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Henry Elder, Co-Founder of Digital Asset Advisors on Real Estate Tokenization
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Expert Interview


 

Henry Elder

Henry is the Co-Founder of Digital Asset Advisors. Henry is also the Director of Origination and Investment for Slice. He has overseen more than $1 billion of investments across the real estate and technology sectors. He has also been investing in and advising blockchain startups since 2017. Now he uses his expertise at the intersection of blockchain, real estate, and finance to build Slice’s real estate investment platform.

Transcript


 

Amy Wan:

Hi. This is Amy Wan with Security Token Academy here at the Security Token Industry Launch Week. I'm here with Henry Elder, Co-founder of Digital Asset Advisors. Thanks so much for being with us.

Henry Elder:

It's a pleasure to be here. Thank you for having me.

Amy Wan:

So, can you help explain for us what is the difference between blockchain and distributive ledger? Do they mean the same thing or not?

Henry Elder:

I look at distributive ledger technologies as sort of like an umbrella term, right? And blockchain is one of the technologies that fall under that umbrella. You have a number of other technologies that people kind of just call blockchain just for a simple colloquialism, but distributive ledger technology, I feel like, is the more inclusive term and it's also something you can use to, sort of, break the ice with people who maybe, may view blockchain a little more of a negative light, right? Because it's, unfortunately, I mean, we all lived through 2017, and there were a lot of utility tokens and cryptocurrencies that have given the whole blockchain industry a little bit of a taint. So, being able to say distributive ledger technology sometimes, and kind of glide over that, at least initially, for that initial impression when you're talking with a new client, we've found to be pretty useful.

Amy Wan:

Interesting. So you're working across many different areas, ya know, finance, real estate, traditional assets, and both with start-ups and established companies looking to bit pivot. What state of DLT awareness are you finding within these organizations and what are their areas of greatest need and how do you facilitate advising that regard.

Henry Elder:

Yeah, so that is one of the most exciting parts of our business. Because we love working with blockchain technology companies but we don't see true adoption coming until traditional non-blockchain companies start look to the solutions that they're building to streamline and improve their own businesses, right.

Amy Wan:

Mm-hmm (affirmative)

Henry Elder:

And so we just signed up this incredible client called Shipsomnia and Shipsomnia runs some of the most unique and entertaining cruises in the world, right? But they have had incredible difficulty processing payments from the hundreds of countries that their 30 million fan base comes from, right? And so, they turn to the blockchain because if you think about it, the initial, the original killer app of Bitcoin was transmitting money across borders, right? And since then, we've had a whole bunch of incredible companies, Wax, HelloSugoi, who are building upon that core ability to create a better UI and a better UX for consumers to use it. So we love seeing companies like Shipsomnia saying, I know that this technology is there and I want to see how it can help me. So that's incredibly exciting.

One other thing that we see with a lot of companies that we talk to is they see the capital formation potential with blockchain, right?

Amy Wan:

Yeah!

Henry Elder:

And we still talk to a lot of companies that are like, I have an amazing idea, I want to raise $100 million and I want to do it ten minutes and I don't want to pay any money to do it. So we still face quite a bit of an education hurdle when it comes to that. When we give them an estimate on how much it will cost to come to market, we see a lot of eye balls pop out of sockets, you know?

Amy Wan:

Yeah.

Henry Elder:

But it's good, it's good. It allows you to weed the people who aren't actually committed to what they're doing. Because at the end of the day, I think a good project still can raise a significant amount of money, not $100 million dollars but maybe $10 million dollars. Money to give them roadway, you know, um, I'm blanking on the term, the thing that an airplane lands on.

Amy Wan:

Runway.

Henry Elder:

Runway. To land on, to get some runway and to actually turn it into a reality. But in order to get there, perhaps you might need to do a small seed round, right?

Amy Wan:

Yeah.

Henry Elder:

So, you just have to set your sights realistically and approach it that way. Break it down into manageable chunks.

