RWA: Future of Real-World Assets On-Chain | Sam Cassatt, Bhaji Illuminati, Manrui Tang, Caleb Lim

[Music] [Applause] all right uh excited to be here this is my third e Denver and my second time moderating so pretty excited um a lot of these panelists some of them are my friends so yeah very excited to dive into you know tokenization of real world assets I figured we just start with some high level introductions Although our MC kind of did you know very very high level introduction but I'm Alexis Johnson co-founder and CEO of light no Ventures we're an advisory and marketing agency based out of New York I'm Caleb uh based in Singapore from Helix uh it's a out way AI Landing platform uh previously was a banker and that's why that's a out outdated photo of me my student thae hi I'm M Ray I am a co-founder of untangled Finance we are a credit protocol bridging real world assets D defy and we would like to be known for three things number one we securitize um private credit asset on chain second we have ai Driven Credit modeling capabilities that allows issuers and uh investors to price these assets and monitor these assets third we are building a liquidation mechanism for Price Discovery and for exit thank you beautiful uh I am baji the chief marketing officer of centrifuge we are also a real world asset protocol we were founded in 2017 so have been pretty heads down building and learned and iterated ated a lot over the past few years excited to share more about that in the next couple minutes hi uh Sam casset uh I've been in this industry a pretty long time I helped build a company called consensus and funded things you all know and love like metamask and INF fura uh that were seminal to the industry uh right now uh you know I just co-founded a new company called layer which is an infrastructure stack uh using a novel wasam VM for performance and IBC for interconnectivity and it is aimed at institutions governments DG anyone who needs uh a a platform that allows rwas to be uh to be issued um in a way that actually is is amable to the regulatory requirements and the the real world use cases um of those assets so thank you awesome thanks for the intros now I'm going to dive in um so first question as the rwa sector within crypto starts to evolve what are what are some of the key Essential Elements needed for rwa infrastructure to succeed obviously Sam given that you're co-founder of a new protocol within the sector I'll let you uh start it off yeah so I I think one of the primary things is interoperability and the other is really sovereignty right so I think um what a lot of companies now are building is you know if you look at something like dydx right they moved to an L1 why do they do that um if you look at you know what JP Morgan is piloted right it looks more like an L1 they really want control over who's a validator they want control over governance right if you have an rwa where it's your house uh and your house gets lost because you lost your private key that doesn't really work right so you need you need Regulatory Compliance and you need governance um that's actually capable of mapping on to the the legal requirements uh of what an rwa might be um and then finally you know I think on the on the interoperability side um if you know an in intution can't send an asset to another institution if you can't uh use the sort of money Legos that we all love in Defi and compose them into more complex assets or derivative assets um it also will fail to capture the full power of what we want to do with rwas uh so I think those are two of the big features awesome yeah I've got something to add I think um for real world I said to in in terms of infrastructure you're also talking about on and off ramp I think even though it's getting better it's still very difficult for an ordinary investor to get onto get onto usdc get hold of usdt or usdc or vice versa and then is uh legal structure because the the we are now kind of at a stage we're still talking about tokenization that means that the asset not leaving originally or like authentically on chain to start with you tokenizing a financial receipt therefore you need a robust legal structure that to actually protect the investors's interest um we don't have that at least that's not what I've seen in the private credit tokenization so far um I guess the third is the liquidity part especially for private credit it's um we don't have um there is no secondary market trading of these of this credit and as a result that um it's almost defeated the thesis of the defi where um the flexibility democracy when you can get out you you can do it we don't have that um yeah and the lastly is a pricing oracles for real world asset all these four items in addition to the infrastructure are also part of the infrastructure that for dly R to succeed in my view and the other thing I would add to that too is the use cases so the partners that have a real need for this type of technology and ensuring that the protocols and the technology Builders are building for that use case so an example of that would be one of our partners block tower credit where we're working working really closely with them to understand what are the steps in the securitization process right now what are those intermediaries what role do they play and what can we automate how can we improve that and incrementally make every step a little bit better to ultimately improve the entire process so there's so much we learn from working directly