Enterprise Meets Web3: Tokenisation of Real World Assets - TOKEN2049 Singapore 2022

hi good afternoon fantastic to be here in Singapore my name's Scott teal until quite recently I was a partner at Global Law Firm dla Piper four years ago we envisaged your future in which this amazing technology we know as distributed Ledger technology or blockchain technology was going to revolutionize the way we go about representing buying selling trading collateralizing assets we were really envisaging what I like to refer to as the future of Finance I was a lawyer in a law firm as we start moving towards the complexity of digital assets that represent real world interests there is a lot of complexity from the regulatory perspective we heard JP in the last talk making reference to regulatory uncertainty and the need for doing it right why is a global Law Firm built the world's most sophisticated tokenization engine it's so that we can help clients deliver tokenized Solutions in a manner that is compliant with regulations on a global basis so dla is global it's created Toco it's still currently the owner of of Toco along with some other Service uh non-non-legal Services businesses so what is it going back four years we looked five years forward so we're close to that moment when we're going to see the rise of security token asset-backed tokens and we now have a pipeline of these types of deals the rationale for this is the inefficiency in today's Capital markets by inefficiencies there are several aspects to that there are the obvious inefficiencies in terms of uh the fragmented traditional Financial Services ecosystem very paper-based very intermediary based lots of layers of fees lots of layers of different participants that need to work together everyone's familiar with the slowness of settlement the fact that Stock Exchange is open a few hours a day a few days a year when it suits local clearing banks for example if we can compare and contrast that to the types of efficiencies we see in digital markets let's use cryptocurrencies as the as the earliest example of that where we have high velocity trading 24 7 exchange low fees access to Lots seen lots of real-time information about these assets and we're envisaging a future in which that same sort of technology and efficiencies can be now brought to bear on real world assets so what we do with Toko is we combine legal structuring asset structuring tokenization of a range of real world assets there are some on the screen here so things like real estate things like intellectual property rights funds Financial products any economic interest or right that you can imagine can actually now be represented in a digital form and once it's in that digital form it can start benefiting from the types of distribution networks exchange platforms and other efficiencies that we are already seeing in markets like crypto and nft but now with more complex and higher value assets underpinning them so the Toco technology solution allows the creation of virtual assets that represent in a compliant way these various interests we can do fungible and non-fungible tokens uh we we and the non-fungible token space we've been working on projects for Enterprises looking at Redemption tokens loyalty schemes uh consumer engagement models these are going to be the nfts uh in the next wave I believe and we're seeing large-scale Enterprise particularly retail Hospitality food food and beverage Leisure these types of businesses are now looking for nfts and metaverse being a new way of engaging with consumers bringing new consumers particularly younger consumers into their products and things like Redemption tokens that then connect real world and digital world because a lot of the businesses that are going to use this technology aren't just digital native they aren't just metaverse companies they're traditional companies very large traditional companies many of them are good Services products manufacturers that are now looking to leverage this technology to change their engagement model Toco will take these rights these different rights and interesting things that we're now creating for clients and creates a digital version of them so we're creating smart contracts with the types of autonomous functionality driven by external data feeds to allow these projects to be far more automated to allow the management of the assets to be far more efficient and to give the investors or the token holders a greater access to rights and real-time settlement and other aspects of the of what it is that's actually sitting under these tokens to all intensive purposes it is the same type of Technology as a crypto or a traditional nft however because these things now are linked to real world assets they typically have a much more complex regulatory requirement and again we've heard some of the other speakers on this stage talking about the need to therefore ensure that they are compliant so the other piece of what we're doing with Toco is really important digital assets unlike traditional financial services are going to be much more Global in nature they are going to move across boundaries just like your Bitcoin can move across boundaries today we're going to see once these instruments are digitized they are going to want and people who are consuming them buying them trading them are going to want them to be capable of moving if you want to do a secondary listing of an IPO now and you're listed on New York and you'd now like to list in Hong Kong or Singapore or London that is a huge process requiring enormous amounts of legal fees lots of Regulatory Compliance quite inefficient and a huge heavy lift okay for the very biggest of companies in the world but what we're going to see with the the digitization of these interests is the ability to now start listing on multiple security token exchanges around the world in a far more efficient and lower barrier tree entry and this is one of our primary drivers of the project is to democratize finance to give more people the ability to participate both as an an asset owner but also as an issuer of these interests so that they can then access new investors and investors can participate in asset classes that are traditionally illiquid or require too much Capital to participate in so the combination of this legal structuring compliance structuring and the world's most sophisticated token engine is then also combined with distribution networks so many of our partners it's fantastic to see here in Singapore at this event that whether they be the broker dealers the custodians the atss The Exchange environments and we've been building ecosystems and route to Market so a typical a typical deal if you like client comes and says I own I own this it might a couple of examples today we have access to several tens of millions of dollars worth of Fine Art we're looking to provide fractional interest in those art we're looking to provide people with access to an exposure to the Capital Growth or Revenue that can be that can be generated from this art either by loaning it out or selling it in the future for for capital gain can you help me tokenize and create these assets that is exactly the type of question that we're working with clients across the world with a range of asset classes to do I had another great conversation in the speaker Lounge just before coming on now about how we are changing the world of mortgages mortgages people who have money tend to give that money to a bank the bank gives you no interest for it the bank then takes that money and Loans it out for quite a bit of interest to people who want that money to buy a mortgage how about we eliminate the bank how about we connect the people with the money with the people who need it Arbitrage that and create new products now not only does that create efficiency in terms of the various intermediaries in the traditional Financial Services sector but perhaps even more interestingly you'd don't have to have something that looks like what you can get today which is