Jamie Finn is the President and co-founder of Securitize Inc., one of the fastest growing companies in issuing security tokens. During his nearly 20-year career, he has worked in six countries with startups and corporations and participated in more than $750m worth of transactions including Kontera, Sansa Security, Jajah, Tokbox, RingRing Media and Zingy.
Before co-founding Securitize, Jamie helped grow Aki Technologies from $1m in revenue and eight staffers to one with more than 60 people and tens of millions in revenue. Prior to that, he held executive roles at Ericsson, Telefònica o2, and AT&T.
Securitize An end-to-end platform for issuers that are seeking to tokenize assets
Hi, this is Amy Wan at the StartEngine Summit here in LA, and I'm here with Jamie Finn from Securitize. Thanks so much for joining us.
Yeah, I'm excited to be here.
Alright Jamie, so there are a proliferation of security token standards out there, what is going on, what's happening, why're there so many?
Well I think it's a great question, right so I think we've seen over the past few weeks any number of different companies launching standards. And if you have a number of companies launching standards, by nature those are not standards.
And so we're kind of looking at this thing backwards. Everyone's obsessed with standardizing something that nobody knows how to do, right, and so in our world what we've been learning is as we go and launch these things with actual marketplaces and exchanges, it's much harder than it appears and everything you thought you thought of that was right, guess what? You forgot something.
Interesting. Are there any standards in particular that you think right now are getting a lot of traction?
Yeah, ERC-20. Honestly we don't need anything else, people have got obsessed with it.
I don't believe in 1400, 1450, 1442, 14 whatever, none of them matter. All that stuff is noise because it's being deployed by companies who haven't actually issued any security totals. So people are talking about standards, they're not actually deploying. What we need in this space is to get actual tokens in investors hands.
What do you see now in terms of standards on other launchings aside from Ethereum?
Yeah, I mean we've been looking at a lot of different blockchains, there's some really interesting ones out there. We've had great conversations with the NEO team, with Cardano, with Stellar, and we're really kind of digging deep, and even EOS, digging deep to understand how we would deploy our protocol in those environments, and for the most part we found that actually most of what we built will actually work on these different blockchains. There is some engineering effort, but again, at the end of the day we're waiting for the full ecosystem to develop around it. So what Ethereum has, which is very powerful, is this ecosystem, they have wallets, they have exchanges, consumers are learning how to use it, investors are learning how to use it. Now you have to learn how to use an EOS wallet. I own a bunch of EOS, but I don't actually know how to use it.
I should probably learn though.
Interesting. So given that there're so many competing blockchains, right, do you think the future of security tokens is going to exist on public blockchains or private blockchains?
Yeah, I mean for me a public security should be listed on a public blockchain. I've heard of some companies trying to create their own variants of it. Thus far those companies haven't been tremendously successful with it. Remains to be seen if anybody has enough market power to do that. We at Securitize are not building our own private chain, we have no interest in that area we feel that security should be public, all the information should be public, and it should be traded on public blockchains.
How about for private companies?
So private companies who opt to list securities are going to do that on a public blockchain because they have public investors, they have investors that are all over the world, why would you hide the transactions from them, it doesn't make sense.
We've seen, the only thing I have seen a little bit of is at Europe, some data protection issues that have come up. For the most part, with what we do at least, everything is hashed, and so none of it's actually visible, and we hash identity on the blockchain as a component of what we do and so that's sufficient around European regulatory law which is the most strict in this environment, so for now I don't think there's anything really needed that has to be on like a secret, private blockchain that nobody knows about.
Do you think the future of the security token industry is going to be with self-custodial flare or with these custodial entities?
Well I think it's a mix, right? Depends on the investor. Now at the end of the day an institutional investor needs a custodian to hold the securities, they can't do that, right? Whereas a family office who's relatively well versed in technology can hold their own securities if they feel comfortable doing it. It's hard, the systems aren't there, we've seen some new stuff from Ledger, which looks super promising in that area for self-custody, and for governance, which is another piece people don't talk about enough. With these securities, how do you transfer them, when do you issue them? Who has the rights to issue them? How is that controlled? So all those different things aren't really there yet, they're being built by a few companies which will help, but I think at the end of the day we're going to have self-custody, and we're going to have institutions using custodians who are insured and regulated.
So what, so given that now at least some people who have that capability can presumably hold their own security token, what happens if they lose their private keys?
