Future of crypto market and asset tokenization, disruption of stock trading and equity crowdfunding

stocks are liquid and you are not going to receive any dividend so why should i buy stock from an equity crowdfunding campaign at the moment there are some important exchange in the market one is the cryptocurrency that achieved the two trillions the second thing is about a decentralization the third one is about a low cost if you are not able to digitize an equity share clearly you are losing a huge stake of the market [Music] the legendary venture investor mark andreessen once said software is eating the world now we can rightly say that crypto is eating the finance and our today's guest is a great proof of the thesis meet mauro andrioto he bring the serious approach of the traditional financial world to crypto being a professor of finance in university of bocconi advisor to european commission partner of wealth management firms now he is turned stoic advisor and founder of european digital asset exchange what brought a highly accomplished finance professional into this innovative field let's find out on today's interview absorption of the organization and evolution of finance bro it's a pleasure to have you with us today it's really my pleasure and thanks for the for the invite welcome everybody to starbucks interview a video series where we've been industry rock stars to discuss the future of crypto tokenization and capital markets overall we are your all-time host boris piccalo and ross chameleon please don't forget to subscribe to the channel and turn on notifications so that you don't miss other fantastic interviews that provide you with an edge or everybody else in terms of knowledge and understanding now let's go to the interview itself mauro please tell us about yourself and your activities well uh i am an adjunct professor in finance i teach different universities in italian and switzerland i help the european commission to select projects that are good enough to receive the public funding in different european programs uh one of them for example is the european innovation council accelerator it's an opportunity for innovative companies up to 17.5 millions of which 2.5 millions as an unrefundable no repayable grant and i am an equity partner of the family office here in switzerland is a family office with the 15 physical locations around the world in particular russia middle east switzerland some offices around europe and the one important office in panama for the south american market i am also an equity partner of another institutional investor is an asset management firm that manages some alternative investment funds in luxembourg in particular real estate gold blockchain yeah we have a fund on blockchain that is called etika chain i will tell you later something else about this and classic cars we also have also found on on classic cars that's quite an impressive background and the list of activities look how you have time to kindle all of this now my question is about uh jumping straight in the topic of our conversation tokenization it has not nearly achieved the kind of growth that has been promised for it so on your opinion based on the range of your activities and investment do you think that it's still a disruptive innovation that is that has been simply held back by structural barriers or has been overhyped from the very beginning so are we going to see the big revival and growth of the tokenization market i still really believe that uh tokenization security token offering digital asset will be the future of capital markets um probably in a different way it means with some innovation compared to the capital market that we know but we can see that every day we have some news about new assets like right now we are speaking a lot about nft but every day i would say we have something new to to say about the tokenization of assets and with tokenization of assets i do not mean cryptocurrency but securities okay financial securities i think there is uh um let's say a delay variable uh and this is why uh the sto and the asset organization uh didn't take off as as the icos and this uh delay variable is the legislation uh it's quite complex to uh let's say digitize an asset in compliance with the actual laws also because of the different laws around the world can be really different and let's say are sometimes complex to understand because they come from from the past from traditional finance and sometimes have not been written with the idea of the future of tokenization and blockchain so some sometimes there are some gray areas where it's not easy to understand if what you are doing it's in compliance with the current law i can bring you an example that is also one of our proof of concept and it's about the digitization of shares of equity shares uh in many different countries around europe there is a public register that is kept by the government where if you want to be a shareholder of a company you need to be registered that you need your name and must be written in that public register and furthermore sometime in some countries like italy and i think of germany you need to have a notary that is going to communicate your name to that public register is not something that you can do by yourself now uh we we all know that blockchain is a register and but from the law point of view from the legislation point of view the only register that has the property of let's say the defining who is the shareholder is the public one so you cannot use it to registers because clearly you would have a double spending problem and it's very difficult in that country to digitize an equity share and if you are not able to digitize an equity share clearly you are losing a huge stake of the market uh what we have done just to anticipate a little bit in switzerland this is possible we have actually already digitized the company because in switzerland we do not have a public register of the shares so we have been able working with the legislator to have an articles of incorporation that has been accepted by the authority in this article of incorporation is written that the shares are kept on the blockchain