EN | Real World Asset Tokenization Live Use Cases Across Gold, Real Estate and Agriculture | MERGE

Okay, let's start our next session that is real world asset tokenization live use case across gold real estate and agri agriculture. So please welcome to the stage Lucia Cardellino um Mro del Diretorio at Camera Blockchain Uruguay. Welcome. So very quickly everyone it's Lucia Cardellino. I represent the uh blockchain chamber of Uruguay.

uh we are a group of uh people trying to um represent the industry with the regulators to get into the dialogue uh with policy makers and and basically be the point of contact if anyone wants to to come to Uruguay any new protocol cryptoreated um ventures sort of we try to to be the the the first the first door to open to you guys so if you anyone is interested please contact me so uh we're going to start talking about real world assets I'm so happy to uh be moderating this panel, learning some real uh cases, how they work in practice. Uh I think that's um very important to see how they come out of a a white paper. Oh,

just has just arrived.

But you need headphones.

Okay. In the meantime, I will be presenting you guys. So, we have Jo recently joined. He's a senior subject matter expert in AI and DeFi, part of the engineering team at uh Pango Inter. Uh Martin uh Coxel, director of growth at BSB association.

Uh we have uh Jose I know you can we call you Pepe or we call you okay the innovation corporate director at Proour and Leandro Almeida, head of corporate development, digital assets and product innovation at Bank of Safra. So, so good.

Pleasure being here.

Great. So, Jo, I can Well, you don't have the setup uh yet. Okay. Good.

Okay. So, I will um u Martin start with you. Uh we're going to be talking about agriculture and gold uh this morning. So, let's uh start with agriculture and agriculture is a sector that uh is often cited as one that really needs a blockchain, right? It's has to deal with fragmented data, paper records, late payments and so forth.

And yet it's still a sector that is hard to digitize especially in emerging markets. So what has uh BSV association uh deployed uh within agriculture and how has it materialized so far?

Okay, great question. Thanks Lucia. Thanks for the warm introduction as well. Very happy to be here at uh at Merge S. Pao.

Um before I get into like the specifics of what uh we've seen in our ecosystem, the solutions deployed, um thought maybe take a quick step back um and um obviously maybe differentiate where the need from tokenization comes from in in agriculture. Um especially since it's I think quite different from the use case of say gold and real estate. Um I think it's fair to say that gold everybody understands the use case for tokenizing gold. I mean it's it's a lot more fair straightforward um and real estate and I think the the main driver on both of those fronts is what I would call uh financial inclusion on some level uh which is a topic which is dear to me me and my organization because we strive to much like yourself you know make sure that blockchain is a technology that's adopted for a better good. But when it comes to agriculture, um I think there's there's a very different uh it's kind of a pivot when you're not talking about we're not talking about final inclusion.

I think we're more talking about uh solving existential problems really. Um money is good. We're definitely pro business. Uh but if we can make money and also help uh you know uh the world be a better place, uh I I think that that that's even better. And and that's where I think the uh ultimately the uh the the real challenge with tokenizing agriculture is we we can literally solve some real world problems that affect uh farmers to name but them right uh I think that the first effective uh is financial inclusion and solving pain points they have in terms of u I guess access to financial markets uh tokenizing their assets that the their collateral uh and there's many many many uh aspects to Um, and if I was to dumb it down to one to maybe just a few things, I'd say there's like three pillars of what blockchain can address in in in agriculture through tokenization.

Uh, I think there's a provenence angle, knowing what we're eating, what's being produced, where it's going. Uh, a supply chain uh use case I guess. Uh number two would be uh the automation everything that smart contracts uh basically addresses whether it's automation of payments uh risk management um at a you know very high level. It's uh you know it's it's it's an industry and a use case it's going to demand a tremendous amount of scaling. Um you know let's just see that there's something like over 500 million farms in the world.

I don't know how many are in Brazil, but I'm sure there's a fair number of them here. Uh, but you know, 500 million farms of which most of them do not have access uh to the financial markets at the moment. And then the the last point is um solving for true what I'd call truth or truthful data, right? Uh making sure that anything uh that is collaterized via token is actually based on uh real information, proof. If I'm going to going to tokenize farmland for example, you need to make sure that uh the farmland is being tokenized based on accurate uh say satellite photography that photography can be timestamped put on chain make sure that it's obviously being tokenized in an appropriate manner.

So that's really the use case for for blockchain and sorry for that very long-winded answer but getting to your point now what BSV is doing in ecosystem we have a number of companies uh that are doing exactly this um notably in uh North America and Canada we have companies deploying uh basically blockchain solutions to IoT centers because again going back to my point it's all about data right so if you get the right data from the right sources in this case I think when it comes to farming IoT sensors is the starting point. Getting the right temperature, the right uh land uh data, then you can tokenize appropriately and create uh to token economy that actually makes sense and you are effectively tokenizing a real world asset with real world data.

