TOKEN2049 - Security Tokens: The Road To Trillions?

so these gentlemen are going to teach you how to make trillions from security tokens there you go okay first of all I'll introduce them so we'll start with a Raphael you're the co-founder of trust token which is San Francisco based token issuance platform most famous for true USD I own true USD I hope it goes to the moon can you tell the guys a little bit more about about what you do apart from true USD it's probably not gonna go to the moon hopefully won't go to the moon but sure USD is one of the largest regulated stable coins in the world today it's got about two hundred million dollar market cap and we're gonna be rolling out a series of new products this year that we're very excited about about other tokenized currencies and we see a lot of what we're doing as laying important groundwork for security tokens that we think will be a large market down the road and which which currencies are next are you able to share the kind of list in order do you think we can't share too many specifics but I can tell you that GBP sterling dollar and Australian dollar are all high on the list ones that are coming up soon and we're also working on Hong Kong dollar as well Oh fantastic that's great for people here in Hong Kong okay very good and we'll ask you later on which one you think is gonna pump the hardest all right Alex founder and CEO vnx exchange and luxembourg-based security token exchange and you do something with venture capital portfolios I'm not rich enough to invest in venture capital or whatever I don't really understand it can you tell these guys what exactly you do that actually the platform is a marketplace for securitized but for those of nyssa funds and it actually solves the problem that you addressed it actually it lowers the barrier to entry so typically the funds would be really looking for LPS 1 million plus the best funds 10 million plus on our platform you can be a qualified investor and start to invest already so so people with less money can take parts of bundles of assets take the cash flow from them so they'd invest you know smaller ticket sizes like 20k in money box and but eventually of course we would like the marketplace to be open to retail investors but for now it's qualified investors only but the benefits are twofold number one you can have in one place a number of portfolios that you can choose to invest and the second one is you can actually liquidate your position at any time so it's I thought it could be a VC for like two days okay I could be an LP a limited partner an investor into a basket of whatever the VCS are buying and for like two days if I want in and out or I probably hold it for a bit longer because there's some income that comes from the tokens that depends let's say you invest it in a portfolio of let's say a fund very famous one and the next day there is news that Google is buying one of the companies the price moved it on sent your probably happy to sell the next day so but at the same time you don't need to you can actually stay there for longer and get the cash flow from the portfolio and these cash flow are you working with him to is the cash flow coming in in dirty fiat dollars through the banks or is it did Chu USD or is it Heather or PACs or circle for now it's unfortunately due to euros euros should be next on your list it's one that we're looking at okay good alright euros in Luxembourg that kind of makes sense Vijay like I don't get it you're doing the same thing but in the u.s. is it the same as this but with dirty dollars or how it was how do you differentiate your you're also a private security token exchange platform sure yeah so we are a u.s. marketplace so in 80's in a broker-dealer for the trading issuance and the codes I have to break down 80s I don't know what that means well sure in 80s is it's it's essentially a marketplace for private securities so you have this concept of a public equity exchange for the private market are essentially the pre IPO market or any of these these kind of other assets like REITs and fixed income and so on you can trade those on an 80s so it's basically a private marketplace okay so we offer that for the US market so it supports the trading the issuance and the custody of security tokens and digital securities so for example a company like uber which isn't publicly listed you can't buy it on a normal stock exchange a stock market can i buy Buber shares on your platform yeah you can in fact shares post for the past six years has been active in the secondary market for private you probably unicorns in the valley so that's actually how we got our start and we see a lot of commonalities between that world and that market and what we're seeing in the sto in digital security space and can I buy like two hundred dollars of uber so you have to be an accredited investor and I mean an accredited investor in the u.

