Um, hello everyone and thank you , Ethan, for inviting us. I am very excited to interview H. Carlos from Securityize. It seems the SEC approved your S4 on Friday, which means the door is now open for a public offering of securities through, um, a spa securities through, um, a spa -means. Uh, yeah, can you explain, uh can you explain, uh , what that means and what its significance is?
Of course. Thank you to everyone who invited us here who invited us here . Uh, last year, um, you know, our company turned eight years old. Uh, the market finally started to grow after years of, you know, no tokenization, and we took the lead because we partnered with Black Rock and, uh, you know, Apollo, Vy, and many other companies. And, you know, we were thinking about what to do with the company, and then, you know, Circle had an IPO you know, Circle had an IPO , which was extremely successful extremely successful , and then I realized that there was a lot of investor demand for tokenized dollars, which is stablecoins.
So, tokenization of everything else that we do also has to be something that, um, um, um, has to be something that has, um, um, um, demand from investors. And for us, working with very large institutions, to go public and have transparency about our finances, and also to be able to raise a larger amount of money, go to public markets, and so on. We thought this was a very good opportunity, and then we looked at different options for going public and decided to go public through a merger with an existing publicly traded company and create a fake certificate company called " called " counter-equity partners ." Then we filed with the SEC, and it's a very long process where you enter into a business combination agreement with a company, which means company, which means you agree to a merger at a certain valuation, and then after that you have to file something called an S4, which is similar to what a company does during an IPO, an IPO is called an S1; in SPAC it's called S4, but it's essentially the same process. You need to submit a very long document, about 850 pages, with all the disclosures from your company or your finances, a description of your business model, like all the, uh, you know, uh, investor warnings about risks, etc.
And finally, on Friday, the S4 was approved, which means it's kind of the final, uh, step towards going public, given that we're doing it on a SPAC. We now have a 20-day period to hold a shareholder vote to approve the merger with Securitiz. This will happen on, uh , June 29th. And then, two or three days after that, we'll go public on the New York Stock Exchange, and we'll change the ticker from Spack, which is CPT, to the Securitiz ticker, which will be Scc, which as you can read, is very sexy. Perfectly.
Hmm, great. OK. So, uh, on July 2nd, uh, Securitize, uh, Spec will begin trading on the New York Stock Exchange. Uh, what will this do for Securitize? As I mentioned, this will give us two things.
give us two things. Firstly, it brings our company to the forefront, as more people learn about securitization and tokenization, as public trading of shares gives us more opportunities. This also allows us to have a larger pool of capital between the Spark fund and the capital we raise . We will have about half a billion dollars in cash that we can use not to fund operations, because we don't consume a lot of cash, but, you know, expand the business, do acquisitions, and so on. But more importantly, it will give us confidence from the big financial services companies that we work with that security is here to stay, that we are, you know, what our financials are, how much we're growing, how much money we have, etc.
And it will give us some of the credibility we need to work in this, you know, very traditional space and try to bring traditional companies into cryptocurrency. Of course. Um, so, uh Of course. Um, so, uh , you have about four billion in assets under management. Um, you facilitate, uh, tokenization services for some of the largest institutions, and a lot of that happens on Ethereum.
Why do you think Ethereum has become one of the leading blockchains for our organization? Well, we started with Ethereum when I founded the company. It was 2017, and Ethereum was practically the only reliable blockchain at the time. So we were something of an EVM shop that deployed Ethereum from the very beginning. I think it's the DNA of our company.
Of course, over the years, all these blockchains have come out, and we've also expanded support because obviously there are different ecosystems and market demand, but Ethereum has consistently remained the biggest, you know, platform for us, the biggest blockchain. I think we have about 30% of our assets there, and this is the largest of them. And also a lot of Ethereum L2s, which are kind of like Ethereum, if you will, that we support, like ZK sync or Arbitum Polygon, etc. So, from a financial company's perspective, when it turns to blockchain, it just wants to make sure that its assets will be safe, that there will be an ecosystem, that there will be enough liquidity, and so on. So Ethereum stands out in everything, it meets all the requirements from this point of view.
