Former currency trader, analyst and fund manager, Mr. James has 9 years of experience in investment management across foreign exchange and cryptocurrency markets. As a co-founder of Fincross International, Mr. James provides support to the strategic development of the firm in harmony with the evolving landscape of the digital asset markets and the core infrastructure that underpins these markets and connects them to the traditional financial system. Mr. James supports the firm’s business development and marketing strategy and is a vocal spokesperson for the firm.
Mr. James is a Founding Partner of Rolle Capital and formerly an Investment Manager at PE Capital with experience in systematic trading and quantitative long/short strategies in currency markets working across London, Monaco and Mumbai.
Fincross International is a regulated investment bank leveraging proprietary banking infrastructure to provide new investment products and financial services to a diverse group of clients.
Welcome to Security Token Insight, brought to you by the Security Token Academy. The security token industry is here and will provide a key foundation for the evolving financial internet.
The Security Token Academy provides insights about this new era for security token enthusiasts, investors, and issuers. The security token industry is here, and you can get involved.
Hi! I’m Adam Chapnick.
And I’m Amy Wan. Thanks for joining us. Coming up on today’s episode of Security Token Insight in your security token vesting news, we’ll take a look at STO growth in the first quarter of 2019. We’ve got an interview with Henry James, the Co-Founder of Fincross International. We’ll also sit down with CEO of TokenSoft, Mason Borda, for a look at the company’s latest news. Plus, details on the Security Token Academy’s Meetup this summer in London. That and more is coming up on this episode of Security Token Insight.
Now it’s time for your Security Token investing news. Recent data analysis by InWara found STO’s increased by 130% in the first quarter of this year. According to the 28-page report, 47 STO’s took place. That’s a 130% increase over the last quarter of 2018. The United States led the way with 11 STO’s in the first quarter of this year. The top performing industry was trading and investing. There is a link between space and security tokens.
Ambisafe is launching a new STO that will allow users to buy and hold SpaceX stocks as tokens. Ambisafe’s new fund will purchase the shares in advance and then tokenize them. 10 USPX tokens will equal 1 SpaceX token. SpaceX is not a public company, so these tokens will provide an opportunity for those to invest who are interested. This is one of the first examples of tokenizing stocks. We’ll give you an update on future shows on how this pans out.
And in other news, those holding Series A preferred shares of Overstock, received a letter from the company about an upcoming change. The shares are transitioning to security token trading platform tZERO. tZERO is a subsidiary of Overstock.com. Overstock will need to issue new shares and the company must receive approval from the shareholder. These shares will not be subject to restrictions on ownership and will be tradable on tZERO. By the way, tZERO is a Gold Corporate Member of Security Token Academy. To learn more, go to our website Securitytokenacademy.com and click on the ‘Directory’ tab and the ‘Corporate Member Home Page’.
The Security Token Academy attended Crypto Invest Summit in downtown Los Angeles last month. The event attracts security token and crypto enthusiasts from around the world. The Security Token Academy team was there interviewing some of the biggest names in the security token industry.
That’s right. Amy and I also had the privilege of moderating panels at CIS. We met a lot of great people who are excited for the future of security tokens. I was lucky to find time to chat with the Co-Founder/Deputy CEO and Chief Strategy Officer of Fincross International, Henry James.
Fincross International is a regulated investment bank leveraging proprietary banking infrastructure to provide new investment products and financial services to a diverse group of clients. Let’s learn more about the company’s expansion plans into Hong Kong and the latest on the STO market in Asia. Take a look.
For everybody that hasn’t heard of Fincross yet, tell us what you are and how you came to be.
Sure. Fincross International is a digital asset focused investment bank. We’ve come about from two co-founders, myself included. My background’s in investment management and trading foreign exchange. So, really, the entry for us was came thanks to the crypto market, the volatility of the crypto market. We had the plan to launch a crypto hedge fund, and we were then identified by officials in Mauritius, the beautiful island of Mauritius, to launch an investment bank that could take full advantage of regulatory frameworks for digital assets from their jurisdiction. So, so that’s where we are of the last two years we’ve been building the company together. We’ve onboarded a senior leadership team based on bankers, people that very experienced in securities world as well. And, of course, now with the emergence of the security token market last year, this is really the key market for us to kind of penetrate our market and our target audience in the U.S. and Asia.