Amy Wan:

Fantastic. So you're an advisor with IBREA, the International Blockchain Real Estate Association.

Henry Elder:

Yes.

Amy Wan:

What major differences are you seeing between U.S. domestic and foreign international real estate asset tokenization? What areas do you think pose the greatest fiction for tokenized, friction for tokenized real estate investment across borders?

Henry Elder:

That's a great question. So IBREA is like one of the original real estate blockchain associations, right? They've been around since 2012 or 2013, and they have worked with a range of different real estate blockchain companies. I would say that the most significant difference that we see between domestic tokenization versus foreign tokenization is that domestic security real estate tokenization platforms are focusing on the regulated securities route. The SEC has been very proactive in making it clear that you need to comply with regulations while also having a light enough touch that they aren't scaring too many people away, I feel. But they've made it, like I said, they've made it very clear that if you are trying to take United States real estate and put it on the blockchain, then that is a security and you need to comply with securities laws.

A lot of the companies I see outside of the states that are tokenizing stuff in Malaysia or Germany or wherever, have not committed fully to that regulated path. I think it's probably just a matter of time, because the problem with tokenizing real estate in a non-regulatory compliant manner, is that real estate is one of the most easily regulated asset classes on the planet. Right? It's here. You can feel it, you can touch it.

Amy Wan:

Mm-hmm (affirmative) It's very tangible.

Henry Elder:

It's very tangible. It's very concrete. It's very centralized. Right? And so, therefore, the, that value can quite easily be taken away if you are securitizing it in a manner that does not turn out to be compliant.

Amy Wan:

What is the demand, would you say for fractionized real estate tokenization today?

Henry Elder:

It is developing. The problem is that real estate and cryptocurrency are fundamentally, incredibly different industries. Real Estate is slow moving. The people who control that industry have made massive fortunes.

Amy Wan:

Mm-hmm (affirmative)

Henry Elder:

Some of the biggest fortunes in the history of the world, right?

Amy Wan:

Yes.

Henry Elder:

And they've done it over generations.

Amy Wan:

Mm-hmm (affirmative)

Henry Elder:

Or over several decades. When you come to those people and you say that I'm going to take your real estate and combine with it the fastest moving, most cutting edge industry on the planet, a lot of those people are kind of like, Hmm, I'm not sure I want to do that. Right?

Amy Wan:

Yeah.

Henry Elder:

And then, when you go to cryptocurrency investors who are traditionally used to massive volatility and making fortunes in a day, right, and you say, okay, now you'll make a fortune in twenty years. Or thirty years, right. They're sort of like, Well, I don't know that I want to do that. Right? But the thing is, that is just a function of the newness of this industry. As it continues to mature, that kind of volatility will fade away and then as people's trading mentalities mature and as you have more institutional investors and traders entering the space, those people understand the value of diversification. They understand the value of putting your money into a high volatility asset, making all the money you can as quickly as possible and then getting out. Right? And putting it into something secure.

If you are trading in cryptocurrencies and you make a ton of money, the easiest thing for you to put it into and be secure, is tokenized real estate.

Amy Wan:

Very interesting.

Henry Elder:

Yeah.

Amy Wan:

Thank you so much for joining us. One last question. How do you think Security Token Academy has made an impact on the industry?

Henry Elder:

So it's exactly what I'm talking about. I mean, this is a nascent young industry and we need people with an institutional professional mindset who are coming in and educating people on the benefits of all the different, ya know, of diversification, of different blockchain solutions, of taking the long term mindset instead of just trying to get that $100 million dollar raise in ten minutes, right?

Amy Wan:

Yeah.

Henry Elder:

And Security Token Academy brings that very much, they bring that mentality. They have incredible speakers, they have incredible events and they put a lot of focus and professionalism and high value into the events that they put on. And I think that's exactly what we need.

Amy Wan:

Thank you so much! Thanks so much for joining us.

Henry Elder:

Yes, thank you for having me.

Amy Wan:

This is Amy Wan from Security Token Industry Launch Week.