So for us, the issue of gas fees and things like that gas fees and things like that , which were problematic for other use cases, is not really a problem for what we do. So it's never been a barrier, and I think the fact that it's the most decentralized and the most secure, and the one secure, and the one that has the biggest ecosystem and liquidity, is what liquidity, is what I think attracts institutions. For example, when we launched BlackRock, the first blockchain they wanted to be on they wanted to be on was Ethereum. Hmm, the fact that it's a public blockchain, uh, doesn't have many privacy guarantees yet. Uh , capabilities like KYC permission to, uh, know your counterparty, like all those things that, uh, institutions typically look for, I think, are harder to do on Ethereum harder to do on Ethereum .
Was this a problem . Was this a problem ? No. So, we use a permissionless infrastructure like Ethereum, but our assets are permissioned, right? Because our assets represent security.
So, we're leveraging the capabilities of smart the capabilities of smart contracts on Ethereum to be able to, you know, whitelist certain wallets that have passed KYC on the blockchain. So, you know, in blockchain, we know that this wallet is safe because it belongs to a real investor. And then we use smart use smart contracts to decentralized control how the transfer happens and how assets move across Ethereum. So the fact that the base layer is permissionless doesn't stop us from creating, you know, permissioned assets that move decentralized. This is the main thing.
There are no rules, when an asset that we issue on Ethereum moves from one investor wallet to another, it moves without any intermediary. It is simply a peer-to-peer transaction that smart transaction that smart contracts approve or reject. With privacy, things are completely different. Privacy was n't really something that was important until recently, when some companies tried to position themselves on privacy. But I want to distinguish between two types of privacy.
There is privacy, like some other blockchains do, meaning they say we are private, but they are private because they simply limit access to the asset. To me, that means you know that you as an Oracle database are private because only these three institutions have access to the Oracle database and no one else can actually see what's inside it. It's not interesting to me. I think what's interesting is that some approaches to privacy can be built on top of Ethereum, where you can create a layer on top of transactions to introduce privacy into transactions while still seeing them on a public infrastructure. So, that's the approach we were considering.
Uh, you know, I think it's going to have to be done eventually. I think it's fine today, most of the RWA ( rental assets at risk) are there, and this SE- are there, and this SE- anonymity of wallets and so on doesn't create a problem, but yeah, I see a future where, you know, implementing privacy and transactions on Ethereum will become more and more important for WAS, especially to create more composability and use in DeFi, which is somewhat limited for tokenized assets right now, and that was true. No, that's not true. So we developed something like a vault technology where any permissionless DeFi protocol, especially for lending, can actually accept permissioned assets as collateral, and then we also control the liquidation process because, as you know, assets are securities, right? So, if you borrow money under RWA, unless your loan is liquidated, you need to know who is actually taking the underlying asset, right?
Like with a digital asset, not a traditional digital asset, it does n't matter because it's, you know, permissionless assets, but with permissioned assets, you need to control it. But introducing a few such modifications to existing D5 protocols actually works. We are integrated with AB, which has a separate trading platform called Horizon, which is designed for RWS. We are integrated with Oiler; we are integrated with many leading Defy Lending lending protocols. Now trading is a different story.
We have integrated Ethereum with Unisopex, which is an RFQ mechanism, to be able to provide liquidity for on-chain assets, and the RFQ from Unis Swap X is still decentralized, but we control on both sides that the asset has permission, and also that the market makers responding to the RFQ request also have permission. So, the infrastructure, the learning infrastructure is still decentralized, but the endpoints are not. And then automated market makers–that's kind of the next evolution that I think evolution that I think will happen, but it's a little more complicated from a regulatory perspective. Of course, that's what's interesting and exciting, interestingly, all the pieces are already in place for RWAS and tokenized assets to integrate more fully with DeFi and see more trading volume and more lending volume, or RDA, used as collateral in lending markets. So, the city said it expects the RDA to grow to 5.