with those players who experience this firsthand and know the pain and the traditional Financial world and see the value and see the opportunity in the defi world and want to co-create because we're not there yet there's still so much infrastructure that needs to be built but those Partners who see the vision are those that are going to build it with us yeah just to add on I think everyone has brought up a lot of points um so I I'm trying to figure out where I can add so just to uh just to add on with with regards to data security I think if you're fa facing an Institutional client uh there's a need to ensure compliance with kyc AML as also as also need to maintain compliance with data protection laws right so how do you do that I think I do see that there is a need for ZK proofs like ZK sync uh fully homomorphic encryption uh secure NPC just to maintain uh secure private transactions while also giving some uh necessary oversight another thing that I can also include would be um in terms of AI and right right now ai is is one of the biggest uh driving factor for for crypto as well and I do see that that that in rwa there's there is a need to catch up so I myself of course we are building an rwa AI platform just like her so AI actually helps to streamline the the risk assessment process to give you uh more better and faster data driven decisions that could be used for equities uh bonds or even Commodities yeah I think that's all for me awesome next question is more geared towards both Helix and untangled Finance how are companies taking advantage of tokenized credit okay so um I we didn't introduce much earlier so previously I was uh the ex interim head of Hy Ventures uh before Justin son took over and I we actually run a web two business uh for the past six years called helcap it's based in Southeast Asia uh it has a perfect track record of zero defaults uh task far since Inception and to be honest and when we actually look at this industry at at helcap standpoint we realized there's a need for stable uncorrelated use to crypto and also um not only that also uh reliable borrower pipeline so in in eventually because helic cap uh because of hel helic Cap's track record and consistent use we decided that Helix building Helix would be an ideal fit um to to to tap onto this liquidity so in terms of taking advantages I would say uh comes in Four Points first thing it allows us to go beyond southeast Asia uh tapping on through the Glo through blockchain be being able to go Global that's number one second thing open I mean onchain reputation for borrowers because a lot of our soueast Asian borrowers can't tap onto Banks because they're too small or they lack the reputation uh number three is in terms of liquidity I think like what people has mentioned here as well uh you able to tap onto the global crypto liquidity and last but not least uh you get Diversified across numerous lenders not just tread fire lenders but also crypto lenders as well yep um here I take companies as our customers like one one part of our customers basically are the borers are The Originators are the fintech lenders these are Innovative group of like of tech savvy uh Innovative people who set up their business to do to take the risk the bank cannot take and these people are hungry all they want is to diversify their funding base they honestly don't care whether is onchain is offchain and you know defi is a different Financial rail to traditional Financial Market here you not only help them to diversify their funding base you kind of help them to do it in a different Rail and they love that because they don't want to be dependent on one single funding source and that is the killer because um I had we have worked with one of the European um um originator fintech lender because they were funded majori by green seal and after it collapsed their book basically have to shrink down to a quarter of what it was before so defi is a Innovative and arguably better Financial rail for many of these Innovative alternative lenders only if you do it right I don't believe in we don't believe in direct lending to smmes Emerging Market because that's why these lenders are therefore we don't know them enough to take these kind of credit risks that's why we do securitization all the things are granular all the assets are granular the pool is backed by tens of thousands of assets and it's originated by by by kind of accredited Parties by experienced fintech lenders and is being vetted by financial institutions so I think being able to bring good quality asset on chain is the primary importance for defi to continue to grow awesome and my next question is for all panelists you know what are the what are some of the benefits of tokenizing real world assets I guess I could start I think I think there are a few and you know one of them was just highlighted by m which is that like there's a there's a long tail of assets that normally are either too frictional or too small for traditional financial institutions to engage in them and now if you sort of look at what you know the internet and the startup culture did to the rest of Commerce uh and the rest of you know business in the world it created sort of this Cambrian explosion of creativity and of new types of businesses um that wouldn't have been possible you know IBM wasn't going to build that Microsoft wasn't going to build that but a startup could build it and so you know it benefits our society and it benefits sort of like the goal