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Dave Hendricks, CEO & cofounder of Vertalo – Interview Series

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Dave Hendricks, CEO & cofounder of Vertalo - Interview Series

Dave Hendricks is the CEO and cofounder of Vertalo which is a stakeholder Registry and Cap Table platform for SEC Compliant Security Token offerings. They connect broker-dealers, issuers, exchanges and ATS’s.

AT:  Could you share with us what Vertalo does?

DH: Vertalo seeks to help more issuers, tokenize more assets, at lower cost and lower risk.  And at less expense.  Vertalo’s core offering is a crypto cap table, in other words a ledger of token holders.  ICOs didn’t care about cap tables, but equity investors do.

Investors can be added to a Vertalo-built cap table before, during, or after a fundraise or ICO.  Vertalo’s wallet registration process is the connective process between issuers – who want to know who owns how much of their company – and investors, who want to know how much they own of the company.  Vertalo is glue for the overly confusing STO ecosystem.  Vertalo helps issuers manage their investor community and Vertalo helps investor manage their holdings – all via a simple graphical interface that is way better than etherscan.

 

AT:  Is this on a public or private blockchain? If both, could you elaborate what information is on the public versus the private?

DH: Most Security Token issuance development is Ethereum-based, and most smart contracts are written in Solidity, so Vertalo started its work in alignment with the community, but Vertalo was designed to be chain-agnostic.  If an issuer wants to write their token using Hyperledger, or Hashgraph, or NEO, or Stellar they can do that and Vertalo’s cap table and investor registration functions will operate the same way. We see benefits of permission-less and permissioned Blockchains for Security Tokens.

 

AT:  Do you perform the KYC/AML accreditation yourselves?

DH: Vertalo partners with major Accredited/Qualified and KYC/AML Services, since there are more than 200 different jurisdictions and we want to focus on what we do best.  We are developing a subscription service with several of these vendors to simplify secondary trading (where KYC-AML is so important).  More on that later in Q1.

 

AT:  Could you describe how the platform enables issuers to manage the investor community?

DH: Vertalo’s Cap Table combines the features of a traditional ledger with network connectivity.  The Vertalo cap table represents a relationship between two parties, determined by consensus.  Issuers use the vertalo registration smart contract process to invite and add an investor to the cap table.  That registration process creates a ledger which is more than a list of holders, it facilitates communications between the issuer and investor so that tokens, dividends, and documents can be transferred between the parties.

 

AT:  There are many non-blockchain options to manage a cap table. What are the benefits of using a blockchain, and more specifically Vertalo?

DH: Token trading is real-time.  If someone trades a security token, the investor ledger by law must be updated with the new address/holder of the token.  So a blockchain-based cap table ledger operates at the speed of blockchain, faster than paper and with better record-keeping.  Without a blockchain-based ledger for a blockchain based security, who would manage the legal requirements for maintaining a list of shareholders?  This was not a concern for ICO issuers, so they didnt create this tech.  ICOs just cared about exchanges.  STO issuers need to maintain compliance with securities law.

Developing blockchain-based cap tables is also the first and fundamental step towards greater liquidity for private assets, because cap tables are where the investor ownership rights are best enforced.  The reason that issuers and investors are tokenizing their offerings is to ultimately achieve greater liquidity by enabling their shareholders to sell on exchanges and ATSs subject to the issuers rules.

No traditional private equity cap table platforms connect to exchanges, and even obtaining a stock certificate from a traditional cap table platform is a days-long effort.  And when you receive a paper share from a traditional cap table platform there is no where to sell it, since you have to get permission from the board, and then there are few marketplaces for anything other than Uber or Lyft, etc..

Tokenized offerings are issued on the predication that the tokens/shares will be ‘tradeable/’ after a restriction is lifted.  By connecting the Vertalo blockchain-based cap table to exchanges and ATSs, we enable token holders to achieve the liquidity that is main differentiating feature of a security token offering, while complying with basic securities law.

 

AT:  How does the Vertalo registry reduce costs for Broker dealers?

