Tatiana Koffman is a speaker, entrepreneur, VC and advisor passionate about bringing consumer technologies to life. With a focus on tokenized securities, Tatiana is the founder of Four Blocks Ventures, providing strategic advisory to several high profile issuances in the space, including Full Cycle Energy. Tatiana is also the founder of Crypto for Girls, a movement to engage more females in the blockchain industry.
Previously, Tatiana was a Venture Partner at DNA.fund investing in ICO’s across sectors. Tatiana was part of the founding team at Machine Shop Ventures, an early-stage venture capital fund started by the rock band Linkin Park, invested in Robinhood, Lyft, Riot Games, and Hyperloop One. Tatiana was also one of the first investors and advisors to Winston House, and founder at MARBL Media.
Tatiana holds a JD/MBA and spent the formative years of her career in Mergers and Acquisitions, and Fixed Income Trading with a focus on Swaps, Derivatives and Asset Backed Securities.
Tatiana is member of the New York State Bar.
Jeffrey Marks concentrates his practice in corporate transactional work, including corporate buyouts, mergers and acquisitions and the private placement of securities, and represents tenants in commercial lease transactions. A major portion of his practice involves the negotiation, structuring and financing of acquisitions and dispositions for privately held companies. He has a broad range of experience, having practiced both as an attorney for a major law firm and as in-house counsel to a publicly traded Nasdaq high technology company. As an attorney at Paul, Hastings, LLP, Mr. Marks received the experience and training of a large law firm, and, as a result, provides the quality of work expected of a major law firm. Through his tenure as inhouse counsel to FutureLink Corp., and as an entrepreneur, he has an understanding of the business and operational needs of companies and has developed a practical approach to advising his clients.
The Security Token industry is here, and it's not too late for crypto enthusiasts and investors of all type to get involved.
Coming up on this episode of Security Token Insight, highlights from the Security Token Academy Security Token Summit in New York.
Plus, we've got expert interviews with Tatiana Kauffman and Jeff Marks, and all of your Security Token investing news.
Hey everybody, I'm Adam Chapnick.
And I'm Amy Wan. Welcome to Security Token Insight, brought to you by the Security Token Academy. The Security token industry is gaining momentum and will provide a key foundation for the evolving financial internet.
The Security Token Academy will provide insights about the new era for Security Token enthusiasts, investors, and issuers. And we thank you for coming along on this exciting new journey.
All right. Coming up on today's episode of Security Token Insight. In your Security Token investing news, details on a big announcement from the SEC on Security Tokens. We sit down with the founder of Four Blocks Ventures, Tatiana Kauffman, for a look at the benefits of tokenization. And, we've got an expert interview with attorney Jeff Marks, managing partner of Alliance Legal Partners. Plus, highlights from the Security Token Summit in New York. That and more is coming up on this episode of Security Token Insight.
Now it's time for your Security Token investing news. While speaking at the Wall Street Journal's CFO Network Conference, SEC Chairman Jay Clayton said that he wants to regulate all tokens in the crypto currency industry. He was quoted as saying, "It made me unhappy that people thought by calling it a token, it was somehow exempt from regulation. Let me be clear: It does not." Previously, Chairman Clayton stated that he didn't think all tokens demanded attention from the SEC, because they didn't represent securities. While the SEC does not currently consider all tokens securities, more clarification will be needed moving forward in regards to their definitions of various crypto currencies. Predominantly in the realm of utility versus security tokens.
According to Stephen McKeon's latest article on Venture Beat, investors can expect to see a shift in venture capital as security tokens begin to disrupt the industry. Industry experts are predicting that more venture funds will choose to skip the traditional limited partner model, in order to raise larger sums of capital using regulated security tokens offerings. This maybe in part to the illiquidity discount concept, where those assets which have a higher liquidity can be priced higher than their counterparts which require a risk premium for investors, due to their illiquidity. Another concern for venture funds is the loss of control of the cap table, this may result in some funds accepting wider investor pools of all accredited investors, while others may decide to keep control via smaller pools of investors.
Ultimately, all venture funds and investors will need to adhere to KYC and AML laws requiring disclosure and vetting of investors.
Still to come, if you missed out on attending the sold out Security Token Summit in New York City, don't worry. Because we'll tell you how you can still watch it.
We're on the leading edge of the Security Token movement, and we've been covering Security Token meetups and conferences from coast to coast.
