On-chain Finance: One Block at a Time - Lorenzo Rigatti

okay now I'll try to explain a little bit better uh what we were trying to say during the panel okay so and also trying to squeeze the experience uh of blocking vest in the last four and a half year um I mean let me start with uh uh a brief background uh I'm coming from construction engineer so I had a very a very quiet life uh in in construction industry I used to work as a project manager in in US corporation uh and uh I learned about cryptos uh 20156 and was lucky enough to to be able to quit my job and start a new career um so when we were in Zug in crypto Valley in the in the first St startup I was working on basically uh we realized that uh crypto was nice but was let's say just speculation speculation is good because uh without speculation a lot of great project will never be there okay uh so all together I think we we financed all this project and without cryptos block imers will never exist so um the the goal of the company was basically to uh and I mean take all the good that we we have in the in the crypto space e transaction transparency and trying to find as I was saying the best compromise in a hyper regulated environment um that's why we we like to Define ourself as a bridge okay between the the traditional finance and and the blockchain or or better the structured Finance otherwise they get offended um so it's not an easy game uh but we we we do that by providing uh a tokenization engine that is designed exactly to enable not only the tokenization of asset which is represent on chain a real world asset but issue natively on chain a real world asset which it sounds similar but is not the same natively means that this value is not keeping in in a book record of a custodian over something but exist only on the blockchain okay we were discussing about the liquidity issue it it can be solved probably to have native tokenized asset and to do that we basically realized that building a a nice Tech uh that can be adopted by the financial institution is not enough will never be enough so the first things that we did apart from building the solution with Security First approach was to build solution compliant first approach uh starting from the EU the EU regulation so we build up our smart contract factories uh try to understand I mean I mean like the doctor right so the doctor push an IT thir and we did that and we were helped by our regulator so uh everyone that is saying that it's hard to build something in Italy because we don't have a regulatory regime the regulator are not willing to to embrace the new technology they don't know what they're talking about uh we are actively talking with the regul our two Regulators actually in Italy since an year and half uh so there is a lot of attention people are learning enough to understand understand that tokenize it tokenize something issue a token is is doable uh but procedural you know the the words procedural it's a pain and uh so the procedural issue is the only way to make it happen because there are a lot of constraints in issue native tokenized assets which are the procedure business procedure legal procedure compliance procedure and this is what block invest does basically we squeezed all this mess in a tech solution that is vertical for the different uh business sector just few words about us uh I mean we launched the company uh I was still in in Switzerland when I launched the company in Italy and we immediately uh try to to get uh very particular Market the non-performing low Market that it's a market that no one touch it probably also because in us they don't have too much non performing low uh in Europe we have particularly in South Europe so we started immediately with that market uh quite proud to say that we we are the first Italian startup in which credit agricult bank invested uh back in December 2021 um there were no regulation at a time in Italy so we started uh providing the solution for the first green Bonds in Luxembourg so again native digital Bond um and actually the the green green part was was really interesting because uh we exploited the the blockchain not only for tokenize and raise money but also to put transparency into the system so again data matters um then I mean the company uh I mean started to I mean Embrace also the Italian market we got selected by uh euron next for the preo program and but mainly we we made two pilot project uh with the bank of Italy and our goal is uh getting their attention to understand how to design what we called block ID again the the tokenization of Finance it's it's important but the first things that we need to care about is the identity uh Sylvio as an asset manager was talking about the importance to treat the retail investor uh we are not all equal okay if you put something on chain and you want to really exploit the benefit of instant settlment uh cutting information symmetries whatever you need to understand who is buying that token and what can do with that token so it's it's it's what we did with uh with this project with this pilot project and also held by uh the the head of compliance and an AML of an important Italian Bank uh last but not least uh as I was saying H we are talking about always us project but we are quite proud to say that we were uh we contribute in the first uh one of the first Native digital uh bonds and was made in Italy the other one was made by kfw in Germany so it is it's doable but just with I mean following some precise steps that are required by by the regulation um before I was saying that we hypothetically can tokenize everything but probably we don't need that okay I don't know if that painting is an nft probably if it was now it's breaking but I don't know if the nft has the same value uh we we grabbed our offering in three sectors the first one is Capital Market we're talking about bonds or equities I personally believe that we don't need to tokenize stocks okay I know how the the equity Capital Market works in the stock exchange the blockchain probably will will never be able to reach their performances never okay so uh the public market is better where it is uh we are focused more on the private one there is a huge gap between what happens in the stock exchanges and what happened in the private Market when you have billion value transaction made via email someone is still using Fox it's not a joke uh the other one is the securitization so the issuance of nodes of SPV vehicle that I mean can manage different underline uh the first the first probably the most interesting one is the non-performing exposure so the bad credit uh that the banks now are obliged to sell and there is a huge market in terms of volume few operators involved a lot of informational symmetries uh a lack of liquidity so this is I mean I think one of the most interesting Market um that can be toiz not only the bad credit with real estate collateral but also uh let's say uh active real estate uh operation