Building on the blockchain since 2013 - Mason has built custom wallet infrastructure from the ground up, and helped scale BitGo’s multi-signature wallet platform up to $1 Billion in transactions per month. In 2016 he launched the world’s first multi-signature web wallet on the Ethereum platform, Ether.li. While at BitGo he architected and prototyped the cold storage infrastructure for the blockchain launched by the Royal Mint of England.
Tokensoft is a technology platform that enables small businesses, enterprises, and institutions to meet compliance requirements for blockchain-based securities at issuance, distribution and exchange. The TokenSoft platform enables its clients to meet banking, securities and tax requirements in over 50 countries. Current and past clients include Hedera Hashgraph, The Tezos Foundation and Andra Capital.
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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 investing news will tell you about Airdrops by republic crypto plus the co-founder and CEO of TokenSoft stops by to discuss the company’s new product, the Knox Wallet. We’ve highlights from the latest security token LA meetup and how you can watch a CRE case study on the tokenization of the St. Regis Aspen resort. That and much more is coming up on this episode of Security Token insight.
Now it’s time for your Security Token investing news. A Brazilian investment bank is looking to raise $15 million through an STO. Banco BTG Pactual says the offering will allow investors to invest in the Brazilian real estate market and based on the performance of the assets received periodic profits. The bank is partnering with Gemini for the offering. In a big about-face, the biggest bank in the US, JP Morgan Chase and Company, has developed a digital coin of its own. The JPM coin will help speed up payments between corporate customers and it is based on blockchain technology. JP Morgan moves more than $5 trillion in wholesale payments each day. You may recall last year, JP Morgan CEO Jamie Dimon said cryptocurrency is a scam and he had no interest in it.
Social networking giant Facebook is reportedly making a digital coin as well. The company’s working on a coin which users could instantly send to friends and family. According to a report in the New York Times, the company has held conversations with crypto exchanges about selling this Facebook coin to customers.
And finally Airdrops by Republic Crypto. Airdrops are a method of distributing tokens to users who provide some type of value to an issuer. They can be a great tool to strengthen networks or new communities. It can help incentivize users to complete bounties across an array of applications and add an additional incentive on top of existing ones.
And speaking of Republic Crypto, the PhunCoin STO is now live on that platform. PhunCoin allows consumers to take control of and be rewarded for their data.
At the past crypto invest summit, I sat down with Randall Crowder, the Chief Operating Officer at PhunCoin to discuss why the company decided to do a security token offering. You’ll hear that, and the specifics of the PhunCoin STO. Take a look
The world that we lived in over the last 18 months is gone. This gold rush mentality, let’s be honest with each other, cryptocurrency right now for most people is online poker. And if you’re being truly honest as what I call a lot of these crypto projects, kind of being a wantrepreneur, you just didn’t want to deal with the SEC. You’re going to argue, this financial autonomy or the rise of blockchain is going to disrupt the man, but the reality is going through the SEC and doing things regulated, is hard, it’s expensive, and it’s long, and you’ve got to have a lot of wherewithal to do it properly.
The SEC has no problem with cryptocurrency. So because we’re actually trying to take Phunware public, and we have a registration statement filed with SEC to list on NASDAQ, we have to make sure that our cryptocurrency is 100% buttoned up and compliant.
So it’s a security token because that’s the only thing that you should be launching right now if you are raising money, let’s be honest, the idea of a utility token is a little stupid-
It’s dead. Well, obviously you’re preaching to the choir here.
So you can have usability. You can have a security token that is usable but the idea of a utility token, it’s somehow, I feel like I have like a moment with the dude, and it’s like, this isn’t Vietnam there are rules. There are regulations in place to control do the sell and registration of securities. And so absolutely PhunCoin it is a security token, it’s fully regulated. Right now we’re only selling to accredited investors through a Reg D to the extent that we distribute to unaccredited investors will be through a Reg A+ or you can do a Reg CF and all of those regulations and those bumpers lanes are already in place and you can abide by that.
