Patrick provides high-level strategic guidance and creative solutions rooted in rich experience. He has worked with clients across multiple industries around the world as a strategic consultant and as a lawyer with three top-tier international law firms, giving him deep transactional and project experience – as well as hands-on understanding of the start-up and growth stages of company development. Patrick has worked with leading energy companies, developers of industrial and real estate projects, and banks on large-scale projects, acquisitions, divestitures, and financings on six continents. His core areas of professional activity are strategic planning (including capital strategy, go-to-market strategy, international expansion strategy and product distribution strategy), transaction and project structuring, deal negotiation, and problem-solving. His industry experience includes energy, agriculture, telecommunications, information technology, hotels, transportation infrastructure, sports management, and music & entertainment. Patrick also has extensive experience with capital markets transactions, project and trade financings, as well as recourse and non-recourse acquisition financings. Patrick is a graduate of Arizona State University (BA, magna cum laude) and the Georgetown University Law Centre (juris doctor). He also served as an officer in the United States Marine Corps, attaining the rank of Captain.
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 are here at Security Token Industry Launch Week, and I am excited because I am joined by Patrick Campos from Securrency, one of the coolest up-and-coming players in our space. Thank you so much for being with us.
Thanks Adam. Great to be here.
Okay, so for everybody who hasn't yet heard of you, can you give us just the quick rundown of what is Securrency?
That's incredibly difficult, because Securrency is a pretty comprehensive platform, but I could summarize it may be easily with three aspects. One is we have an issuance platform with what we call decentralized investment banking services. It's all the onboarding issuance tools as well as the back office and token maintenance support. The second part of it is we've got interoperability tools to promote liquidity for security tokens through the use of identity and credentialing services and interoperability. Then the result of that is the third thing, which is our new security token protocol, the CAT-20, which stands for Compliance Aware Token, which is what we believe to be the world's first truly interoperable multi-ledger security token protocol.
Okay, that's a huge deal, huge deal.
That's a big deal.
Okay, so tell us about this new protocol and tell us why interoperability is such a game changer, which it is.
It's all about liquidity, and it's all about finding the players in the secondary market where they are. That ability to move tokens, security tokens, not just from one chain to the other but also off-chain, where you have legacy systems or across exchanges, while retaining the compliance features and the identity features, that's critical. It's critical for the interlinking of these various tools of liquidity worldwide, so we can call it the network effect, of course, which is establishing really a decentralized network of centralized pools of liquidity, if you will.
Okay. Now bring it back to the caveman which is what's my job. I'm the resident caveman. If I'm doing an issuance, why would it make a difference to me? What are the benefits that I get from having interoperability? You're talking about having access to lots of different pools of liquidity, but in caveman terms, what does that do for me that just hasn't been possible before?
Yeah, so look, great question. At the end of the day, if I issue a security token to someone who's just going to hold it for 30 years and never do anything with it, I've just basically ... It's a gimmick. There's no additional value to that token holder who has no intent to do anything with it, aside from perhaps some secondary features where we might ... We were speaking earlier here about things like tokenizing or representing collateral interests, but if we ignore those pieces of it, the reality is what makes that security token more valuable is the fact that it is more liquid, is the fact that now you can appeal to a whole different set of investors who are not long-hold investors, who are interested in having things that they can exchange when they need to exchange them, as individual investors or institutional investors, when they need a liquidity event, so that presupposes that you have liquidity.
You've got to create the conditions for liquidity in the first place, so security tokens become more valuable and more marketable as a result of the promise of liquidity on the back end. That liquidity is established by the very fact that those tokens are a digital form that are easily exchangeable, and now with our protocols, exchangeable in a highly interoperable manner across different exchanges, across different ledgers, that sort of thing.
Right, so if I'm an issuer, I'm a young startup and I want to give investors access to what I'm building, something that I can offer them is the idea that, okay, you can get into my company, but relatively quickly, there are going to be a lot of people who didn't know about us. But when they hear about us, they're going to want us.
They're going to want a piece of it.
Right. Now with your new protocol, many, many more people will be able to buy my investor's tokens, right?
That's the bottom line, the caveman.
That's right. In its simplest form-
That's a big deal.
... that's it right there. Exactly.
Then it's a really big deal, I think, for issuers.
It's a huge deal.
I think especially in such a nascent community, industry as we have, there's just not that many places where people can do any kind of secondary trading.
You guys are making it possible to kind of turbocharge that for issuers, which I think is ... I don't know if people understand what a big deal it is, but it's a really big deal.
Yeah. Yeah, thank you for saying that, because we're really excited about it too. It's great, first of all. Organizations like Security Token Academy that understand that this really is the future of finance and are getting the word on the street, that is actually helping to legitimize something that I think a lot of people would say, "Oh, well, isn't this just sort of a new form of the old sort of ICO?" It's not. It's really a new form of the old finance, system of finance, that's leveraging and taking advantage of the technological benefits that we saw coming out of the cryptocurrency world. As you say, this is truly game-changing stuff.
