As a Co-founder and CEO of AlphaPoint, Igor’s mission is to help clients leverage blockchain technology to make illiquid assets liquid. Igor brings over 15 years of experience in leading companies to harness the power of technology to deliver innovative, next-generation solutions. As a recognized thought leader he speaks frequently at industry events and conferences to share his vision for blockchain technology’s impact on the future of finance. Prior to AlphaPoint, Igor served as Managing Director of Cvetlo, an early stage venture firm making investments in fintech, adtech, and online media. Prior to Cvetlo, Igor led West Coast Business Development for LiftDNA, a digital ad exchange platform focused on managing online publisher ad revenue by making real-time pricing predictions for over 10 billion ads per month. LiftDNA was acquired by OpenX, a global leader in digital and mobile advertising, in 2012. Previously, he held multiple roles over 5 years in the Security Technologies and Systems Integration divisions of Ingersoll Rand / Allegion, where he drove adoption of new security technologies. Igor holds a Bachelor of Science degree in Marketing, Business, and Economics from Penn State University.
Hey everybody. Welcome to Security Token Insight. It’s brought to you by, of course, The Security Token Academy. We are coming to you in our special remote editions of Security Token Academy as brought on by our unusual circumstances here in the first half of 2020 but we’ll continue to bring you all the knowledge you seek, all the up-to-date information and news you know you can trust us to bring you. So with that, let us press forward. The security token industry is here as you know, it will continue to 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 is here and you can still get involved.
I’m Adam Chapnick, coming up on today’s episode of Security Token Insight in your security token investing news. Steven Seagal settles charges with the SEC. We have an expert interview, believe it or not, with Kinsey Cronin, vice president of business development at Prime Trust. And hear from Igor Telyatnikov in our Security Token Stories Podcast. That and even more is coming up on this very episode of Security Token Insight. Now it is time for your security token investing news. Up first, Hollywood action hero, Steven Seagal, recently settled charges with the SEC. The charges stem from a six week promotion of the digital tokens, Bitcoinin-2-Gen for which the actor received compensation.
Mr Seagal failed to disclose that he received compensation worth $250,000 in cash along with $750,000 in B2G tokens for his social media posts. Seagal agreed to repay $157,000 he received from the company, pay a fee of $16,448 in prejudgment interest, and a civil money penalty of $157,000. Additionally, he’s agreed not to promote any securities products for three years.
In other news, the United States SEC has proposed rule changes to simplify and improve the exempt offering framework. The amendments will provide a more rational framework, eliminate complexity, and increase access to capital while preserving and enhancing important investor protections. Chairman Jay Clayton had this to say, and I quote, “Emerging companies from early stage startups seeking seed capital to companies that are on a path to become a public reporting company use the exempt offering rules to access critical capital needed to create jobs and scale their businesses. The complexity of the current framework is confusing for many involved in the process, particularly for those smaller companies whose limited resources spent on navigating our overly complex rules are diverted from direct investments in the company’s growth.
These proposals are intended to create a more rational framework that better allows entrepreneurs to access capital while preserving and enhancing important investor protections.” Unquote. You can find out more about the latest security token regulations by visiting our website, securitytokenacademy.com and click the education tab and select regulatory timeline. And finally, the Ethereum-based FLYT token is the first token out of Africa to be backed by property. FLYT Property Investment, which is based out of Cape Town, Africa, is launching a new token which will bring South African real estate to the Ethereum blockchain. Each FLYT token will represent one share in the FLYT Hospitality Fund, which focuses on section 12J Property in South Africa. The properties primarily consist of apartment hotels and hospitality properties.
Have you listened to our latest podcast? Make sure to check out our Security Token Stories featuring the one and only Derek Schloss as he sits down for one on one interviews with security token industry leaders. Derek recently sat down with Alphapoint’s, Igor Telyatnikov, to discuss the two core arms of AlphaPoint’s technology stack and their partnership with Securitize and Elevated Returns. Take a listen.
One of the themes that has come up just talking through some of these projects with you, Igor, is the regulatory piece. And I wrote a paper about a year ago arguing that disruptive technologies in the past, the security token industry was undergoing this critical infrastructure stage but we still needed to build out the three key areas of any infrastructure stage, the tech, the regulatory infrastructure, and the deal flow infrastructure. And so I think AlphaPoint has this unique perspective operating across so many different countries and jurisdictions. And I suppose seeing security tokens come to bear across the world instead of just the US, which is where many of my guests in the past are really speaking to. So I’m curious how you see these three categories developing out, the technical infrastructure, regulations, and deal flow.