5 trillion by 2030. We are still very far from this. So what does it take to see this kind of growth? I think we are very far away. So we're roughly...
I don't know, depending on what you consider tokenized assets, because there are a lot of misleading metrics misleading metrics . But let's say we have about 30 billion, and most people would agree that these are true tokenized assets on a permissionless infrastructure. Um, so going to five trillion is a huge leap, right? So, uh, first of all right? So, uh, first of all , it depends on what you're counting, what asset classes you're counting, whether you can, you know, grow faster or not.
But I think one of the things that we're really excited about is tokenized stocks and ETFs, um, because if you think about the size of the market, the entire volume of tokenized stocks and ETFs around the world is probably about $150 trillion or something like that or something like that . So if just a small percentage of that, like two or three%, moves on- chain, that gets you very, very close to that $5 trillion , and that effectively doubles the size of all cryptocurrency, that is, token stocks and ETFs, if you do it right, because, you know, there are many ways to do it. I think that's the asset class that's probably moving the needle, and it's really exciting to see leading companies in the TRF space, who you know work with these assets in traditional markets, moving to blockchain. So we announced a partnership with New partnership with New York to be able to trade tokenized stocks and ETFs 247 with instant settlement instant settlement . We announced a partnership with Computer Share, the largest funds transfer agent that controls shares of publicly traded companies, and they want to use collateral to move them across the blockchain and so on.
So I think that's what's going to move the needle to get us closer to that $5 trillion projection that the city recently released. Good. So tokenized stocks tokenized stocks are where you see the biggest, uh, area of growth. ETFs, ETFs, ETFs. But you said there is a right way to do it.
Uh, and of course, there are many competitors in the tokenized stock space. Uh, can you, uh, tell me more about what you mean by that? For example, how does Securitize deal with tokenized shares? How is this different from all the competitors and, um, related to that, if you can also, um, touch on the potential fragmentation that, um, you know, could arise from all these different platforms doing tokenized shares, issuing tokenized shares in different ways. So, first I would like to say that as much as a lot of people today say they are tokenizing stocks, they are not tokenizing stocks.
They tokenize something else. They give you a token that does not represent the actual underlying equity. They give you a derivative tool. They give you a wrapper, a price swap, and obviously most of them block the US, which is the biggest market in the world, because the way they do it is probably not compliant here. Otherwise, why exclude the largest market in the world if you qualify qualify ?
Hmm, and on top of that, it creates fragmentation, as you mentioned, because every company that creates this different derivative with a different design is essentially creating a different asset, right? It's like you don't have the same asset. And look, tokenization was supposed to be a technology to solve problems and eliminate middlemen, and what these people are doing, in my opinion, is they're adding more middlemen, more counterparty risk, and creating more problems because they're fragmenting the market, they're circumventing regulation, they're creating problems with insider trading, they're creating problems with ISS, allowing, you know ISS, allowing, you know , people in countries like China to access U.S. stocks that aren't, uh, legal, etc.
So we think this is the right way to do it, and by the way, we're not alone in the industry. There are some of our competitors like Superstate, Centrifuge, Bullish, etc., they are moving in the same direction where the token actually represents the same share of the company. You are not buying anything else. You do not assume any counterparty risk with respect to the new organization.
You are not buying a derivative. You are buying the same asset. It simply resides on the blockchain, not in a centralized database on the exchange. So this gives you the same rights. This gives you the same, well, you know, voting rights, access to dividends, etc.
And I think it doesn't introduce any fragmentation because it's the same asset that already exists. This simply creates more liquidity as it allows for more efficient blockchain trading. So we think this is the right way, and of course, doing it right is more difficult than if you decide to take shortcuts. Uh shortcuts. Uh , and unfortunately, this is the situation we find ourselves in today ourselves in today .
