Thinking of potential use cases for NFTs, I came upon the following and have permission to share it:
I trade stocks with an online broker account. Recently I wanted to attend an annual shareholders meeting that was being held virtually (COVID 19 pandemic precautions). While I could vote my shares easily using my online broker’s software, I could not attend the shareholders meeting without registering. To register to attend the meeting, I needed to provide a legal proxy. I attempted to obtain the legal proxy prior to the meeting, however, the legal proxy document arrived via snail mail a few days after the shareholders meeting so I was unable to attend.
Going through the process to obtain the legal proxy, I was reminded that even though I bought shares using my online brokerage account, I did not legally own those shares, the online brokerage has legal ownership. From the legal proxy document:
we hereby appoint and constitute ( INSERT NAME) as our true and lawful attorney to vote as our proxy, for said securities only, in our stead at the ANNUAL meeting of security holders of ‘company’ …
So the online broker is the legal owner of the securities and appoints me with power of attorney to vote the shares.
So I had to go through an inefficient manual process to obtain the privilege to attend the shareholders meeting which I missed because I wasn’t proactive enough to anticipate the lengthy manual process to obtain the legal proxy which took several days.
I thought to myself, there must be a better way!
Why couldn’t shares of equity in a public company be provided as NFTs and traded on decentralized exchanges?
Formed as NFTs, equity shares could provide the following benefits:
• a stock certificate image embedded that could be viewed or printed.
• Shares could be easily voted online
• shares could be traded on DEXs (7x24x365)
• shares could be registered to decentralized identifiers proving ownership
• shareholder meetings could be attended (registering/providing) decentralized identifiers
• Dividends could be automatically paid using crypto currency to an address authorized by the owner (decentralized identifier)
• Fractional shares could be realized
• Options could be written with proper signatures
• Shares in circulation could be published and proven in a transparent manner
• Ownership transfers could be streamlined eliminating the monopoly clearinghouse intermediaries
I’m sure securities laws could be followed using an NFT format for equity shares. It would be nice if the Investor Relations dept of public companies started to seriously consider some of these features and start to innovate!
I hope we can start some discussion to include these types of features in the future roadmap for finance.