That's right. And I had the pleasure of speaking with the founder of Four Blocks Ventures, Tatiana Kauffman, and the Crypto Invest Summit in Los Angeles. Hear why she feels the major benefit of tokenization is liquidity. Take a look.
What do you think about Security Tokens, why do they matter?
So as someone who's worked at two different investment banks, I've seen how archaic those systems can be. You know, in 2014, when I was building interest rate curves on derivatives desk, we were using MS Doss, believe it or not. That's how archaic it is right. And if you've seen the financial crisis in 2008, you saw how complicated derivatives can be, and how there's a lack of transparency which gives way to fraud and mispricing and arbitrage. And trading securities and structuring securities just for smart contracts and trading them on the block chain can really eliminate a lot of those risks. So my hope is that in the next 10 years, most equity offerings, most at offerings, most venture capital fundraising is done on the block chain.
That's incredible. Few people have had that sort of behind the curtain look at what the ugly part was, and why this sort of new world can be so good. So, where have you put yourself in the ecosystem now?
Yeah. So I started my crypto career at DNA Fund, which was Rock Paris's and Scott Walker's fund, and I got to see all kinds of deals, both from a utility and a Security Token perspective. And now I've opened up my own firm. We have three different clients that we work with. Two are friends and one is a company, and they're very large offerings from 100 to 500 million. They're all using this tokenized security method to do their next raise.
What made this the right method for them, and is it right for everybody, or was it something about these companies that made this perfect for them?
Sure. So one of the companies that I work with, is developing renewable energy plants, they've already built three of these plants, and it's an amazing technology that burns garbage and converts it into clear blue syngas. Which can be converted into natural gas or power.
So you can take energy off of the grid, you can put these plants anywhere. Preferably as close to a garbage dump as possible. So you put one of these things near a garbage dump in India, or in Puerto Rico, which is having energy issues, and you can power numerous cities and solve for climate change, and solve for the garbage problem. We said, "Why don't we open up this opportunity to the world," right? So right now we're looking at RedD and RegS to do an international offering, but we're also looking at our Reg8 cost. The goal is to allow residents of those cities and towns where the energy provider is established to actually have a stake in profitability in those projects.
Yeah, that's great. That's the Reg8 plus part. Is there any other underlying benefit from tokenizing something like that, when before, it might not have been that makes it particularly suited to, let's say, this kind of an energy plant?
Yeah. The major benefit of tokenization is liquidity. So whereas before you would raise a fund like this, and it would take you seven to 10 years to get your investment back, here you can take your investment back quarterly. After 12 months, in the US. And immediately, internationally, you're trading right away. And then, a lot of these funds also have buy back models, where quarterly they'll buy back a portion of the funds back at fair market value. And so it's a way for you to cash out a lot quicker and to eliminate some of the risk.
Are there any other benefits, a lot of people talk about there's liquidity, then there's also the compliance part of Security Tokens that people say, "Oh that's so great, and so refreshing."
Is that true?
Yeah, so if you look at companies like Secure Ties, which are good friends of mine, they've automated the KYC and AML process. So instead of having a back office sitting there vetting every single investor, and then especially when there's secondary trading and that security is being resold to someone else, who's not the original investor, a company's life secure ties and harbor can do the vetting for you. It's written into the smart contract what the requirements are of each investor.
So have you got a sense of what the appetite for these fantastic things called Security Tokens are overseas, versus here? Because they seem to have such, I don't want to say lax, but maybe fewer regulations than we've imposed. Is there a similar kind of excitement, or not? Do we know?
Yeah, so I think that there's a dual appeal to these types of securities. On the one hand, they're very appealing to traditional investors. There are exempt offerings compliant under RedD or RegS or Reg8 plus, and you have an option to convert to a token, and it becomes more liquid, right. And it's no different than investing in a RegD privately. On the other hand, you have these crypto investors who have incredibly volatile portfolios, and they don't necessarily want to be cashing out in fiat, but they want something to hedge the volatility with. And especially if these are impact focused projects, like this energy one is, it's a great way for them to hedge their risks and balance their portfolios.
Yeah, that's interesting.
And that's domestically and internationally.
Right, okay. Great. What about the different sort of promises that people are looking forward to? Obviously, they're sort of making an offering, which is something we're talking about, how does a company raise money? Well they can use these Security Tokens, that's exciting. But what about what people are talking about, which is the tokenization of global assets? Where do you see that going?