Excellent. Wow. You're doing a lot. I have a more specific question in terms of carbon credits and sustainability verification. These are increasingly tied to how farmers access capital right particularly in the EU and and ESG driven supply chains.

How does uh BSV uh data integrity infrastructure help farmers to uh verify this uh environmental claims that they have and have you actually seen revenues uh coming from this?

Uh absolutely. um the very same companies uh that we're working with in our ecosystem who are actually tokenizing um assets like farms, they're also working with those very same IoT providers I mentioned previously. um all the data they are essentially putting on chain whether it's the temperature and for the forecasting you can do climate forecasting climate change uh analysis you can do based on on on those readings from from from sensors and that is the very basis for for ESG and sustainability because if a say farmers going to in the European Union for example we have uh which is where I'm based um we have a lot of subsidies for for farmers through uh the European Union I think that that much is fairly well known in in the world of agriculture. Um and those subsidies need to be u obviously delivered via proof. These IoT data is a way to uh ultimately and putting IoT data on chain is a way to uh create that proof and deliver those subsidies and create transparency.

So again, that's how we're giving uh the uh I guess access to to to to these farmers who you know wouldn't have it otherwise because uh the technology just wouldn't if it if it wasn't for blockchain technology just wouldn't be there or be accessible to them basically.

Excellent. Well, that's very good. Jo have a question for you. So we know you've been working on tokenizing agriculture uh instruments, CPRs, digital letters of credits and so on. And you were also part of the Drex uh pilot for crossber commodity uh settlement.

Could you walk us through uh how a tokenized coffee export would look like from end to end? It's would be helpful to imagine and to see

how that flow will be and what happens on chain that could not happen before.

Yeah, I love this question because we are talking about an complex environment scenario, right? I I would like to to to start with the storytelling. Imagine producer here in Mros of the Brazil, right? That starts to to production of the soybeans or coffee or another another team that starts to would like to export uh natural protein right from wheat. Imagine that you would like to to find some buyer in the another another place of the world for example Hong Kong that's the part of the of the of the pilot in the drax but to have the opportunity to to to go from the pilot to the production right we develop platform to facilitate this tokenization of the the title the the the title the nodes that represent the harvest For example, soy beans or coffee.

This way with this part of the tokenization, we need start the process of monitoring. Why? To check if really I have one one strong to talk that we can facilitate the marketplace and to find one good buyer and another in another country. We have a lot of the countries that buy and purchase soybeans from Brazil and we can facilitate in the trade finance platform for example uh in the part of tokenization of the bill of lady that's the part of the the to start the process of the of deliver from the farm to the port to the port to another port and and deliver to the it's a complex uh h environment but say if So if you can create some titles tokenize, if you can use the blockchain to tokenize the part of the process and reduce the or mitigate the counterparty risks between parts, I believe that you can reduce the costs uh and spread of this type of the process and that's the river of the deliver. We are we are talking about the global DVP but you have another river that's a part of the PVP and effects.

In this way you have in this way you have the three rivers to facilitate this. I'm talking about the coffee, soy beans and and the natural protein because I believe that's the most part of the export from Brazil to the to the another counter, right? But to have the other process that affects that we can introduce other other topics effects with the PVP include the liquid pool and IM. That's another topic that we can discuss. But I believe that to have the opportunity to to to facilitate the process of export use one trade finance platform the blockchain and with interoperability because we have the some companies in China and Hong Kong that can facilitate the tokenization of the EBL the bill of lane and you have the part of the Brazil that you can connect for example with the DRAs with the environment of the Ambima with the environment of the BBC that's federation of the banks that if I don't have interoperability between these platforms is almost impossible facilitate the life of the producer.

Wow. Amazing. Such a complex uh engineering there. So um I guess you touch upon one of the most challenging parts of commodity tokenization which is uh liquidity. I know you worked with AMMs and and liquidity pool stable coins that are collateralized with real agriculture assets.

So, how do you price and manage liquidity risk when the underlying asset is seasonal and is physically located somewhere in Brazil?

Yeah. And uh about about this part of the liquid provider, imagine again the story telling after I have the producer here and I have a bank. I'm here I'm representing banker here, right? I would like to to start a process to create a bullet fund with the some central banks or commercial banks that facilitate this part of export. But we can facilitate this process if you have for example tokenized deposit or holy sales CBDC to facilitate this process of the effects.