Yeah. Can you for our viewers explain a little bit about what you just touched on? Security tokens, what are the things that make them much more versatile and powerful than sort of the old, I guess I would call it, the file cabinet model?
What do they do?
First of all, one of the key features of where people want to go with security tokens and actually where we are with our CAT-20 protocol is what we call the automated governance, if you will. We leverage a proprietary piece of technology that we have called the rules engine, which really writes into the token the rules that apply, first of all, for that transaction. There are transactional rules. We might say, "Hey, my minimum ticket size is going to be $100,000," or, "I only want my tokens to be held by graduates of Arizona State University." I happen to be a graduate of Arizona State University.
I'm so surprised.
Undergrad. But there are also obviously regulatory rules that apply across different jurisdictions. That token now, we call it Compliance Awareness. That's a patent that we filed. It is aware of what it can or cannot do. That's new. That's never existed before. Normally, you would have to find a bunch of professional advisors who are themselves aware of what you can and consult with them. Now the token, you consult with them once. You write those rules into the token, and now the token is self-governing in that respect. That's incredibly different, and that establishes really that first part of the liquidity that we keep talking about.
Right. Now Securrency, can it help me? If I'm a new issuer, you can help me from soup to nuts really, right? If I just say, "Hey, I've heard there's this thing called security tokens that might be better than just doing stock certificates," I just-
Yeah, that's right.
... call up Securrency, and you guys help me, right?
Yeah, that's right. We do work directly with issuers, but one thing that I think is really important is ... A word that's used and maybe misused a lot is disintermediation. We're not actually looking to disintermediate a lot of the actors that are in the space already. We're not looking to disintermediate the bankers or the lawyers. They're very critical roles to perform. What we do is we actually provide them with tools on a white label basis typically. Actually, you could call Securrency and we could provide those tools to you directly, or you could go to a broker-dealer who has our tools and is white labeling those. What we don't do, because we're just a technology company, we don't market. You still need to go to a broker-dealer to market your securities, and we give them the tools on a white label basis, so that they can provide these incredible new technological resources to you.
Got it. Okay, so where do you see this new protocol taking us that we aren't today?
Well, first of all, it is that key to interoperability. One of the things, and I think you've spoken with our CEO, Dan, about this-
One of the things-
Dan has done an amazing interview. Check it out, securitytokenacademy.com.
Absolutely. It was an amazing interview-
... by the way, from both sides. It's a good watch. I concur. We would both give it two thumbs up.
There we go. What was the question again? We were talking about-
You've got this amazing, sort of revolutionary protocol. How do you guys see it changing things in the future from the way we do things today?
Yeah, so where I was going with that, in terms of the limitation to one ledger, for example, if you think about it from a governance perspective, just a simple thing that I know that Dan talked about, if you think of it from a governance perspective and you say, "Okay, here's a good idea. Let's move trillions of dollars of the nation's economy onto one ledger."
The question sort of answers itself, right? Number one, one of the things that our protocol is able to do is what we call sort of disaster recovery. We can literally lift the cap table off of one ledger and drop it onto another ledger in case there's a hack or whatever, so this is really important. But that's in the worst case scenario. That's disaster recovery.
But that's a big deal.
It is a big deal. Preserving value is a big deal, and not just preserving value and recovering it, but minimizing the time of sort of disruption in the financial markets, right?
But the other part of it, and we've been talking a little bit about it, is the interconnection of these different pools of liquidity, and the ability to allow a user on one platform to see that there's an identified credentialed user on another platform, not know anything about that person except that that is someone, that there's a wallet out there that can accept this token and the transaction can now occur. So universal credentialing-
So sorry to interrupt-
No, please, please.
... but I think that's something that I think a lot of people don't even realize is an issue right now.
Can you describe what it would be like right now, someone on one platform, what don't they know? They don't know about that other guy. Why?
Well, so I use ... This is really crude analogy, but-
But I like it, because-
I'm a crude man.
And I'm a pretty simple dude myself, so this is how it works. If I want to get in my car and I have a California driver's license, and I want to drive to Texas, what I don't want to do is get stopped at the Arizona border and told I need to take a whole new driving test, okay, and be issued a new driver's license so that I can proceed on. Then I get to New Mexico, and the same thing happens all over again, right?
Even though I've been issued a California driver's license, my credentials are recognized across all of those states so that I can continue on my drive, and I am qualified to continue on my drive. I have a license that says that I have the proper credentials. That license also contains my identity, so if somebody needs to know who is this person and do they have the right to drive, there it is. That's my license, right? That's a very, very simplified way of describing what we're really doing here, which is saying we need to ... For compliance purposes, we need to know that that person is who they say that they are, number one.
Number two, we need to identify what credentials that person has, what rights that person has, with respect to a particular transaction. We say in the case of transaction A, "Well, we know who you are and you're a retail investor. That's fine. You can participate." But in transaction B, you need to be an accredited investor. Oh, wait, by the way, you're not a resident of the United States. Okay, under Reg S, that's fine. That credentialing process and the rules that are built into the token allow for the instantaneous identification of those people.