of financial inclusion in general of the entire planet if uh you know kids in startups uh with a computer are suddenly able to to build Financial products so that's one thing secondly you know I think uh building on that as well is really like the composability and the uh the maneuverability and the agility of onchain assets because if you take uh traditional assets just zooming out big picture to like the vision of why we're all doing this and why we're here right normal assets move at the speed of a boardroom and they move at the speed of pieces of paper right um and if you have a 100 page legal document and lawyers reviewing it and Boards approving it or whatever you know committee approving it um that's a lot different than some people being able to code something up verify it against an oracle or verify it against an onchain reputation credit score whatever um and then just issue these assets and compose them into new assets so I think you know in general we're we're opening up a new phase of accelerated growth um accelerated Innovation that comes much more cheaply and is more accessible to everyone on the planet uh I think that's the big picture why and I can give two specific examples of types of assets um and the benefit that blockchain and onchain finance brings if you think of like real estate for instance there's a big wave of tokenization for Real Estate assets um what what's needed there is fractional ownership and liquidity so if you invest in a real estate asset that might be held for you know 5 to 10 years if you tokenize that then you can have you can make that more liquid and you can H fractionalize that um another example would be like the 2008 financial crisis right there that was we were trusting the banks and it was completely opaque and we had no idea what the underlying loans were within those securitizations something like that would never happen on blockchain because every single loan every single deal all the way down to the very bottom has the ability to be viewed and to be reconciled by anyone at any time so those are like two very opposite side of the spectrums but um indicative value that blockchain can bring to the real world to things that we've experienced firsthand yeah I really like the the word composability that Sam just mentioned um that is the beauty of Defi and blockchain that brought to um to everyone it it is just so easy to move values around and that's great in the case of financial product um create creating access but I also want to kind of come from a defi perspective now if you look at defi um we're talking about in billions and majority of that is crypto Assets in order for defi to grow um you really need to tap into the trillions trillion dollars of Real World Finance Market don't you and um it is also a way where you really kind of show def's value to The Regulators to the governments that you're actually funding the real world economy and having a way for government to actually apply tax on you um yeah I think that's also one of the benefit and from a crypto investment perspective you know all these real world assets they have intrinsic value that based on contract already performed schools already delivered so therefore they have intrinsic value that is not subject to crypto up and down I know we're in another buun so we it might be the bad market for real world asset but you know this is the most sustainable type of returns regardless whether it's rainy days or sunny days in Defi and I think the interesting thing is is it doesn't all have to be that there can just be a diversified portfolio where you can do some speculative fund crypto trading but then you've got a part of your portfolio that's stable yield that's in t- bills or in structured credit and you think of a more like treasury management approach to managing your onchain capital and growing that oh yes I think everyone brought up good points again so uh I'm never a few so I think the first thing that came to mind when she mentioned con posibility and inability I think that struck a c in me because imagine being able to use o USG from Ono as a collateral to borrow against other assets so I think there something interesting it hasn't been implemented but there is one instance by uh hash note and Noble they are coming up with a stable coin called USC and it's actually backed by treasuries and you can use it as a collateral across the cosmos ecosystem so I think that's one very good use case I think maybe that's on the the that side besides that I think on the borrower side itself on on RW ISU itself right how it benefits is in terms of 24/7 settlement like I think previously with bonds you got t plus3 t plus 5 those are hell along man I mean now with blockchain is instantaneous sentiment 24/7 sentiment and you get access to global cryp crypto Capital yeah I think that's all for me although I I have to disagree on that because this 24 seven settlement is a little bit deceiving at the moment because the asset are not leaving organically on chain so we are basically doing a lot of things to wrap a real world asset in a real world financial receipt form into a token so you still kind of have to follow a bit of the real world practice in terms of timing how interest rate are calculated and reconciliation but I do believe in the world that hopefully soon that with the legal framework with like am compliance with all the things getting ready that we have loans that originated on chain like invoice issued on chain so yeah