DH: Broker-Dealers have fiduciary requirements to check KYC and AML.  Vertalo’s investor registry function, which connects KYC verified email addresses to blockchain wallets, was designed in conjunction with major broker dealers to help them comply with basic AML requirements.  Vertalo built its platform to be whitelabeled by broker-dealers so they don’t have to build or manage this process themselves.

 

AT:  You offer investors who register with Vertalo the opportunity to instantaneously share their investor profile with broker-dealers and issuers. How do investors sign up for this?

DH: This feature will be built out later this year.  Our focus is on the Picks and Shovels for our business clients.

 

AT:   One of the tools that you offer is the verification of wallet ownership? How is this performed?

DH: The Vertalo Wallet Registration process uses a smart contract to run a process that is similar to the method by which a bank verifies your ownership of an account, by depositing random amounts into an account. We send an email to the registered account holder, with a link to kick off a process. If you can log into that account and verify the amounts, that is the beginning of proven ownership.  It’s actually a little more complicated than that, but to the proper owner of a wallet, it is a very smooth process.  We use a special utility token (no, you can’t trade or transfer it) and smart contracts for this process.

 

AT:   Are there any notable projects that are currently using the Vertalo platform?

DH: We were our first client.  I think that Vertalo issued the third or fourth real, US compliant Security token in March 2018.  That is why we built this.  We are working with PrimeTrust, Issuance, Entoro, and we will be announcing some Major real estate, fund, and debt issuances that are launching in February and March. By the end of Q1 there should be more than 10 projects or Broker-Dealers using the tech to simplify their token issuances, investor relations and cap table management.

 

AT:   Is there anything else that you would like to share about Vertalo?

DH: Issuers should create a great product, find a great law firm, find a great broker-dealer and call Vertalo.  We can stitch all the parts together for you and also help you save a tremendous amount on your overall tokenization costs.

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Antoine Tardif is the CEO of BlockVentures.com, and has invested in over 50 blockchain projects. He is also the founder of Bitcoinlightning.com a news website focusing on the lightning network, and a founding partner of Securities.io

Interviews

Myles Milston, CEO of Globacap – Interview Series

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Myles Milston, CEO of Globacap - Interview Series

Myles Milston, is the CEO & Founder of Globacap, an end-to-end solution for Capital Raising, Asset Administration, and Custody of Digital Securities.

 

You were previously CTO of Colossus Bets, which is a successful sports betting business operating out of the UK. Were you initially introduced to bitcoin and crypto in this role?

Colossus doesn’t use bitcoin or crypto in its business, however I did see bitcoin gaining traction in the wider gaming industry, and I started to explore blockchain more after seeing this. Prior to Colossus though – I did almost buy a load bitcoin when it was at $300, unfortunately I didn’t understand enough about blockchain at the time and decided against it at the last minute. I’m sure everyone has their ‘almost bought bitcoin’ story!

 

What made you shift from CTO of a successful sports betting business, to founding Globacap?

Prior to Colossus, my background was capital markets: starting off as a programmer in a bank, then quantitative equity research analyst, derivative structuring and sales, and later algorithmic commodities trading. So when everyone doing an ICO in 2017 was trying to avoid their token being called a financial security, it made me think about structuring a real financial security as a token.

The advantages were apparent: (i) instant transferability of private assets, and (ii) simple administration (e.g. corporate actions, stock splits, buybacks, etc). It was so compelling that I had to start Globacap. The founder of Colossus was one of our first investors.

 

Could you share with us what exactly Globacap does?

We’re an automated capital markets platform. Regulated by the FCA with passporting across Europe.

Our automated platform does:

(1) Securities Issuance – all of the administration throughout a capital raise, including the structuring, approving, and distribution of offering documents while ensuring regulatory compliance across 41 countries (and counting), and issuing the tokenized debt or equity securities to investors.

(2) Securities Administration – simple, one-click cap-table management, including all corporate actions (stock splits, buybacks, etc), restructuring, proxy voting, and paying out distributions (dividends or coupons). The difference between us and other cap table management platforms is blockchain. When a transfer of ownership takes place, it is reflected in the cap table in real-time, slicing off a layer of administration overhead that the non-blockchain platforms can’t escape from.