and that the shareholder registry is on the blockchain so when you transfer the token actually you are transferring the property of that share and you are transferring also the rights that are connected to that share this is the safe way to do the sto about an inequity share because clearly there would be also other let's say work around that sometime are not safe at all for the investor if you if you are able to write this in the articles of incorporation and to have this accepted by the authority clearly this is the best way because the token is becoming the share for the company and for the authorities we also have another possibility that we are studying right now for for funds that it's about using a fiduciary contract that is something that we can do with edsx i forgot to say clearly that between my activities my core business is the european digital asset exchange that is a platform that we have built for a primary offering and secondary offering on on the exchange we have completed our proof of concept that is over future so we now know that we are able to do it and we are completely in compliance with the streets law and also with the european law because clearly we have we have launched the offering all over europe um yeah i would say that i think that this is the future okay so yeah we will have i think that many countries will change the law in order to accommodate this need and clearly at the moment there are some some important change in the market that must be considered that are that are happening one is the cryptocurrency that achieved the two trillions and there are many companies that clearly are interested in having access to this market companies and also the asset management industry that is interested in having this this type of access the second thing is about the centralization and i think that is this is a big plus that can be given just by the blockchain because it gives you the possibility actually to trade a security without an intermediary without a stock exchange and without all the different type of actors that you need with the traditional finance uh the third one is about a low costs that you can have we are moving the platform on eos about edsx i think it will be eos and this will allow to give the opportunity to trade the security token with the no fees for for the transaction and the fourth element that i think is a really big plus and will help this change process is about the automation just think when you have an equity crowdfunding campaign you might have 300 investors and i'm just thinking when they need to organize the shareholder meeting and all the 300 investors maybe they won't participate to the shareholder meeting and they need to be identified all 300 in order to be sure that they can vote for for example or you need to pay them a dividend another thing that we are doing and that you can do with a blockchain is to uh to use the power of blockchain to identify people give them the possibility of voting and distributing them the dividend so i think there are really a lot of plus in in what in what we are doing and i think capital market is changing i'm not the only one that is saying this also the ceo of the swiss stock exchange made this statement and i really believe that this is true thank you for a detailed reply and the overview and many of what you say interact with our experience and whatever face as well the issue of of reporting the government registers is one of the key reasons why we chose the jurisdictions we work with other and others so we've been thinking first of all just like malta and estonia but specifically because of this issue we decided to work with countries like switzerland or wyoming in the us or gibraltar where the there is no such problems in the legislation although interestingly i think that the issue of registers will become easier in the future as well we've seen that it may be possible to not arise digitally through digital signatures certain transactions in pre-baltic countries so this may at least partially solve the problems we are speaking about and the the automation of dividend payments and the corporate actions and drag along take a loan provisions and preemptive right this is probably one of the biggest benefits of tokenization that you see when expanding the things that i want you to expand more on is when you said about that decentralization and removal of intermediaries is what justifies the use of blockchain could you please expand on that do you think that this is the main benefit that we get and how would it work well uh i mean i think it's one of the benefit just to think at the number of actors that you need to to launch an ipo you need the bank you need the custody you need the central depository you need lots of people that can be and this if the company is listed but also when the company is not listed that you need some intermediaries like the notary as we said before you need the public register and decentralization is giving you the opportunity not to deal and not to spend the money toward this intermediaries that can be substituted by the blockchain in an easy way low cost and with the instant transfer you you can substitute them furthermore there might be also a security uh consideration that we we we can do just a thing i do not know how it works in ukraine but in europe usually your bank account is guaranteed by the government till on average 100k euro is the same thing goes in switzerland till 100k francs but if the bank is going to fail and you have more than 100k you might probably not be able to recover your money if you have a decentralized uh wallet uh then you are safe because nobody can steal your your money or or your asset from that wallet so i really think that this decentralization is an important feature is not the only one but it's something that you might want to to consider in future yeah you previously mentioned that uh for example in italy and in germany they they have notary and in general it kills the idea of stakeholization when you it every time and authorized some changes in a shareholder registry and security token offering is very competing with a number of