But I believe that in the long run this will be the prevailing mechanism. Um, now, what else needs to be addressed, like what do you, um, need to see, what do investors and issuers need to see to bring more assets to blockchain? I think you need to see the utility of the assets, right? For example, if you put something on the blockchain, but then you can't do anything new with it, then that's less interesting, right? It might be more efficient, it might be better managed, etc.
But usually when it comes to innovation, innovation that creates efficiency versus innovation that creates new markets, you know, efficiency is less interesting. New markets are what's interesting. So I think that as we see that tokenized assets have certain characteristics that make them better than non-tokenized assets, that will drive investor demand, and I'll just give you a very simple example. As you know, we work with Black Rockck. Black Rock is a very large asset manager, the largest in the world.
They manage about $12 trillion in assets , and among the many verticals that BlackRock manages is one they call cash products, which are products that act like cash, like dollars, but usually contain Treasury bonds. So, BeBidded, the product we tokenized with BlackRock, falls into this category. And because Treasury bonds give you a yield, we pay dividends pay dividends . And then if you buy any of these products from BlackRock, they pay you dividends based on the Fed rate, based on the U.S.
government interest. The tokenized version of Bidd is the only one of all Black Rock products that pays daily dividends. Why? Since it is very easy to pay daily dividends on-chain, for us it is essentially one blockchain transaction that actually releases more tokens into the wallet, and we know the balances in real time, even if tokens have moved, etc. So why is this important?
Because if you get paid dividends every day, it means the same thing as if you got paid more the next day because you contributed more interest to the fund. So our fund is most effective precisely because of these daily dividends. It can also be moved between investors between equals 247. You can also have onchain liquidity 247, etc. So it has characteristics that make it better than non-tokenized assets.
So I think once you start creating these tokenized versions of assets that can also, for example, as you mentioned, be used as collateral in DeFi for loans or traded on a blockchain with instant settlement 247 and so on. When these things happen, investor demand will shift from traditional assets to tokenized assets. So, this is kind of the path we're on to make tokenized assets useful, to make them more attractive than the non-tokenized versions. And I think that's what will ultimately drive their adoption by investors. And by the way, where do you see the greatest demand for tokenized assets today?
It's almost a cryptocurrency crowd, isn't it? Are there big, you know, uh, protocols that are migrating to RWA. Let's say like Sky, Athena and others. Also, many cryptocurrency hedge cryptocurrency hedge funds use RWA for collateral placement and derivatives trading, some frameworks for treasury management, some protocols that create derivative versions that are supposed to generate returns, etc. That's where the demand comes from today.
I think the dramatic shift in demand for RWAS, and getting to that $5 trillion that Citi is talking about that Citi is talking about , happens when you factor in, as I mentioned, you know know , people who want to consume tokenized assets, and that still requires them to be familiar with wallets, use stablecoins, etc. So it's still a little bit of friction that cryptocurrencies don't have because crypto users are familiar with wallets, they already consume stablecoins, etc. But I truly believe this is the direction of movement, and where we will see a dramatic shift in demand. Are there any regulatory steps that institutional investors are still waiting for to hold tokenized assets? No, not really.
Uh, today tokenized assets are legal in the US if done correctly. Of course, many people do it wrong. They claim they can't do it in the US, but that's actually not true. You can do this in the USA. We do this in the USA.
We have licenses in the USA. We work with the biggest, you know, asset managers that are based in the US, the biggest exchanges like New York and so on. So there is certainly clarity on regulatory issues, especially after the changes at the SEC, uh, recently, about a year ago. So there is a way to do this. Are there certain things this.
Are there certain things that will eliminate some of the friction? Yes, of course. I think clarity will help because it will, you know, bring more clarity to the crypto ecosystem in general. I think the genius hack for stablecoins is great stablecoins is great because it now makes stablecoins legal. I think there are certain things for tokenized stocks, certain rules that apply to centralized exchanges centralized exchanges , that maybe when you trade them on centralized exchanges on defy, you don't have to follow them, etc.