So you do, you have an interesting niche, because there’s not a lot of companies that portray themselves as digitally focused investment banks. How does that make what you do unique?
Sure, I mean, in the market today, we like companies like Galaxy Digital, Diginex out of Hong Kong, Seba is another of our peers in Switzerland, these are banks...sorry, excuse me, investment banks that are focusing on digital assets. How we vary is that we’re actually producing a lot of our own proprietary technology, because we believe that an investment bank dealing with digital assets has to be able to rely on its own technologies to deliver on the trading and the liquidity the production of liquidity for products in this market. So, really, we’re joining that group of great companies. Like I said, we’re the HQ in Mauritius, but our management team is currently spread across the U.S., the U.K., and Dubai, and with a view also to launch a branch in Hong Kong later this year.
So, maybe a silly question, but will you be able to do deals everywhere or do you have certain jurisdictions that you’re able to operate?
Well, basically, our investment banking license in Mauritius doesn’t limit us to where we can do business. But, naturally, in certain markets, let’s say like in the U.S., obviously, for us to sell security tokens, we’ll have to either work with a broker-dealer or acquire a broker/dealer license ourselves. So we’re in the process of doing that right now. We just right now activating our investment banking license in Mauritius. We’ve received an approval for that license in November last year. And kind of from this period moving forwards, we’ll start onboarding clients for the first time.
Got it. Now, we’ve been talking about sort of your travels and you’ve got a really unique insight from your global focus to how people are responding or the different appetites for security tokens and being involved in the space from different places around the world. What are you seeing in Asia in particular from maybe both sides of the deal?
Yes. So I think that the security token market’s being driven from an innovation standpoint here in the U.S. The Asian markets are, kind of just a little bit, a wait and see approach, let’s watch the Americans do this.
And then kind of catch on once we see some momentum coming out of the U.S. But that’s said, they are still very sophisticated understand the market well. And the potential for this market, we all identify that the security token markets going to dwarf the size of the cryptocurrency market and that sentiment is felt also in Asia. Where crypto is very popular and probably more popular than it is here in the States.
But we’ve spoken with multi-billion dollar asset managers in Asia. We’ve mandates to buy security tokens now. I think they’re still exploring what kind products they want to buy, but they do see it as a means to have greater and wider access to investment products in different parts of the world, whichever one’s for traditional markets would be harder to access.
Is there any type of asset that they have a predilection or are they most interested in real estate? Or something else?
Real estate is out there.
It’s real estate.
Real estate is out there. But not, it’s not limited to that. We’ve found there’s two kinds of trends that’ve emerged from the groups that we’ve spoken to around the world that are interested in security tokens. One trend is from institutional investors are looking for more complex products. Products that they can buy and access through traditional markets. In other words, they’re looking for new investment product and we’ve, let’s say, IRR of 20%.
It is high.
It’s a high yield product. So whereas on the other hand, there’s another client segment that’s emerged, and that trend there is an investment mandate that is focused more and more I like to coin the ‘vanilla security tokens’-
Maybe real estate backed or precious metals backed-
Or even oil backed. Right-
If people want to buy and access oil, trade oil, it’s quite difficult for them to do that. So I think these kind of products appeal more to family offices and high net worth individuals. And they have a different investment fees. These guys are in the game of wealth preservation.
And the fund managers, of course, institutional guys are here to make some good returns.
So you’re talking about there’s something interesting you had shared with me earlier about these vanilla opportunities and sort of what the strategy is behind them. Can you talk a little bit about what why [inaudible 00:08:56]?
Yeah. Okay. I know what you’re asking me for here. So, yeah. When we probed a little bit deeper, we-
Asked these groups why do you want these vanilla products, which you can buy in, by the way, much more liquid markets through traditional markets today, why do you want to buy them in the form of security token, and their view is their taking a medium-to-long term view and saying once liquidity does come to this market, we will have the ability to trade asset for asset via the security token market. And that’s huge. And I think that’s a movement, an investment movement that’s going to resonate also of millennial investors as the whole market grows and matures over the coming years.