a traditional mortgage which is very much boxed into a set of rules there's an LTV there's a possibly a variable or fixed interest rate and that's it that's what you can do you loan and you tend to then have the all of the flexibility of choosing 20 or 25 or maybe even 30 years for your loan product what we're now beginning to see is the market saying well hang on if I can connect investors and homeowners directly for example what interest do we have that both of them and products that can we we can create that are brand new and that's where it's getting really exciting is tokenization is allowing people to create new and different products and new and different investment opportunities that we haven't seen before so just a quick overview of that process what do we do again client will come to us we have an asset it's a piece of real estate it's some fine art it's uh an ex billion dollar fund where we have all sorts of assets or equities in there we in combination typically with the law firm will give advice the regulatory advice what is this thing at law what is it at Law in this country or that country who can you sell it to do they need to be professional investors all of that we do the associated due diligence then we create the tokens we help the clients build the tokenomics we help them create the structures we help them then take all of that traditional legal documentation that is essential to real world investment and we bake that into the token we hash legal documents we put them on the blockchain we put information about the underlying asset on the blockchain so it provides information to investors in a level of transparency that we don't currently see in traditional Financial Services that's great for primary Market issuance it's going to be even more important for secondary Market liquidity because one of the barriers to liquidity in so much of traditional markets today is what is this thing I'm buying let's go and let's go and ask the law firm to spend a couple of hundred thousand dollars building a data room so I can then have a look at it and decide whether to invest we're going to put all of that data room into living and breathing on-chain information packs so people can make decisions far more efficiently and quickly we then mint the assets we then as I referenced with our partner networks around the world we can do distribution of those and then we can provide ongoing asset servicing whether it's things like on-chain voting automatic Capital distributions and other cap table management and other features and functions that are going to make the asset then far easier to manage I want to talk about the Toco architecture for a moment because this is really critical and it's a fundamental difference in terms of what Toco offers that other tokenization platforms do not it is a hybrid structure it is a hybrid public chain private chain structure this is really important if you want Enterprise and if you want institutional and professional investor participation in real world assets they they are not going to accept that all information is visible through a block Explorer to everybody in the world and I know that might sound at odds with the objectives of fully decentralized you know crypto Ambitions and blockchain Ambitions but if you want the world to move on mass to the use of DLT Solutions it's a critical thing that you can hybridize and you have some information that's public and some information that's in a private chain layer so Toco uses a hyperledger fabric environment in the private chain to keep the information that only should be accessible by permissioned whitelisted AML KY seed professional investor proven people to get access to it and that's important both for the investors in terms of their own confidentiality but also in terms of the issuer to make sure they don't do things like selling a pi product only to a retail investor which would be illegal in many jurisdictions so it's a critical part of making sure we this is an example of how we've baked legal compliance into tokenization we then leverage uh the hedera consensus service our good partners technology Partners hedera hashgraph the world's best consensus service for any distributed Ledger technology we work with hedera and every one of our tokens leverages the HCS service so in terms of transaction approval subsequent trading of transactions it's running through the world's best abft level for those who are into the mathematics of consensus we leverage that trust layer and then we can deploy assets on multi-chain again a decision we made some time ago different projects there are so many blockchains out there different projects have different priorities different needs different wants in terms of where they would like their assets so we've already integrated ethereum layer one we've integrated a layer 2 in polygon the hedera token service which is our preferred standard for complex high value assets as well as the algorand ASA standards so we can mint multi-chain using a twin smart contract model and this is something that we're able to continue to evolve so we have some conversations going with some other protocols we're saying we have we have asset owners wanting to Mint on our on our platform can you help us please so why is this all so important and I think this slide neatly sums it up there is so much excitement about crypto and nfts and D5 and I I am also share with that excitement it's been fascinating to watch the rise of this brand new technology and the associated asset class I I didn't check this morning but it's somewhere in the region of one trillion dollars is the current value of the crypto markets and at its peak it jumped over three trillion dollars before we had a little a little crypto winter um that we're currently going through but we are talking one to three trillion dollars is the total value of crypto assets now the world economic Forum Davos they've estimated that by 2027 which is actually not that far away we're going to see at least 24 trillion dollars worth of assets on a blockchain they will be asset-backed tokens and that is that itself is just the tip of the iceberg if you start looking at real world asset classes real estate is already 310 trillion dollars Global debt so debt instruments the types of things I referenced earlier mortgages which are just a simple example of a debt 220 trillion dollars Global equities is running at just over a hundred trillion dollars and there are many other asset classes that we don't even necessarily think of as an asset class because they aren't currently serviced by the financial services market so I think what we're seeing here is the potential for you know five to seven hundred trillion dollars worth of assets that are going to be moving on chain over the course of the next decade or so now let's just compare that to the one trillion dollars worth of crypto today that technology applied to the tokenization of everything is where toco's positioned itself to do high value complex tokenization uh quick overview Toco is in all the Global Financial Centers New York London Dubai Singapore Hong Kong where we have teams uh quickly mentioned on Dubai it's our most recent setup we're currently working and supporting the virtual assets regulator there on an advisory capacity and on Monday night we also announced that toco's received its provisional license from Vara so we are going to be a regulated entity in that market hugely exciting we're seeing one thing I would say about this map if we look at the traditional Financial Centers of the world I would caution that they may not be the same Financial Centers that become the center of the digital virtual assets World they may be but that's definitely not a given and this is what we're seeing in markets like the Middle East that are positioning themselves to be at the Forefront of this new Revolution I am conscious of time my time is up we do have a booth just in the back at the right here m17 thank you for your attention it's great to be here