What’s PhunWare, and what are you guys up to?
Absolutely. So, PhunWare is 10 year old tech company based in Austin. Offices in San Diego, Newport Beach, and Miami. Been around for 10 years. We built the first NASCAR app, the first NFL app, we built most of Fox’s mobile applications. And then, it kind of turned into a data company. We see a lot of devices that have a lot of devices that have our software on them.
We consider ourselves a fully integrated cloud platform for mobile. Everything you need to succeed on mobile, we have something that can add value to you and your customers. And through doing all that, we started seeing an incredible amount of data. We see about a billion active devices touch our platform every single month. So now, the thought process is how do we use that data, use that kind of scale and reach to help brands engage consumers in a more authentic way. Because, quite frankly between you and me, they’re tired of wasting money at Facebook or Google and not really understanding what they’re getting, and how they reach the right people at the right time with the right message. And that’s what we want to do, and we want to enable all that with blockchain. So, it’s been fun.
And so how have you guys been involved with security tokens? If you are yet.
Yeah so, we are involved. Our role, primarily, is as a lead underwriter. If you think of an IPO, and this is an STO. So we’re the lead underwriter, so we’ll go in and we’ll analyze the companies, the management teams, the financial evaluation. And we’ll go through the whole package, we’ll put together a whole diligence report on those companies. And we’ll provide that information then to verify it, provide it to investors. We’re a thinner license firm, so it gives them the good housekeeping seal of approval to say that somebody actually went through this. It’s not just representation by a CEO of a company, and so there’s a third-party review of it. So, that’s what we primarily do. And then, we distribute those securities.
And we’re working on a couple tokenized products right now. One is a fund, it’s called CityBlock Capital.
We know CityBlock. Rob Nance, friend of the show.
So we’re raising money for him. We’ve got a listing agreement with them on SharesPost, so secondary trading is potential, as this works. And then, we just launched a new one for a company called Metals House. And it’s a 150 million dollar capital raise for ostensibly inventory finance for a gold trading firm. So you have invested, and they use that money to buy gold. And then, every year that increases in terms of the amount of gold that’s backing the token. And by year 5 it’s 100% backed, and they pay a dividend. They pay an annual dividend of 8%, 2% per quarter.
US capital, the next six to nine months, the remainder of 2019. What can we expect from you guys?
I would expect that we’ll have more offerings coming to market. We should be announcing some closings on these deals, and raising a couple hundred million dollars, hopefully, for our different issuers. Those will then positioned to start trading. Most of the deals we’re doing are Reg D, Reg S. So internationally, they could start trading after 40 days, as long as they’re not coming back here.
We have relationships with a lot of the different trading platforms, and the tokens that we originate, and that we distribute will then start trading on the secondary market.
I know that you’re in another fairly new endeavor. Will you want to tell us what that is?
Yes, I’ve been working on a project called Onera. It started actually here, in this conference, six months ago. And it started as a concept, as an idea, and it evolved into a project foundation that we’re now starting. And the idea behind Onera is to build a new blockchain, new network blockchain, for security token designed for institutional investors, for bankers, and for people like that. So, we can actually reach this scale?
How so? What makes it particular to bankers? What does it consist of?
So, it’s what I would call institutional grade. Etherium is not institutional grade, bankers would not use that. So what we’re using, we’re building it on top of what we call Hyperledger Fabric. What Hyperledger Fabric is usually used for private network, we’re actually turning it around and making it into a public network. Yes, it includes everything you need for doing security token out of the box so that privacy is there, regulation compliance is there, Everything already there so it’s building blocks of security. But it has one other critical element, and that critical element is that the tokens on Onera carry their value with them, unlike other security tokens. Security token-
So, does that mean no wallet? Is that what that means?
What it means is that security tokens today are only a trading element, but the value that they represent is outside the blockchain. It’s completely off chain. So you can be trading tokens from one hand to another, but the value is on somebody’s website, which can be changed. It’s not immutable, nobody checks it and so on. So there’s a problem here where practically every shirk whatever they want. There’s not enough scrutiny, and very very hard to find information.
BlockQuake, we’re rolling out a centralized digital asset exchange on a global scale. So we’re opening up end of May, just very globally, we’re going to have seven fiats onboard immediately. We’re using qualified custodians, we have a transfer agent. We were created just out of our own frustrations with the market, particularly in 2017 year-end, where just platforms were inefficient, crashing, or they just didn’t have a lot of the features I’m used to. Myself and my team, we’re from traditional financial services, we traded stocks, options, forex. We’re accustomed to complex order types, a better speed efficiency, and just a lot of that was just lacking. So that’s how BlockQuake was born.
Fantastic. So I understand that you have something specific involved. We are the Security Token Academy. Do you have some, perhaps, news to share about security tokens and BlockQuake?
Yes. We are actually pursuing or broker deal with ATS currently. And, we believe we’ll have it in about six months. Our attorneys are the same attorneys that a number of the platforms that have their ATS used so they’ve got the process down at this point. So, we’re pretty confident. We’re also launching our loyalty token, probably within the next week or two. We’re doing a Reg S first, overseas.
Interesting, starting with an S, okay.