Yeah. I think that’s very exciting because I hadn’t heard that yet and the idea that what sounds like an innovative thing to do, but from the most conservative-
Investors. That’s kind of mind blowing and exciting. Because these people are deeply understanding the space. And that, to me, is an indicator that it’s going somewhere.
Yeah. Absolutely. And like we said, these are kind of investment mandates with completely different needs and objectives.
These guys are here to try to reduce their exposure to cash with their reliance on cash in sovereign currencies. They want to protect themselves in case of recessions, regional recessions in different parts of the world that may affect themselves. And they see the security token market as being a market where they can actually start hedging some of their positions and diversifying their portfolio in a more efficient and cost effective way.
We have the full interview with Henry on our website. Be sure to check it out. Fincross International is a Gold Corporate Member of the Security Token Academy.
Speaking of Fincross International, the Security Token Academy is honored to host its first London MeetUp in partnership with Fincross. Join us on Wednesday, June 12th, from 6:00 to 9:00 in the evening at the illustrious 12 Hay Hill Club for an evening of networking, insightful discussion, food, and drinks. Admission is free. You can find all the details on our website Securitytokenacademy.com.
Also, at CIS, I had a chance to catch up with Mason Borda, the CEO of TokenSoft. TokenSoft is a primary issuance and compliance platform enabling the issuance and distribution of tokenized securities. Automating compliance requirements is no easy feat. However, they are doing just that at TokenSoft. Let’s learn more about that and more in this expert interview.
For everybody who doesn’t know TokenSoft, even though we had a great interview with you a little while back. Why don’t you just sort of give the quick one-two on what is TokenSoft and why did it come to be?
Yeah. So we really came to be because there were issuers out there in the market looking to issue digital assets on the blockchain. And we started the company to help them comply with the applicable regulations, whether it was things like banking securities or tax laws. And we do so either domestically, so we can help them comply with domestic regulations, or comply with regulations in the jurisdictions that they’re offering in. So our largest client we’re helping comply in 56 countries with their local regulations, and we automate things like that. When they go to subsequently issue the digital asset, we also help with the enforcement of the compliance requirements as these tokens transfer on the blockchain as well.
Amazing. Okay. So now that people kind of get what you’re up to, we’re here among all kinds of crypto-know-it-alls and try-it-alls and what are you hearing or what are you seeing out in the world that’s interesting to you these days?
Yeah. So, I think coming into 2017, there were a lot of startups that were issuing these digital assets-
And through 2018, it was sort of a little bit the same. We also started to see a lot of experimentation with institutionals and that’s the one thing that we’re seeing consistent in 2019 is there’s a lot of institutions taking a look at the space, looking at different pieces of infrastructure that they need to stand up to start issuing digital assets on the blockchain and there’s a lot of activity in that space that we’re seeing.
Interesting. So institutions in this space are interesting because they actually are on both sides. We’ve seen funds that are tokenizing and we’ve also, you know, the kind of the holy grail that people are talking about is what’s it going to take to get the institutions in to start investing. Which side are you seeing movement on or both?
Yeah. So we really sit on the infrastructure side, the technology side. So it’s really with folks that are, or institutions that are seeking to build their own infrastructure-
And to build it within their rules and their compliance requirements-
And that’s one thing that we’re seeing is people don’t want to follow other people’s rules, so they want to follow their own rules.
Especially in crypto. Right?
That’s always been. So what’s a use case for an institution that wants to kind of implement things that you’re doing? What’s the most popular or attractive part of what you’re doing to them?
Yeah, so I think the technologies is still very obscure to a lot of-
Major institutions. If you look broadly in the market, there’s not too many blockchain developers.
There’s not a lot of schools or universities out there that are training developers to code on the blockchain.
And so, I think that’s one of the things that we’re seeing is the domain expertise is very interesting to them. And so, they’re coming to us looking for that type of domain expertise so they can package this infrastructure within their own requirements.
Got it. And what’s that going to help them do better now that they have you baked in?
Yeah. So that’s really hard for me to say... From my perspective, we’re still in the experimentation stage-
So it’s institutions that are seeking to figure out what is value about building on the blockchain, you know, why should I build infrastructure on the blockchain, what are the efficiencies that I gain? I think there are a lot of efficiencies on the compliance side, in particular.