other financing engines such as institutional private placement uh classical ipo equity crowd funding clones etc and what other kinds of businesses in terms of industry stage offering size and other characteristics for which sto is the best solution and what is the typical profile of clients that will use this services okay well i will start from the ipo the ipo clearly is the most expensive one uh it's uh the most high ends uh highest compliance that you can get and well i'm not sure that is the highest liquidity that you can get because it really depends on which stock exchange you are going to list the company there are some local stock exchange that i know that are not liquid at all above all there are some stock exchange that have segments that have been created for small medium enterprise um well i'm i'm not going to give the names because uh this is like i'm not sure but there are some uh stock exchanges that have i've created like a segment of the stock exchange that is just for small medium enterprises and just institutional investors can have access to that segment in order to trade the shares of of the companies and i have to say that i spoke with the many founders that made a list in there that is not cheap at all because we are speaking more or less around half a million and they are not liquid at all so they are not really happy clearly if you are going to list your company on the nasdaq or on the london stock exchange probably the amount of liquidity it is it's huge but also the cost and the for sure is not a service that you can have if you are a startup or a small medium enterprise i think it really depends by the type of client that you are looking for for example as edsx we are looking at small medium enterprises because they are the 99 percent of the company in europe and historically this is the segment that has the highest obstacles in getting the access to the capital markets or to the depth markets through through banks the second segment is a new one and it's the segment of alternative investments and illiquid assets like real estates but also as i said could be about art pieces or classic cars or diamonds or any other valuable assets that historically didn't really have a a liquid or exchangeable let's say contract that was traded on on a market that today they can have through the tokens and the third really interesting segment for us is that the equity crowdfunding we wanted to offer a secondary market to the equity credit i think our idea is to start in 2021 just after we will be able to uh let's say exit from this moment from this worldwide moment about them the pandemic we would like to start with a campaign to offer the secondary market for free of edsx to equity crowdfunding projects because we really believe that there are a lot of advantages some of them have been listed at the beginning of this interview and there are also some some other because clearly if you are an investor of an equity crowdfunder of the necritic crowdfunding campaign actually i'm well i'm not saying that you are throwing out of the window your money but you are putting your money in something that is completely liquid and you will be able to get back this money just if the company will will will make an ipo or it will be acquired by a private equity fund that i mean we we always hope about the positive events in future but i mean is is is not something that is so close in in time when when you buy the stock so the possibility to give a secondary market where clearly the price of the share is moving with the result of the company that can publish the company can show the balance sheet can give a communication to the investor i think this is really valuable and this is completely different from the bulletin board that i have seen with the different crowdfunding platforms because bulletin boards usually do not give you the possibility to exchange immediately the share while you can have this on edsx and so you you will have a secondary market very much similar to a trading platform private placement to come back to the initial question i think is an easy way that you can use it to collect the money if you have a network and if you are able to uh to present your project to venture clearly there are some disadvantages the first one is that usually with private placement if we speak about small medium enterprises or startups so we speak about venture capital uh clearly the investor here here has a lot of power and is going to sign a term sheet that has a lot of closes that are not yeah that are in advantage of of the investor and second thing uh you might also have a liquidity premium because uh i am pretty sure that uh the sto and digitization will take off and as soon it will take off and you are not listed as it's happening with the traditional stock exchange you need to pay a liquidity premium uh so a lower price of your share if they are not liquid so it makes sense to list them uh the third thing i've already spoke about that is about the equity credit crowdfunding consider just to to have an idea that the total size of the equity crowdfunding is much much smaller than the total size of the crowdfunding including also the peer-to-peer lending and the crowd reward the crowdfunding and this clearly it's because you do not have a secondary market the stocks are liquid and you are not going to receive any dividend so why should should i buy stock from an equity crowdfunding campaign it's like a kind of i mean it would be in some cases at least in some cases at least it would be better to call it a reward the crowdfunding because you do not really have if this is true also if you are going to look at the average return of the crowdfunding investment it's really really low because i mean the amount of companies that are going to default and the amount of companies that are able to be acquired by a private equity or to do an ipo is is very small yeah and as an advisory firm how much the demand you receive currently for sto and ico i mean as you mentioned currently crypto market in general reached 2 trillion yeah and it touched also astro space and what how much demand do you receive currently