EthCC 2: Alexis Collomb

you know researchers and you know whoever is interested in the topics that we cover and this is actually you know what one of them so very briefly and this talk is gonna be sorry you know very conceptual so there's no there's no code here and nothing of the sort what are we talking about here you know I'm sure that you you all know that there's been a push recently on let's say over the last six six months on security tokens that they used to be unsexy and I'm not to say that now they've become sexy but you know that the people are getting interested in them and this old conversation or around whether tokens are utility security tokens and so forth and you know essentially a lot of the ico that we'd seen where people were trying to dodge you know sort of dodge regulation by you know making sure that they were insisting heavily on the fact that their tokens were only utility tokens and that no security or financial component you know this is just like pass see and now you know they'd have you as now we know everybody I think you know many people are just trying to to make sure that you know they they comply with regulation and you know financial regulation in particular and I think it I just want to point this or to insist on this because you know that sort of you know that was on view about 18 months ago ready that you know this discussion was you know interesting and understandable obviously but that for me one of the one of the the really the strong value added of blockchain was the ability to convey security tokens and essentially to just transform the security industry so you know first of all a quick definition security tokens what are we talking about you know they're designed to replace the other two represent complete or fractional ownership of you know interest in assets or entities I mean it's you know very wide definition and you know I had earned a set of rights that associated with this ownership so this set of rights can be you know pretty much anything it can be economic you know I've you know I've stock and bones and so that could be dividends coupons and so forth it can be governance associated you know with voting rights and so forth oh it could be other rights and you know not gonna dwell on that but there could be other things as well so just a quote here that just to capture or sort of try to capture your attention on why this is you know really important no later than November 2017 the Roberts great field the chairman of Nasdaq pointed out that you know in his mind every stock and bond on Wall Street could be tokenized and you know various pendants subsequent to this declaration I've you know I've predicted by 2025 essentially you know I'm even like you know some said five years from now that was in 2018 but certainly by 2025 every financial asset would be tokenized so you know we're talking here obviously about a huge huge market one of the actually one of these pundits so if you can be called like that with his you know for instance Patrick Byrne the the president of overstock that founded t0 so now the you know the main issue now is why you know can we come up with with a standard with a norm to have a universal token you know obviously I mean talking of a universal token is very presumptuous if and you know preposterous in some way because you know it is obviously much difficult to do there are efforts underway as you know and probably some of you may be associated with that with I'm sorry the the norm the you know the orig GRC 1,400 norm and you know the various norms that it could cover as an umbrella I want to point out the the work you know by a polymath the security soaking standard and so forth and you know roughly speaking the ERC 1400 should be retro compatible with the RC 20 so you know at least within the etherium community there's been you know quite early on a strong push for coming up with you know with the security token standard and as far as I know it you know it's still now we know it's been published and there's there's a lot of ongoing work on this and you know I think it's it's great another recent announcement was by you know tutorial network by consensus in particular actually in French office and you know they they came up with with a platform that you you may have already used for issuing managing and transferring security tokens compatible with theorem block trains where the public of private while and I insist on that because that's you know that's very important while complying with European regulation which as you know is quite intricate and demanding as all regulations now one important thing you know why do security tokens you know what do security tokens bring to the table I mean and why is the finance industry so much interested I mean I'm focusing on the finance industry but you know it goes way beyond that actually I think you know the various economic interest but at least the finance you know industry financial industry is interested in well the post rail infrastructure it is not a particularly sexy subject you know within if you teach finance I mean you know they I used to work in it I was you know in the front office and if you look at the programs in you know in in master programs in finance if you look at the the syllabi you will often see this issue of you know like the post trade infrastructure sort of you know put aside because until like you know a few years ago it wasn't you know particularly interesting now it's become you know very focal point because all you know the you know the financial industry in the the various institutions think that there's a lot of the you know savings there's not this essentially two things they don't last a lot of cost savings to be made and that's you know that's I would say as usual but there's also a lot of new services to be added to the existing infrastructure and that is why actually they're so interested in it because you know I would say as Google and Facebook want to go into the banking and the insurance you know industry those players could want to do the opposite in sort of you know getting out of their traditional financial services now the second main reason is you know from you know for CFO's and treasurers and asset managers you know that that is very important to better know the liability side so the liability side you know essentially the investors creditors that you may have is really essential to better manage the asset side so in terms of liquidity risk and so for you know if you're an asset manager or portfolio manager you want to know what what patterns do your investors have in terms of withdrawal and so forth and so if you have a very clear control understanding and control over that there's you know it will certainly help you better manage your portfolio said you know that is very important point then you know the last two points I mean regulators obviously why are they so I think enthusiastic about proctoring the o TLT you know in general it is because they hope that it's gonna and I think they rightfully think that it's going to help with you know with controlling and avoiding various things such as market manipulations and so forth so the last point here is you know it's a higher immunity from fraud for every stakeholder now I'm gonna skip the various sign I'm just going to discuss that very quickly what are the promising spaces the use cases where security features you know can be involved and I think as you know for our research group these are the things that you know we we focus on there's obviously you know the asset organization which you've all heard of and you see tons of startups you know around the world going about you know the it's Bank asset organization whether it's for real estate luxury products for instance I mean you know in advice one of the company is doing that art works and so forth now supply chain traceability we've all heard of that again you know it's it's across economic sectors you know speak push with that I insist that you know there could be a security token component in that for instance there