Dan Doney is the CEO of Securrency, Inc, a financial services company that combines world-class security, advantages of distributed ledgers, and a global compliance framework to produce a new kind of financial instrument: a highly-liquid, dividend-yielding, investment-grade securities tokens with the stability of bonds, transferability of Bitcoin, and exchangeability of dollars. The Securrency platform provides end-to-end financial services by offering decentralized investment banking technologies.
Prior to founding Securrency, Dan was a leader in US government IT innovation for 15 years. Dan has been an innovator in a wide variety of fields (process automation, enterprise architecture and software development, financial modeling, organization theory, robotics, and signal processing) drawing on his background in social systems, control theory, software engineering, and artificial intelligence. He is an avid software developer, architect, and engineer and remains deeply engaged at the forefront of technology. Dan graduated from the U.S. Naval Academy in 1992 with a B.S. in Control Systems Engineering and an additional major in Economics and received an M.S. in Nuclear Engineering from MIT in 1994. Dan and his wife Jodi have 5 lovely children and live near Annapolis, Maryland.
Securrency is a financial services technology infrastructure and products company that delivers decentralized investment banking services built around core universal identity, custody, and interoperability technology. This lightweight, yet powerful, infrastructure supports Securrency’s complete suite of compliance and financial services products to enable the creation, maintenance, transfer, and secondary trading of tokenized securities by issuers, broker-dealers, alternative trading system (ATS) operators, and exchange operators.
Securrency is a Gold Corporate Member of the Security Token Academy. Learn more here.
Hey, everybody! It’s me again, Adam Chapnick, with the Security Token Academy and we are here in Los Angeles for CIS 2019, and we are joined by returning champion and friend of the show and Gold Corporate Member of Security Token Academy, CEO of Securrency, Dan Doney. Thanks for being with us.
You bet, Adam, anytime.
All right, so we have talked frequently over the past year, but for those who haven’t yet heard of Securrency, despite all of your myriad accomplishments, what is Securrency and what do you do?
We provide blockchain-based financial services infrastructure to banks and investment banks, so we make it easy for existing financial institutions to get involved in the blockchain space, and at the same time we make it easy for issuers, who are bringing new offerings to market, to come and take advantage of the security token economy.
Exactly, and you have a few sort of special sauce items that you sprinkle in there that set you apart from others who do similar things and can you just tick off a couple of those?
Yeah, we center on compliance. So that’s the key piece and we’re going to go into a little bit in terms of progress updates on our Compliance Aware Tokens, so we’ll dig into that, but the bottom line, the main secret sauce, is we produce shares, securities that actually have the rules built into them, such that they’re smart shares. They know what they’re allowed to do, and so they will only allow themselves to participate in transactions between known and qualified parties.
This is a game-changer. This isn’t like your grandma’s shares. These are shares that are actually able to transact internationally, and that’s a big deal to get liquidity. So, we’re excited about that. We’re going to give you some progress updates there and a number of other important integrations and offerings that we’re bringing to the market.
Fantastic. Okay, so now that everybody gets what you are and why you are important, give us a little taste of what you’ve been up to in the last six months. I’m sure you’re not doing much.
Well, the last six months have been pretty busy. So, we’ve rolled out some interesting and important technical capabilities: support for tranches, which is important for companies going through Series A, Series B, different voting rights, or issuing shares here in the U.S. and overseas, Reg D, Reg S. So that’s an important piece. We’ve infused-
So, sorry to interrupt, but when you talk about tranches, does that mean that the smart token itself has some trigger built in to understand when a milestone is met, or something like that?
So, that’s a piece of the way that you do tranches. More importantly, most importantly, not all shares are equal inside of a company, so some have different rights. Some have different handling requirements, et cetera. So you’re able to have a single company’s shares but with different rules built into them based on the rights of the actual shareholders.
Got it. Amazing. That’s so great!
So that’s a cool piece. We’ve supported non-fungible tokens now, so we can do not just shares of things, but whole title ownership of things, and this is opening up the possibility to do all sorts of new financial instruments as a baseline. Funds are just really combinations of both of those, so there can be shares and funds, and then funds themselves have assets, which can include rights in other funds. So, you can build in those behaviors in a generic way and so there’s a bunch of things from ... a baseline set of financial transactions that we’ve built in.
We’ve done a number of important integrations, so integrations with Paxos, for example. With BitGo for custody solutions. Paxos we’re really excited about because of their ability to do publicly traded shares and so that’s opening up new possibilities to trade, for example, shares of Apple or IBM, in crypto-networks. We’ve got an integration through Cascade FinTech that allows us to do credit card transactions, and so we believe the source of liquidity is convenience. So, the extent that you can make this everyday usable, and the kinds of payment channels ...
See, the folks don’t even need to know that their working in the crypto-space is where the widespread adoption really comes from. We’ve got some great relationships with partners. So, you know, Vertalo, a great working relationship there. We’re supporting the Inventium launch, the big security token launch there, a crowdfunding launch for Indeco, so the big and little token offering.
So, sorry the- Yeah, so Inventium, that’s the real-estate of a couple hundred-million, is that right?
260 million dollars across a few cities, right?
That’s right. So there’s several offerings built into that one core offer.
Interesting. And then what was the second one that you mentioned, I’m sorry?
Indeco, which, they are a crowdfunding offering. So, we’re showing that this works at the very biggest scale, the biggest security token offering ever, and then we’re also showing that this works at small scales. So even at the hundred thousand dollar level, it’s so efficient that we’re able to do even tiny security token offers.
And, this is a little bit off the subject, maybe. And then, does that mean that your prices structure is even workable for someone who’s only raising 100 grand or something?