Yeah, I think it’s an interesting question. I think it’s evolved over time with what the biggest challenges have been. I think the largest challenges to enter into the market in the past was really the challenge of custody. Right? And you have institutional investors that are very , very comfortable with investment risk of, will the price of that asset go up or down? But very, very uncomfortable with the risk of the asset disappearing or basically the wallet solution being really the of the asset and how that’s managed. And that was really the challenge in this space previously that I think is now being solved with entrants like Fidelity, like Nomura, as well as some of the newcomers in the space that are providing underlying technology.
And with brand names like that coming into the space for both, excuse me, initially cryptocurrency custody, but writing’s certainly on the wall that security token custody’s right around the corner, that is providing confidence in institutional investors that are interested in getting in the space. And it’s also providing comfort to large extent to regulators that regulate the market and expect the same types of capital markets, infrastructure and role separation in the digital asset space as is seen and mandated in the traditional space. Because ultimately if it’s a security, it’s going to be regulated by security and it doesn’t really matter.
I think one of the challenges right now is that because you have this regulatory framework in place that does not yet recognize and enable some of the benefits of blockchain, what you’re seeing is projects are doing effectively a double notation of a transfer of an asset, etc, where they have essentially a traditional database with clearing partners and custody partners that are relying on that. And then they have a blockchain system layered on top that’s replicating all the same activity. So until we have that piece resolved, until regulators come in with new frameworks that allow the elimination of that backup database or the primary database and can rely on the blockchain, you’re going to see things move a little bit slower.
And that’s why I think we’ve seen the security token market not blow up as fast as many had thought because regulations are there for a reason for consumer and investor protection, they move slowly through a process for a reason. And based on the security incidents and issues with cryptocurrencies, nobody wants to see that happen. And regulators aren’t going to allow that to happen with securities trading and having similar types of incidents in that space.
That’s great insight. Wrapping up, Igor, I’d love to hear your perspective. What does the security token industry look like the rest of this year and maybe what does your vision of the space look like over the next few years from everything you’re seeing on the ground and where we’re headed and what might AlphaPoint look like within that future?
I think in this year, I think we’re finally seeing the first regulated issuers as well as trading venues come into this space and in the market. Right? And right now there’s really very few markets that are operational that are properly regulated and allowing access to this asset class and instrument. And I think with elevator returns and first bullion and other leaders driving the charge, we’re going to see that change this year and we’re going to see activity pickup as well as new entrants coming into the space. I think we’ll also see some existing established cryptocurrency exchanges actually apply for and obtain the appropriate licensing in their jurisdictions to operate as both cryptocurrency exchanges as well as security token exchanges. So that’s something I think we’ll see in the short term in the next 12 to 18 months.
Go to our website, securitytokenacademy.com. Click the interviews tab and select podcasts to listen to the full episode. The Security Token Academy is proud to present an expert interview with Kinsey Cronin, vice president of business development at Prime Trust. Prime Trust is an SEC qualified custodian for security tokens issued using the ERC 20 standard. In addition, Prime Trust compliance services include KYC, AML and bad actor checks. We sat down with Kinsey to discuss Prime Trust’s service, PrimePay, take a look.
I know compliance, that’s a big part of what you guys do. Why don’t you talk a little bit about how that’s done. How do you tackle compliance?
So as you know, compliance requires for every individual or entity that comes through the system and makes a deposit or offers the sale of securities to go through your customer, anti-money laundering in the case of issuers, bad actor checks. So that means we have to collect information about each individual or entity so that we can run a know your customer check and make sure that they are who they say they are. And then we also need to take that same information and run it through a number of international watch lists to make sure that there’s no reason to expect that this individual might be money laundering. So our team is, it’s an amazing team of compliance officers that are all based out of our offices in Summerlin, Nevada, and they handle it.
So we have automated some of the process so that it’s really quick, especially for users that are coming from the US, the UK, or Canada. But there’s still definitely constant high touch sort of experience there on the compliance side, which is really valuable to our customers because it means that they don’t have to do it.
Definitely. Yeah, that and so many other parts of this process are daunting in how much paper used to be shuffled and Headspace has been taken up to do all of the work that you guys are now tackling. I know you mentioned automation. Can you explain how, first of all, maybe what API technology it even is and how you guys use it to do some of the things that you do?
