As the digital asset world continues to evolve, crypto-native firms are stepping up to modernise how private markets operate. One such firm, Fairmint, has made waves by submitting a detailed blockchain-based proposal to the U.S. Securities and Exchange Commission (SEC), aiming to address what it calls outdated systems governing private securities.

Let’s break down what this means and how it could reshape private equity for the future.

Outdated Infrastructure in Private Markets

Private equity refers to investments in companies that are not listed on public stock exchanges. While this market is massive, valued at $5.3 trillion in 2023 and expected to reach $6 trillion by the end of 2024, it still runs on legacy tools like spreadsheets.

According to Fairmint, many private companies are using Excel to manage billion-dollar cap tables (records of ownership and shareholders). This creates inefficiencies, makes compliance harder, and slows down capital formation. In contrast, public markets have access to regulated, advanced financial infrastructure.

Fairmint’s CEO, Joris Delanoue, summed up the issue:
“Private companies are managing billion-dollar cap tables in Excel while public companies have regulated infrastructure. This creates unnecessary friction, compliance gaps and limits American capital formation.”

Seven Steps to Modernise Private Securities

Fairmint submitted its proposal to SEC Chairman Paul Atkins and Commissioner Hester Peirce, presenting a seven-part framework to revamp private markets with blockchain technology. Here’s a simplified breakdown:

1. Standardised Infrastructure: Promote interoperability across different transfer agents (companies that manage investor records).
2. Real-time Regulatory Oversight: Use blockchain to give regulators live access to compliance data.
3. Investor Self-Custody: Let investors hold their own assets, but with built-in compliance checks.
4. Knowledge-Based Accreditation: Replace outdated income/net worth requirements with skill or knowledge-based investor qualifications.
5. Tokenization Support: Create a structure to support digital tokens representing ownership in private companies.
6. Regulated DeFi Sandbox: Establish a safe, regulated environment for decentralised finance (DeFi) innovation.
7. End-to-End Digital Settlement: Enable seamless, blockchain-based clearing and settlement of private securities.

Why Tokenization is Gaining Attention

Tokenization turning assets like shares or real estate into blockchain-based tokens is becoming a popular concept in finance. This allows for faster, cheaper, and more transparent trading and settlement of financial assets.

Fairmint isn’t alone in this vision. Retail trading platform Robinhood is developing its own blockchain network to allow Europeans to trade U.S.-listed stocks. CEO Vladimir Tenev has stated that tokenizing private equity is the company’s next frontier.

Meanwhile, the SEC’s Crypto Task Force has held recent roundtables to explore the future of tokenization and decentralised finance, signaling that the agency is open to industry feedback.

A Step Towards Fairer and Smarter Investing

One of Fairmint’s key suggestions is to rethink who qualifies as an accredited investor. Currently, people need to meet income or net worth thresholds, a system that often excludes knowledgeable but less wealthy individuals. Fairmint proposes a more inclusive, knowledge-based system that focuses on understanding risks rather than just financial status.

This change could open up private markets to a wider group of educated retail investors while maintaining appropriate safeguards.

Bridging Traditional Finance and Blockchain

Fairmint’s proposal represents a push to bridge the gap between traditional finance and digital innovation. By modernising the private equity space with blockchain, it aims to reduce friction, improve compliance, and unlock new capital opportunities.

If regulators like the SEC embrace this shift, it could mark a turning point for both private markets and broader blockchain adoption.

As the crypto industry continues to influence policy and infrastructure, all eyes are now on how the SEC will respond to this forward-thinking proposal.