So as we’ve gone through this process with the SEC to list Phunware, we’ve actually had to talk about PhunCoin a lot and we’ve actually had to talk to reviewers and so we’ve had this really interesting dialogue with the SEC. We even had a question from the office of capital market trends and said, “Hey, we want to learn more about this.” And not one time has it been adversarial-
Its not been, “Oh my God, you’re doing a crypto. We’ve got to stop this.” They’ve said, “Listen, if you do the right thing.” Like I said, I had three law firms, three auditor’s, that’s been over a million dollars but you do it the right way-
Other than that it’s been so easy.
That’s why people avoid it because it’s hard and it’s expensive. So in the beginning there’s two phases to PhunCoin and how we’re going to launch. So the first phase really it looks like a loyalty program. And so a lot of companies, so we will only work with the largest brands. And so we’ve raised over a $100 million dollars of private financing up to this point before we are able to try to have this chance to go public and we work with this world-class brands.
And so, a lot of them are interested in this world of blockchain, but really it’s, what can I do for me, my shareholders or my customers? It’s not really, “We want to be the pioneer for blockchain.” It’s, they have profitable behaviors and they want to maximize those profitable behavior. And so for us, you think about a loyalty program, it has inherent flaws. It’s fraudulent a lot of times and it sits on your books as a liability. Blockchain presents it’s very interesting dynamic where if you have a regulated security, you’re shifting custodianship over to the user. So now you think about a CFO, the light bulb going on, you can have your entire loyalty program off your books.
Thank God. So that’s what we will want to do first is we can incentivize people to communicate with brands in a more authentic way and we can reward them for the data they provide or the actions they take and they can get rewarded with PhunCoin.
The next phase is what really excites me though. We’re going to take that ecosystem and we’re going to tokenize probably one of the most valuable assets on the planet, your data. And so think about, if I’m BMW and I have a fleet of cars, it’s my asset. I own it. I’m a lease it to people. Let them use it, drive around, have some fun. But at the end of that lease is coming back to me. So I’m going to get paid for it while you use it but if you have the day, it’s still my asset.
That’s how your data should be. You should decide what you share, who you share it with, when you share it, and for how long you share it and if somebody is benefiting from it, so should you. And so we have to create a very decentralized, innovative data exchange that allows brands to purchase data directly from consumers instead of having to go through Facebook or Google and you have all these intermediaries that are just making billions of dollars off of your data.
You can learn more about the fun coin STO by going to republics website. The address is Republic.co/Phuncoin. P. H. U. N. C. O. I. N.
Do you have questions about security tokens and the security token industry? Are you unsure about the laws and regulations? If you have any questions, we here at the security token academy, have the answers. Be sure to send us your security token questions and we could answer them here, right on security token insight. The address is [email protected]curitytokenacademy.com. Be sure to include your name with your question and you might find out your answer on the next episode of Security Token insight
TokenSoft is making headlines with their new Knox wallet. The company is a primary issuance and compliance platform enabling the issuance and distribution of tokenized securities. I sat down with the co-founder and CEO, Mason Borda to find out what makes the Knox wallets so secure.
Tell us a little bit about custody and especially maybe for the viewers, what is it? Why does it matter?
Under a money transmission laws custody for digital assets is very binary. And it’s a well-trodden path at this point. There’s companies like Coinbase and Gemini that fit squarely in that category. And now that these digital assets are being treated as securities, it’s sort of a new regulatory regime and there’s different considerations that have to be taken into place. One thing that we sort of see it as a huge need in this space is a need for the custody of digital securities. And so, one thing we started deploying with our clients in 2017 when we started was a Knox Wallet, which we just recently announced.
Yeah, that was a big deal. Just this month, I think you guys came out with that news, right?
So what is that and how does that relate to custody?
Yeah, so with digital assets, the custody needs are very simple. One may need to simply hold the digital asset. They may need to send it or transfer elsewhere, and they may need to receive digital assets into their accounts. With securities, it’s a little bit different. So, those three needs still transfer in the world of digital securities however, there’s a new administration concept that’s necessary. And so when you, for example, when you have a company and you issue shares, down the road, you may want to issue more shares. At one point in time you may want to undergo an S-1 filing, so your compliance requirements may change. And because the compliance requirements of the digital security exist at the blockchain level that requires custody solutions that can administer the tokens of the blockchain level as well. And so these tools are slightly different. So we found ourselves having to build these things once we started out.