s. is someone who has above a million dollars in assets or two hundred thousand dollars in annual income so the bar is pretty high we see that as a good starting point for the market because when you're talking about these things that are a little more opaque or less regulated it's always good to take the baby steps I know it's hard for the crypto space to move incrementally verse zero to sixty but I think the security token side of things merits that kind of approach so I got to be rich so then can I invest $200 in uber so there are minimum transaction sizes but yes you can one quick note is that long term we see a lot of potential for retail facing broker dealers to basically provide access to this market in the same way that a Schwab might first the market has become more liquid and there has to be more infrastructure out there for that to happen make it more efficient and drive down the pyramid towards where I am and then I can buy $200 of maybe a digital collateral receipt a token that represents a fraction of a share or some small amount of shares of uber right and that's a long-term mission absolutely okay so similar to what what you guys are doing yeah indeed and the future of course I think for both of us is that at some point you may actually tokenize the future proceeds from your book and then get the cash now so private markets is basically what work great okay didn't David Bowie like tokenized so it wasn't called tokenized then he securitized his his future so he's great saying he's gonna sing loads of well he's got loads of albums there's money coming in but you want to raise money now and then his future cash flow would go to investors absolutely wish he could do that on on blockchains on-quarter are threescore days the best blockchain all right last but not least stephen founder of alchemist it's a new york-based security token offering sto advisory but you structured aetherium in 2014 that was the first I recognized I see oh there a couple before that but they were bit rubbish and T zero the first Sto Caesar is also a platform so it's all kind of intermingled it's really hard for me to understand in my head can you talk a little bit about alchemist so yeah so Alchemist we helped build blockchain companies and sometimes those are protocols sometimes and then blockchain is what led to security token marketplaces so both of those and then also invest in them as well you do everything advisory and structuring and investing maybe you could like you you maybe you could do your VC in a basket for him and he could and I'm coconut a true USD yeah and and the income streams are true USD or pax coin I used to work for 8-bit which is now become paxos so I'm kind of fond of packs as well but I also love true USD okay alright that was the introductions anyone got any questions I got tons all right here we go security tokens Vijay I'm going to pick on you define them for me how they different from I SEOs how they different from a shaft which is a PDF file that sits on people's hard drives that has two digits two signatures that says like someone's going to send some tokens to someone and how is it different from a regular issuance of equity yeah yeah so I think ultimately it's more similar to the latter that you mentioned so to the way traditional assets are issued right because at the end of the day the way I think about security tokens and it's a personal view and I'm sure there's a lot of different views and and also these views are evolving over time but at the end of the day it's a blockchain bay security rights what does that mean I I ultimately see two ends of that spectrum right you have your asset tokenization out of that spectrum where you have people who are tokenizing equity and companies anywhere from Series A through Series D or E you have REITs fixed income Oh what's a REIT a readers are really will not use acronyms or at least explain them to the auditor and for me please yeah absolutely I read is a real estate investment trust so it's a model that's often used around the world to invest in properties and provide exposure to the stream of cash flow or the equity of the asset itself so it's basically a structure where you can compliantly invest in real estate and be able to trade it in the secondary market so so on that end of the spectrum you have a lot of traditional asset tokenization so that looks very much like traditional markets right where you have your full cap table and people are looking at so cap table is where the equity investors sit and so on that sort of the spectrum it's much more of traditional market players right so a lot of the banks are looking at this and then on the other end of the spectrum and this is where there's a bit of regulatory uncertainty depending on a jurisdiction is the notion of how do you launch a utility token right and depending on the jurisdiction certain regulators are saying that any token has to be launched as a security first and then you you evolve from there into a utility token and exactly how that works is still a bit up up in the air I know this guy's shaking his head you're right no I mean look that's some of the regulator's are saying is somewhat preposterous but I don't know I mean they're programmable but like they also grow and turn into other things and then turn back in it's not necessarily because the nature of what it does what their regulators are saying is like they said it with like aetherium and they said it with Bitcoin at the beginning maybe it wasn't decentralized but now it's so decentralized nobody controls that there's no corporation behind it you're not making money off of somebody else okay it's some new thing that just came out because of this and it doesn't really make that much sense but so is it that the regulators are uncertain or is it that you just haven't read up enough about the regulations in your uncertain oh no no I mean listen it's I don't envy their position right so I'm not about the smart place in the US SEC chairman yesterday reiterated that their official position is that Bitcoin and aetherium are not securities because they're so widely distributed decentralized there's nobody controlling it like I but they're just throwing out one thing and they're not giving the marketplace any like framework so like there's there's there's some regulations in the US and put in particular that are trying to like say alright if you do this that you are not a security token if you do that and problem is at the market one of the things that the market is waiting for because there's so many people want