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FIC Networks’s, Arturs Ivanovs
Discusses Custody and Tokenized Bonds

Transcript


 

Arthur Ivanovs:

It’s a legal obligation for the borrower to pay back the money that has been lent by the investor or the lender to that company. Specifically in the corporate bonds business,

Corporate bonds have historically been lagging behind equities markets and FX markets. And the whole market is actually driven by decades of old processes and technologies. So we’re modernizing the whole infrastructure from the ground up. We’re starting with the plain vanilla bonds, meaning companies that need to raise that capital and they’re seeking the investor community to put faith in that instrument.

Quality tokens, it’s a new term. What is more, accepted in this industry is just securities or bonds. So what we’re saying most of the times is that “Hey, we’ll take your current processes, we’ll make them a hundred times more efficient, both on the primary market and on the secondary market so that institutions can actually benefit from greater transparency, instant settlement, and just more participation from the greater community. Because right now this market has been dominated by gatekeepers, the middlemen, and basically you need to trust so many institutions to actually participate in this market. So we’re simplifying a lot of stuff and we actually did the first bond offering last year, which was the first USD corporate bond in the world on the blockchain.

From a legal perspective, I think that the main sort of challenge is the lack of guidance domestically on the federal level and state level in the United States, just from how to apply the new blockchain technology, the processes involved in the transfers, in the digitization of the certificates, the custody piece and so on. From the technical standpoint, we’re ready to do this and get scaled up, but the problem is that we need to figure out how to navigate the legal environment in the most compliant way.

The thing is, Internationally it is possible and there are some sorts of, let’s call it safe Harbor in different offering types, but still to get it into a scalable business model, it’s pretty challenging to navigate the legal landscape.

When investors and buyers are looking at these bond deals. It’s really about the merit of the economic terms of that security. So tokenization helps with the efficiencies that gets in. Also the transparency that it allows for down the line, plus the smart contract automation for the back office and middle office operations.

Anybody can do self-custody. We can do that tomorrow, today. The problem is how do we create like an Interconnected Network of custody solutions or just one solution that would accommodate all of these bonds and for all the institutions. So, in general, right now, how we see it, we have a solution with a single custody provider and we’re looking to expand the custody companies into our Network so that their all interconnected through our proprietary bonds on the blockchain protocol, which is called Bob Protocol.