By the way, we have 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 homepage.
We’ve covered quite a bit so far in today’s show from global security token investing new stories to the latest STO campaigns and product launches. 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 and latest edition featured news from Vertalo, Securrency, Templum, Polymath and much more.
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 new behind the scenes series with the teams building out the security token industry, either in depth interviews covering a wide variety of topics. You can view these when you follow us on Medium.
The security token academy held its fourth meetup here in southern California on January 31st Amy and I were on hand and met dozens of people interested in the security token industry.
That’s right. The meetup took place inside Magianno’s at the Grove in Los Angeles. We had a packed house as security took an enthusiasts from all over converged on the meetup. There was free food, drinks, networking, and more. Here are your highlights.
So what brought you to a security token meetup?
I’m passionate about all things blockchain. Recently moved to LA area, and I just kind of randomly stumbled upon it and the meetups section there turns out I knew a couple people that were in attendance. Yeah, it’s been good. The turnout was great today.
Yeah. You’ve picked a good one. So did you learn anything in particular? Did any takeaways from tonight?
Yeah, I think so. We’re always still trying to grasp the level of engagement, and a custodianship in terms ownership of who really ... ownership is a huge thing, and not within the blockchain space, but there’s just monetary systems and physical items. Who owns what. And I think a lot of the questions on this panel today answered a little step further, I think to true ownership and really how we value that and how we’ll appropriate that moving forward.
And this is a hurdle that takes a lot of time and money and hiring the right attorneys and the right advisors, and the right ... We’re talking about compliance now. You can’t just say you’re doing something that’s compliant, and it’s compliant because we’ve said it was, you actually have to do filings and do things right and make sure that everything is verified and done correctly. There are going to be more than a hundred, but when we talk about real ones actually trading maybe a hundred.
Yeah, now I think it makes sense. Like a hundred that are going to be compliant with us securities laws, which doesn’t mean that all the other ones aren’t going to be compliant. And we have to remember just the one thing that the STOs are like SEOs is that it’s completely global, and there will be issuances outside of the US by non US companies and those are going to be just as legitimate as the US ones potentially. There’s also been to be a lot of them that don’t recognize that US laws are more complex than laws in other jurisdictions at times or more strict and they’re not going to comply with them. And if we add those in there, the ones that take it easy, or the infrastructure providers that say, “Hey, this is how you tokenize is by coming and creating this asset on our decentralized STO platform,” We’re going to have hundreds and hundreds and hundreds of them, but we’re probably going to be close to a hundred that are actually regulated.
There are so many reasons to have a custodian, but there are also a lot of challenges surrounding, does your custodian had the technology that matches well with what you’re doing? So, there are plenty of custodians out there who hold all types of assets, custodians at hold, art and gold and money, but do they have the infrastructure necessary to connect to a blockchain? So if you want a custody, something that’s digital, now you’re talking about looking for a tech company. So at Prime Trust, we call ourselves a tech driven trust company because really very much focused on the technology that allows us to hold cryptocurrency.
What is an STO, what is security token offering? And I think that a lot of people right now look at it as, or I take an asset, and I tokenize it and I sell the tokens, and I think that that process is completely backwards and frankly, this might not make me super popular, but I think that this is actually significantly slowing down the adoption of security tokens because creating the token is not the most important part of the process. The most important part of the process is getting the deal funded.
Then the education part is the crazy thing like you’re absolutely right, most of us are or a lot of us came from the crowd funding space, which is why we know way too much more than we ever want to know about the specific regulations around security tokens. Like none of us or not none of us, but a lot of us are forgetting the lessons we learned in crowdfunding, which is just slapping crowdfunding on a deal is not going to make an investor want it. It actually, if anything can confuse them, can signal that this company couldn’t raise money any other ways so they’re trying this new-fangled thing. Tokens need to be an integral part of your company or reason why you’re doing it or it should make the product better maybe in the long-term, but you don’t have to lead with it. If you’re leading with it, then you’re probably not the greatest deal because the deal like the company or the piece of real estate or whatever it is that you are tokenizing should be what you lead with.