to issue security tokens they're afraid that people want to issue utility tokens they were afraid because they don't have any clear diamonds that's a US view Alex yeah European Luxembourg view I think the regulators are uncertain as to what actually constitutes security what is payment and what is utility the Swiss regulator took a view but the European regulators have not actually adopted it but the security tokens in my view is actually a representation of what would constitute a security in the real world in the regulated manner now I think that's the safest way to describe them and utility tokens is any membership benefits any access benefits etc etc in payments is pretty clear it's like Bitcoin etc payments let the payment dude speak so how are you faring with regulators are they are they supportive are they skeptical are you finding your regulatory engagement well so the products that we're building right now a true USD and the other tokenized currencies they're only launching over the next couple of months those are definitely not securities because no one invests in them in with the expectation of profit they're not gonna go to the moon unfortunately what but the we're regulated under a completely different environment where our company is an MS money services business and so it's a very different regulatory framework and it's a much more well trodden path okay okay so it reminds me a little bit like you're from the US so I'll say venmo kind of like you put money into a bank account over here and you get the tokens or the the credit or whatever in Singapore we have grab which is a wallet there's WeChat there's Oprah has a wallet is it similar to that yeah it's similar of that okay so same kind of licenses in Europe you call it imani right all this exactly okay good so who's good what's gonna go first what's gonna on the road to trillions ok what's gonna change first and how and why is it is it private markets is that public markets is it money how's this gonna how's this going to play out I think it's going to be private markets for regulators per se are not concerned about their wealthy individuals their concern regulators don't care about rich people if you generalize they are more concerned about old granny in Sicilia being tricked to invest into the options by explaining that this is a very very secure product more specifically their concern I see eyes and stuff more specifically they will be concerned that there will be a lot of people like this because these are the voters and they are so and they are unqualified to make their decisions private markets are for the wealthy guys who a are supposed to have knowledge of what they do and B can take a hit from their decisions therefore in my view all the innovations that we're speaking about will first affect the private markets and once the regulators are comfortable or have extended the kind of the regulatory framework that exists now to protect the small investors it will move to the public markets and I see you guys nodding Stephen disagree No so the I mean I think what's the definition of a private and public market somewhat changes because of security tokens and so the right now you think of a public market with these big huge companies and what happens if public market your local coffee shop is actually listed there right and that's a security token market and the barriers are the cost are driving so far down that our definition of a public company is changing so those private markets are public markets the whole concept of it is it's gonna be altered by this and this is underpinned by a mega trend of companies staying private for longer and increasing valuations in the private markets this because it's pretty tedious being a public company or the quarterly reporting and the the analysts and all that stuff is much easier being being private you can think further forwards you can have a vision and maybe take a few hits for a few quarters you're not always chasing the next dollar well the private markets have been flushed with cash right now too so you're not getting that extra you don't need the public markets this is different though this is all this is are going to affect more downstream so that's not the Ebers of the world but it's more the smaller companies that the Reg at the regulatory requirements to go public or much higher for them as a percentage of their revenue and so it's a much more onerous burden and using a security token it's much lower they can they can go public and then also they can get access to capital it's a have and have-not market like the huge companies these unicorns access to unlimited capital but then smaller companies are now getting that they're getting starved of capital but this is a way to access masses of capital without going public they just have that alternative before but you've been talking a lot about equities if everyone's been talking about equities what about debt what about the other way of the other traditional way of raising money through through a loan for a bond or commercial paper or something like that where companies don't want to give away a share of their company they don't want to go to jails that are not doing icos so they want to raise debt instead where the investors will pay them and you know they'll pay them some coupons maybe using true USD and in five years time they've got to repay the capital you guys looking into debt the debt markets yeah I think what's a long term we have the view that it's going to be a great use case I think the challenge with debt is that there's there's much more involved in order to actually make a debt issuance happen right and it's just harder to structure there's a lot more maintenance with the coupon payments in the principal though in many ways those actions are things that smart contracts can help to automate and scale so we do think it's it has a lot of potential but it will take a bit of time for that side of things to come to market but I think in many ways the whole idea of a digital security or security token that trend is helping to enable the democratization of access to capital markets so long term I do think the idea that providing a way for the coffee shop to compliantly secure a loan as opposed to giving away equity like that is the end state vision right but it's gonna take some steps to get there and I think I in terms of fixed income or debt it it's something that will happen it'll just take a bit of time anyone disagree I'm gonna disagree so I think equity is actually quite hard work there's there's you know the all