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. We're here at Security Token Industry launch week, and we're with one of my favorite guests, CEO and confounder of Securrency, Mr. Dan Doney.
Wow, that's a lot to live up to Adam. So thanks for that.
It's really a pleasure here. This is such a great event, as we really kicked off. We launched security tokens.
This is a revolutionary industry. It's really going to change how finance works, financial services are delivered, we're bringing it to the globe.
It's a big day.
Amen, brother. I agree, we agree. And you guys are going to be an integral part of that, which is why it's always fun to talk to you. So first for people, I obviously know what you are. vBut for people who are just learning about you, what is Securrency?
Yeah, we offer decentralized investment banking services. So we really bring cutting edge financial services to folks anywhere. What this means is issuers, that is folks who are trying to raise capital for an opportunity have a one stop shop. One place where they can go and get all of the services that they need. The compliance components that they need in order to bring their offering to market, raise capital for the opportunity that they represent.
Then ultimately handle the resulting shares as security tokens. So this makes it very easy to govern the life cycle of a company's equity and other offerings that are in fact securities.
Right, and you guys do that by handling, not just what the first blush would be about what someone needs. But you think kind of around the corner about what you're going to need, and you've handled all that too. How have you done that.
I mean that's a great question. As a CEO of a start-up, I've had to learn the hard way all about security's laws. So as you do your own issuances, as you raise capital for your particular company, there's a whole slew of laws you need to consider as part of that offering. What you would like is a world where you can just be a CEO of a tech company, you can focus on your business and the capital raise component basically handles itself. Where the work flow associated with properly onboarding investors, and properly disclosing risks, and properly handling the financial aspects of the business are actually built for you. And that's the platform we really set out to deliver.
The complex part of this is of course the compliance rules built into any offering. The rule sets that you have to go by, for example a Reg D US equity offering has a specific set of who can qualify, who can participate in the offering, how you disclose to them, how you handle the shares that are produced from this. We build all of that into our platform. So the issuer gets what they need throughout the life cycle of their shares.
Yeah, it's amazing. So for people who are watching, who maybe are new to that whole concept, not only do you have the rules built into the token itself, but you also have dormant intelligence into your token for what's going to happen later. Once an issuance happens, people buy, they own the tokens, they hold the tokens. But what everybody loves is liquidity, right? So what have you guys done to handle what happens when the liquidity opportunity happens?
Yeah, I'll tell you. So this is what's revolutionary about this industry.
Never before in history, has there been a financial instrument, which is smart enough to govern itself. So what we're actually building into these into a share, is the rules that govern what that share can do.
Such as the share can never engage in a transaction which is not permitted. In fact if you are an investor, and you're holding on to one of these shares, it's tricky if you have to know every law and every regulation associated with when you want to make a payment or a transfer or a trade of these shares. By building those rule sets into the share, you're able to freely engage in these transactions and if they're permitted you can do it. If it's not permitted, the share will tell you why.
So from this then, suddenly what used to take, if you're an investor, oftentimes you would be locked in for seven years in an investment opportunity, not liquid.
Right. Oh, I know.
So if you need your capital for a family incident or for whatever reason you need to monetize your interest, you're stuck. There's really not much you can do. In this case, there is a secondary market that can form, that is very easy, very convenient for you to engage in transactions to monetize. For others to come, who may be interested in that opportunity and actually engage in an investment in that opportunity, it's radically different than the private security markets we know. In fact they start to behave a lot more like the public markets, that people have come to understand. I can take my shares of Apple and trade them on the New York Stock Exchange, that's easy. We're now bringing this to the sort of murky world of private placements.
Yeah, and now there's also been a slightly more technical challenge, which is things generally have to talk to their own kind. These tokens have had to use their own chain. They're not able to cross over into other environments. You guys are tackling that too.
Yes. So the root of the matter, the whole problem that distributed ledgers are designed to solve, is that every bank, every law firm, our current cap table exists in a law firm on a spreadsheet somewhere. So that's a ledger.
That doesn't talk to another ledger, so when we transfer ownership, there's a whole process by which people resolve those ledgers. Banks have their own ledgers. So my accounts in maybe federal happens to be on their databases somewhere. It's not easy to make those databases talk to each other and that makes transfer very tricky, and slow and resolving or what's called clearing those transactions are tricky. So distributive ledgers resolve that. Now in the case of Bitcoin's blockchain ledger, we can engage in financial transactions and as long as you're on that distributive ledger, that transaction can clear quickly. But you have the same problem in that you got one distributive ledger, that's Bitcoin's blockchain, and another one which is Ethereum's blockchain, et cetera. And all those pieces can't easily talk to each other. So we have an exciting technology that actually allows those ledgers to talk to each other, and allows us to issue tokens which have the compliance rules built into them, that can move freely across those ledgers. So what you have then is the opportunity for really universal liquidity.
It is a significant advance.
Significant advance. That's a huge difference. So back to you, you mentioned Navy Federal. So you guys are a really interesting company to me, because you don't match the general profile of a tech start up in terms of who's involved. Why are you different and your team?
There's a good number of members in a team who have prior military experience in this, which has been a real advantage to us in this space which requires operational discipline. So certainly the industry has been characterized by a number of participants in the past, who have not valued compliance and in operational discipline as a part of their model. We think the industry has actually suffered from this, and by really taking the opposite path and actually their integrity is a core value of our company, by really building a company around those values. We think we're offering something that's quite unique into the space. Also for those who may know my background, I was involved in the intelligence community, the chief innovation officer there. Delivering really elite cutting edge technology into mission settings.