There’s been significant demand overseas for US projects because of the fact that we have our securities laws that are pretty tight. There’s just a ton of interest. We were in South Korea last week, and they told us they’re looking at our project because they find a US project to be more transparent, more regulatory friendly. So there is a huge demand for security token projects globally.
You guys also have some interesting vehicles that you’re toying with.
Sure. So we’re exploring a number of things. So we’ve launched an investment index that looks after the large cap to try to give clients a feel for what a beta exposure would look like. We’ll be launching a series of different indexes, which hopefully will give the client a better feel for looking at cryptocurrencies.
I think a lot of people look at just Bitcoin. Where is the market going? Just Bitcoin, that may not necessarily the right exposure. We’re going to try to find different angles to be able to show clients where the crypto market is going.
We’re also looking at derivatives, that’s a new market that’s up and coming. We’re seeing people trade derivatives in bitcoin right now. We’re starting to see nascent marks in Eth derivatives. And of course you can call up an OTC counter and they’ll make you a derivative in whatever fashion you want, on whatever token you want. But overall, I think we’re starting to see that.
And the third series which I think we had discussed yesterday that was interesting.
Yes, this is my favorite.
We’re looking at real assets that we can tokenize that would make a lot of sense. It would take advantage of the tokenization process. I believe that there are a lot of cash flows, and yield curves that could be liberated using the token format so that more people could have access to it. We could talk about things which are not boring, things that I do all the time. Which is real estate and so forth, and we could talk about things that are interesting which we talked about yesterday. We’re looking at whiskey, potentially doing something with whiskey in terms of tokenization and so forth. I’ve spoken to people about brand new whiskey, the aging process. The interesting way of talking about it is we would hold barrels. And the boring way to say it is we’re basically providing balance sheets to distillers for them to make their business more efficient.
The other direction is more on the collectible side. I’ve talked to friends who are going to Scotland to buy 20-30 year old barrels and aging it for another 5-10 years, to try to pick up the gain in value from that perspective. And that smaller volume-
Like series D barrel.
That’s right, and much, much later than that barrel. Obviously, starting point is high, but the theory is that the ending point is higher as long as nobody drinks it all before doesn’t all evaporate away.
That’s fantastic. Now those would be security tokens or not?
So, we’re envisioning all of these things basically in fund format. And we would issue securities tokens, and what we call digital funds, around these things. So they’re token representations of funds, and the funds would have these different types of investments. And we haven’t launched any of these yet so we could talk about them to our liking.
Well I love that part.
And the concept is that these tokens would then be tradable on security token exchanges. We have very close relationships with the top three in the US, and in many others, overseas also. So we would like to list them, have them be available. Just back to the whiskey example, we could have the 2018 vintage, we have the 2019 vintage. You could trade fractional barrels with other people, thinking certain barrels are better than others, and have all that debate. I’m not a big drinker so I’ll leave it to the experts to trade those tokens.
What’s around the bend for Rivver. Where are you focused for the remainder of 2019?
So 2019 for us, is working with our design partners. We have about six funds that we work with right now. We’re looking to cap it at around 10, work with them, build a product around them, really understand their needs, and how we can better our offering. The client obsessed approach. Asides from that, we are also product obsessed right now. Really our R&D team is working very hard to really build the best product for our clients, and to have it on the market with our final product as soon as possible. Right now, we are in beta and we hope to have our final product ready for launch in the next quarter?
What’s on your 2019 roadmap for Archax?
So we submit our application to the FTA to be an MTF, so there’s no doubt that they’ll put us under a great deal of scrutiny over the next six to twelve months. We hope to get our permission, obviously, in six but it may take longer. The FTA recently released a consultation paper where they laid out that they are working out their position on cryptocurrency utility tokens. They don’t regulate the securities they do, and security venues. They will regulate security venues. So, from our point of view, we’re straight up a fairway for them. This is a security venue trading securities. So, hopefully it will be quite straight-forward, but obviously since we’re dealing with a slightly different asset class, there will be a lot of conversations.
In the next six-seven months as well, we’re working out our partnerships with companies like Securitize and Tokeny. DLA and Tokeny in the UK have just bought something called a Digital Token Alliance, which is useful for moving the space forward. So, we’ll be working with those guys, seeing how the whole ecosystem is going to operate. And then hopefully, towards the end of this year, we’ll be listing and we have come to market with ten to twenty tokens on our exchange, day one.
So, 2019, NovaBlock. What’s going to happen? What have we got from you?
Sure, so we are actually in the process of launching our second fund, which is a larger ecosystem fund. We’re going to continue to invest in the space and building out the ecosystem for digital securities. So definitely stay tuned as we’re going to have quite a few interesting announcements in our pipeline.
OpenFinance, you’re so new and yet so important to the space already. What can we expect from you in the coming six months or nine months?
The pipeline of listings looks really strong, as we continue to partner with the issuance platforms like Securitize, and Polymath, and Harbor who are doing a lot of great work in the space as well. So we continue to add to that pipeline, and we add more and more listings to the platform throughout the balance of the year. And then, like I said, the next progression for us is to really get much more institutional. And we start talking to larger issuers more in traditional offerings. Which we think is really attractive to investors that historically might now have wanted to invest in one of these types of offerings because of the lack of liquidity. Now we’re bringing this option that is much more attractive for the investor.
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