(3) Digital Custody – we are an authorised custodian for blockchain securities and cash.

We are also the only company to date that has created tokenized equity as a direct shareholding, without using a nominee structure. In other equity tokenizations globally, a nominee was required to act as the legal owner of the underlying shares. However, we created a structure that works around this within the existing bounds of regulation, allowing the token holder to also be the legal holder of the underlying shares.

 

In June 2019, Globacap successfully exited from the FCA’s regulatory Sandbox Cohort 4, becoming the UK’s first fully regulated digital security offering and administration platform. Can you share with us the experience of being in Cohort4?

Great experience. The FCA successfully pioneered the sandbox concept amongst regulators globally, we know of several other regulators that are now trying to copy the FCA’s success. We had a case officer assigned to us on day one, he was available throughout the process at any time and was always extremely helpful, even replying to emails on the weekend (what government organisation does that?). The Sandbox gave us the opportunity to trial our new technology and processes in a controlled regulatory environment, which ultimately led to receiving full authorisation in a quicker time frame than might have been possible without the Sandbox.

 

Two months ago Globacap announced a strategic partnership with Archax which offers secondary market trading. Could you elaborate on the benefits of this partnership?

Globacap is focused on private investments. However, some of those securities issuers may seek full public secondary trading, and if they do then Archax will be ready to list and facilitate trading in those securities. They have great institutional support, and core technology supplied by Aquis, which is a leading European equities exchange and provider of matching engine technology. We are a partner in order to use Archax as a listing and trading venue.

 

Globacap was recently recognized as of the UK’s most disruptive companies in the Disruption50 index, which highlights the UK’s most disruptive tech companies. Did this achievement surprise you? Has it helped to bring in additional clients?

It did surprise me as we hadn’t heard of the Disruption50 index prior to being nominated! We’re thrilled and humbled to be included in this index, amongst other highly disruptive tech companies. We believe that we are disrupting the traditional securities market, and we will increasingly do so in force as we continue to scale our business. The recognition did indeed send additional clients in our direction.

 

Investors can currently invest in tokenized private assets from around the world on your platform. Do you accept USA investors? Are there any restrictions on international investments?

We do accept US accredited investors, depending on the specific offering. Around the world, each country has its own unique set of financial promotion rules. Even within the EU there are small differences between some of the member states. Our platform streamlines this for an issuer – automatically showing or hiding certain investment opportunities to specific investors depending on their location and type, ensuring local regulatory compliance at all times.

 

Globap is raising £3 million. Could you tell us more about this raise and what the funds will be used for?

We’re in the late stage of completing a funding round at present. A large portion of funds from this round will be used for marketing and scaling the platform. To date we haven’t done extensive marketing, instead we have been focused on building out the product and gaining regulatory authorisation. Having done that, and having completed several transactions on the live platform, we are now starting to market the platform and scale.

 

Where do you see Globacap being positioned in 5 years?

We are focused on private assets in the small and mid-cap segment. In other words: too-big-for-crowdfunding through to listed on a small/mid-cap exchange such as the LSE AIM market. We believe the market is over-priced and under-served for that demographic. Our tech gives companies a better experience, an easier process, full regulatory compliance, lower costs, and empowers the larger end of that range to stay private for longer – giving investors access to secondary market liquidity while avoiding the overheads associated with becoming a public entity.

 

Is there anything else that you would like to share with our audience?

This is an exciting phase in the evolution of the securities industry. It’s now possible for private assets to trade more freely, for paper to truly disappear in securities administration, and for billions of dollars worth of private assets to be securitized cost effectively – potentially unlocking a new wave of economic growth.

To learn more visit our Globacap business listing or visit the Globacap website.

 

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Claus Skaaning, CEO of Digishares – Interview Series

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Claus Skaaning, CEO of Digishares - Interview Series

Claus Skaaning is the CEO of Digishares, a software solution that is used through the issuance process and the ongoing management of the tokenized shares.