One thing that we’ve seen with our own existing clients is that we’ve been able to automate a lot of the compliance requirements when it comes to transferring these assets from one jurisdiction to another-
Yes. That’s amazing.
Or onboarding investors within these complex web of regulatory requirements.
Now this may be a silly question, but you said you have one case that had 50 fifty different jurisdictions?
Is that right?
So does that mean you guys have to take 50 different regulatory sort of regimes and bake different rules-
For each thing? Every single one?
So, yeah. So our platform automates that-
And so as these-
But to make it automated, somebody over there had to code every single one of these in?
It was very painful. Yes.
I think it would be. That’s sounds painful. I’m glad that was you and not me. Wow. So what sort of hiccups did you guys encounter in trying to make that possible?
So on the tech side, our platform we designed to be very configurable. So we literally have a different front door for every country. The fun part is even within those countries, different types of investors have to be treated differently, whether-
Individuals, institutions. And so those were some of the challenges that we saw but-
Then on the regulatory side, the regulations change per country. It might be legal to issue a digital asset in a certain country one month and then the next month the government comes out, or the regulators come out and say some negative things about bitcoin or security tokens.
Oh my god.
The same place real-time is changing its rules.
Holy lord. I didn’t even think of that.
Yeah. We’re finding ourselves having to update these rule sets and these compliance requirements in real-time as they change.
Wow. So is that a service that you provide to all of your clients that you’re going to update, you’re going to watch the news and as they evolve their regulations, you’re going to bake that into an existing token or did they have...how does that work?
Yes. As a company that helps issuers follow their compliance requirements, we’re definitely very paranoid about putting them out of compliance.
So when things come into play like GDPR-
It went into effect in May 2018, we did get all of our whole platform into compliance for GDPR and get all of our clients as a result into compliance at the same time.
It’s just something we do just because it’s our job to make sure that our clients are following their compliance requirements.
You know, it’s funny we have spoken to not a few companies that do similar work-
To what you do, but that has never come up. That there’s this ongoing paranoia you have to embrace in order to keep all of the people that you’ve handled issuances for in compliance-
When like at the whim of the regulators in 50 different countries.
So we have to do, yeah.
Oh my lord. That’s impressive. So, okay so where do you think we’re going with you’re talking you guys are seeing movement in institutions. Where do you think we’re going in 2019 in terms of adoption from the institutional side?
Yeah. I think the world of securities is very complex. There’s a lot different licenses you need to do different things. I think the good sign is when it comes to institutions, they already have the regulatory covered to do a lot of these things. They can take a more sandbox approach-
And start with experiments and then go larger.
And so I think it’s a lot of figuring out what all the pieces are for the institutions to continue to do business as usual but perhaps augment it with additional products.
Be sure to check out the full interview with Mason on our website. TokenSoft is a Gold Corporate Member of the Security Token Academy. To learn more, go to our website Securitytokenacademy.com and click on the ‘Directory’ tab and the ‘Corporate Member Home Page’.
We want to remind our viewers that if you have any questions about security tokens, be sure to email us and we could answer them right here on a future episode of Security Token Insight. The address is [email protected] Be sure to include your name with your question. One more time, the address is [email protected]
Did you know that you can get the latest industry updates in our free weekly newsletter, The Security Token Edge? The newsletter’s packed full of insightful information about the security token industry. To subscribe and get your free weekly edition, go to our website Securitytockenacademy.com.
We also invite you to check out the Digital Wrapper on Medium. It’s our new behind the scenes series with the teams building out the security token industry. These are in depth interviews covering a wide variety of topics. You can view them when you follow us on Medium. You can find more information on our website Securitytokenacademy.com.
In a first of its kind, multi-city webinar on tokenization of commercial real estate CREST, a project the Security Token Academy provided a detailed case study on the tokenization of St. Regis Aspen Resort. Learn how the webinar explore the disruptive forces that are emerging in commercial real estate or CRE financing. Here is your preview.
Disruption in commercial real estate has been appearing in lots of different ways. Certainly, in the office category of commercial real estate, also known as CRE. The appearance of co-working companies such as We Work is a major new trend. Also, the appearance of technology companies that strive to improve property operating efficiency through prop tech, or property technology, is another area of CRE disruption.