what do you see well it's growing well uh i have to say about icos the gold era of icos is is over so i i do not have any more project that is that is looking for uh creating its own platform and to launch it some token so let's say i usually have blockchain projects now more than icos it means that these are projects that are looking for creating for using blockchain to solve a problem creating a community inside the project and creating a cryptocurrency that is going to likely yeah that [Applause] let's say that while till the beginning of 2018 uh the idea was let's create a project for doing an ico yeah for doing something for creating a token now i would say that it's the opposite let's create a token that can help to solve some problems that can have really a market sense and so i have this type of project i have a marketplace another project that is on uh very interesting on the palette i have a project on art for [Music] certification i have another interesting project from one of the most important entrepreneur in italy uh that is the name is digital gold another one is circular and another one is yes w so they are all looking to create a community for uh with with the token that can be used by this community and to grow this this community let's say that the uh listing of the token is of secondary importance okay about stos uh we have a lot of interest we have a really interesting pipeline right now we have uh some contracts that have been signed also with big companies not just with the small medium enterprises unfortunately two of this contract are in the hospitality tourism sector so clearly they have started in 2000 they they have been signed at the at the beginning of 2020 one is uh for example did well i can tell you one is the digitization of an hotel in russia in kaliningrad and the other one is the digitization of a luxury resort in in brazil but clearly they are on hold because the moment is is not at at its best uh i think that as we will create the secondary market as we will increase the number of projects and people that will start to use the token as we will increase the number of projects that will decide to go for this type of solution recently i have seen also some interesting project from institutionals but okay there is the swiss stock exchange that is launching as the x but there are also some other institutional investors that are i think that they are trying to do some test proof of concept to see how to use the blockchain in digitization but this is interesting because it means that uh i mean i i think it's uh this is part of the change of capital markets and maybe is not a bad news that this is happening slowly and and not like ico in in one shot i you mentioned previously that one of the problems that you see is that on many exchange many exchanges listed inexpensive and there is no liquidity at all and one of the things i'm curious about is how is the your exchange different because still we are speaking especially if you're speaking about small and medium enterprises these are very small cup issuers and in the eu according to prospects regulation and this is true about switzerland probably as well in order to go to the regulated market you still have to register prospectus and become a public company which may be quite which which is still expensive for smes uh given that the liquidity is limited well on on our side for example the way we in which we solve this problem through decentralization where if you go to decentralized exchange which is not a regulated venue according to the according to the me fit you was therefore not subject to requirement to register and the cost is dramatically lower so this is a benefit of decentralization that is brought and that reduces the cost truly so in your exchange how do you solve the problem of the cost of the liquidity and don't you think that you will be disrupted by decentralized exchanges for securities well first thing we have a fund that is called ethical capital sorry we have an institutional investor i think a capital that has created a fund that is hetika chain that is uh in luxembourg and the mission and scope of etika chain is to provide liquidity to the secondary market on edsx the second thing is that we are not really different from a decentralized exchange because you the tokens that we create can be traded anywhere so let's say that on edsx they will have a window okay they will have a space where they can propose and provide their their offer to the rest of the market but the token is freely exchangeable anywhere can also be exchanged outside of the platform so i think that we are at the centralized exchange okay we are not a protocol like uni swap so but we are at the centralized exchange all that all the wallets are called the wallet so they are outside of the platform your own wallet and you can trade and exchange the token anywhere as you want in in any way if you want to transfer it to somebody else without going through the platform you can do you are absolutely free but the platform clearly is helping you to do this type of exchange because you have a clear place where you can do kyc where you can exchange the token also in fiat where you have a secure place with the clearing and settlement uh i mean i think that we can put together both of the advantages of the decentralized exchange with the with some of the advantages of a centralized exchange okay and as i said our strategy is to provide the platform for free so if you want to list your token it's it's almost free cool how do you survive if the listing is almost free simply on transaction fees now well on success fees on the primary market so also if you want to do a campaign on the primary market the platform is free and we we survive with the success fees clearly we will get a percentage of what is raised by the company and and that's all it will be free for the investors it will be free for the issuer and and that's all and in case we can also provide advisory services for example for writing the prospectus and any other advisor financial advisory services and legal advisory services so for example as you said we can write prospectus for a european offering we can write prospectus for swiss offering and and and so on we also have some partners in us so in case that we would be able also to do a regulation to apply for a regulation in u.s even if we are speaking right now with a project in us but we have not made any any offer any public offering in u.s yet