Like water? And resources?
I didn't even think of water. I was going to say real estate, or wine, or you know, things like that. Or anything, but maybe water, I hadn't even thought about it. Tell me about water.
We've had a company come in and pitch a few weeks ago, it was interesting. I don't know if we're there yet. I think at some point, when water becomes more and more scarce and we actually have to measure it, maybe that's something that we'll see. With real estate, there are already several players in the industry. So there's a company called Property Coin, that is tokenizing real estate investment.
Friends of the show, yep.
So they're doing a really great job. I like the idea that I can transfer ownership and investment into something. You know? And I think we'll see something in the title chain space as well. So another fund that I'm working with, they invest in companies in the distributive ledger space that specifically benefit the public sector. So one example that we're looking at is title chains at the county level. So if you're a real estate lawyer, a part of your life is driving to the county office, digging through tons and tons of papers, to find the Easmons and the purchase of this, and all of that, right. To actually track the title, if you put all of that on the block chain, our entire system becomes way more efficient. Half the real estate lawyers might not have jobs.
But you know, that may be a good thing.
Yeah. So what about the idea of tokenizing illiquid sectors that are huge, like fine art. Is that something we're going to see?
You know, all the block chain and tokenization does is give us a more efficient spreadsheet of how to keep track of things. So more efficient, constantly verifying itself by multiple parties. But it's still a spreadsheet, that's what a block chain is. So if there's a way for us to keep track of all of the art in the world so that there's no room for fraud and copycats, I think that's great. I'm all for it.
Yeah, so looking into your crystal ball, the Tatiana crystal ball, where do you see by the end of 2018, 2019, well let's put it another way. When do you think people are going to shift from ICOs into Security Token offerings? And what do you think they're going to call them? Are they going to be STOs? ICO 2.0? Or what?
Yeah, STO is definitely a term that's already being used.
It's already being used. I think you know, Security Tokens is kind of a catch all. Security Tokens will be the majority of the tokens that are out there.
With the exception of utility tokens that can really be proven that they're..that they're only to users, rather than investors, with a platform that's ready, and you're essentially buying a license to a piece of software, the way you would from Microsoft, right? True, true, true utility. The majority will be security. Under that umbrella, you'll have Security Tokens that are meant to be used as utility in the future. And then you'll have financial or investment tokens. And these are the tokenized security space. What was your original question?
When do you think we're going to shift from ICO to STO?
So my answer..
Or will we?
My answer is now.
So, the exchanges are all being launched in the next few months, liquidity will be there, the SEC keeps pushing further and further and further against utility tokens. And it's not that utility tokens won't exist, it's that we'll see a lot of dual issuances. We'll see a lot of companies coming out and issuing a security, to fund the building of the network and the product, and then doing an AR drop, proportionally to the ownership of the utility circuit.
So we will see a lot of that.
That is a very specific forecast, I love it. Only possible from a true guru.
I predicted four x on EOS last week and I was right.
Wow, well done. I wish I had listened to you.
So what about, still looking in our crystal ball, what are our biggest risks in this space, that people either are or are not talking about?
You know, the biggest risk in this entire game, crypto game, block chain game that we're playing, is that not enough people are understanding what we're doing. The knowledge gap is just too wide, and when people don't know something, they get scared. And they act out of fear. And we're seeing a lot of big voices in the financial world acting out of fear. You know, like Warren Buffet, Jimmy Diamond, people have made statements that were just purely made out of fear, and if we really want this to be a global pool of assets and we want it to be a global movement to tokenize everything, we need to up our education of those things. So I want every university to be offering block chain courses.
I'm starting a program for young females, to educate them how to invest in crypto. It's called Crypto For Girls. So we're going to do seminars around the world, and making guides, and I think that part is really important. The knowledge needs to grow.
Well, at Security Token Academy, we agree with you. Thank you so much for sharing your knowledge with us today.
Thanks, Adam. This has been amazing.
Great to meet you Tatiana.
Great interview Adam. You also sat down with Jeff Marks, right?
That is true, I did. I sat down with the super attorney, Jeff Marks, partner of Alliance Legal Partners, and he had some great insights, from a legal point of view, including the tokenization of global assets, let's take a look.
What do you think is the significance of Security Tokens and how this whole shift has been to talking about Security Tokens versus ICOs?
