Watch your back Coinbase and Robinhood!
Overstock CEO Jonathan “JJ” Johnson says he’s hoping that one day tZero, a much smaller trading platform that offers some services similar to Coinbase, will be one day be a legitimate rival to the crypto behemoth that just listed on the Nasdaq Inc.
last Wednesday with a valuation that briefly hit around $100 billion.
He envisions a time soon that tZero achieves what he describes as the “Holy Grail” for a trading platform.
What you want to have is a platform that has a “digital wallet that let’s people hold and trade crypto, NFTs (nonfungible tokens), stocks, and digitized securities,” Johnson told MarketWatch in an interview last week.
“It would be a Coinbase meets tZero, meets Robinhood,” he said referring to the Robinhood Markets trading platform that has become popular among young investors and is planning a near-term public listing.
“All three [platforms] are working toward that Holy Grail,” the Overstock CEO said.
tZero, is a division of Overstock
based in Utah, that touts a trading operation that has drawn some attention in the crypto community. It operates as an alternative trading system, or ATS, which are venues that usually compete with more traditional securities exchanges for order flow.
Overstock’s tZero, however, uses distributed-ledger technology that supports crypto like bitcoin
and Ethereum’s Ether
as well as other digital securities. One of tZero’s key aims is to serve as a secondary trading platform for pre-IPO companies. However, the platform is tiny when compared against a behemoth like Coinbase.
In 2020, tZERO saw total volume on its ATS platform of $53 million, a 10 fold increase compared with 2019, amplified by the mania around bitcoin brewing last year, a spokesman said.
Overstock’s Johnson told MarketWatch that tZero is a broker dealer approved by the Financial Industry Regulatory Authority, and said that it is a sanctioned ATS that has three security tokens, or STOs, that are governed by the Securities and Exchange Commission.
“It has a crypto wallet that is up and running and what’s next for it is to get a digital wallet,” he said.
For the first quarter of 2021, the ATS reported $28 million of volume, said the spokesman, adding that officials expect “these trends to continue as it adds additional assets and users to its ecosystem.”
By comparison, trading volume at Coinbase
totaled $335 billion for the year, and the platform boasted 56 million verified users on its platform, including 6.1 million “monthly transacting users,” according to its estimated first-quarter performance filed with the SEC before its April 14 listing. The tZero spokesman wasn’t able to provide user figures for the company, however.
Robinhood on its blog earlier this month reported that it saw 9.5 million customers trading digital assets on its crypto platform in the first-quarter of 2021, compared with 1.7 million in the fourth quarter of last year.
More broadly, Overstock is in the process of restructuring its business and selling all or part of the blockchain and crypto operations inspired by controversial and outspoken CEO Patrick Byrne. Byrne, who had been the public face of the e-commerce retailer, for years until he resigned from its helm three years ago.
Back in 2015, Byrne’s Overstock rented out Nasdaq’s Times Square offices to throw a launch party for tZero, The Wall Street Journal reported, noting that the company had fallen short on its fundraising efforts—efforts that drew scrutiny from the SEC.
“As previously publicly disclosed, starting in February 2018, the Division of Enforcement of the SEC made a number of requests to Overstock and tZERO to provide information related to the tZERO security token offering and certain related matters,” tZero said via a spokesman.
“Overstock and tZERO have provided the requested information and have been cooperating with the SEC,” the company said.
Johnson said that Overstock owns about 90% of tZero, which is run by CEO Saum Noursaleh, and plans to retain a 40% minority equity interest in the platform, as it aims to divest a chunk of its blockchain ventures. Medici Ventures, Inc. Overstock’s blockchain-focused subsidiary that had been run by Johnson, has been converted into a limited partnership with an eight-year life, with venture-capital firm Pelion Venture Partners maintaining sole discretion to oversee the portfolio.
Johnson, a one-time Utah gubernatorial candidate in 2016 and 17-year Overstock veteran, was named permanent CEO of Overstock back in 2019 after a brief interim status period.
Shares of Overstock are up 37% so far this year. By comparison, the Dow Jones Industrial Average
and S&P 500 index
are up around 10%, the Nasdaq Composite Index
is up nearly 7%, while bitcoin prices
are up over 90% in the year to date.