Longtime Bitcoin Advocate Launches Broker-Dealer for Crypto Firms

Longtime bitcoin advocate Bruce Fenton has created a new broker-dealer for digital asset firms and financial advisors called Watchdog Capital.

The firm is registered with the U.S. Securities and Exchange Commission and a member of the Financial Industry Regulatory Authority, public filings show. It’s a subsidiary of digital securities firm Chainstone Labs, also led by Fenton, founder of the Satoshi Roundtable conference. He is also a former board member of Overstock’s security token platform tZERO and was the 2015-2016 executive director of the Bitcoin Foundation.

“A lot of companies have been advised by their lawyers to become a broker-dealer,” Fenton said. “What we can do is license a representative, and they can have their own business.”

Watchdog is capable of securities underwriting, investment banking, crowdfunding, Reg A+ offerings, starting real estate investment trusts and doing over-the-counter trading for retail and institutional business.

Fenton began the process to license a broker-dealer around nine months ago and was approved to operate in July, but he has had the idea since April 2016 when The DAO, an ill-fated decentralized autonomous organization, debuted.

“At the time, knowing the regulations so well, I said ‘This is not going to fly with the SEC,” Fenton said. “I wanted to acquire a firm and get the personnel in place because I think tokens are going to be a big thing … I thought they were going to be mostly declared securities.”

Long leash

Watchdog is serving as a back office to crypto and blockchain companies as well as serving individual representatives such as financial advisors. Independent financial consultants can use Watchdog’s license to trade crypto for interested clients.

“They might be at a large wirehouse like Merrill Lynch … In some cases representatives of the firms aren’t even allowed to discuss bitcoin,” he said.

Fenton describes this process as “decentralized” because Watchdog Capital allows financial advisors to run their businesses however they want to.

He wouldn't say what percentage of Watchdog's business with crypto and blockchain-related firms would make up but predicted all assets will be tokenized in the future, including government bonds. (In December 2018, Chainstone got into the space by issuing 12.4 million shares in the form of digital tokens).

“You can’t move your Apple shares and you definitely can’t move shares of your local favorite restaurant around the way you can move a token,” Fenton said. “If you can tokenize those investments, it opens up a lot of exciting doors in the way that you can form capital and move money around the world.”

Bruce Fenton (right), Peter Kroll (middle) and Vitalik Buterin (left) image via CoinDesk archives.