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Blackmoon Financial Group’s Anna Cox: The State of STO’s in Malta 

Expert Interview


 
 Anna Cox,Chief Compliance Officer, Blackmoom Financial Group

Anna Cox

Anna started her career in 2001 as a Marketing Assistant at New England Financial. In 2004-200, she was a Middle Office / Client Relationship Manager at Goldman Sachs. In 2005-2007, she worked as an Analyst, firstly at Merrill Lynch, and later at JPMorgan Chase. From 2007 to 2011, Anna served as a Relationship Manager at Troika Dialog.

Later, she worked also at Russian Commercial Bank. During 2015-2018, Anna had a position of Head Of Compliance at eToro and Sova Asset Management. From 2018 and until now, Anna has been a Chief compliance officer at Blackmoon Financial Group. In addition, she is the Co-founder of Cox Fire and Safety Consulting, the first company in Cyprus to provide comprehensive fire, health and safety solutions for businesses and individuals.

Transcript


 

Adam Chapnick:

Hey everybody, it’s me again, Adam Chapnick with the Security Token Academy. We are here in Los Angeles at the Crypto Invest Summit 2018, and I’m joined by a very special guest. We have here Anna Cox, the chief compliance officer of Blackmoon. Thanks so much for joining us.

Anna Cox:

Thank you very much. It’s an honor to be here.

Adam Chapnick:

Thank you. So, for everybody who hasn’t yet heard of Blackmoon, why don’t you tell us what it is?

Anna Cox:

Sure. Blackmoon is the first fully operational blockchain-based investment platform, and we’re offering simplified access to innovative investment instruments for both investors and issuers.

Adam Chapnick:

Okay. So, when you say it’s blockchain-based, what does that mean in an experiential way for me if I’m an investor?

Anna Cox:

Okay. So blockchain is a technology. In and of itself it doesn’t really provide you with anything other than a very transparent proof of ownership record. So we’re using blockchain to demonstrate proof of ownership in various financial instruments to investors and to issuers alike where they can track the records of their security owners based on blockchain.

Adam Chapnick:

So is it an issuance platform? If I want to raise money for my company I can list on your platform?

Anna Cox:

No, that would be probably an exchange or a crowdfunding platform. We are not really offering either one of those services. However, our primary focus is the creation of liquidity to those companies that have already done an issuance.

Adam Chapnick:

Got it.

Anna Cox:

Our main focus is STOs and also companies that are listed on exchanges.

Adam Chapnick:

We love STOs. Okay, this is great. So you, and I know because we’ve spoken a little bit before this. You have a very impressive background that is sort of a perfect introduction into this world. Can you tell us sort of why you think security tokens in particular are interesting right now and why you guys are including that as part of what you’re doing?

Anna Cox:

Sure. Well as you’ve mentioned, my background is very traditional in the world of finance. I come from investment banking background and I started off in the world of IPOs. I’ve watched the roadshows, and I’ve watched the very complex process of an initial public offering of an equity. Now, this brought me to mind that there are a lot of inefficiencies in this process, so STOs are fantastic in a way that they’re allowing smaller companies to gain access to raising capital in a very structured, transparent and efficient way.

Now, what we are trying to do is we’re trying to solve the problem of liquidity for such issuers because very often, despite the fact that blockchain is an efficient tool for raising capital, the investors are left neglected without any access to liquidity, unless the issuer steps into the process.

Basically, even if you have a listing on an exchange, it doesn’t matter how many liquidity providers or market makers you have stepping into the process. Unless the issuer himself takes responsibility for providing liquidity to investors, not much is going to happen.

Adam Chapnick:

Can I stop you? Tell me more about that. So that’s something we never hear. What would it look like if an issuer didn’t take part but there were all these liquidity options, and then conversely, how would it look the other way?

Anna Cox:

Equity unfortunately has this market phenomenon that’s called Perception Valuation. So you can have one investor, one market maker who with a single trade can wipe out most of your ICO or STO valuations. So you have one trader for basically things that your token stocks and makes a trade for probably not a very significant amount but at a much lower price, and all of a sudden investors panic and you see your entire equity offering wiped out up to 50% of its valuation.

Adam Chapnick:

Wow!

Anna Cox:

This is not something that you want to see. This is not something that you want to happen. So what we’re trying to do is we’re trying to sidestep this single equity risk by packaging equities into tradable and valuable products, such ETXs, exchange traded indices. This is where our partnerships with indices and with issuers comes into play.

Adam Chapnick:

Oh, that’s great.

Anna Cox:

By creating a packaged product, we’re removing the individual risk of an equity while creating additional liquidity in such an instrument, and also providing arbitrage opportunities for both traders and speculators.

Adam Chapnick:

Wow, okay. So, for people who might be new to this idea, you have an ETX. Is that the same as an ETF, what people know, or is it similar?

Anna Cox:

We try to avoid the term ETF, mainly because of regulatory implications and because there are no crypto-based ETFs just yet. But functionally it is-

Adam Chapnick:

Same idea.

Anna Cox:

... essentially the same idea. Yes. It’s a packaged product based on a multiple amount of underwriters that is traded on an exchange. What we’re offering to the exchange is it’s a branded product, so it would be branded with a particular exchange, that would be operated on our platform, that would be sold through our platform.

Adam Chapnick:

Got it. So if I’m an investor and I were looking through your platform and at your ETXs, what might I see? Would they be vertically grouped or would they be like in solar things, or would it be all supply chain, blockchain companies, or what would they be? Or would it be currencies?

Anna Cox:

At the moment they are currencies-

Adam Chapnick:

Okay.

Anna Cox:

... okay? So again, we’re being very, very careful in terms of regulation.