I just to expand on that I I think um the merging of governance with the legal structures is really where it gets very interesting right because the only reason a piece of paper is the asset is because that's what our society agrees to when we write it in a piece of paper right but like even two years ago sogen issued a bond like a $100 million Bond on ethereum and they said well this legally is the definition of this Bond it it there is no wrapping right it is it is that right and so I think as as those structures mature then we will have that and I don't you know I think bare Market or not trillions of dollars trillions of dollars into tvl of any platform that's doing real business and providing a real service is a beautiful wonderful thing probably probably not that bearish bullish I like it and so next question you guys touched on before high level but which sectors within the economy are most likely to embrace tokenization first I I'll start first this okay thank you guys for it um yeah so for me I mean this my personal view it might be wrong so I first say stable coins stable coin is still a form of rwa is token tokenized Fiat uh followed by uh financial instruments like equities fixed income private I mean yeah fixed income then next will be real estate and followed by other asset classes like healthcare Supply Chain management and IP management as well I think the reason behind all of this is because for stable coin it's very it mirrors what you see with fed right it's and there stability so it's very very easy to actually integrate all of I mean stable coins into Financial systems and I think for me in Singapore uh I mean Ms has already started regulating stable coins so um given that I do see that stable coin will be the Forefront in terms of uh mainstream adoption for rwa second would be uh like what I mentioned earlier financial instruments if you look at market cap itself financial instruments is the highest uh or second to stable coins I think it's higher than real estate higher than all the other asset classes as well I think uh the reason being is because people are familiar with the asset class be it equities or be it fixed income like government bonds um and in terms of where in terms of the asset class itself or for financial instruments I believe that you follow the risk curve the the adoption follow the risk curve first people take the lower uh sorry lower T bills lower risk T bills subsequently then expanding into private credit F uh bonds and also receivables that's on the again the financial instrument side the second the third one is the real estate real estate is second I mean third is second to St to sorry to financial instruments and the reason being is because it's tangible so when it's Tang when it's tangible you got uh again like very complicated local regulations that governing this properties uh it could be in the form of taxes or uh property management and also in the form of and second thing it's properties itself is tangible so there will be Property Maintenance and insurance as well so there's a lot of considerations and last but not least would be the asset class for supply chain IP management and Healthcare yeah so in that aspect again there is complex regulatory uh uh Frameworks that need to be resolved second thing with regards to uh they needs to be tailored blockchain solutions for some of this uh products like IP IP management as well so in that in that order I do believe that that that will follow the trend for rwa yep um for me I'm probably biased um I believe it's private credit for a few reasons first of all it's it offers a very uh risk adjust good risk adjusted returns I know that it's not going to be like the 10x 5x 100x that crypto investors are looking for however these are very good double digit returns if you do it correctly and with the right partners and then this um often private credit often um these lenders are often lending to the real world economy to give access to finance to smmes um so from a from that perspective is really open up the access as well um and private credit opportunities in the real world is very not accessible at the moment by ordinary investors you whil it's very easy to access to treasury products regardless whether you're onchain or offchain but it's not the same for private credit it is traditionally only available for financial institutions but we can use defi to open up this access we love private credit too and that's part of um some of the value of securitization because absolutely so much more powerful with blockchain we also like to just kind of think about like longer term some more speculative use cases and asset classes you touched on it a little bit but supply chain Finance is a good example and the founders of centrifuge previously founded a company called Talia which did supply chain finance and that's essentially like in the most simple terms it's like Coca-Cola and Ford and these major for 500 companies take 90 to 120 days to pay their suppliers so they're going to pay their suppliers it's just going to take them four months so capturing that opportunity and paying those suppliers early and then having Coca-Cola pay you is this like really powerful use case where it removes a lot of risk from the process but it's pretty complicated there's a lot of like that goes on behind the scenes um and that's another really cool potential application of blockchain so ultimately like we build for what the investors are demanding right now