Right? In this way, if I have an liquidity pool that you have sale CBDC or tokenized disos or encodes retail CBDC, we can facilitate for example introduce the concept about the AMM. Okay, I'm studying deeply the part of the AMM that's automated market maker that can facilitate BIS. uh are the BIS is using for example there's some uh constant product or some product to facilitate this calculation in the process of the FX rate in this way this is spread between two different countries it's not easy to calculate because you have the part of spot you have the the the oscillation of develop of your your curity curious right in this Okay. Uh we are study the possibility that in the same liquidity pool we can introduce the soybeans tokenized and for example federal bond securities that can facilitate the part of the the liquidity and we can use the trade finance platform to facilitate the proof that I really start the transaction between the two countries.

again remove the the the assets. We can introduce the holioc in the same liquid pool apply the same algorithm of the amm. Okay. Now I can replace this hold introduce the tokenized deposit. In this way we can use one solution amm not following the the the some guidance about the unis swap v2 that we can introduce another level raise the bar in terms of the fees that we can and the premium that we can introduce for everyone that's involved in this in this scenario of the effects and the PVP that's a party that we can facilitate the process the producer in Brazil and the buyer in Hong Kong example.

Okay. Wow, that impressive. Okay, moving on to gold pipe. I've heard that you're launching uh in this very event uh the new product, the pro digital gold. So, congratulations on that.

Thank you.

Could you explain how the product works and how it differentiates from other gold based tokeniz that exist already?

Yes, of course. Uh first of all, thank you for having me here. Yes. Uh today we are launching procure digital go. Brazil is the second country we we launched the the product.

Uh pro is in in 34 countries and we are going to launch in one of uh each. But Brazil is very important for us. So is the is the second country we we launched the the thing. I think we are going to put here um a code of discount for everyone in the in the merch with zero fees of uh of buying gold is very easy. The first thing we we when we saw that the product was the asset has be good right uh gold is good that there is no problem there.

Second is uh legal possible. Legally possible, right? We we we spend a lot of time with the Spanish security uh authority to to develop the architecture of the of the product uh to fit to fit in what we want to put in the market. Now I'm going to explain what what is the product. Third is technically possible.

Right? This is and for it's a good business who knows and so uh what is prosecute digital goal is physical gold on the customer hands this is it's not an ATF is not a coin it's not transfer is not everything you can may say that is only physical gold is one gram of physical gold we hide the gold with prosecutor money. We custody the gold. We tokenize the bullion. We custody the token.

We distribute and we sell. This what we do except the mine is everything on procure right. We we have of course in prog crypto we have many capabilities. We we are helping banks to to sell Bitcoin, Ethereum and so on so forth. We we have a securities agency in Spain trying to tokenize a capital asset market.

Um but this is very easy. This is very easy. What is the token? What does the token represent? Is the property the property of one gram of gold of a bullion that is custo big bunker in Madrid.

So the gold is for nines is pure is LMA is the best gold you can buy and is what you get. Why did we launch this product? First of all because if you buy physical gold the price increases in 40 to 45% in the refined process from 1 kilo to 1 gram. I mean, if you buy a one kilo of gold for $10,000, let's say if you buy a gram of gold is 146, right? With the tokenization, this is only one 2%.

Okay. Second, and this is very important, liquidity. Prosecutor in terms and conditions say that if you want to sell your token, your money is in your account in five seconds. No matter the price, no matter the thing. So liquidity is fulltime.

This is very important because if you want to sell your gold, physical gold is not so easy. It's liquid, right? but not so because the the people who who buy the gold can say no I don't want the gold right and third of all is tracibility audit pro has a a periodically audit uh demonstrating that the number of tokens and the number of grams of gold is one to one there is no derivatives there are no price differences nothing regarding nothing is physical gold what you get and it's not transferable. There is not secondary market. It's not a coin.

You cannot pay anything with it. So it's physical gold. This is why we could sell this product from Madrid to all countries of the world. That's why we put the the the product on the market. And is prour a B2C company?

No, it's not. We are not launching this product B2C. We are doing because we can but we we are calling the the the natural distributor of this product which are the banks to to the action. We call to the action because they are the owners of the investors. So we want to be the infrastructure and they should be the distributors.

Good. Well that was very clear. So do you think that tokenization has fundamentally changed the role of gold in a portfolio particularly in high inflation economies?

Yeah, pretty sure because uh as you may know uh gold increases prices uh more than 85% even with the with the two ruins of the last period due to geopolitical themes. Uh but gold has increased in in four years a 85 to 86% prices. So it's is a value preservation. I I think no there is no doubt that physical metals especially gold is a is a is a ref for for uh for financial investors. So I I don't have any any doubt that this is true.