 

You were previously the COO of Venturefusion – a crypto-security ecosystem for startup creation and growth. How did you transition to becoming CEO of DigiShares?

The vision of VentureFusion is to create a decentralized incubator platform for startups. It will work as a collaboration and bootstrapping platform where founders can tokenize the equity in their startups (even if no legal unit exists) and use the equity tokens as a means of payment for anyone that contributes to the startup. Founders can then make a plan for how much equity they want to spend to get various parts of their startup developed, making individual equity token allocation plans for short-term contributors such as freelancers and long-term contributors, such as co-founders and permanent team members, under vesting conditions. VentureFusion is still an ongoing active project but it primarily managed by my co-founder Yuriy Zubarovskiy these days.

VentureFusion prompted us to look at how to tokenize equity and in early 2018 this was a relatively new concept. We went to some of the first conferences in Europe on the concept and decided to create a new project, GoSecurity, which would focus on tokenization of securities. This project later re-branded to DigiShares and I became the CEO. It is now my primary focus to manage and develop DigiShares.

 

Could you elaborate on the services that DigiShares offers?

DigiShares is one of the leading providers of white-label infrastructure for securities tokenization issuance and management in Europe. Our first product was a single-project platform for issuance and longer-term management of tokenized securities, and we are just releasing a major upgrade that can handle multiple projects with a lot more functionality. We are one of few companies in Europe – and the only one in the Nordics that can provide an operational platform of this type.

Our platform can handle the complete workflow of an STO (security token offering), from investor registration, verification (KYC/AML), approval, to the actual purchase of tokens with fiat or crypto, signing of contracts (e-signatures), token holder cap table overview, communication with token holders, voting (shareholders’ meetings), payment of dividends, etc.

For tokenized equity, we offer a unique function where we allow a proportion of shareholders to be non-tokenized, i.e., as digitized as possible but not tokenized, so with no tokens issued. This is by customer request as some of our clients have voiced concerns that they would like to approach both crypto and non-crypto investors – and non-crypto investors may prefer a non-tokenized registration. Another unique function that we are working on is a mini-exchange, an internal OTC-like trading platform for the token holders within a single project.

Overall, we provide solutions to enable anyone to conduct their own STO or offer a number of simultaneous STOs. We primarily work in white label partnerships where clients offer the solution under their own brand name.

In addition to providing the software, we also provide access to the security token ecosystem. We have a big network of partners for legal, investments, custody, KYC/AML, etc. Some of these are integrated into the platform.

 

Digishares is one of the few companies in the industry that is headquartered in Denmark. Do Danish securities regulations support the digitization of shares?

While we are based in Denmark and concerned about local securities regulations, it is important to state upfront that we are jurisdiction agnostic and can operate from any jurisdiction. Indeed we have ongoing projects in both Europe and the US.

Locally, we are working with a Danish lawyer and the Danish regulators to establish whether shares can be represented as tokens. So far, our lawyer has established that tokenized shares are supported by Danish legislation but some details need confirmation from the regulator and the Ministry of Industry, Business and Financial Affairs. DigiShares has applied to participate in the sandbox of the Danish regulator to further analyze how tokenized securities can co-exist with Danish law.

Some countries do not support the tokenization of shares since they require either paper-based stock certificates or notarized trading. Fortunately the Danish securities legislation supports digitization of shares and has neither of those requirements.

The ability to tokenize shares (and other types of securities) is of course important for DigiShares and for Danish companies, but it will have importance outside of Denmark as well, since securities that are issued in Denmark can be passported to any EU member state. We believe Denmark could be a good STO destination for the above reasons – but also because we believe other typical STO costs can be significantly reduced here (incorporation, legal costs, etc.). As an added benefit, Denmark is a highly trusted financial jurisdiction with one of the lowest levels of corruption in the world.

 

How is the security token ecosystem and community in Denmark?

It is as of yet quite small but we are doing our best to develop it with regular conferences in Copenhagen. We’re organizing an annual conference focused on tokenized securities (Fintech Disruption Summit – http://www.fintechdisrupt.dk/en/home/) and regular events on different types of tokenization, next time on September 12 with a focus on real estate tokenization (http://www.digishares.io/events).