uh last but not least which is probably in terms of volume will be the bigger one is the asset management so the tokenization of fund units particularly which it's worth um it's something that now we buy from our banks I don't know if someone invest in every I think everyone invest in funds even without knowing it we pay a lot of Fe a lot of this so they make money the banks makes money for and I mean we we take probably the smallest percentage of gain of the funds uh so we think that for the asset management uh we need to treat differently closer than the funds and open-ended funds because the open-ended funds like monetary Market funds or Global Equity Funds whatever you have the benefit of let's say a strongly improved processes now you have a settlement in t plus4 t+ 5 so I invest in something and I receive the value of my investment in five days from now with the blockchain you can do in one days you still have I mean one day to wait CU you need to get have the net asset value on chain of the of the uh of the funds value instead of the close and ended funds which is really interesting for many let's say classical investor you have the lack of liquidity okay you have the closed maturity funds that I mean last 7 to 12 years sometime even 15 uh and you are locked up so you invest in something that for at least seven years need to remain there uh it's really hard to be with the traditional centralized system um a a secondary market so what they did in the past they went on Stock Exchange and they listed it I mean the drawback was that they discounted the net asset value by 20 25% on average so they delisted basically all the funds all the funds I mean there are very few funds listed um and this is something that can be built uh with a pure tokenized uh infrastructure but I mean this is what I mean the core of my intervention is uh everyone is talking uh about tokenization of real World asset tokenization is Art more than we thought um we discussed that also in uh token 249 in Dubai um no one thinks that you need to follow some processes okay when you have a value which is on chain you need to understand what comes before okay all all the value chain the token in our business basically is represent less than 15% % of the blockchain transaction less than 50% so the other 85% are onchain transaction that uh you need to make to set up the operation so having something which is on chain I use the blockchain to trade value and trust is I mean it's it's easy because it was built for that but structure the operation if the token needs to be just on chain it it takes a lot of a lot of steps another thing we are in an open market okay uh the country regulation are different as we were saying before so you need to understand where is the issuer where are the investor depending on where the investor is you need to adapt something so it's it's very challenging okay a real pain is I mean regard the Legacy tool okay when you deal with structured financial institution they have leg Legacy too they probably invest millions of Euro in setting up this ancient uh softare tool and you need to adopt the blockchain with that so the the other critical part is how to make a consistency between between tool the Walling I will be very brief on that Walling is is still missing so it's still for ner uh I love all the decentralized wallet but you can you cannot ask a traditionally investor a financial institution to use metamask or even use coinbase wallet it's hard so needs to be put it on the back end and manage a better user experience and other things that uh no one consider in the classical Finance is that now the finance move with Market Towers the blockchain which is great is 24/7 but you need to I mean train your smart contract to understand the cut off time so you need to to to train your platform to understand that tomorrow is Saturday and the day after tomorrow is Sunday so you cannot trade potentially so in the short term you need to make this effort in the long term probably and we we I mean we wish that uh there will be no Market hours but the transtion will take I think at least 15 years just what's next our idea uh and now we want to contribute to this evolution of the onchain finance so the first of all the the web tree identity okay we make ayc we make AML but uh the data are really sensible to touch so the only way to to have an open market and manage liquidities and let liquidity provider work on it is to better protect the investor data and working in zero knowledge proof methodology and creating a digital identity the digital identity will never be created by block invest it will be created by the European Union but what we are trying to do is contribute a little bit to understand what is the investor profile that you need to squeeze in a token okay so what we called block ID the second thing is the cash on chain okay the other the other huge piece the the classical Financial world is not using stable coin we don't have a Euro St I mean we have a couple stable coin but is like I don't know 50 million in total it's is nothing uh so we are trying to understand what is the best solution if to use the cash lag in the tread fi and Bridge it on chain or if the market will Embrace a stable coin we don't know that the market will decide and the last things that we are doing I would say autonomously is the block invest Global Market so uh the bigger risk that we have in our industry is to build Chinese world so we we have a decentralized system but if if everyone builds its own platform uh I mean is was better than the classical wor so basically what we are doing is providing a way to structure the operation for I mean all our clients uh in the different verticals but a way if it's possible by laow to reconcile in in a unique place which unique Global Market that is not block invest platform we just provide the API to Plug and Play potentially to the most Distributors as possible this kind of data so and this is the only way that it can works but for a very simple reason it's not block invest that put the value on chain a value is not real because it's on chain I I could put on chain that I'm an NBA player but I'm not unlikely for me um but it's because the institutional guys that are entitled to do that that put that value on chain and use the blockchain for what it is a transactional ledger that's it it's it's no more than that okay it's not like something more abstract it's very simple transactional ledger so if you have the right to to put that value to structure that value on chain you can use this network to create what we don't have in the classical finance a capital Market Union even in Europe even with all the euron next uh venues in Europe we don't have a capital Market unit it's really hard to build with centralized system uh probably the blockchain is the only technology which even is it's really hard to use but is the only technology that potentially can enable the Capital Market Union