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Capital markets are highly regulated environments with significant responsibilities and requirements placed upon the primary parties — businesses looking for investors to raise funds. Unfortunately, standard blockchain technology is not equipped to accomplish this strategy. Polymath is one of the leading projects designed to address these limitations and bring the benefits of raising capital to the blockchain world.
The highly regulated nature of capital markets has long impeded large-scale fundraising on a blockchain. By default, blockchains are designed to have open access, and are subject to virtually no regulatory mechanism, while privacy and regulatory control are two pillars of securitized capital raising.
In 2017, the early days of crypto initial coin offerings (ICOs), many projects tried to attract investors by issuing security tokens meant to provide some assurance of ownership. They were different from the utility tokens used by these crypto platforms. Unfortunately, many of the tokens were “security” in name only, without any tangible standards or regulations. The Securities and Exchange Commission (SEC) was rightly unimpressed with the offers, and didn’t consider these tokens proper securities.
Polymath was then launched in 2018 and registered with the SEC to bring standardization and regulatory compliance into the process of tokenized capital raising.
Polymath (POLY) is an Ethereum blockchain–based security token issuance platform. It allows entities seeking to raise capital to issue standardized, Ethereum-based security tokens that are compliant with SEC regulations.
Polymath helped develop Ethereum’s ERC-1400 token, a compliant standard for security tokens.The platform uses a related security standard, ST-20, to issue its own security tokens. The tokens specify a set of rules and requirements that issuers and investors must satisfy for a capital-raising transaction to occur.
Polymath's technology brings efficiency to the process of tokenizing securities on Ethereum. However, the team behind the project didn’t stop there. They’ve also developed a native blockchain, Polymesh (POLYX), which is specifically designed for tokenized securities and capital-raising on the blockchain. Unlike Ethereum, Polymesh has been created with capital markets in mind. As of now, the Ethereum-based Polymath and Polymesh operate in parallel. Eventually, Polymath’s activities will likely shift toward Polymesh.
Polymath Capital Platform is the company’s comprehensive solution for end-to-end tokenized capital-raising. It helps companies establish and manage the life cycle of their capital-raising activities — creating offers, tokenizing the offers, attracting investors and more.
Investors can also use the company’s white label platform to browse through offers and narrow down their selections using a variety of filters — e.g., by country, capital requirements, identification requirements and so on.
Polymath Token Studio is a utility for managing security tokens. You can use it to handle all the token’s operations, such as reserving ticker symbols, configuring token rules and distributing the token.
While the new Polymath Capital Platform is a one-stop solution for the overall tokenized capital-raising process, Polymath Token Studio manages all the details and specifications of the actual security token.
Polymath requires issuers to specify all the parties involved in their projects. These include brokers, legal representatives, custody agents and more. Upon satisfying these requirements, a company seeking capital can mint and promote its security token with the ST-20 standard.
At the moment, Polymath has six security tokens listed on its Ethereum platform.
The security tokens listed on Polymath’s Ethereum account
To choose a suitable project, potential investors browse through offers on Polymath, just as traditional market investors evaluate stocks, bonds or commodities to invest in. Polymath offers a good deal of information about each one of its projects, thanks to the platform’s standards.
This is in stark contrast to many other crypto projects, even those with “security” tokens based on the conventional ERC-20 standard. Many such projects, now and in the past, have lacked the critical information required to evaluate their attractiveness and safety from an investment perspective. Projects with obscure two-page white papers and anonymous founders using online forum handles have sought significant capital by issuing these tokens.
With Polymath, significant project-related details are rigorously collated to help ensure the safety of investors’ funds. For example, Polymath uses a procedure that biometrically identifies token issuers. Thus, a Reddit username, no matter how inventive or funny, will not work for a project founder’s registration.
Similar rigorous identification and information standards apply to investors. You have to prove your identity and supply key facts demonstrating your investor status.
When an investor selects a project, Polymath uses an escrow system based on smart contracts to hold the deposited funds, which are then released when all the requirements are met by both parties — the issuer and the investor.
To be fully compliant with SEC regulations, Polymath applies waiting periods on the release of security tokens to investors. For those with accredited investor status, the waiting period is 90 days. The SEC defines accredited investors as individuals meeting one of the following criteria:
If you don’t meet the accredited investor criteria, the waiting period to access your security tokens will be one year.
POLY is Polymath’s utility cryptocurrency. It’s an ERC-20 standard token on Ethereum, and it powers the platform’s Ethereum-based operations. The new Polymesh blockchain has its own native crypto called POLYX. Polymath has announced that POLY tokens may be converted to POLYX at a 1:1 rate and transferred to Polymesh using the POLY to POLYX Bridge utility.
POLY is used on Polymath to pay fees for all on-platform transactions — e.g., minting of security tokens, or using services such as identity verification. The token is involved in transaction payments on Polymath, just as Ether coin is used on Ethereum to pay for all blockchain-wide transactions.
While the Polymesh blockchain’s new POLYX coin has governance and staking functionalities, the POLY token doesn’t have either of these. Thus, POLY is a classic utility token employed largely to facilitate on-platform transactions.
POLY has a total supply of 1 billion tokens and a circulating supply of 898.5 million. There’s no supply cap specified for the token. Its current price (as of Oct. 19, 2022) is around $0.26, giving it a market cap of around $220 million.
The trading of POLY began in early 2018 when the platform deployed its first smart contracts on Ethereum. Despite quickly reaching a high of $1.59 on February 20, 2018, it eventually declined to about $0.15 by the end of the year, as its launch coincided with the 2018 crypto bear market.
In 2019, POLY dipped below the $0.10 mark and stayed at sub-10-cent levels throughout the rest of the year and 2020. Beginning in February 2021, the token’s fortunes changed dramatically, with wild ups and downs throughout the year. POLY’s volatility was nothing unusual, given the overall crypto market’s spectacular crashes and recoveries in 2021.
As the market experienced its final major crash of 2021 in November, POLY’s price entered a multi-month downtrend, bottoming out in June 2022 at $0.17. Since then, POLY has had a mild recovery.
In general, POLY’s performance since early 2021 has been nothing out of the ordinary, given the overall market conditions. Many price prediction experts anticipate POLY to grow in value due to its potential contribution to the blockchain industry. Price Prediction expects POLY to hit a maximum of $1 by 2025 and cross the $6 mark by 2030. DigitalCoinPrice is also bullish toward the token, though more conservative, predicting POLY’s price at around $0.65 in 2025 and only exceeding $1 by 2030.
We expect POLY to perform moderately well, perhaps at the level of the overall market. The project has moderate potential for these reasons:
Polymath is a major project designed to bring venture capital to blockchains. It may prove to be instrumental in getting investors to view crypto security tokens as a legitimate form of securities. For now, Polymath may provide companies and investors with a capital market platform that’s complementary to traditional financial market platforms. In the future, however, companies and investors might come to view blockchain and security tokens as the preferred platform to raise capital and invest.