Hey everybody, it’s me again, Adam Chapnick with The Security Token Academy. I’m here in New York City with Daniel Skowronski of DX Exchange. Thanks for being with us.
Great to be here.
So, okay tell us about DX Exchange and how you guys have a little more of a unique take on the security token world than we’re hearing today.
Okay. So, DX Exchange is a utility token exchange, so we basically we offer bitcoin, Ethereum, Litecoin. We’re launching in June of this year and in terms of security tokens, we’re going to be launching, we hope, in August of this year.
We’re going to actually take it from a European regulatory standpoint. We’re lucky in that aspect because here in the US it’s still developing, it’s still you know, working with the regulatory bodies, so there’s a lot of moving parts that are still happening. In the European union it is a little bit more freedom to be able to do some certain things and so that gives us a little bit of an advantage I think that we can be able to launch the exchange hopefully first on that.
Now, having said that unfortunately the exchange won’t be available for US customers right now, but for anyone who is trading on security tokens or even if some of the funds or the tokenizations are happening with non-US customers they’ll be able to have some place to go for liquidity event.
Got it. So, okay. All the talk here is about compliance with the US regulations. Obviously you’re, I won’t say skirting, but you’re not dealing with that yet, let’s say. So how do the regulatory issues differ in the EU from US?
Now, it’s a great question. Look, yeah, you’re right. We’re certainly not skirting any regulation. We are actually actively talking to the SEC, in fact, we’re using events like these, so thank you for throwing this event. No, we’re using this to potentially even develop partnership where maybe we end up partnering with a broker dealer over here rather than doing a broker deal on ourselves.
Now having said that under the EU regulations there is still very a lot of similarities between EU and US so like there’s your typical KYC, or typical AML, your typical accredited investors versus non accredited investors. There is a whole ‘nother issue around MiFID and MiFID II and GDPR.
So there are some things that are a bit more difficult than say, compared to the US. But there are a lot of similarities. So what I like about that is the main undertone which I touched on earlier was that the regulatory body isn’t black and white in Europe, it’s usually guidelines and then you take those guidelines and interpret it in a certain way and then you act on it. Then the regulatory body will look at it and go, “Hmm.” Maybe that’s right, maybe that’s wrong, and then they’ll tell you what to adjust or not or maybe they’ll fine you.
In the US, for example, it’s very black and white. You can do this but you can’t do that. So in Europe it gives us a little bit more freedom in a space like this that’s still developing to help work with the regulatory bodies, to work with the government agencies to try to help craft those models, and then what we hope will happen is we’ll be able to take that experience and then roll it out into the US.
Interesting. So, do you guys have any kind of wheelhouse that you’re expecting? Just kinds of listings you foresee participating in?
Yeah, I mean, look, there’s not that many security tokens out there.
But there are a few…in fact in Consensus a couple of weeks ago I met a few. I met a few here already as well. And the good news that I’ve heard from them is they don’t just have US customers attached to it, they have non-US customers which obviously again is important for us. But I think the problem that I found when I speak to some of these security token developers, okay, for lack of a better word, they’re having a hard time raising the funds or launching the token because there’s no liquidity yet. So I think once somebody like us comes in and launches or some of the other ones eventually that’ll come around, I think you’ll see a massive influx of these tokens coming up, security tokens.
Now having said that also I believe there’s a number of security tokens that are going through their lock-up period. From what I understand in US it’s a six-month lock-up period, and I think that’s going to start unrolling here in the next few months. So, I think we’ll see more and more as they come.
Yeah, the Reg D were 12 months I think from last summer.
Is it 12 months? Okay, so 12 months, sorry.
You’re right, it’s all coming to right now so that’s exciting.
So, is there some sort of, for lack of a better word, special sauce that you guys apply to this that you guys feel makes you more interesting than someone else?
Yes, we’ll be first I hope, number one-
First is special, for sure.
... which is very good. Number two, is again it’s about regulation, right? Because unfortunately the clarity in the United States is really unclear. In the European Union we have a little bit better vision to be able to see which way we need to take this. So, I think being a fast market mover we’re partnering with the right people. For example, the exchange is run on the back of the Nasdaq Matching Engines we’re utilizing Nasdaq’s technology.
That’s some special sauce right there.
Absolutely, that’s a good one. We’re partnering with Google in terms of when we move to a decentralized, we’re currently a centralized platform, when we move to decentralize we’re going to move everything into the cloud and we’ve been working with the Google team to make that happen. They would be one of the first exchanges to be run fully in the cloud, so I guess that’s a good special sauce too.
And we have some really great professionals, a great team. We have 70 developers in Israel, most from our blockchain specialist which is great. We have a great team in Cyprus. We also have EU regulation out of Estonia as well which they’ve done some really nice things, but again it’s all under EU MiFID II regulation. And what we’re, again, hoping is that we can launch the exchange, we can actually start listing some of these security tokens out there so they can provide some liquidity which will jumpstart this space which will also be good for everybody here in the US as well.
Absolutely. So, where do you think you guys are going to be a year from now?
I think utility tokens and security tokens will live side by side. I disagree to an extent where the SEC is just doing a blanket, everything is a security token. We see a number of security, I’m sorry, we see a number of utility tokens currently coming to the exchange wanting to get listed and one of the things that we look at very closely is it really a utility as is a security? And we have our own guidelines, we do the Howey Test, we do some certain other things and we look at it.
Now having said that, the Howey Test isn’t a global regulation. It’s only a strictly US regulation. So, there are other guidelines that are out there for other regulatory bodies especially out in the EU. So, we’re following those types of regulations which, again, are somewhat subjective so we’re helping in working with the regulatory body to make that happen.
So, again from a year from now I think that DX is going to be very unique and very special in that it’ll offer a full fledge utility token side of it as well as the full security side token of it.
Thank you very much for having us and thanks again for putting on this conference. It’s been amazing and I’m glad I traveled all the way from half the side of the world to come here.
Yeah, we’re glad too. Hope to have you back, Daniel.
Thanks a lot.
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