I think it's inevitable. For a long time, a lot of companies were going around issuing securities, and trying to claim that they were not securities by not calling them securities. So it was inevitable that the regulators were going to crack down and that things would turn in this direction.
So do you think that what the SEC Chairman called the semantic gymnastics, right, do you think that was as big a problem as he was indicating? That everybody was saying they're a security but nobody is? Or do you think there's a demarcation where there is such as thing as a utility token?
I think there's a demarcation. Chairman Clayton came out originally and basically said he's never seen anything that's is a utility token that's not really a Security Token but then, he's kind of come back around. Then he talked about laundromats, and a laundry token, and how something that might be classified as a security today might not be tomorrow, which kind of brought a little hope into the fact that the SEC does recognize that there are some things out there that might not constitute securities, that are being offered. And we'll see where it comes out.
What do you think is the great promise of the Security Token? Is it in the issuance of, raising money by issuing these tokens? Is it the tokenization of global assets like real estate and things like that, is it both?
I think it's both. I think it's both. You know, at the lowest level, I'm not sure if this is answering your question, and feel free to cut this. But at the lowest level, at the simplest form, a tokenized security is common stock that's issued via ERC 20 smart contract. It's as simple as that. And there's nothing wrong with issuing a security as a smart contract, if you do it in the blinds of the securities loss.
What advantages will someone who does what you're just describing, issuing a security as a smart contract, what advantages are they going to have? And it might be that there are other intrinsic technological benefits there. What's the benefit in the future for someone to do that?
Well, there's a few advantages. One is, you know we have something called a lock up theory in securities laws, so you can build up lock up periods and other restrictions in the smart contracts.
So what does that mean?
That basically means that under, for example regulation D, or regulation CF, if you buy a security from an issuer, you're not permitted to sell it for a year. And you can basically embed into the smart contract a restriction that prohibits you from actually transferring that security for a year. Which is something I think, that would be viewed as positive, in the eyes of the SEC.
Other benefits are, assuming that a security becomes tradable, it's an easy and quick way to trade them. The block chain can track all ownership of a security that's via smart contract. There are a lot of benefits.
What about on the other side, on the tokenization of global assets? How is that going to end up working with these tokens? The question I always have when people talk about it, I get the real estate side, 25,000 of us can own the Empire State Building, I get that. But, what about things like my Pokemon cards, you know?
Things like these illiquid but valuable things? Is that also going to get tapped?
I'm sure everything is going to get tapped.
Oh everything, okay.
I never thought to much about Pokemon cards and crypto currencies.
I don't blame you.
But you know, I think everything is going to get tapped eventually. I think it's going to get over tapped.
How do you mean?
Well, everybody is trying to tokenize everything. And, you can imagine a world with a token for everything. And you'll either need some kind of system that readily converts tokens into each other, on the fly, automatically. Which I foresee coming. Or it's just going to get too much. There's going to be too many of them out there for anybody to keep track of them.
Yeah, it's a lot. It's interesting to see where things will go.
To watch additional interviews, be sure to visit our website, securitytokenacademy.com and click on the Interviews page.
The Security Token Academy just hosted the first ever Security Token Summit in New York City. It was the first conference to focus on the emergence of Security Token trading organizations. This ground breaking, sold out event brought together the key players in the industry, to learn about the new directions in Security Token trading organizations.
Yeah. The day long event zeroed in on Security Token exchanges and trading organizations. The best and the brightest spoke at our summit, and we captured it all on video.
There were keynote addresses from David Wield, former vice chairman of NASDAQ, and Bruce Fenton, CEO of Chain Stone Labs, plus panel discussions, interviews, and much more. If you missed out on attending this sold out summit, don't worry.
You can still get an inside view to what the top experts had to say about the future of the Security Token industry, and where Security Token exchanges and platforms are going this year and beyond.
You can purchase all of the videos from the event for just $99. As a bonus, you'll also receive a free one year membership to the Security Token Academy. You can learn more on our website, securitytokenacademy.com. And click on the Events page.
Also, mark your calendars for our next event in New York this October. You wan't want to miss it, as we launch the start of the Security Token industry. You can also find those details where else, on our website.
All right, that's it for today's episode. Be sure to follow us on Medium Telegram, Facebook, and Twitter. 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.
I'm Adam Chapnick. From everyone here at Security Token Academy, thanks for watching.
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