Fairmint Proposes Blockchain Framework to Modernize Private Markets

Crypto-native companies are intensifying their efforts to shape regulatory guidance on digital asset transactions. On Monday, Fairmint, a blockchain-based platform, submitted a proposal to the United States Securities and Exchange Commission’s (SEC’s) Crypto Task Force. The proposal aims to address what Fairmint describes as outdated and fragmented back-end infrastructure in private securities administration.

The seven-part proposal, submitted to SEC Chairman Paul Atkins and Commissioner Hester Peirce, focuses on standardizing infrastructure for interoperability across transfer agents. It also introduces real-time regulatory observability through blockchain and enables investor self-custody with compliance safeguards. Additionally, the proposal calls for a shift to knowledge-based accreditation standards, moving away from traditional income and net worth thresholds, and for a regulated decentralized finance (DeFi) sandbox.

Private equity, which involves investment in privately held companies rather than publicly traded ones, has seen significant growth. The global private equity market reached $5.3 trillion in 2023 and is expected to grow to $6 trillion by the end of 2024. Fairmint highlights that the private equity industry is heavily reliant on expensive spreadsheet software that lacks settlement capabilities, unlike public markets which have more options available. Among Fairmint’s clients are the wallet infrastructure provider Privy and the place-based social media platform Bloom Network.

“Private companies are managing billion-dollar cap tables in Excel while public companies have regulated infrastructure,” said Fairmint CEO Joris Delanoue. “This creates unnecessary friction, compliance gaps and limits American capital formation.”

The SEC Crypto Task Force has been exploring regulatory pathways at the intersection of traditional and digital assets. The agency held two key regulatory roundtables over the past few weeks, receiving industry inputs on tokenization and decentralized finance. Financial firms are also exploring the tokenization of publicly listed companies. Retail trading platform Robinhood, for instance, is planning a blockchain network to enable trading of US-listed stocks for Europeans. Robinhood CEO Vladimir Tenev recently said that tokenization, including of private equity, would be the company’s next focus.

Fairmint's proposal to the SEC for a blockchain framework for private markets represents a significant step towards modernizing the private market landscape. By leveraging blockchain technology, the framework aims to enhance transparency, efficiency, and security, while also ensuring investor protection. If implemented, this framework could set a new standard for private markets, attracting more investors and fostering greater trust and confidence in the system.