential milestone toward that goal.
“Eventually we will see tokenization of many more financial assets onto the Bitcoin blockchain. Although these assets are not bearer assets like Bitcoin, having both digital asset securities and non-security digital assets available through a simple interface for users who meet accreditation investor criteria marks the beginning of merging Bitcoin ecosystem with mainstream finance…
This also fixes the problem of liquidity fragmentation across many different exchanges and applications”.
Unlike publicly listed companies, investing in private markets still has significant limitations. Unspecified lock-up periods, a lack of liquidity, and uncertainty about the actual value of equity holdings are all problems investors face when entering these markets.
HighCircleX eliminates many of these limitations by tokenizing private holdings. Hemanth Golla, the CEO of HighCircleX, told CryptoSlate that HCX makes it easier for investors to enter private equity offerings. HCX members can access fractional ownership of stocks in some of the most sought-after companies without the burden of actually owning equity.
With HCX, investors don’t directly own shares of the underlying company—instead, they own tokens that represent ownership of the LLC. HCX structures and manages an LLC for each investment, using the proceeds from the sale of LLC tokens to buy a specific pre-IPO investment.
These tokens can then be traded on the HCX marketplace, enabling quick liquidity, fractional trading, and instant settlement for their owners. This process allows investors to cash out and access liquidity before the investee company goes public or gets acquired.
HCX’s partnership with Portal will enable accredited Portal users to access non-security digital assets and tokenized securities from one wallet. It will also increase the available investor base for HCX, bringing more liquidity to the private equity market.
“We believe that tokenization and fast, easy tradeability that come with it will unlock and expand this market tremendously,” Golla told CryptoSlate.