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Expert Interview


 
Jed Halfon: Tokenized Asset Market Growth

Jed Halfon

Jed is a member of Republic's crypto team. Focus on token sales and equity crowdfunding. He also advises companies on token-sale logistics and mechanics. Previously, he was a corporate and finance attorney at Mayer Brown who received a JD from the University of Pennsylvania Law School and an MA in international studies from the Lauder Institute at Wharton.

Transcript


 

Adam Chapnick:

So, Jed, thanks for joining us today.

Jed Halfon:

Great to be here. Thank for having me, Adam.

Adam Chapnick:

All right, so Republic Crypto, friend of the show, had you guys on a couple times. We love talking to you because you guys have a unique insight into a slice of the world that has been sort of fundamental to this whole ecosystem. You started in just straight up equity crowdfunding. And now we went through sort of the ICO, fits and starts, and we're into what people are calling STOs or digital securities, offerings. What are you guys seeing in terms of a similarity or a different from the straight equity crowdfunding time to now?

Jed Halfon:

Sure. So if you really think about ICOs and the ICO movement at their core, it's a crowdfunding movement, right? Threw out the page, you reach out to your friends and family,-

Adam Chapnick:

Absolutely.

Jed Halfon:

Your community. They fund you. You hopefully go build something, sometimes you don't as we know. But at its core, that's what it's about. It's about allowing retail investors to get access to exciting new projects.

Adam Chapnick:

Right.

Jed Halfon:

So moving into crypto for Republic was a pretty natural segue.

Adam Chapnick:

Yeah.

Jed Halfon:

We're definitely seeing the structures and styles of the ICOs change. The market has tempered a bit. People's expectations have leveled out.

Adam Chapnick:

Right.

Jed Halfon:

But we still see a lot of excitement, both in the STO space and, in general, people who are looking to launch utility tokens.

Adam Chapnick:

Now for people who might be watching this and aren't familiar, amazingly, with Republic, you guys do a nice hybrid where you do compliant listings. What are some of the ways people can list with you guys without feeding you the answer]? What are the things that you could do?

Jed Halfon:

Sure.

Adam Chapnick:

So everyone can know.

Jed Halfon:

Sure. So if you think about early-stage investing it's, in general, you can sell securities to retail investors who are, quote unquote, unaccredited.

Adam Chapnick:

Right.

Jed Halfon:

A few years ago, the Jobs Act was passed which allowed for an exemption. Issuers can raise up to $1.07 million from everyday people. So if you want to have an STO and you want to get into the hands of everyday people, you can use a funding portal like Republic. It's a special regulated entity. We're heavily regulated by FINRA and the SEC. We have a whole set of compliance and rules, lots of fun as you can imagine. And you can launch on the site and raise money.

We use a debt offering. We structure it as debt, and the debt is repaid in tokens or cash.

Adam Chapnick:

Oh, that's interesting.

Jed Halfon:

We find that it's both issuer friendly and investor friendly. Investors have more protections than they did under the SAFT and other models. And it makes issuers happy. They can walk away if they need to. It's a very flexible document.

Adam Chapnick:

Wow, that's great.

Jed Halfon:

And we think that as the industry matures, this kind of framework is going to become a lot more common.

Adam Chapnick:

Are you noticing any kind of trend in terms of the kind of companies or people that are coming to you to do an issuance?

Jed Halfon:

I think the people are getting better. I think the quality of people are getting better. I think people are coming to us who have more visions of companies than kind of ideas of the past. The number of STOs and people who are accepting that the thing they're going to launch as a security has definitely increased.

Adam Chapnick:

Ah, they're not resisting, saying, "Mine's a utility, it's a utility."

Jed Halfon:

I mean, when we say STO, we really mean a token that is intended to be a security for its entirety of its life.

Adam Chapnick:

Got it.

Jed Halfon:

That's the true STO.

Adam Chapnick:

Got it.

Jed Halfon:

We're seeing two token models where there's revenue or a dividend paid to a security token holder of a utility token which serves as purchasing power in some kind of network.

Adam Chapnick:

Interesting.

Jed Halfon:

There's tokenized assets, tokenized real estate. As you know, there was a East Village condo at $30 million that was recently tokenized. I think we're going to see a lot of this.

Adam Chapnick:

Now that wasn't through Republic.

Jed Halfon:

That wasn't through Republic.

Adam Chapnick:

But it's an indicator.

Jed Halfon:

It's an indicator of ... So these tokenized asset markets are really new, right?

Adam Chapnick:

Yeah.

Jed Halfon:

I think that really no legal place to exchange these tokens. Liquidity is not necessarily there. This is just the beginning of it.

Adam Chapnick:

That's right. So also the Aspen St. Regis was another sort of-

Jed Halfon:

Right. Aspen St. Regis was another big one.

Adam Chapnick:

Bellwether. Interesting. Okay, so something that we hear a lot also is a confusion maybe, is does my company have to be a blockchain company to list on Republic Crypto?

Jed Halfon:

No.

Adam Chapnick:

No.

Jed Halfon:

So first and foremost, we started before crypto was ever a thing, before I ever knew about it, that's for sure.

Adam Chapnick:

Right, that's right.

Jed Halfon:

We hold this traditional what we call equity companies, which are just companies you see every day. SAS Products, restaurants, bars, what have you, real estate, doesn't really matter. Any company can come and raise. To be in our, quote unquote, crypto or blockchain space, we're really looking for companies in the ecosystem. You don't need a token to be on Republic Crypto. There are plenty other ways to get involved, whether you're a wallet, you use blockchain tech. We have a company that's live now that verifies ticket authenticity with blockchain. It's a really exciting company. There's no token involved.

Adam Chapnick:

Got it. So, what do you think overall is the benefit, is the revolution that security tokens present? That people, once they get their handle on it, will really start to take advantage of?

Jed Halfon:

The revolution is that you can turn anything in the world into a financial instrument. That's really what it is, right? It's the fractionalization of everything around us that wasn't otherwise accessible, whether it's a car or piece of real estate, a piece of art as we see here today. You can take anything, turn it into a fractional share, give it around, sell it, and it really opens up ... It makes everything able to be part of the markets. Which is truly revolution.

Adam Chapnick:

It truly is. So given that, let's say a year from now, where are we going to be in STOs? Is it going to be same, giant, or gone?

Jed Halfon:

It will not be giant. It will not be gone. There's still a long way to go. I think we'll probably need another six months before we see any true security token exchanges really take flight. Once we have that, I think we'll start to see the proliferation of more obscure assets, whether they're cars, real estate, what have you, they'll start to be trading soon.

Adam Chapnick:

Exciting. Well, thank you for giving your unique insight from where you sit on your perch. We love having you. You have to come back soon and keep telling us what's going on.

Jed Halfon:

Thanks, Adam, great to be here.

Adam Chapnick:

All right, good to see you.