Because we’ve automated so much of this process, we’ve driven down the costs and actually bring in a token offering,-
Oh, that’s great!
-to the point where it’s the kind of thing that could be done for everyday kind of offerings, for 100,000 dollar offerings, for 500,000 dollar offerings.
That’s a big deal, wow! Congratulations on that too!
It’s big for municipal bond offerings where, often times, when small governments are doing offerings to fund their projects, they spend a lot of their money on the actual offering itself, so if they’re raising two million dollars, and have to spend 250,000 dollars,-
You’re right. That’s a shame.
-that’s coming off the bottom line, so by driving that cost down, we can do more public good as well.
Fantastic! Okay, any other interesting things you’ve been up to? I mean,-
Yeah, there’s two things. I want to emphasize these two components. So, the first one is, again, as we come back to these Compliance Aware Tokens. The centerpiece of this is the ability to map global securities regulations into the behavior of the tokens. Global securities regulations are complex. Each jurisdiction has their own particular rules, so you can map these into the tokens. They can change and the tokens can adapt to the new rules. That’s important.
We’re working with the regulators from two governments to actually show that we can issue private securities with the jurisdictional rules of each of those governments, and trade them between the citizens of those two countries. This is showing cross-border trading, decentralized cross-border trading of restricted securities.
That is a really big deal, because in the end, it’s possible to layer in all the world’s frameworks into these same tokens and allow cross-border trading. Currently, only the very biggest financial institutions are capable of these types of trades because they’re so complex. This brings it to everybody and allows for global liquidity.
Working directly with the regulators is very exciting because they can actually provide their inputs and oversight into this so we know that we have something that is workable.
Yeah, yeah. Amazing!
So that’s big, and there may be even bigger!
Yeah, there’s another one? This is six months! My God, what are you guys doing? Incredible!
So, that’s coming. What we’re really starting to focus on now, we’re calling it the operating system for finance, or the inter-operating system for finance.
Okay, I like it.
So, if nothing, first, the various token standards that are out there were agnostic in this. We have our own compliance aware framework. These are just add-ons that you can add onto, for example, Polymath’s tokens, Securitize’s tokens, et cetera, so that when an issue, or issues, they’re able to use any one of those interfaces to interact with their tokens. So, it’s sort of a framework that allows you to issue tokens once and interact with them through any one of those channels and the desire, again, is full interoperability.
From that, then we can layer in more and more financial instruments at their base level. So, lending, we have a lending platform now doing full Securitize lending, again, on the same basic framework, becomes very possible. So we call it the operating system of finance because, in the same way that an operating system takes and abstracts away the principles of how you do storage, how you interact with the monitor, et cetera, freeing up the software to interact with all of the other pieces, this is designed to do the same basic thing for finance, so that it doesn’t matter which ledger you happen to be using.
There’s some great new ledgers coming along with Algorand. We’re real excited about Algorand. As you know, we also like Hedera and the direction that they’re going. So you’ll be able to use these same baseline tools across these ledgers as they continue to evolve and improve.
Amazing. Yeah, and that’s a component of the liquidity promise as well. I think, “Wow. Okay, so, anything else before we ...”
A couple more things, I don’t know.
You bring the good questions, so-
Wow! No, that’s amazing. So, given that you are sort of up-leveling the whole ... sort of menu of what’s possible for issuers and investors. How far ahead of everybody are you? There’s two possibilities, right? You’re developing and seeing around the bend and nobody sees it yet, or are you bringing it all down to where everybody can use it? Which do you think?
Well, so, that is another important addition. We have open-sourced the compliance aware framework. So the intention of this is really to allow anyone to take advantage of these advanced technologies in the space. And our strategy along those lines is sort of the same as Red Hat did with Linux. They took that operating system and they made it work for the enterprise. We do that with our interoperability layer against this open source framework.
So we think we’re far ahead of the market, maybe too much, to some degree because often times folks are sort of overwhelmed with the possibilities. But we’re really laying the framework for the future of finance, so that’s what my-
I think you hit on something really fundamental, which, a lot of times, get left in the weeds, especially when people are so busy inventing and creating. The simple thing you said, that there’s a way to help so people don’t even have to know that they’re in blockchain, because there are so many inherent benefits of everything that you’re doing, but if you have to explain it to someone, “It’s too much for me. I’m just going to go back to my yellow pad.” But if it’s just, “Here’s a way you can do something you like to do faster, or cheaper, or better. You don’t need to know how.” I think that’s going to be the key that unlocks mass adoption.
Adam, there’s no question and that’s when the industry’s really arrived, when mom and pop use it and they really don’t care that it’s blockchain. And again, you can look at the way credit card transactions occur and all the complexity that has to actually happen and if someone came to you and said, “Guess what? I have to say, I’m going to give you a piece of plastic and it’s going to be able to do a transaction but it has to go through, and there are many, many steps and many, many components to it,” you’d say, “That’ll never work.”
But if the minute where you can go buy something, swipe and actually purchase, that’s all you need to know, then mass of option followed. We think we’re very close now. So, all of the technical components that we’re doing are really to make this accessible, easy, global, practical, at any level.
That’s incredible. Well, as usual, every time I talk to you, my head is exploded all over the ceiling. It’s very exciting. I hope you know that you guys are doing incredible visionary work and I love hearing what you’re up to every time we talk. I can’t wait for the next one, and thank you for sharing with us all of what you guys have accomplished.
Adam, my pleasure. So, to the fellow Security Token practitioners, let’s come together in our operability framework, not ours. We’re open-sourcing it so that we can all have a baseline and build the financial services industry of the future.
I love it. Dan Doney.
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