We are presently the only Nordic company with an STO issuance platform and we are also the first to conduct an STO. However, we expect others to join us soon.

 

You’re currently in the process of raising funds for your own STO. How much are you raising, and what benefits will investors receive?

We are raising just below EUR 1 M. This relatively low limit was set to enable us to approach retail investors and market the STO publicly across Europe. In addition, we’ve filed a form D in the US so we can approach US accredited investors. European regulations is more flexible than the US and enables us to make a more “democratic” STO since we are allowed to target retail investors in almost all European countries.

We have designed our STO so investors receive common stock in the company with exactly the same governance rights as founders, similar to a standard IPO. Many STOs design “handicapped” tokens with quite limited governance rights for investors but we didn’t want to do that. In general, we believe it will be a problem for the STO industry if issuers keep creating tokens with very limited investor governance rights.

 

What are the plans for the raised funds?

The raised funds will be used to speed up our development & marketing efforts. In addition, there are certain licenses we would like to obtain in order to extend the scope of our business. In general, we are seeing more leads & opportunities right now than we have the resources to exploit.

 

You are arranging an event on tokenized real estate in Copenhagen on September 12. Do you see real estate as being the most promising asset class to be tokenized?

Yes, if you look at statistics and speak to industry experts, there is consensus that real estate is the biggest homogeneous chunk of the STO market right now. So currently, we are directing our marketing and development efforts in this direction. Our real estate tokenization event will be attended by around 100 real estate professionals from the Nordics. 90% of them are non-blockchain people that we hope to motivate and inspire to adopt blockchain. In general, we don’t go to many blockchain industry events but rather spend our efforts on the traditional financial & real estate industries.

We hope to announce a real estate STO quite soon, and we are also involved in a really exciting project about creating Eurasian security token exchanges.

 

What other asset classes will you be focusing on?

Through partners we are also looking at debt and bonds, but we are primarily focused on equity at this stage. The platform can handle any type of security.

 

Where do you see the industry being in 5 years and the role of DigiShares in this industry?

We currently see two major trends; one with startups attempting to create a new parallel financial infrastructure and another with incumbents adopting blockchain and approaching the new opportunities in their own speed. These two trends will eventually merge and a new financial infrastructure will emerge where some old financial institutions will still exist and some of the new players will be established as leaders. We will see just one or two main security token protocol standards. The consumer (investors) are the real winners with much decreased fees for trading, decreased interest rates for debt, increased interest rates for deposits, faster and more efficient financial operations, etc., etc.

To learn more visit our Digishares Business Listing page or the Digishares website.

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Bastiaan Don, Managing Director of Token Factory – Interview Series

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Bastiaan Don, Managing Director of Token Factory - Interview Series

Bastiaan Don is the Founder & Managing Director of both Token Factory and blockimmo.

How did you first get involved in the blockchain space?

Early 2011 I read about Bitcoin online at a bulletin board with lots of active and interesting members. Pretty soon I was more interested in the underlying technology and started to read on a daily basis about it at various sources (reddit, bitcointalk, etc.). After Ethereum was introduced in 2013, followed by the pre-sale in 2014 and the launch in 2015, I followed the progress and possibilities closely. After the ICO madness, I decided to become active and combine 2 worlds I understand quite well being Real Estate and Blockchain, with a serious approach towards product development and regulation.

 

You’re currently managing 3 projects, Blockimmo which specializes in tokenizing real estate, STX Swiss which is a decentralized security token exchange, and TokenFactory which is a technology provider for asset digitization. Can you let us know which came first?

