Adam Chapnick:

Hey, everybody. It’s me, Adam Chapnick, with the Security Token Academy, and we are joined right now by Mr. Khurram Dara, the General Council of AirSwap. Thanks for being with us.

Khurram Dara:

Thanks for having me.

Adam Chapnick:

All right. So AirSwap. First of all, you had a little bit of exciting news today, about sort of a landmark thing that happened. What was that?

Khurram Dara:

So we have been working with Securitize, and we’ve had some successful testing of their DS protocol with AirSwap, and so that’s a big milestone for us. As you know, AirSwap’s a decentralized trading network. We focused initially on consumer tokens, or tokens that were intended not to be securities.

Adam Chapnick:

Yup. Friend of the show.

Yes.

Khurram Dara:

And now, what we’re doing is we’re trying to take some of the underlying technology we’ve built and apply them to security token trading.

Adam Chapnick:

That’s great. Okay, so let’s decode a little bit of that.

So what happened today, when you said you tested some of their protocol successfully, you were able to trade one of their tokens, essentially. Right? Wasn’t that what happened? That was an executed trade. Yeah.

Khurram Dara:

Correct. Yes, it was test trade. It was an executed trade on main end of the test token, using their protocols, so that was very exciting.

Adam Chapnick:

Yeah. And that says a lot, because everybody’s kind of holding their breath waiting for that to become widely employed, and one of the problems or potential problems was, this whole thing doesn’t work. You know?

Khurram Dara:

Right.

Adam Chapnick:

What if we try, and it just fundamentally doesn’t work yet with the technology? And sure enough, today’s the day.

Khurram Dara:

Right.

And I think that’s one of the exciting things. You know, and as a lawyer in the space, it’s exciting and also terrifying at the same time, because you have this technology that can improve the way assets transfer, the way you track assets, but there’s a little bit of a paradox or a catch-22 in that even though it’s easier technically to transfer some of these assets, because you’re talking about real world assets, you’re talking about securities, you’re talking about regulated products, it’s not any easier legally.

Adam Chapnick:

Yeah.

No.

Khurram Dara:

And so threading the needle and finding the points in the transaction life cycle, where you can make improvements without running afoul of securities laws, making sure that you comply and work with market participants, I think all of those are really important to the ecosystem as we move forward, and I think that’s part of the reason, when you look at Securitize and their DS protocol, and kind of putting these tools together, you can start to build an ecosystem where, you know what? Maybe a year ago, it looked like it would be kind of a long time or a very tough road ahead for this type of industry to thrive.

But after, you know, months and months of work, you start to see some progress, proof of concept, and I think that’ll help drive adoption.

Adam Chapnick:

Yeah, it’s exciting. So, tell us a little bit about how AirSwap shifted from what it used to do to what it does now.

Khurram Dara:

So I wouldn’t really say that we shifted. So we really kind of ... It’s an expansion of what we do. So if you think about it, we’re really tools, software and protocol oriented.

Adam Chapnick:

All right, expanded. Expanded. Let’s say “expanded”. That’s better.

Yeah.

Khurram Dara:

It starts with a smart contract that we develop that solves for counter party risk, the ability to trade assets simultaneously without giving custody to a third party.

Adam Chapnick:

Right.

Khurram Dara:

You see a lot of the hacks in the industry, a lot of the security breaches. Those happen on custodial platforms. The Swap protocol, built on top of the smart contract, it allows for peer-to-peer exchange of tokens with no order book, no order matching, no transaction fees and no custody.

Now you build on top of that, and you have something called AirSwap, right? A peer-to-peer network of consumer tokens, additional products that we rolled out spaces, giving issuers or platforms the ability to carve out their own space and leverage the protocol, but in a walled garden environment where they control the onboarding requirements.

Adam Chapnick:

Hmm.

Khurram Dara:

And you can start to see when you mesh all of these different tools together and work with compliance partners, like Securitize, for example, you can build the tools to have an ecosystem for a secondary trading solution that complies with all applicable laws.

Adam Chapnick:

What a vision. So, okay. Given that that’s ... I mean, it’s clear, if you can follow all of the stuff that we talk about, because it can be very lingo-y, that that is an exciting evolution from the way it used to be.

What do you think is the most exciting part of that, and what do you think is the biggest risk? Right? What are you most ... You’re the General Council.

Khurram Dara:

So, I-

Adam Chapnick:

What are you staying up at night, saying, “Oh, God.”

Khurram Dara:

Well, we’ll start with the first one.

Adam Chapnick:

Yeah, go with the good one first.

Khurram Dara:

The biggest risk is that I think sometimes, folks’ expectations run ahead of reality sometimes, and I think in this industry, it’s going to take a long time and a lot of hard work and a lot of, you know, I think trial and error in the industry, but I think long term, we see adoption and a lot of moving towards this technology.

Adam Chapnick:

Okay.

Yeah.

Khurram Dara:

One of the things I’m really excited about, as a lawyer, is, actually, you know, the compliance perspective. Initially, it seems like such a challenge because you have all these new players in the space, but long term, if you think about it, this technology actually enables for real time AML monitoring, for example.

Adam Chapnick:

Yes.

Yeah.

Khurram Dara:

Right? If you can have a way to audit the block chain transactions, it allows for programmable compliance, so you can actually have more assurance that a certain disclosure was given to somebody, or that a person appropriately solicited the right group of people.

Adam Chapnick:

Mm-hmm.

Khurram Dara:

And so, I think a lot of those things can improve the efficiency of transactions, and then that ultimately, I think, can improve the quiddity in the grand ecosystem.

Adam Chapnick:

Absolutely. Okay. So, looking ahead a year from now in Khurram’s crystal ball, with ... We won’t hold you to it, but where do you think this security token ecosystem is going to be compared to now, maybe 12 months from now?

Khurram Dara:

I don’t know that it’ll be substantially different.

Adam Chapnick:

Mm-hmm.

Khurram Dara:

I think it’ll be ... I think some of the paths that have been forged will, all of those will be, you’ll kind of see the ball moving forward a little bit in each of the areas. So there’ll a little bit of progress on custody with some of the bigger exchanges that need to solve for institutional clients that want to deal with security tokens.

So there’ll be a little bit of movement on issuers trying to find better structures, right? Because at the end of the day, tokenized securities are just securities, and they have to be good investments, well, structured, good assets. It’s not enough that the technology is there.

So I think those are things that we might see improvements on in about a year from now, hopefully.

Adam Chapnick:

Right.

Right. Yes.

Great. And, but you think the volume will be roughly the same? Are we going to be exploding? Not yet.

Khurram Dara:

I don’t think so. I think it’ll be just a, you know, the lawyer in me cautious, cautious, cautious assumption. Yeah.

Adam Chapnick:

Okay.

Hey, risk management. That’s what you do. That’s it. I love it. All right. Well, we’ll have to have you back to hear all the stuff that you guys are into. You got to keep us posted, and thanks for joining us and giving us your thoughts.

Khurram Dara:

Yeah.

Yeah. Thanks for having me. Great. Thanks.