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Security Token Academy encourages you to read our
May 2019 - STA Corporate Member Update

Transcript


 

Adam Chapnick:

We have talked frequently over the past year but for those who haven’t yet heard of Securrency despite all of your myriad accomplishments, what is Securrency and what do you do?

Dan Doney:

We provide blockchain based financial services infrastructure to banks and investment banks. So we make it easy for existing financial institutions to get involved in the blockchain space and at the same time we make it easy for issuers who are bringing new offerings to market to come and take advantage of the security token economy.

Adam Chapnick:

Exactly. And do you have a few special sauce items that you sprinkle in there that set you apart from others who do similar things and can you just tick off a couple of those?

Dan Doney:

Yeah. We center on compliance so that’s the key piece and we’re going to go into a little bit in terms of progress updates on our compliance aware tokens.

Adam Chapnick:

Yeah.

Dan Doney:

So, we’ll dig into that but the bottom line, the main secret sauce is we produce shares, securities, that actually have the rules built into them such that their smart shares. They know what they’re allowed to do and so they will only allow themselves to participate in transactions between known and qualified parties. This is a game changer. This isn’t like your grandma’s shares. These are shares that are actually able to transact internationally and that’s a big deal to get liquidity. So, we’re excited about that. We’re going to give you some progress updates there and a number of other important integrations and offerings that we’re bringing to the market.

Adam Chapnick:

Fantastic. Okay. So now that everybody gets what you are and why you are important, give us a little taste of what you’ve been up to in the last six months. I’m sure you’re not doing much.

Dan Doney:

Well, the last six months have been pretty busy so we’ve rolled out some interesting and important technical capabilities, support for tranches, which is important for companies going through Series A, Series B, different voting rights or issuing shares here in the U.S. and overseas, Reg. D, Reg. S., so that’s an important piece. We’ve introduced ...

Adam Chapnick:

Sorry to interrupt. So when you talk about tranches, does that mean that the smart token itself has some trigger built in to understand when a milestone is met or something like that?

Dan Doney:

So that’s a piece of the way that you do tranches. Another, more importantly, most importantly, not all shares are equal inside of a company.

Adam Chapnick:

Right.

Dan Doney:

So, some have different rights.

Adam Chapnick:

Yes.

Dan Doney:

Some have different handling requirements, etc. So you’re able to have a single company’s shares but with different rules built into them based on the rights of the actual shareholder’s…

Adam Chapnick:

Got it. Amazing. That’s so great.

Dan Doney:

So that’s a cool piece. We’ve supported non-fungible tokens now so we can do not just shares of things but whole title ownership of things and this is opening up the possibility to do all sorts of new financial instruments as a base line. Funds are just really combinations of both of those so there can be shares in funds and then funds themselves have assets which can include rights in other funds so you can build in those behaviors in a generic way and so there’s a bunch of things from a base line set of financial transactions that we’ve built in.

Adam Chapnick:

Wow.

Dan Doney:

We’ve got a number of important integrations.

Adam Chapnick:

Okay.

Dan Doney:

So, integrations with Paxos, with Bitgo, for custody solutions.

Adam Chapnick:

Yeah.

Dan Doney:

Paxos we’re really excited about because of their ability to do publicly traded shares and so that’s opening up new possibilities to trade, for example, shares of Apple or IBM in crypto networks. We’ve got an integration through Cascade FinTech that allows us to do credit card transactions and so it makes it, we believe the source of liquidity is convenience.

Adam Chapnick:

Yes.

Dan Doney:

So, to the extent that you can make this everyday usable and the kinds of payment channels, folks don’t even need to know that they’re working in the crypto space ...

Adam Chapnick:

Right, that’s interesting ...

Dan Doney:

Is where the wide-spread adoption really comes from. We’ve got some great relationships with partners so, you know, Vertalo.

Adam Chapnick:

Yes.

Dan Doney:

A great working relationship there. We’re supporting the Inventium launch, the big security token launch there. A crowd-funding launch for Indeco, so big and little token offerings.

Adam Chapnick:

Yes, so the Inveniam, that’s the real estate of a couple hundred million? Is that right?

Dan Doney:

$260 million.

Adam Chapnick:

$260 million across a few cities right?

Dan Doney:

That’s right. So there are several offerings built into that one core offer.

Adam Chapnick:

Interesting and then what was the second you mentioned, I’m sorry?

Dan Doney:

Indeco.

Adam Chapnick:

Okay, what’s that one?

Dan Doney:

They are a crowd-funding offering.

Dave Hendricks:

The thing about vouching and crowdfunding cap tables is, if you put your cap table on vouching you don’t have to issue a token, but it gives you the option, the ability to issue a token later.

