Responsible for product structuring, Mr. Liu’s strength is in designing innovative financial products that adeptly navigate existing regulatory and legal frameworks. Previously the General Counsel at a leading managed futures asset management company, Mr. Liu was principal in-house counsel responsible for the legal structuring of the first actively-managed, managed futures mutual fund. He is also an experienced capital markets and derivatives finance lawyer with over 20 years in the financial services industry.
Hi, this is Amy Wan with security token academy. We're here at Security Token Industry Launch, and I'm here with Philip Liu, Co-founder and Chief Legal Officer of Arca. Welcome, Philip.
Thank you, glad to be here.
Your company, Arca, specializes in regulation, security compliance and custody. Do you see a need for more regulation in the token space?
I think the current regulation here in the U.S. is pretty good, the way it is. It's really just the education of people in the space, both investors and participants, rather than needing more regulation. I disagree with some people that say that regulation is too intense or there's too much regulation. I think the regulation is just about right. It's just a matter of educating people on what those regulations are.
What do you look for when you're going about launching an investment fund? What makes a signal that a token may be a good investment?
I'm not on the investment team, but I understand that our investment team takes a very bottom up approach. So, we look at the team, the distribution of the tokens, whether there's really centralization or not. All of those factors are important to making a decision whether this is a good investment or not. We also look at technical analysis just to make sure that we're entering at the right point and exiting at the right point. Given the volatility of the space and investments, what's really important for us is, really making sure that we have proper risk management controls in place. So that we can capture 80% of the upside and only suffer 30% of the downside.
Can you explain to me how tokens improve liquidity?
You know what? What's so fascinating for me about tokens is the ability for these digital securities to take a very illiquid asset and make it very liquid. The way that you make it liquid is, really through asset-backed digital securities. I don't really like calling them tokens because tokens have a bad connotation to them, but they're digital securities and they truly are securities. But, these securities backed by illiquid assets but because they're backed, these digital securities are backed, they're able to be traded amongst yourself, or on me, and that's what's make it very liquid. You take an illiquid asset and you made it liquid.
What would you like to see from the security token industry in 2019?
I would really like to see a lot of the legitimate players in this space, the grownups really come into the space and squeeze out some of the early adopters and the scam artists out there. 'Cause I really think that there's a lot of them in the space and it just does a disservice to everybody in the space.
Do you have any particular thoughts around tokenization of real estate or art?
Funny you should mention that. We are actually at how to implement those type of solutions. We have some proprietary methodologies and structures that we think will actually accomplish a lot of the things that ... tokenization of real estate and art is trying to accomplish, which is to get broader investor participation in these fields and in smaller chunks. You don't have to take the risk that a particular piece of art may not sell in the future. The tokenization really allows you to ... or digitization of the shares, really allows you to take a very liquid asset and break it up into little chunks so that smaller investors can participate and trade amongst themselves.
Very interesting. Thank you so much for joining us.
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