the all the documents about being a shareholder there's the meetings the shareholder voting there's there's he talked about coupons being troublesome but what about dividends they're troublesome as well stock splits buyouts all that kind of stuff that's really easy and you can do that without a coupon you can issue some debt that you know if you want to raise half a million dollars you can actually raise 450 and then and then in a year's time pay back five hundred zero-coupon so just just issued at a discount and then you know they pay the full amount later there's you can still figure out the interest rate off that but I think that's actually perhaps a simpler instrument so challenge you guys to go and think about like the easy low-hanging fruit in terms of short-term debt as well as doing what you're doing with with equities cool all right who's had traction you've got traction because I have your coin in my wallet do you guys have traction yeah this is your chance to show off to the audience how awesome you guys are he said we've got a somewhat controversial a view that may be somewhat controversial on this panel when it comes to security tokens which is that we think that the traction today is pretty low as I think many people have similar it's pretty luck attraction in terms of security tokens in the market and also there's been say that in front of these guys because they're meant to be hyping it up right also there's in general there's been a lot more supply than demand and and if you go to conferences people are always saying like a security tokens this secure than that but where's the actual demand for security token who's gonna buy these things who's gonna buy them today and so our perspective is that what's going on here is that we're actually in we're not in the deployment phase when it comes to security tokens we're in an infrastructure phase and that there's a lot of groundwork that needs to be laid before security tokens will be actually useful and today they're not actually very useful and that's why there isn't that much demand to be buying them and so from our perspective we think that there's there's a bunch of enticing trucks that needs to be built one of them is stable coins so that's a great thing that we're working on right now that contributes the whole security token ecosystem stable coins can be used for dividend payments they can be used to trade security tokens and stable coins are also in themselves a good business so that'll also help us to build a great business while we're building toward something that we think is also a huge potential in the future but there's a lot of types of expertise that our company is building up in terms of being able to you know custody assets and issue tokens and support purchasing and redemption that are really setting the stage for being able to issue security tokens down the road but when we think about security tokens and the timelines we're not thinking one to two years we're thinking more like five to ten years and the next one to two years we see a lot of that as laying the groundwork and building the infrastructure all right he's trash-talking your business guys so so I know I'm not supposed to agree with that but I actually agree with that 100% I think the the challenge is that there we're moving that crypto speed into space that's that's highly regulated and it's just going to take incremental steps I think as opposed to a full revolution happening overnight yeah you could all these conferences and people who used to have ICO in their title now have sto and their title like it's it's kind of a control F thing and so I feel like there's a lot to kind of cut through in terms of the dialogue and setting the right expectations it's something that we think is super super important just because people have the crypto expect expectations up here and right now we're here and I personally feel that there's a clear path to getting to the end state and kind of as we spoke about at the start of the panel but it's going to take time definitely this year is and laying that foundation absolutely next years when you start scaling more at the secondary market but it's not going to be an overnight success it's gonna require a lot of kind of incremental listings and and making sure that people pick thoughtful issuers to put on their platform because if it ends up burning people there won't be a lot of shots on goal right so it's important to be super thoughtful and that's easy for you to say because your real business of real kind of attraction before tokens came along sure yeah okay so what Steve you had some you kind of Road it's it's not that that's wrong that's happening right now but I actually don't think that that's the big problem for adoption that's a matter of time and money they know what to do you like is private marketplace is already up right now a chair pose and could be trading it's the Pareto problem is standards and regulation right so there's no standard right now so the u.s. is doing one thing Europe is doing another thing in different countries in Asia are doing they're all their own thing and so it was like could you imagine the internet before tcp/ip and saying is gonna go worldwide and just not gonna happen right tcp/ip comes in everybody accepts it as a standard and now all of a sudden we're talking about infrastructure right there the status will drop out of you know it's it's not what I'm trying to say is that everybody is building their own tcp/ip right so that's it's not the actual building of it it's just agreeing on on one of them they should use coda which is our threes platform it's a company I work for it's just the best it's designed by by with and for banks for regulated financial securities it's just we've we've had Total Return swaps yeah I'm doing a bit of Schilling they only I had a great it's just awesome for for regulated Intimus if you want to do crypto kitties go nuts on aetherium but if you want to do serious stuff you should consider kora the commercial break back for the panelists guys all right what's the sweet spot in terms of deal size ticket size you're doing you're doing cash so maybe it's less of a question for you but in terms of we're talking big deals little deals where do you see the sweet spot for these kinds of things and I'm going to ask all three of you separately actually right now I think you're seeing smaller deals people where there's control like one or two or three people can say we're gonna take this because it's there give me some compass what's the small if T to 150 u.s.