But there is a new type of disruption emerging in the area of CRE financing. It’s a way to raise money via a new solution which is compliant with U.S. SEC regulations. It’s called tokenization and it is based on security tokens. This wave is barely just beginning. But examples are starting to emerge and that’s why we’re here today as we cover the tokenization of the St. Regis Aspen Resort.
I wanted to help our viewers take a closer look at this iconic hotel. So while I was there, I had the opportunity to meet with the hotel’s general manager, Heather Steenge-Hart. Let’s take a look at what she had to say.
This is a gorgeous property. Can you tell a bit about it?
I’d love to. We have 179 guestrooms, 30 suites. This is one of our three specialty suites. And then we also have 25 residences, two and three bedrooms, which are fractional ownership pads.
Fantastic. What else should we know about this property?
Well, the rooms and our public spaces were designed by Lauren Rottet. She was wanting to make sure that we’re bringing the outside light into the hotel, that it was like a mountainside manor, that it was contemporary yet very, very comfortable because when...after you go skiing, you just want to-
I think she did a lovely job in portraying those goals overall.
Regarding this specific property, you had the listing at JLL and sold it to Stephane at Elevated Returns. What’s the back story on that?
Yeah. In 2010, we had the property on the market and we had reached out to a number of offshore investors and had gotten in touch with OptAsia. We had been in touch with them on previous transactions before. And we sold the asset to OptAsia and Stephane in 2010.
And the $19 million of tokens that were raised, what were those funds used for?
Well, I mean, that’s with a return of capital to the owners. So effectively, the tokenization is a true a sale of ownership into the property, so the current owner decided that the maximum they were willing to give away at that valuation was 18.9%, so that’s what we put for sale and we were happy enough to fill up the entire stack.
So the way that it works is that you actually sell the property into an uprighting partnership. You create share interests out of the partnership and you capitalize the shares through the sale of the smart contract. Smart contract is effectively a digital share certificate, so rather than to have the old fashioned paper share certificate, you have a digital form of it. It’s a beautiful instrument because all the securities regulation are actually embedded into the contract itself and it’s cheaper. It’s faster to transact and it offers the ability to have a global product trading on multi-product chains.
We got involve with Elevated Returns first helping Stephane in trying to liquefy in a different format, in a registered format, a traditional listed read format, the St. Regis Aspen, and then helped him transition his project to a tokenized solution. Prior to helping Stephane, we’ve also been very active in the whole idea of creating liquidity around non-traditional liquidity solutions around single asset real estate. And so, it was a natural for us to help Elevated Returns and Stephane with their project.
Henry Elder :
Everything is going to get tokenized. Your identity will be tokenized. Your title will be tokenized. Your mortgage will be tokenized. Your equity will be tokenized. I mean that is the future when everything is running on this integrated efficient and usable blockchain system.
To watch the full webinar, just go to crest.io to register. Registration is free.
Back in October, the Security Token Academy held events around the nation to signal the kickoff of the security token industry.
We held Security Token Meetups in Los Angeles, and also in New York City. Attendees who purchased tickets to our two day cruise and conference in New York, boarded the Spirit of New York Yacht from Chelsea Harbor for an evening cruise along the Hudson River.
That was followed by the security token industry launch event inside the Conrad New York. Hundreds of people were in attendance as industry leaders rang the opening bell to signal the official kickoff to the security token industry. To view all of the videos from the security token industry launch week, go to our website Securitytokenacademy.com. Click on the ‘Events’ tab and select ‘Launch Event Video Library’. The best part, it’s free and contains a wealth of information.
Alright. That’s it for today’s episode. Be sure to follow us on Twitter, Facebook, Telegram, and Medium. And don’t forget to subscribe to our YouTube page so you don’t miss out on any of our videos and expert interviews. I’m Amy Wan.
And I’m Adam Chapnick and before we go, a big thank you to our Platinum Corporate Member, Merrill Lynch, and all of our Gold Corporate Members as well. We invite you to learn more about our Corporate Members by clicking on the directory page of our website. For everyone here at Security Token Academy, thanks for watching.
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.
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