Public companies are trying on-chain capital raises. It could change fundraising — if regulators play along

Immediate move and why markets should care

Today a service called Superstate announced it will allow SEC-registered public companies to raise money directly on blockchain networks. That means companies can accept stablecoins and issue tokenized claims that live on chains such as Ethereum and Solana. For markets, the headline is simple: fundraising and settlement can be much faster and cheaper than the current paper-heavy system. For investors and trading desks, it also opens the door to new liquidity pools and fractionalized ownership.

Don’t mistake novelty for maturity. This is a clear technological step forward, but it immediately raises big legal and operational questions. The short-term market reaction is likely to be mixed: crypto-native traders and some fintech firms will cheer the efficiency gains, while broker-dealers, custodians and conservative institutional investors will wait for legal clarity and robust custody solutions before they engage at scale. For shareholders, the change could be positive if it reduces costs and increases access. It could be dangerous if tokenized instruments don’t carry the same enforceable rights as traditional shares.

How the Direct Issuance Programs work in practice

At a practical level, Superstate’s program is a hybrid of on-chain code and off-chain legal plumbing. The public company still files whatever SEC disclosures the offering requires. On the tech side, investors send a stablecoin to a smart contract or a subscription address. That contract mints a corresponding token that represents a claim tied to the company’s newly issued securities.

Those tokens are typically ERC-20 on Ethereum or SPL tokens on Solana, chosen because they’re widely supported by wallets and trading venues. Behind the scenes, a transfer agent or custodian keeps the canonical legal record of who owns the company’s shares. The on-chain token is meant to mirror that record and make transfers instant and programmable, but the legal share ledger remains the authoritative record until regulators explicitly accept otherwise.

Technology choices matter. Ethereum layers and Solana offer different trade-offs in speed, cost and decentralization. Smart contracts handle subscription logic and token management. KYC and AML checks are often done through on-chain gateways or off-chain identity providers that talk to the subscription contract. Stablecoins bring liquidity and a familiar settlement currency, but they also import issuer and peg risk into the deal.

Regulatory and market-structure implications investors must watch

The crucial question is whether an on-chain token equals a legally recognised share. Under current U.S. securities law, transferring legal title in most public-company stock is governed by transfer agents, broker-dealers and the central clearing system. For on-chain issuance to be more than a marketing novelty, regulators need to accept that a blockchain entry can serve as the authoritative record, or transfer agents must commit to mirror the on-chain ledger without friction.

Then there’s trading. If tokens representing shares move freely on decentralized exchanges, secondary trading could happen outside the regulated broker-dealer system. That risks running afoul of registration rules that govern trading and might create compliance headaches for market makers and custodians. Large custodians and exchanges will also want clarity on whether they can custody these tokens as “qualified custodians” under custody rules that apply to securities.

Enforcement is another open door. The SEC has historically scrutinized novel token structures. If tokenized shares behave like securities — offering ownership, dividends, or voting — the agency will expect the same disclosure and investor protections as for traditional offerings. That could push some parts of the program into familiar regulatory territory and slow adoption.

What investors need to know: access routes, custody, liquidity and risks

Access: Expect early deals to limit participation. Even if a company can technically accept retail stablecoin subscriptions, legal restrictions, state blue-sky laws and platform KYC mean most early raises will favour accredited or institutional investors.

Custody: Where you hold the token matters. If the token is just a claim and the transfer agent’s ledger stays off-chain, the token could be more like a receipt than a direct share. That makes custody with established custodians valuable. Cold wallets or self-custody may be possible, but they carry extra legal and operational risk unless custodians and registrars agree on treatment.

Liquidity: Liquidity will start thin. Early secondary trading could appear on decentralized venues, but volumes will likely be small and prices volatile. Tight settlement can improve market efficiency, but it won’t create buyers where there are none.

Key risks: regulatory rollback or enforcement; disparity between on-chain tokens and legal share ownership; stablecoin issuer or peg failure; smart contract bugs; platform insolvency; and cross-border compliance headaches. For public-company shareholders, dilution, voting rights and dividend mechanics are practical points to verify before treating a token as equivalent to a share.

Near-term outlook: who to watch and the big open questions

Watch large custodians and brokerage firms for signals. If major players such as big custodians, primary transfer agents or national exchanges start building tooling or publishing clear policies, adoption could accelerate. Regulators — above all the SEC — will also be decisive; any enforcement guidance or pilot approvals would change the landscape quickly.

The unanswered questions are stark: Will regulators accept an on-chain ledger as authoritative? Can custodians provide the legal protections investors expect? And will secondary trading be corralled into regulated venues or spill into unregulated markets? For now, on-chain capital raises are an intriguing innovation with real operational benefits, but they remain experimental in legal and market terms. Investors should view initial deals as early-stage plays on infrastructure change, not as a finished product ready for broad retail adoption.

Photo: Thought Catalog / Pexels

Sources

• cointelegraph.com
• cointelegraph.com
• cointelegraph.com