Adam Chapnick:

Good, yeah.

Anna Cox:

We’re trying to ensure that before we step into a new area, we investigate what we can offer specifically. We are offering full scope of services in Europe, whereas in the US we’re primarily focusing on currencies, but we are definitely taking the STOs a next step further in the very near future.

Adam Chapnick:

Got it. Now you guys are based ... you have dual bases, right? Malta and Cyprus? Is that correct?

Anna Cox:

Correct. Correct.

Adam Chapnick:

So, can you tell us why those two jurisdictions are interesting compared to the US?

Anna Cox:

Well Cyprus is more of an operational hub. We have the provision of several services coming from Cyprus, but Malta is the basis of our two entities. We have a broker dealer entity there, and we also have an entity that is soon to be licensed in virtual financial assets.

Ironically, small islands in Europe are taking the lead in terms of cryptocurrency regulation. You probably have heard a lot about Gibraltar and definitely Malta.

Adam Chapnick:

Yes.

Anna Cox:

There’s a lot of support from the government in Malta for blockchain industry. I personally, as a compliance officer, am a firm believer that in order for an industry to function efficiently and to last, it needs to be regulated. And the regulator in Malta is very proactive in terms of approaching the companies and enabling them to function in a structured and regulated way without letting them do whatever they want.

Adam Chapnick:

Yeah, that’s fantastic. Okay, so how is it different? What’s the regulatory regime in Malta or even Europe, and how are those different either from each other and then from the US?

Anna Cox:

Well, the one similar thing is that a lot of the security token offerings, they are considered security, so they do fall into the broker dealer license, and this is one thing that Malta has very similar with the US regulator.

However, in terms of cryptocurrencies, the regulator is not letting companies run loose and create wallets and exchanges and aggregators of coin issuers just without having a license. There’s basically a legislation that is a replica of a broker dealer legislation that’s focused on virtual financial assets, so the rules are the same for all market participants. They’re based on traditional security laws, but now they’re applicable to cryptocurrencies as well.

Adam Chapnick:

Interesting. Yeah, that’s exciting.

Anna Cox:

It’s a very transparent and understandable legislation because we’re used to it from the traditional securities world, but it’s applicable to cryptocurrencies.

Adam Chapnick:

That’s great. So, looking at the landscape that you see maybe a little better than most, what do you think are the sort of lingering challenges or frictions to having this become more of an adopted practice, the security token? What’s missing?

Anna Cox:

Liquidity. Liquidity. Everybody a year ago was focused on the issuance of ICOs, and most of the projects have failed and they have failed to maintain their value. I’m not talking specifically about the projects, but most of the ICO coins have simply failed to maintain their value because there is no liquidity provisions. The issuer doesn’t step into the process, and what I’ve explained in the very beginning, the market runs can kill or devalue most of the coins.

So without liquidity in the market, without all the market participants understanding the need and the means to achieve such liquidity, it’s never going to be a widely accepted mechanism. And the same thing for security token offerings. In order for this mechanism to become as widely accepted as the traditional one, and certainly it has a lot more advantages than a traditional IPO, there definitely need to be liquidity mechanism post-STOs.

Adam Chapnick:

Yes, okay. Now what do you think about regulations? Is there a future where in the US we’re going to just keep having sort of this different and more constrictive regulatory environment, whereas internationally it’ll be a little freer and easier, or is that going to-

Anna Cox:

No. No, no, no, no.

Adam Chapnick:

We’re going to have harmony, do you think?

Anna Cox:

I am a firm believer that global regulation eventually needs to converge. This is one of the problems worldwide that we have, and again I believe the blockchain is definitely going to assist in this process.

Regulators in different jurisdictions, they have drastically different rules, and it’s very hard for a global company to operate in multiple jurisdictions because you have to abide by all these rules. There are multiple forums, regulation, legislation, there are endless legal advisors that you need to consult with because it’s just too complicated.

So in order for the global economy to continue thriving, a regulation worldwide needs to converge. We have already established that tokens are securities, so it’s only natural that regulators need to have open channels of communication between each other. They need to learn from each other.

The information flow definitely should not be restrictive in order for all the companies worldwide to be able to simplify their offerings and to definitely protect investors. That’s the main thing that regulators really need to accomplish. Regulation should never be punitive. It should be proactive and it should be targeted at protecting investors and enabling the companies to do so.

Adam Chapnick:

I love it. Okay, so when do you predict that the security token will become the thing everybody uses and everybody’ll think it’s weird that anybody ever out there did it any other way?

Anna Cox:

I think it already is.

Adam Chapnick:

Already is! Okay.

Anna Cox:

I think it already-

Adam Chapnick:

When will everybody agree with that though?

Anna Cox:

Well, I honestly think that the year 2019 is going to be the year of the STOs. More and more companies are going to be taking advantage of [Reg A 00:10:35] in the United States, Reg A outside the United States. It’s just a simpler process altogether. But again, it’s very important for the regulator to step into this process and to make it simple for the companies to do so.

From what I heard, I don’t know if it has changed, but last time I spoke to one of our legal consultants, basically there hasn’t been a single token Reg A that has been approved by the SEC. It certainly makes it very difficult for the companies to make this an accepted way-

Anna Cox:

... for raising equity, so I hope that the regulator in the United States takes a more educated and active approach to enabling this business development.

Adam Chapnick:

Amen. Well, Anna, thank you so much for joining us-

Anna Cox:

Thank you. Thank you for having-

Adam Chapnick:

... sharing your thoughts. Please come back. Let us know how you’re doing with Blackmoon.

Anna Cox:

Excellent. Thank you very much for your time.

Adam Chapnick:

Thank you.

Anna Cox:

Pleasure.