Uh we are putting more uh different metals in the future silver copper and and lithium and other just to clarify that this is the very beginning. Uh, of course we we we cannot accept picss but picss we accept in less than three three weeks as well. But yes, I'm pretty sure that that is is the thing that the tokenization is the way to put the gold in the hands of the vast majority of the retail investors.

Good. Leandra, I have a question for you. So you work with Bank of Safara, one of the most traditional conservative banks in in Brazil. What does it mean um for for institutions such as Saffra to to embrace the digital asset tokenization? What do you think convinced the bank that this was not some kind of hype and and uh you went for it.

Okay. I'll do my best with the last two minutes.

I guess we this is

Yeah. Uh so congratulations on the launching. I think it's amazing what you're doing. uh you can see tatter uh also expanding their gold reserves uh you can see HSBC doing the same movement as proigur but it's nice to have was just mentioning prior to to come to the stage with that prouru which is a a neutral player actually providing this kind of service where they're they're basically leveraging what they do best right which is custody uh many banks in Brazil already uh uh are served by process group services and overall I think it's a very clever way to transform uh what it is nowadays a costbased uh product into a revenue based product because he he's explained very clearly that uh in order to benefit raw gold into you know uh gold coins or physical bars uh the the cost increases quite a lot. So what they're basically enabling that's the same thesis as tatter as HSBC is to provide not only access but making it more efficient for banks for financial institutions and especially and consumers to hold gold uh positions without having to have all the complexity and cost related to uh custody.

So it's a very clever way of uh based on blockchain to tokenize an index that is actually backed by a physical asset. Uh it's it goes in my opinion uh with the same logic as the stable coins but in this in in this case you're talking about um commodities. This goes also for you know my other colleagues here talking about agriculture. This could go for you know uh cow index. This could go for oil index.

All kinds of commodities right now are actually going through a transformation where the index is not only uh you know priced but it's it can be directly negotiated uh instead of you have having like instruments like ETFs and and funds that work uh to basically pursue the index and in this case the index itself it's tokenized. So I think it's a it's a real transformation in the commodity landscape. Uh I think gold right now becoming the largest fund reserve once again taking over do US dollars as the most uh uh the largest reserve for central banks. I think uh it's it's just a perfect product for the time we are we are living right now

and in particular gold is of course a well understood asset for for clients saf client high net worth individuals family offices and so what do you think tokenization adds to a client that already has access to say gold ETF or a gold future or

increases liquidity reduces drastically the cost of doing it uh provides people with the ability to uh access liquidity in the market easily and really fast in 5 seconds as you mentioned. Uh what could take like days even like weeks to be executed now is done instantly. So uh for for from a product slashc customer standpoint it's more tangible. So uh you know you have goldbacked uh stable coins or tokens that has a physical gold attached to it and you whenever you want or need you can cash it out. So I think that's the that's how is is advantage for all wealth clients that used to buying and hold and sell gold now they can do it um much more simpler.

Excellent. I don't know how flexible we are. Can we take a few more minutes because we started a little bit later in case nobody says no. So let's go ahead. Okay.

So just a few seconds if each one of you can please take a few moments and and say what needs to happen in the next 12 months in order for your specific use cases to get to full potential. If you wish to start VIP and we go.

Yeah sure. Uh one thing regulation. Regulation legal security. Yeah. In Spain, we modify the law of uh securities to let the tokenization come into the market.

And this is what we we think is going to change the market of investment. Regulation, regulation, and regulation is the only thing.

Um I think my final thought is uh everything's being done in in Brazil already. Uh drex picks definitely the way to go. regulation and uh I think no uh agriculture is 25% of uh Brazil's GDP and this country's already tokenized like over I think 600,000 acres of farmland. So there you go. It's happening.

It's so more of the same is my answer I guess. Oh, I I agree to the to the the two points you made and in my in my view uh I mentioned that on Tuesday. It's a race of who understands better technology capability and how you can apply it in order to make your current products uh better for your customers, cheaper and on a liquidity standpoint. how you can become more efficient from a balance sheet sheet perspective as a bank on moving assets that are basically tokenized. So instead of the underlying assing has to be negotiated all the time you basically mint and burn and there you go you are transferring uh assets uh very seamlessly for me I believe the in the the key word that's regulation regulation to facilitate the regulator to create an enforcement positive enforcement to facilitate the life of the commercial banks and the companies for example in the part of the agriculture is very very important for example quick example EB EBL EBL is not is not standard.

The electronic bill of lady is not a standard to facilitate the export. If you have the globally central banks with the standard regulation that can enforce the utilization of the BL, I believe that facilitates this process.

Okay. Excellent. Well, thanks very much uh the four of you. It has been very interesting.

Thank you.

Thank you. Likewise.

Thank you.