Sure, sure. So the API tech actually doesn’t really have anything to do with the automation. That’s really on our side. But what the APIs allow for is for our end customers. So our end customers are using our primary customers. Those are maybe a website that is an ATS or an exchange or a crowdfunding platform. So the end customers, the investor or account holder, they are able to open an account, deposit assets, make an investment all from the platform of our customer. They’re not coming to Prime Trust. And the reason that’s possible is because the APIs allow for the integration of the two systems. So it’s obviously limited, it’s carefully managed on both sides, but it means that a user can be creating a Prime Trust account and making deposit into it using an interface that isn’t Prime Trust.
Got it. That’s super useful. And that disintermediates a lot of people that used to have to be involved. That’s fantastic.
So tell us about PrimePay. What is PrimePay? That’s something you guys have developed.
Sure. So PrimePay is what we call our funds processing services. So we’ve always been able to offer wire, ACH, and credit card processing. On the crypto side, being able to offer credit card processing is a little bit new. So we call it PrimePay because basically it is the way that a user can get funds into the system. We’re really excited actually because we have a widget that we have in the works, it’s probably coming out Q1 of next year and that will allow for much easier integration of specifically PrimePay.
Got it. So for people who might not know the terminology, what in your lexicon is a widget and who uses it?
Okay. So widgets are... they are very easy to use, very easy to integrate function systems, right? So basically instead of doing a whole backend integration with the APIs, which require engineers to build in both systems and do that integration. So engineers on our side and engineers on the customer’s side both have to work together to build a system, which is amazing because it’s customizable and it can do so many things. But a widget is a lot faster and it usually does one thing really well so that the customer team can integrate it maybe in a day or a week. It’s really quick, it’s very simple, it’s straightforward, it’s not customizable, but it does achieve the function.
So we’ve identified some key functions that are really important pretty much to all of our customers and we’ve turned or we are turning them into widgets so that those customers can get up and running quickly.
Got it. So who would be a key user of the PrimePay widget, for example?
Well, one key user might be a company that is looking to allow for crypto deposits or crypto payments and that’s all they need. They simply need a credit card to be able to be run so that the Fiat can be converted to cryptocurrency and then the cryptocurrency can live on that site and be used.
And boom, they put the widget on their site, goes through you guys, looks like it goes through them and-
... Bob’s your uncle.
Exactly. Bob’s your uncle.
Great. Okay, so tell me about the Prime Settlement Network. What is that and why is that important?
Okay. The Prime Settlement Network is basically the way that we can create a near instant settlement between anybody that’s integrated on the Prime Trust platform. So any of our customers and any of our account holders. So what it means is that if I have an account at Prime Trust and you have one at Prime Trust and we want to make a trade or a funds transfer, we can do that very quickly through the Prime Settlement Network. The network is really important to OTC desks and exchanges, anybody that’s trading, it’s really incredible to be able to have that instant settlement.
We have the full interview with Kinsey Cronin on our website. Be sure to check it out. By the way, Prime Trust is a gold corporate member of the Security Token Academy. To learn more, go to our website, securitytokenacademy.com and click the directory tab and select corporate member. Did you know you can get the latest industry updates in our free weekly newsletter, The Security Token Edge? The newsletter is packed full of insightful information about the security token industry. To subscribe and get your free weekly copy, go to our website securitytokenacademy.com. We also invite you to check out The Digital Wrapper on Medium. It’s our 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 these when you follow us on Medium. You can find more information on our website, securitytokenacademy.com. I want to remind our viewers that if you have any questions about Security Token, be sure to email us and we could answer them right here on a future episode of Security Token Insight. The address is again, [email protected] Be sure to include your name with your question. One more time, the address is [email protected] You can also learn more by visiting the frequently asked questions page on our website by clicking on the FAQ tab. Our frequently asked questions page is packed full of security token industry terms and concepts.
Today’s term of the day is fractional ownership. For many retail investors, it’s non-trivial to come up with the resources to buy single high value assets like commercial real estate or fine art. Today, an investor can either forego exposure on that expensive asset category entirely or obtain exposure through an intermediary like a rete. Due to the unique divisibility of blockchain based securities, fractionalization can provide non intermediated access to previously inaccessible categories of expensive assets. Makes sense? All right. That’s it for today’s episode. Be sure to follow us on Twitter, Facebook, Telegram and Medium. Don’t forget to subscribe to our YouTube page so you don’t miss out on any of our videos and expert interviews.
And a big thank you to all of our gold corporate members as well. We invite you to learn more about our corporate members by clicking on the directory tab and click corporate member. I’m Adam Chapnick. For everyone here at Security Token Academy, thanks for watching. Stay sanitized.
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