Liquid & CT for Digital Assets

Categories:Personal
Bruce Fenton

Privacy for Private Equity with Digital Securities

There are a lot of privacy violations we tolerate on Wall St just because it’s been the status quo.

But private equity and many huge deals LOVE privacy — it’s right in their name.

Securities laws have lots of room for privacy. Even some requirements. It’s not all about AML/KYC. Bitcoin combined with other digital assets and digital securities can enhance privacy not just for individuals but for large transactions.

Digital assets make it so private equity can trade between counter-parties without a trusted third party. CT allowing it to also be private is potentially a very big deal for private equity and other use case.

Large PE firms (one was my main client for years) move tens and tens of billions in very complex and expensive transactions almost weekly. They buy companies using leverage, try to improve the value and then sell them. Often the purchases and sales are private. Many PE firms only report what is required (such as transactions with public companies) nothing more.

Confidential Transactions are turned on by default on Liquid.

This would enable PE firms to have a sort of private network on top of a public network / Bitcoin.

This could then allow their customers and contacts even competitors to trade with each other. For most PE firms, competitors are also often customers, co-investors and counterparties.

With CT they wouldn’t even know who did what or who moved securities where ….but could still verify it’s fair and overall amounts / rules enforced.

That’s mind blowing.

It could make hundreds of billions of trades that are happening right now increase privacy and liquidity.

Lots of the bottleneck now is due to attempts at privacy — to even get into a data room you need all kinds of assurances you aren’t telling the competition etc.

Let’s also not forget that LN works well with this and is super well suited for the massive volume of the securities world.

We could have an M&A future where we don’t even know who bidders are until after the sale is closed.

So much potential for this.

(Sorry for the sloppy writing — I pasted this from a Slack convo. I got stuff to build!)

  • Bruce

Note: for more on Liquid, visit Blockstream’s website for several videos and technical papers