Adam Chapnick:

Yes.

Dave Hendricks:

If you’re in this business like we are, you’re here because you believe this is a mega-trend right? So, Vertalo is working to capture the early part of that mega-trend by helping companies raising money to put their cap tables right on blockchain for self-sovereign ownership of the things people are investing in. Connections between issuers and investors. We’re taking this to market now. We’ve got too many clients, too much work, so it’s getting busy and exciting.

Adam Chapnick:

And we’ve seen funds that are tokenizing and we’ve also, 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?

Mason Borda:

So, we really sit on the infrastructure side, the technology side so it’s really with folks that are institutions that are seeking to build their own infrastructure and to build it within their rules and their compliance requirements.

Adam Chapnick:

Got it.

Mason Borda:

And that’s one thing that we’re seeing, is people don’t want to follow other people’s rules, they want to follow their own rules.

Adam Chapnick:

Especially in crypto, right? I think that’s always been. So what’s a use case for an institution that wants to implement things that you’re doing? What’s the most popular or attractive part of what you’re doing to them?

Mason Borda:

I think the technology is still very obscure to a lot of major institutions.

Adam Chapnick:

Yeah.

Mason Borda:

If you look broadly in the market, there’s not too many blockchain developers.

Adam Chapnick:

Right.

Mason Borda:

There’s not a lot of schools or universities out there that are training developers to code on the blockchain.

Adam Chapnick:

It’s true.

Mason Borda:

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.

Adam Chapnick:

Got it. And what’s that going to help them do better now that they have you baked in?

Mason Borda:

That’s really hard for me to say. From my perspective, we’re still in the experimentation stage so it’s institutions that seeking to figure out what is valuable about building on the blockchain, you know, why should I build infrastructure on the blockchain. What are the efficiencies that I gain? I do think there are a lot of efficiencies on the compliance side in particular.

Adam Chapnick:

Yeah. Absolutely.

Mason Borda:

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.

Adam Chapnick:

Yeah, that’s amazing.

Mason Borda:

Or it’s onboarding investors within this complex web of regulatory requirements.

Dan Doney:

As we come back to these compliance-aware tokens. The centerpiece of this is the ability to map global securities regulations into the behavior of the tokens.

Adam Chapnick:

Yes.

Dan Doney:

Global securities regulations are complex. Each jurisdiction has their own particular rules

Adam Chapnick:

Sure.

Dan Doney:

So you can map these in to the tokens, they can change, and the tokens can adapt to the new rules. That’s important. We’re working with the regulators from two governments to actually show that we can issue private securities with the jurisdictional rules of each of those governments and trade them between the citizens of those two countries. This is showing cross-border trading, de-centralized cross-border trading of restricted securities.

Adam Chapnick:

Wow.

Dan Doney:

That is a really big deal because, in the end, it’s possible to layer in all of the world’s frameworks, into these same tokens, and allow cross-border trading. Currently, only the very biggest financial institutions are capable of these types of trades because they’re so complex.

Adam Chapnick:

Yes.

Dan Doney:

This brings it to everybody.

Adam Chapnick:

Wow.

Dan Doney:

And allows for global liquidity.

Adam Chapnick:

Incredible.

Dan Doney:

Working directly with the regulators is very exciting.

Adam Chapnick:

Yeah.

Dan Doney:

Because they can actually provide their inputs and oversight into this so we know that we have something that they ...

Adam Chapnick:

Approve.

Dan Doney:

It’s workable.

Mason Borda:

Yeah, yeah. Amazing. 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 ...

Adam Chapnick:

Oh boy.

Mason Borda:

Individuals, institutions, and so those were some of the challenges that we saw but then on the regulatory side, the regulations change per country. So 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 ...

Adam Chapnick:

Oh my gosh.

Mason Borda:

And so ...

Adam Chapnick:

The same place, real time is changing its rules?

Mason Borda:

Yes.

Adam Chapnick:

Holy lord I didn’t even though of that.

Mason Borda:

So, we’re finding ourselves having to update these rule sets and these compliance requirements in real time as they change.

Adam Chapnick:

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 do they, how does that work?

Mason Borda:

So as a company that helps issuers follow their compliance requirements, we’re definitely very paranoid about putting them out of compliance.

Adam Chapnick:

Right.

Mason Borda:

So, when things come into play like GDPR, went into effect in May of 2018, we did get all of our whole platform into compliance with GDPR and get all of our clients, as a result, into compliance at the same time.

Adam Chapnick:

Wow.

Mason Borda:

It’s just something we do just because it’s our job to make sure that our clients are following their compliance requirements.