I would say at that point that I really got a chance to see blockchain in its full potential, and both its weaknesses and what was the shortcoming of those environments as well as their advances. We're bringing all of those technology advances to bare in cyber security in blockchain and how it works, and some other advances into this platform, which gives us a real advantage.
Yeah, it's such a unique way in, and it's so compatible that I always love hearing about it. So why did you guys decide that this is the place that you're going to start, why this? Why token creation? Why this?
We saw a need for stable value. The clear stable is income producing assets and real estate. The kinds of financial instruments that characterize these financial centers here, and what we wanted to do was bring that value to any investor anywhere here in the United States, and actually globally. Now we've been compelled as we've seen the impact of this technology in emerging markets. So we've worked with a great partner. The company name is Ricult. They're the middle letters of the words agriculture and laboring. Credit services to developing world farmers. Now these are some of the world's most exploited people. Two-thirds of the world's poor are small holding farmers. By bringing low cost credit to these folks, we can change lives. But this means bringing sophisticated financial services like securitization, done right, all the way out to the edge of the world.
And this can change things, it's a radically different model for delivery. And it raises all ships in the end.
So you're in the process of building that.
Since 2016, we've actually been doing small holding farming lending, using a securitization model, and the impact on farmers' lives is just striking. We actually think this model will spread, and for more, check out Ricult. They won a UN Innovation Award for their work. So you guys can thank them for this. But what we're doing for them is a securitization portfolio that allows you to invest in these small holding farm loans, get a return, change lives, make a large social impact. And as easy as it is to raise a venture capital fund here in the U.S. to do a major debt offering et cetera. Again, this is not a technology that's only meant for the world's financial centers.
Right, god bless.
This solves every problem, everywhere.
I love that
I didn't know you didn't know that.
Now I know. We gotta do more interviews. I thought you're the most interviewed guy we have.
Yeah, we got to dig in on that one, cause that's a big one. If you like impact, it's big.
I do like impact. So you guys, ironically, people have only started hearing about you in the last few months. But you have one of the older companies, you've been hustling this for years, just in stealth. So you have a little more of a fundamental understanding of what is the right way, the wrong way, what works, what won't work. I always like to ask about the bad. What do you see as maybe some of the biggest pitfalls that are before us, amidst all of the cheerleading?
What should we be worrying about, or watching out for?
So in 2015, while working my government job I produced the platform that allowed us to tokenize securities. And it made it easy to do real estate income streams. It was possible to then in 2016 to do this farm lending component, it's straight forward. And what we saw is this could apply to any sort of financial instrument. The hard part was the compliance piece. I figured it would take me about six months to build in the real rigorous compliance component. But again, these are global instruments.
So you need to be able to do this at global scale.
So the process of doing that took us not six months, but really almost three years to get all of those pieces in place. The big thing with compliance is you can't do half compliance.
Right, once you let the cattle out of the barn you cannot get them back in. So seeing how big the challenge was, and making sure that we did this the right way and the power of this. We were quiet. We stayed below the radar screen. We worked out what the hard problems were, and we'll go through a couple of those.
And ultimately figured it would be smarter to stay low profile, to not make the mistake of going to market too early and letting the cattle out of the barn and building in the right pieces. And now we've got those pieces in place, and this is why we're doing these great interviews with you and others in this space as we've launched some pretty important offerings.
Yeah, amazing. Okay so now, I guess we'll look at the crystal ball. The Doney crystal ball, and it's now 2020. So we've had, let's say a year and a half from now, eighteen months from now let's say. Are we going to be stuck in the how do we comply phase? Are we going to be in the all of real estate is now tokenized phase or are we somewhere in the middle? Are we going to be global? How's the STO adoption going to look?
So undoubtedly, this will be global. It will not be touching every instrument, but by mid 2020, you're going to see a wave, as folks clearly begin to see the benefits of liquidity within this phase. The benefits and terms of easier access to capital. Investors see that they actually aren't locked into positions. We see that ticking out. But there's a number of fundamental components that all need to come together within this space. By then the regulatory precedent is not going to be a question. We have, as you have seen in our platform, something called recipes, is a repeatable model where you build in global regulatory rules into an easy to verify piece. Once those are used and shown that the regulators agree with those basic models, they can be reused. Then the questions surrounding regulatory uncertainty begin to evaporate. At that point you just flat out have an easier tool to use. It seems confusing now, if I told you how the credit card industry worked in its early days. All of the players have to work together, so when I swipe that card something happens. You'd say that's crazy, no one's ever going to use this. But in fact it's that easy. I swipe my card. I engage in a transaction. Securities tokens by that time, will be that easy. Then there's no reason to go back to cash payments, carry around lots of cash with you. There's no reason to go back to the old share model.
You've heard it from the oracle. Well thank you again, for yet another griping interview. I loved talking with you, and I hope we'll do it again soon and often.
Yeah, I think we're going to get into tech details. So next time we do this, lets really dig in on some of the things. We'll even showcase some of those components. I know the techies who are out there really want to see more about how all this works. That's what we're going to do next time.
You are on.
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