What do you think is the prognosis for the security token space? Do you think it’s ...What do you think?
I believe that it’s going to take until about 2022, 2023 those are my projections and that’s why I put myself on the boogie board and all of us are right now because the waves coming soon. We just have to be patient. So I’m using that analogy and all of us are on the boogie boards right now. And you set up a couple of different boogie boards and you wait for the wave to come and the wave’s coming and the security tokens are a big part of that wave.
They’re going to carry you to shore? The shore of wealth creation.
We love it.
One of the things that everybody’s going to remember is that offshore offerings where, like the hot thing, especially when SEC started cracking on things, the thought was let’s just sell our securities offshore and then we’re going to be free. The question was always, there was a legislation in the Dodd-Frank Act that actually addressed the fact that the SEC had very, very broad rights to actually go after anyone making securities offering offshore. The Dodd-Frank Act essentially addressed that, but it was done at the same time as a supreme court offering, literally a month apart. Wording in the legislation is very strange. It was never clear whether they actually meant to address it and limit the SECs jurisdiction or not. And essentially what we ended up seeing is about a couple of years ago, there was a case where a district court essentially decided that sure the legislation didn’t directly address it, but the legislator meant to address it. And now we’ve had an appeals court, just a couple of days ago or a couple of weeks ago that have addressed it as well, and that basically said “Yes, the supreme court was actually trying to go ahead and give the SEC some expansion of the SEC jurisdiction.
In some ways it’s not different at all. It’s just split ownership and the markets will move. But there is a technology that’s going to come in and basically change everything.
To view all of the interviews from the January meetup, go to our website securitytokenacademy.com and Click on the interviews tab.
In a first of its kind multi-city webinar on tokenization of commercial real estate, CREST a project of the security token academy provided a detailed case study on the tokenization at the St. Regis Aspen resort. Learn how the seminar explored, 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 coworking companies such as WeWork as 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’s 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 US 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 is 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 hotels, general manager, Heather Steenge-Hart. Let’s take a look at what she had to say. This is a gorgeous property. Can you tell me a bit about it?
I’d love to, we have 179 guest rooms, 30 suites. This is one of our three specialties suites. And then we also have 25 residences, two and three bedrooms, which are a fractional ownership house.
Fantastic. What else should we know about this property?
Well, the rooms and our public spaces were designed by Lauren Rottet, and she was wanting to make sure that we’re bringing the outside light into the hotel that it was like a mountain side manner that it was contemporary very, very comfortable because when after you go skiing you just want to-
So, I think she really did a lovely job in portraying those goals overall.
Regarding this specific property, you had the listing of JLL and sold it to Stephane and Elevated returns. What’s the backstory on that?
Yeah, in 2010 we had the property on the market, and we had reached out to a number of offshore investors and gotten in touch with OptAsia. We had been in touch with them on previous transactions before and we sold the asset to OptAsia, Stephane in 2010.
And the $19 million of tokens that were raised. What were those funds used for?
Well, I mean that was a return of capital to the owner. So effectively the tokenization is a true sale of ownership into the properties. So the current owner decided that the maximum that we’re 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 operating partnership. You create which share interest out of the partnership and you capitalized the lead through the sale of smart contract.
Smart contract is effectively a digital share certificates or rather than to have the old-fashion papers, 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 also the ability to have a global product trading a multiple exchanges.
We got involved 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 resort 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 elevate the returns and Stephane with their project.
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 beautiful blockchain system.
To watch the full Webinar, go to crest.io to register. Registration is free
Now back in October, the Security Token academy, how 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 security token industry launch week go to where else? Our website securitytokenacademy.com and click on the events tab and select launch event video library. The best part, it’s free and contains a wealth of information.
All right, 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 on our website. For everyone here at security token academy. Thanks so much for watching.
Learn about regulations governing cryptocurrencies and security tokens from around the world with our regulatory review, it’s on our website, securitytokenacademy.com. Click on the learn page so you can stay informed.
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