and that's a lot of the lower risk stuff that's a lot of T bills that's definitely structure credit but we still have the these visions of like music royalties Emerging Markets um supply chain Finance just like carbon credits everything you know could come on chain yeah I think those are all great answers uh I guess I I just really want to offer the observation that it seems like um access and like uh sort of stability are are things that we're sort of moving down the curve of right so we already have USD represent right everyone in the world wants to use USD uh it can be frictional and that's why we have so much of it and people some of the best real business models in blockchain are just moving USD around in various forms and then you know you go down the the curve and you have things like um like t- bills right people want access to them it's not necessarily easy in an emerging market for instance to get access to T bills even if you know if you have good banking relationships you can but a lot of people don't but suddenly on chain you have access to those things so I think you know if you look at what do people want the most and the scale of what they want the most like those are the things that are already on chain and we're see we're seeing it first so just making that observation that we're moving down that curve as as this progresses yes and so my next question is for panelists how will tokenizing real world assets help developing countries so so that's so that's you know s sort of what I was just saying right people the US dollar is the uh the gold standard how to transact and now people can have US dollars they can also have us T bills um I think also um infrastructure the way we build it is actually a lot cheaper right so for instance I remember sitting uh with a friend of mine who was he was the prime minister of Haiti uh and they literally had in in the um during a hurricane the building that had all the um the land records washed into the ocean and they were like well guess we don't have all the Land Titles anymore uh what do we do now right so I think you know there are there are systems that can kind of be leapfrogged because of the way that titling and rwa uh assets and and the the sort of legal and governance link because because you get a lot of that for free or you get a lot of that in a way that's scalable um Emerging Markets can take advantage of things that um would normally require a very expensive set of governance and you know set of uh of institutions in order to administrate so that's that's an obvious one and people sometimes just forget like the simple store of value use case of stable coins in Emerging Markets you don't always have the confidence that your money in the bank account is safe um so that's you you see a lot of like more utility in just the pure stable coin use case yeah I really Echo um Sam's view on this leap frogging um develop developing countries um their financial Market are less developed in the sense that they developed later and that give them a perfect opportunity to Leap Frog and utilizing all these new technologies that we currently have now for European Banks American Banks who've been around for for so long their legacy system go back to 1970s it is so hard for them to adapt anything new and we had live live experience on that we helped um Nigerian Banks to ex to help their ummes to access to finance via Nigerian Banks through the model that um um B you just described that supply chain Finance basically we have deals with like very big companies in big companies in Nigeria and they it takes them 180 days by the way sometimes to pay their suppliers and then we then kind of using to get a credibility of these large companies and then the bank would advance to the smmes um using the blockchain tokenization um that's back in 20 2018 yeah so that's one of the ways that Emerging Market can take advantage yeah just just really quick like I often hear a lot of people especially during bare Market say why do all this stuff why why you know why is this interesting aren't you just recreating what already exist like it seems like just a you know a way to make money or something um but you know tell that to someone who like literally doesn't have a credit system or doesn't have a land titling system or their currency is hyper inflating right now like there's a huge use for everything we're doing totally and also like uh in those in those in those Market um for example the farmers or the small smaller businesses they are very much agriculture based so they have inventories but these inventories are dead at the moment they're IL liquid where you when you tokenize become a warehouse receipt they become liquid they then they can move around that is extremely helpful for those countries okay um yeah I think just on just to add on to uh I think everyone has been mentioning a bit about supply chain um and I mean from where I come from in Singapore uh in Southeast Asia I think there is a lot of corruption like there's a lot of traps that set by um some of the the the the companies in Southeast Asia uh to to try to scam you right so in terms of the blockchain itself I think what it can offer is transparency so in in in for me in Malaysia so there there is in Malaysia there is a Malaysia palm oil Council so that they started this uh traceability P pilot program to actually Trace how the palm oil is being sent uh from Malay from Malaysia uh to the different parts of the world and in the event