but what do you think about blockchains and technical infrastructure for operating with securities i mean currently we have different technologies ethereum else hyper ledger corda the three the dry air or many others and how businesses can choose the right way it is need to be centralized to decentralized from your perspective well i like i mean right now the platform is on ethereum edsx is is built on ethereum the problem with ethereum is about the transaction cost i want i want to create something that is free and and then uh the investor will have to spend it could be 50 euro for uh for for transferring maybe 200 euro tokens it makes no sense so i'm really thinking to change the blockchain i was thinking at eos because clearly would be free and because it's very fast and this is helping us because we use some particular smart contract that needed to be faster and to check immediately what is happening on on the blockchain so i mean i'm i'm pretty convinced that we will ears everybody is moving to some other blockchains and leaving ethereum yeah by the way our technical infrastructure for primary issue of digital security is based on ethereum as well do not solve their transaction yeah transaction costs and when the ethereum will be for example five or eight thousand dollars the transaction cost for uh working with smart contracts yeah for weight listing uh could be thirty fifty one hundred dollars yeah absolutely yeah but from from from other side uh it is adopted from the regulation perspective ethereum infrastructure and it is enough applications to operate i mean metamasks and many others to store to control your wallet and to operate this ecosystem that you're building yeah this is true but as i said i think that i really wanted to make it easy for everyone to use easy and low cost for everyone to use the platform so we really need something that is much cheaper than ethereum and also we really need something that is not uh let's say becoming as eterium in in a couple of years because otherwise we will have to change again with the difference that now we have just uh some bunch of tokens to substitute and if we we start to have a lot of projects that clearly it won't be the the best to change thousands of tokens in wallets of of of people and what do you think what is the target audience of investors who can invest in sto what is the profile of investors or how do you see this market so who will be investing sto and who are investing currently for example in your project or in your client project well i have uh i would say people that are interested i mean i have it is crypto or it is traditional yeah i i would say both i would say both now we have closer uh over future we have almost closed over future they have raised 500k 300 are on the platform and 200 are committed by an institutional investor that is interested in well first he liked the company because our future is is not like a project he's a real company with more than one million in revenues with some important clients so he liked the company first and i think this is the best thing that you can do it doesn't matter if we are speaking about a token or about a paper share the first thing that you want to do is to understand if you like or not that asset okay and and then clearly was also curious about this this new world i guess that they are investing also for testing this procedure and maybe for doing it in future for for themselves in general i would say that the people that are investing in in this type of tokens can be traditional people that were investing in in icos um and look for example a bit bond okay and people are people that coming that are coming from the crowdfunding world i think they are the most close type of traditional investor that might invest in stose and also people that in general are curious about technology about fintech and maybe they they wanted to do like a kind of a of a test they they wanted they are looking for let's say alternative returns okay because this is also helping to diversify portfolio i'm thinking for example now we are speaking with the um an art project that would like tokenize uh art pieces uh in in the form of securities so you are buying a piece of an art piece and uh and clearly in that case uh we are speaking about also some really good painters and in that case it would be really an investment that could help you to diversify your portfolio and i think this particular historical moment diversification and alternative investment what they are called the correlated asset it's an asset class that every also institutional investor is is looking for so if we are able to bring that type of assets on the blockchain world this will be a kind of a win-win both for that asset class because it will get more liquidity and both for us as as industry because it will help to attract a lot of interest also from traditional investors traditional investors and the assets they want to invest in but kind of deceives like they're like two lovers and we bring them together using blockchain removing intermediaries mauro thank you for the wonderful interview there is so much more to discuss but unfortunately the time is up so thank you for your applies for the expertise and research you brought to us and and hope we will be able to see you on our channel on collaborations more thank you very much it was my pleasure and to all of our viewers thank you for being with us today do not forget to like this video share it with somebody who can also benefit from it and subscribe to the channel to see other fantastic interviews we had with people from stock exchanges such as london stock exchange nasdaq and inax and generally cool professionals in the crypto space stay tuned and see you in the next episode

2021-05-14 17:32

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