So there are some minor improvements that will improve the RWS space, but for the most part today, if you want to work within the rules, there are no problems. So, okay. So, it's more about overcoming the initial hurdle of getting used to a completely different type of asset wallet, perhaps such as UX difficulties such as UX difficulties when working with cryptocurrency. Yeah, it's like: uh, I mean, there's a very young audience here, but if you wanted to connect to the Internet 30, 20, or 40 years ago, there were a lot of difficulties. You had to download the TCP IP software to your computer because it was n't there.
You need a hardware modem, connect it to your phone, and ask your mom to let you not take phone calls for about two hours while you're connected to the internet. And you know, you connect to a number via dial-up and wait five minutes for it to connect, and you have difficulties, right? But people saw the value and started connecting to the Internet because the Internet opens up many new applications and new opportunities. So, I see cryptocurrency as just us being in the very early stages of the adoption curve, where people who are really ahead of others in terms of adopting new technologies are going through the difficulties of using wallets, consuming stablecoins, etc. But I also see etc.
But I also see cryptocurrency moving the same way as the internet, where today you open your phone or open your laptop and connect to the internet; you don't even think you're connected to the internet. So I think in the coming years there will be a future where you open your phone and connect to the blockchain, and the financial assets that you consume stay on your phone and are on the blockchain, without having to know what blockchain is behind it , or remember the access key, or download a separate app, etc. And I think it's when endpoints integrate with blockchains, and blockchains become transparent, that true mass adoption happens. So, looking at this future, maybe not as distant as the city says, but just you know, what are the financial markets going to look like in the next, uh, five years, uh, and what role, uh, does secrecy play there ? I think we'll see something like new traditional markets staying there.
Let's just be realistic. For example, this thing that says, "Oh, everything will be tokenized and then tokenized and then , you know, [nice] will disappear," that's not going to happen. In my opinion, traditional markets have a lot of market participants, a lot of liquidity, a lot of infrastructure that has been developed over many years, etc. So it will stay there. We will see that you will see a new market that will emerge in parallel, that will be gradual, that will operate on blockchain rails, and that will be much more efficient.
And which will slowly migrate from traditional markets to, you know, blockchain to, you know, blockchain capital markets, and they will coexist for a period of time. And then, over time, one will move to the other. But they will coexist for a while, and I see security as a company, you know, that powers these new blockchains, on-chain capital markets, if you will , where, where you need to leverage assets, you also need to leverage trading capabilities, different lending markets, etc., obviously interacting with the rest of the ecosystem. But I see us as something of a middleman between getting people from TRI into cryptocurrencies and those in the middle, right?
Because we are fully integrated with, say, Ethereum and all the protocols, all the wallets and all the infrastructure, but at the same time we are fully regulated. So we can actually interact with a traditional financial company financial company to bring them into the blockchain. So in this world where, ahem, Ethereum is, is it still leading the way? I think Ethereum...I find it hard to imagine Ethereum going away, don't you?
As you know, it's been around for so long, and it continues to improve, and it's still the leading, uh, you know leading, uh, you know , blockchain in many different aspects. Hmm, so I still think that first of all still think that first of all , I think there's going to be something like a collapse in the number of, uh, blockchains that exist. We have too many of them today, and some of them don't really have any meaningful activity. And I think they'll fade away over time, and I think the market will consolidate with multiple blockchains multiple blockchains , where Ethereum will probably be the one that's going to be more like a, uh, multi-purpose, uh, blockchain that will serve multiple use cases, and then use cases, and then maybe you'll get specific blockchains that are focused on, I don't know, stablecoins or specific use cases. Hmm, and that's where I see the market evolving, and hopefully at some point we, you know, consolidate even more , and we , and we as developers don't have to deal with a bunch of blockchains, and we can just sit in one specific blockchain.
Perfectly. OK. Thank you very much, Carlos. Congratulations again on the S4. I'm looking forward to July 2nd.
Let's see how it goes. Um, and thank you to everyone who joined us. Thank you.
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