In this case, for example, let's assume that we now have a token that is freely tradable. It's a security token, but now it's freely tradable, you think, but that's not exactly correct. Can I trade that token to someone in North Korea? Well, it turns out that I can't, for a whole different set of regulations having nothing to do, so we still need that type of distribution control even in an environment where we think that we have free trading. You still have other factors that you ... So distribution control continues to be an issue. If you're an issuer, you really don't want to wake up in the morning and find out that there are people on your cap table who aren't supposed to be there. That's distribution control.
It continues to be important.
Right, so it couldn't be clearer about why that is useful. Today, without that, are people forced to confine themselves to California, as it were, in their understanding of their users or their investors or their token holders?
It's actually funny that you should say that. I'll share an interesting anecdote off camera with you about that very question, about just California. What people are doing is sort of taking ... There are a number of different approaches that people take. Sometimes they'll say, "Well, look, we'll lock down the tokens for 12 months, and then they become freely tradable," and so off they go. I think that people have recognized that that's not going to do for the reasons that I just pointed out. Then another approach that people would take-
Just to follow that, that doesn't do, because at 12 months, you still need to know where it's going, right? That's the point.
I like to say it's like putting someone in a car and sending them at 100 miles an hour toward the river. You say, "There's no bridge there, but don't worry. By the time you get there, maybe there'll be one." It's not useful, right? I think that methodology has passed. We now see predominantly the use of whitelists and smart contracts on the Ethereum network with ERC-20 tokens. That's a fairly manual process on both sides. The whitelist is fairly proscriptive. Of course, smart contracts can be pretty cumbersome to write.
We do that in a much more simplified, and then if I may say so, elegant way in that we don't need a whitelist. We don't need to identify, "Oh, I know who that person is, and he's qualified." We simply say, "These are the attributes that one must possess in order to participate in this," and the token looks out and says, "I see that wallet. I see that wallet. That one has the right attributes. That one doesn't." That's how it works. The methods that are being used now, they are useful, but I think that they're transitional methods. Ultimately, what Securrency has developed, we believe it's the ... We say it's the standard for the future of finance. We think that there will be one protocol, one protocol that basically everyone can all use and interoperate, and we think that we have it.
One protocol to rule them all.
One protocol to rule them all.
One protocol to bind them.
Not to bind them.
One protocol ... I forget how the rest of it goes, in the darkness bind. Okay, so Securrency, this is amazing. Where is it? This protocol is launching when?
At your event.
At our event? This is the Security Token Academy-
... of New York Launch Event this Friday. Amazing.
Yes, it is. Yes, it is.
Or I should have said maybe it's last Friday by the time we see this video. Okay. We're very excited-
But it's still this Friday for us.
Yes, for us here in real time. Okay, and now what about for Securrency as a company? Once that's happened, what's the plan for the next six months? What's happening?
We're trying to get the word out really to all of the other players in this space that a rising tide lifts all boats. What we're really trying to do is talk to all of the folks who are also issuance platforms and say, "Listen, let's all cooperate, because here's the deal. We can be super clever, and if the security token economy never takes off, we fail just like everybody else. That's not useful. What is really important is that we demonstrate to a global community of financial services professionals, of investors, of regulators, that this is not just viable, but it is a truly evolutionary step, that this is really the future.
It's transformative. Exactly.
And so we all have to really work together. We want to make our protocol available to issuance platforms and advisors, so that we can create this truly sort of networked ecosystem to establish that kind of liquidity that we were talking about earlier. That's really what we're going to be focused on. We will be working, of course, with issuers to demonstrate how really, really functional our technology is. But beyond that, I think we're going to be working really closely with a lot of venue operators at exchanges, whether they be ATSs or crypto exchanges, with other issuance platform, and with all the really incredibly talented and forward-thinking people who are operating in this space, to really establish this security token economy.
Well, we will be rooting for you. Wish you all the luck, and hopefully we'll have you and Dan back on for another interview.
Well, I'll have to sort of stand in his shadow. He is quite the intellectual giant, but it's an honor to work with him and really great to be here with you as well. We love the work you guys are doing.
Thank you so much, and thank you for joining us. It's great to see you.
Thanks Adam. Appreciate it. Likewise.
SecurityTokenAcademy.com is a platform for information about the new world of Security Tokens. We are not a registered broker-dealer or investment advisor. We are not a Security Token or blockchain platform, nor can you purchase or invest through our website. We do not offer investment or purchase advice; nor do we endorse or recommend purchases or investments in any Security Token, and we don’t tell you if any purchase or investment is suitable for you. Additionally all investments entail risk, and investments in start-ups as well as Security Tokens involve a potentially greater risk.
Copyright © 2020 SecurityTokenAcademy.com®. All Rights Reserved.