Yeah. Well I mean in the security token space it's not as big an issue, right?
So you lose your keys and you can prove that you lost them, that you had control of that wallet, and everything was done properly through a proper forensics investigation, then those tokens can be reissued or inburnt on the existing ones. So you can basically pull them back and reissue them. So it's not as much of an issue but it's still a security, it's still a bare instrument, so it has to be treated with the appropriate protection.
Is there any topic that you think has not been adequately addressed or hasn't been talked about enough in the security token space today?
Capital formation. To me, talking tech in this space is actually not that useful. What we have to focus on is getting investors into the space. It's a very hard space, Carlos, my co-founder, said it last month, it was like 99% of the people didn't know. Now we've done this whole pusher on security tokens, now 98% don't know about security tokens. It's a one percent increase, and so nobody knows about this space, we're talking to ourselves, we need to bring investors into it and really make them comfortable with it, and stop focusing so much on tech.
What do you think is going to be the thing that makes investors want to invest in security tokens more?
I mean the fundamental missing piece right now is anywhere to trade this things, right? Be it a marketplace or an exchange, they don't exist in any live formats yet, right, so we're testing with a number of companies, we're seeing things are about to happen, and I think we'll start to see the first trades this month. Once we see those first trades happen, I believe we'll see a new wave of demand for these products, and then we'll get to see in six to nine months if the second wave hits and then when that happens, we have a real business.
And so when are all these ATS's and exchanges that have been talked about and promised, when are they coming out?
What day is today? Honestly, I think we'll see a few of them this month, and we'll see a couple next month, and it'll kind of roll from there. It's going to take some time, there's some other gaps, people aren't thinking about how do you make a market in this space, who's going to do it, how does that business function, who's going to hold the securities when they make the market, who's going to lend it to them. There's a lot of fringe issues that don't really come up until you start trading, so I think that'll be a next phase in investor relations, nobody's talking about that, how do you do that.
Yeah. One thing that we always saw in the crowdfunding industry was the adverse selection problem, right, people approaching us where it was like they couldn't raise money any other way, and so they think, oh, I'm going to use this new app, in need of money, it's going to get me the money. How do we combat that in the security token industry?
Well, I mean, to be honest there's a few different layers of filters. The way we look at businesses, and we filter them because we don't have unlimited capacity yet, hopefully we'll have it at some point but right now, we simply can't do every deal that comes through the door right? And so, what we have to do is look at the track record of the kind of companies, we split them up and take kind of three areas. Venture funds, operating business, and real estate. Right? If you're a first time BC this is not a good avenue for you, right, if you're a first time startup business with no traction, this is not a good avenue for you. And on real estate, if you've never done anything in the space, it's probably not going to work out, cause raising money in this space isn't easier.
It's harder. And so you have to get out there and sell these securities to people in a new format, you better have a track record behind you.
And so if it's harder, why are issuers clamoring at your door wanting to issue these things?
Well, so I mean I think there's two reasons that are really fundamental and they're much bigger than they sound on the service, right, so global capital formation and the ability to sell a security to anybody in the world is a humongous world changing thing, right? This hasn't happened yet, you haven't had the ability in today's market for somebody in Japan to buy in an investment in a venture fund in the U.S. with cryptocurrency. Today you can do that, right, so whole different ecosystem. And then the promise of liquidity, right, that's happening, it's coming, it's going to take longer than everybody wants, but this promise of the marketplace and the exchanges is really going to be the two major areas that we're going to see change the world.
What do you think is going to happen with all those other jurisdictions, the Maltas, the Singapores of the world that right now are kind of playing a little bit of regulatory arbitrage?
Well, I think naturally investors have a flight quality, right, and so they're going to look for environments where they feel comfortable placing their money. And it's also going to depend on custody, where these securities are, right? It's actually not as big an issue to trade through Malta security token because to be honest, you can custody the token yourself, you can trade it, and you get the money back into your own wallet. It's not like you have to deposit the money in a Maltese bank, it's not like you're going to bank a le-po or deposit it right? So I don't see that as much of an issue but I do think the exchanges in the marketplaces have a tremendous responsibility there in order to stay secure and make it so that this environment works.
Fantastic. Thank you so much for all your insight Jamie.
My pleasure. Thank you.
This is Amy Wan reporting from the StartEngine summit in LA.
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