“How could I conduct STO (security token offering) business in Korea? I contacted Korea’s regulatory agency and confirmed that I could conduct STO business in Korea too only if I meet SEC (Securities and Exchange Commission)’s ATS (alternative trading system) and broker-dealer registration requirements for digital asset transactions. This might mean that Korean authorities will follow SEC’s regulatory guidance.”

SeriesOne CEO Michael Mildenberger made the comments in New York Friday, answering the reporter’s question: “How could SeriesOne holding hands with Bithumb contribute to Korea’s cryptocurrency industry where there is no regulation?” SeriesOne is a U.S. fintech company based on the platform technology segment of Funding Wonder, a crowdfunding company established in 2013. The company is the American partner of Bithumb, Korea’s leading cryptocurrency exchange, and is trying to create an STO exchange in the U.S. SeriesOne is currently waiting for ATS approval from the SEC and expects to receive the approval by the end of the year.

The following are questions and answers with Mildengerger.

Why do you conduct business based on security tokens?

The concept of utility tokens has disappeared since the SEC clarified its position of seeing ICOs (initial coin offerings) as securities offerings. The U.S. regulatory agency is now applying securities-related provisions to token sales. So I didn’t like to do business far away from regulation.

Interest in STOs is huge around the world but regulation has yet to be in place. How do you assess the current market?

Every country is still in the stage of market search and education. Institutions are used to investing in oil, gas and real estate but avoid investing in STOs that emerged like a comet. What they are overlooking is STO’s strength. Unlike other products, STOs don’t require many processes for a long time and can be divided for sale. It’s necessary to educate this and have enough discussions with regulatory authorities. At least 12 to 16 months are needed from now on.

Then do you expect SeriesOne’s ATS approval, which had been expected to be determined in June, to be postponed?

Postponement is a high possibility (since it is about new industries). We expect the approval within this year but are mindful of further delay.

We cannot but talk about Bithumb. Why did you join hands with Bithumb?

Apart from Bithumb’s volume, we had a lot in common in terms of business. At a time when prospects for regulation were obscure, Bithumb had been busy looking for business models in addition to the exchange and STO drew Bithumb’s attention. While STOs are being conducted concerning artworks and floating assets in the U.S., Koreans’ interest in STOs is greater than elsewhere. We thought that there should be a vehicle through which Korean investors can invest in STOs.

Bithumb is frequently troubled by hacks. Might these affect your business in the U.S.?

Crypto exchanges across the world cannot help being troubled by hacks because of the absence of regulation. We see this as the period during which exchanges can accumulate experience. Namely, they are accumulating experience as to when and how they cope with hacks.

What must be addressed clearly, however, is that the most important thing in meeting requirements for SEC’s approval is security. Regulatory authorities of all the countries of the world as well as the U.S. are scrutinizing STOs. If regulation is in place, crypto exchanges will face different circumstances in operation. So the upcoming STO exchanges won’t be troubled by hacking issues.

If there must be an investment vehicle for Korean investors, will Korea also need STO exchanges?

That’s our ultimate goal. We plan to establish an STO exchange in Korea after obtaining the SEC approval, depending on the situation. We continued our discussion with Korea’s regulatory agency and heard that we could do STO business in Korea if we meet SEC’s ATS approval and broker-dealer registration requirements. This appears to be a position to follow SEC’s policy direction. But patience is necessary because SEC’s ATS approval won‘t take place overnight.

Bithumb is rumored to be pushing for the backdoor listing in the U.S. through SeriesOne. Do you think it’s possible?

(Laughter) It’s not an impossible scenario. (He hurriedly stopped answering and changed the topic.)

NASDAQ and other prominent enterprises are ready to release STO platforms. At a time when Airbnb and Uber are also showing keen interest, what strategy will SeriesOne come up with over its STO exchange?

Most companies listed on NASDAQ are large ones. So large companies interested in STOs are likely to move to the STO platform naturally. We are targeting smaller firms hidden by the shadow of large companies. In fact, there are a number of small and medium-sized firms utilizing the OTC market. We will offer a vehicle of investment for them. /yjk@decenter.kr

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