KEY POINTS

  • WisdomTree leads a Series A funding round that raised $17.65 million for startup Securrency
  • The fund management company will apply Securrency's technology to the ETF ecosystem
  • Securrency's blockchain-based financial and regulatory technology makes it easier to tokenize securities because of its built-in compliance framework

New York-based exchange-traded fund and exchange-traded product sponsor WisdomTree led a Series A funding round for startup Securrency as it aims to deliver blockchain technology to the ETF ecosystem.

On Tuesday (Jan. 7), WisdomTree announced via a press release that it raised $17.65 million for Securrency, the leading developer of institutional-grade blockchain-based financial and regulatory technology. Other strategic investors that participated include the Abu Dhabi Investment Office, Japanese financial services giant Monex Group, and venture capital firms RRE Ventures, Strawberry Creek Ventures, and Panthera Capital Investments.

WisdomTree's investment in Securrency is oriented towards leveraging the startup's technology that solves the challenges of tokenizing securities. A blockchain token that represents an asset provides broader access to investors offering greater accessibility and liquidity, but along with it is the obstacle brought about by identity compliance, particularly on a global scale. 

Securrency's institutional-grade blockchain-based financial and regulatory technology is a way around it as it's an easier process for issuers to tokenize securities since the compliance components are already built-in their platform. 

"We are working very closely with them [WisdomTree] to deliver regulatory-compliant financial instruments that are representative of the asset types that they currently offer in the market and therefore bridging the legacy financial services environment to the distributed ledger environment," Securrency co-founder and COO John Hensel told International Business Times in an interview.

"Using the technology, we believe we have identified areas for exciting innovation within the ETF ecosystem and in financial services more broadly, all with a focus on meeting the highest standards of regulation," said WisdomTree Founder and CEO Jonathan Steinberg.

The second-largest investor in the round with $5.4 million is the Abu Dhabi Investment Office, and their investment is centered on Securrency as an essential element of growth in the digital asset space in the UAE's capital. The investment of the sovereign fund of Abu Dhabi brings the majority of Securrency's engineers to their office in the oil-rich country.

Several changes are set to take place for the ETF market this year, including the "ETF Rule" that the Securities and Exchange Commission established back in December, which makes new issuance subject to less red tape. There's also a new kind of actively managed ETFs and falling retail trading commissions. 

Under these new changes, the ETF market could be more competitive, according to The Wallstreet Journal. WisdomTree's move to integrate blockchain is geared towards expanding its audience and that is something new to the ETF ecosystem as well. It will be interesting how the technology factors into the expected competitiveness of the industry in 2020.