there's like um uh again some some kind of abuse in terms of children I think they can identifi through the blockchain as well so essentially is just solving uh environmental and societal issues uh that is faced by emerging markets and so my next question is uh more focused on you know the barriers and challenges that you know will come up and arise um as you guys are us companies tokenizing real world assets are those challenges more legal related technical related should I okay um there are a lot of challenges um I think I I will only talk about private credit because that's what we believe in um as treasur re bills you can get it off chain private credit you can't um for private credit from the last bu run we we now have about 500 million US dollar worth of credit credit private credit like in terms of tvl um but there a lot of these asset are perhaps not as very good quality as it could be because in last def5 bu run like lots of borers they couldn't get the real world kind of Finance like from Tri and they see liquidity in defi they jumped in and then some protocols offer like yield farming opportunities to then add on to the return that these assets are promising and as a result that some of the less good quality asset will Brad on chain to start with so they are more prone to default and then at the same time the investor don't have a way to really value this asset they don't know how how should they look at these private credit asset because private credit asset they are private for a reason many of these things are secretive that originator don't want to disclose these kind of things and how do you make credit private credit like public and but yet private again that's kind of with ziki knowledge proof that we are we we we kind of um are developing with some Partners right now um they then so some investors are getting double digit return like 12% but what they're really taking on is equity risk and that obviously don't add up and then the third which is compounded or uh make it all these worse is the lacking of liquidity lacking of the ways to to actually liquidate there is no second market trading of secondary market trading of these tokens so all these things combined when there is a default then you know investors don't know what to do and all these were compounded by the fact there is no good legal structure protecting investors interest uh it took us with our partner fanara nearly six months to set up a traditional securitization structure in Luxembourg that is token friendly and Regulatory in compliance you don't have that with other protocols I just want to take it from the technical Direction um and you know it's really nice if you can tokenize something and as you said like you know you can have this token sit there and that's great but if you actually want to realize the vision of Def and it's not interoperable um you can put it on some ATS and each each ATS can integrate some kind of you know specialized API call into your specialized chain that doesn't talk to any other chain that's not that's not the end game here the end game is that they can all talk to each other they all meet some kind of standard that we all agree upon or sets of Standards um and technologically those things can move around otherwise otherwise really all you're doing is you're having a different kind of ledger to take you know to to record the same things um so I think um interoperability of both standards and the Technologies is really one of the challenges for us to realize this vision and another challenge we've seen is that like the reality of it is we are still so new and back to the infrastructure question there is still so much that needs to be built so it's still the kind of early adopter Visionaries who might need to run parallel systems and run everything offchain and ensure that um we're kind of Crossing all the te's and dotting all the eyes so they aren't necessarily saving the full potential yet but they believe that they will in the future so it's still early in so many ways and there's still so much infrastructure that needs to be developed but that's why these conversations are important and that the there's this kind of call to action for these Builders and for these new players to come in and start to fill some of those gaps uh just to add on I think we got a one minute left so yeah so with regards to uh the points I think some them mentioned I think there's a need for a secondary uh marketplace right so currently I'm inan private credit I'm also doing private credit so the deals are it's large and it's like one it doesn't happen like every few seconds right it's not amm model but what what happens if you bring to the secondary loan Marketplace currently what we are doing actually is we're really doing some OTC transactions with our web to business but we bring onchain and transactions happen too quickly I mean the gas fees will be high right and as of now as you know ethereum gas fees are crazy right and it's probably more expensive than your your old school banking transfers so I think what we need is probably scalability infrastructure like a bit rollups ZK sync optimism that will help a lot with RW as well or or layer yes out layer yes sir there you go nice awesome uh unfortunately we're out of time but I'd like to thanks everybody for tuning in and the panelists for their contribution thank you I love that we've got the strategist the operator the sales person the marketing person we're like the founding team