million 150 million relative to what you were seeing before there's still the cost associated with this it hasn't dropped where it's going to drop I said taken by two or three people so these guys have been clips of like furthered in like a built they're doing like an individual building that they have out of their whole portfolio there so let's try this out with this one building but we have 10 billion we'll take a 200 million dollar building a hundred million dollar building and we'll do those latest real estate real estate is one that they're trying to do a lot with there's some equities that they're trying to equity like features it's hard to actually say whether or not it is you know so it's they're programmable so those are kind of the two areas the debt market actually with you I think that's other than currencies that's the mother of all markets he's on the Twitter feed guys at the back the debt market is the mother of all markets the debt the security Turner Market supermarket on quarter that's what he said okay Vijay yes so I think I would probably say smaller is better at this point in time just because what's your definition of small I would go even lower than Steven I'd probably say somewhere between 10 to 30 million raises and the reason is exactly the point that you guys were speaking about earlier which is that there's a ton of potential sto or digital security issuers right but the challenges really where's the buy side and if you go to all the conferences everybody's talking about the potential sto they might issue or sto issuers who they're working with but we still have yet to see I think deals closed successfully in the market and happen at scale and again I think we'll get there but it's a little bit of this the bootstrapping that flywheel a bit and starting small so I'd say 10 to 30 million is kind of the sweet spot in my opinion at this moment in OP it's in equity and and you know I would say even in in real estate or fixed income I think obviously it's harder to get properties that small and will stay that was my job like fixed income was my idea you guys didn't say that at all in the first half of this conference I'm glad I've influenced the influences there enough okay okay so we've got real estate slightly larger ticket sizes you're slightly smaller sizes in real estate and perhaps debt yep and but also working hard at equity as well as shares post it's a great platform I wish I could access that and and of course the from when you go from the u.s. to Europe everything seems smaller our idea for the ticket size is even smaller than that I think it's not a competition you know it's reality us is much bigger as a market as an economy in my view five to ten million and probably twenty to thirty people of qualified investor spirit is what we're looking for at the moment coming back on the previous topic it's important that people are not burnt from both sides actually that the issues of the of the securitized but for the on our in our particular case feel that they really have a good deal and at the same time they're investors so this is a fine balance when you start building it you really need to make sure that both sides of the marketplace are happy right the balance otherwise it's all supply and no demand you you wanted this thang something you're gagging to go good I guess we've had some descending sizes on and again maker you're doing one single I this is something that like that I'm still unsure of and that I need to do a lot more thinking about and we don't think of as a team but one of the things that we think is interesting is looking at extremely extremely large size so for example tokenized SP 500 right there's twenty three billion dollars plus in the S&P 500 that's that's that's the kind of market cap that we're talking about and if you think about a product like if you could launch true S&P 500 as an NRC 20 token what's the global demand for a product of that type that could be in the tens of billions it could be a huge huge demand and the similar for debt instruments like the tokenized Treasuries and one of the advantages of price of these type this type is that they're they're very well understood by people I don't have to explain to you you know what a SNP 500 is or what a Treasury bond is these are super balanced understood super conservative super solid investments for people and also from a business perspective you know when we're thinking about launching products you know if you're launching if you're if you're launching small tokens small security tokens you're sort of like an investment bank well you're only as good as your next deal and you need to hunt down that next small startup or that next real estate investment to bring it to your investors and the moment you don't have another good deal you're done and that's the business that JP Morgan and the other investment banks are in and it's not a bad business but it's not like a scalable technology business and so we actually are very bullish about security tokens but in the long long-term not necessarily in the next year and we think that it may look very different from what it looks like today and one possibility is that it could look like you know very very large very well trusted tokens and a products that would I have you know billions of dollars of market cap and I've traded go bullets so that would look more like a true USD or these types of tokens as opposed like a tokenized property right right I hope these guys proved you wrong because five or ten years is a long time with we'll be doing a lot of panels before we get to markets so I hope these these guys are working really hard to compress that time line but uh speaking of time lines our time is up if there's an I agreed with everything you said apart from the ERC 20 bit we got a we got to talk about that if there's one kind of call to action for the audience see how they're going to make the trillions or any kind of call to action what's your single bullet point to tell them to tell the crowd well I don't think that you're gonna make I don't know you're gonna make trillions oh okay you're not gonna make trillions buying true USD unless you buy trillions of true USD and then you'll have trillions of true USD nice times aren't they Alex what's your bullet point invest in ground to make trillions invest and work hard so buy their security tokens Vijay I always ask yourself the question would you invest in this Oh interesting okay so think before you invest all right I'm Steve this area's the largest wealth generator I believe that we'll ever see in our lifetime so you have to have some vested interest here over time fantastic hey guys thank you very much that's your panel