are various initiatives related to trade finance where essentially the token which is circulated as financial rights attached to it so you know I include the supply chain traceability within within this category then then you know SME that stands for small and medium enterprise financing there's been a lot of initiative on that green finance Islamic finance actually which is sort of a you know there's maybe some of you and coming from the Middle East there's you know for Sue cook and you know Islamic bonds there's probably and there are various initiatives around that now one thing that I particularly care about in an interesting about is this thing called slow finance what is slow finance in short in in thirty seconds that is you know finance where you've all heard that you know if you talk to company managers and so forth they hate speculations they hate hedge fund I mean exaggerating but you know they don't like hedge funds they don't like like you know investors we're very short term positions and so forth and they can hardly you know control for that now with you know the security to opens you know properly parametrized and you can you know you can attach a whole variety of lockup conditions not just on the issuer side and you know against what you would see in traditional I don't know initial public offerings and so forth and I see us as well but on the investor side and so that could you know I think it's a very promising field forints because you know it should allow for instance companies to raise money with security tokens with the assurance for instance that their tokens are not going to be traded on the secondary market for three to five years to you know for whichever period they deem appropriate and then you know the the other areas are just you know things that we've heard about I mean I put hybrid tokens which have utility and security features directed money I think is another I'm gonna skip that but I think it's a very interesting field in the insurance sector and also consumer loyalty programs especially for systems in the making that is we know in situations where token holders require the token in the hope that the overall system that the token is attached to is gonna grow an expense so there is a speculative component in the act of acquiring the token which makes it not just a utility token so I think I have one minute left so I'm gonna skip that but you know if you look I've done a sort of a comprehensive summary of all the initiatives I've seen over the last 18 months showing that you know institutions are moving clearly into the crypto space you know that also the security token space and you know I'm just gonna you see you know Nasdaq the sweet six the Swiss Stock Exchange to expose the eyes the parent company of the NYC fidelity investment one of the largest fund managers in the world Goldman Sachs obviously it is zero I've already mentioned and then you know many other initiatives one of which you know is worth pointing out the World Bank which I sold a two-year public bound to public investors for about eighty million euro which is issued actually on an Assyrian base block train and also you know the sacs in Australia which is very advanced and DTCC and you know some other the last point here is some initiatives that we have in France especially one called liquid share which has many you know stakeholders around it so essentially now in terms you know like the the concepts and the desirable features that one wants to see I'm just gonna you know insist on the the point of finding the right trade-off between simplicity and complexity so you know the desirable feature I mean you you have already mentioned but you know you want to have control over economic rights governance right the conditions of acquisition with you know K Y Z and so forth the conditions of transfer ability with lock ups for issuers and investors and also on I think this is sort of a skip sometimes or not properly considered you want you know as much as possible to have an holistic approach to anticipate some considerations that are very important for you know SMEs or you know companies in general and any issue which is risk compliance and regulatory considerations so if when designing you talkin you can anticipate that as much as possible and because as you know for instance you know the if you look at Solomon c2 in the insurance sector it's you know it's a real pain if you look at the compliance and the Reed holding burdens that financial institutions or small asset managers have the huge you know so complying with the regulation in its own right is a you know as a big issue so as much as you can facilitate that when designing you're talking it's you know it it should be extremely helpful so clearly you know the issues I mentioned is interoperability and the main issue is you know as I said really finding the right trade-off between pushing forward a simple cornerstone standard to have large adoption across all asset classes while allowing specialization for more sophisticated products down the road through you know some kind of add-on modularity I mean I used to structure you know products and derivatives and exotic options you know obviously I'm not expecting that the you know security token standard that if I mean whatever is existing already or whatever is likely to come up in you know within the next 12 months is gonna you know accommodate very sophisticated products of the exotic option time but still you know I'd like to have a you know basic building block of a security token upon which I can you know add on some modern features to to know to to be able to accommodate and deal with more sophisticated instruments so the you know this is just you know some just take away points that I want you to I mean whoever is interested in that subject and not already working you know on it too to remember I mean I think you know it's fair to say that right now and you know it's a it was to be expected many of the standards have been catering to their own use cases as opposed to you know focusing on developing a global security standards and that's perfectly on this you know understandable because you know as I said when you want to develop a norm you need to get all stakeholders around the table and as you know the more people you have around a you know a conference room usually the slower the advancement you know and the slower the progress but still you know this issue is all about norms interoperability obviously and scaling so I I really think it's a race to acquire critical mass obviously and my main point here in which I wanted to and something that I wanted to convey here to the community at large is I think that you know there's right now and I've I didn't dwell on this but there's a huge I think there's a very important institutional push right now and while I think that you know it's very difficult to predict the future but while I think it's going to be difficult for all the banks obviously to agree on one common standard there are initiatives and for instance you know there's one initiative called the universal trading network which is related to trade finance which has you know which has a good number of institutions around and I think if this materializes you will have an example of a global you know trading token now one could expect to have the same for a global you know standard security token and when this happens actually you know it's going to be interesting to see the interplay between the open source approach for instance the one fostered by consensus and you know and others around the etherium community and this you know institutional approach and I think you know as you know the latter has so much power that and that would be the last point you know make sure that whatever this global standard is make sure that it remains a blockchain in the sense that you know it won't be too much of a private private security token standard which would be controlled by you know small number of interest thank you very much I don't think we have time for any question but it is