Coming from the Real Estate industry I’m rather familiar with the challenges around this illiquid investment class and the high entry barriers. Initially, the company I founded was called “blockimmo”, with the vision to enable anyone to invest in real estate (access) and, in addition, turning this asset into something more liquid. With our 2 fantastic developers (Michael Dietz / Jesse Ngatai) we developed our (primary issuance) platform on the public Ethereum Blockchain, without the introduction of any proprietary standards or useless in-between (utility) tokens. In addition, we conducted several (successful) rulings with the financial regulators of Switzerland and Liechtenstein related to the tokenization of assets. In order to live up to our second promise (liquidity for the secondary market) we initiated STX.SWISS to demonstrate the possibilities of a trustless, peer-to-peer (decentralized) exchange without an operator, for tokenized assets like real estate. Summarized, we built a tokenization solution for both the primary and secondary market. In order to broaden our potential clients and partners we decided to rename the company to Token Factory Switzerland Ltd. The platform (brand) “blockimmo” will naturally still be used for real estate tokenization.

 

Blockimmo tokenizes real estate, currently all the properties are in Switzerland. Will we be seeing more international real estate options?

Yes, definitely. In fact, the Swiss Real Estate market is, thanks to its attractiveness amongst established players (investors) quite tricky to get started. Currently, we have several projects (both existing properties as well as property development projects) in the pipeline which are located outside of Switzerland and will be announced in due course.

 

How do you source and select the real estate portfolio that is offered?

This is a good question, which applies to any real estate investment platform (irrespective if you use blockchain technology). Due to my experience in the real estate market (12+ years) and of course due to the fact that we are one of the few platforms that actually already have tokenized real estate with public available smart-contracts for the security tokens issued and traceable transactions of the investments on the public Ethereum blockchain – we gained a lot of attention and receive a lot of requests for future tokenization cases.

 

Is STX Swiss currently licensed, if not are you in the process of acquiring a license? What jurisdiction will this be licensed in?

STX.SWISS is a decentralized exchange proofing the concept how security tokens can be exchanged on a public Blockchain (Ethereum) without the involvement of any controlling party (operator). This means that no centralized party controls any important element that require a license, for example the wallet (only decentralized access is possible) but also more important elements like the order-book (there is none) or the liquidity providers (only possible through a decentralized process). More information can be found in our blog posts (high-level / more tech focused). We are however in progress of establishing a regulated exchange, with centralized elements (in order to control certain elements which are required by the regulator to be controlled). We do this together with a licensed institute based in Switzerland and hope to announce further details in the near future.

 

What are the requirements to list a security token on STX Swiss?

We require that the security token is under control of the asset owner (issuer) at any point in time. Simple put, this is what makes our tokenization solution unique, as with blockimmo (TokenFactory) we introduce a smart-contract “whitelist” which is attached to the default ERC20 token smart-contract. Inside the “whitelist” there are the address of identified investors (meaning they went through a compliant KYC/AML on-boarding process). Although we call it a “whitelist” it’s actually a mapping mechanism, so with our solution you don’t lose (transaction) speed no matter if there are one thousand or one million address whitelisted.

 

Token Factory offers asset digitization services. Could you elaborate on what the different types of services are?

Yes, currently we offer an important puzzle piece for tokenization; being the technical solution that has been multiple times audited and executed before and is available for any other asset. Another important aspect is that this solution is based on the public Ethereum blockchain, open standards and thus is “future proof” for the upcoming Decentralized Finance ecosystem. In addition, we do not make the asset owner (issuer) depended on us, they are in full control and ownership of the smartcontracts representing the tokenized asset. Of course, based on our experiences, we offer consultancy services mainly around the topic of tokenization and financial market requirements and challenges.

 

What are the white label services that are offered by Token Factory?

There are plenty of niche markets with strong players where tokenization as such brings benefits to the existing solutions. We are open to provide our technical solution as a complete white label service (Software as a Service / SaaS) for those players and are currently actively working on launching such in the near future.

 

You offer investor management; can you elaborate on what these management services are?

A key puzzle piece related to security tokens is, besides our on-chain whitelist, the way how you onboard the investors and how you manage them actively to stay regulatory compliant. We have built a complete paperless on-boarding solution, integrated with strong KYC and AML providers and offer this to our clients who seek a working technical solution.

 

Is there anything else that you would like to share with our audience?

Yes, we’re currently very close to partner with a strong, regulatory compliant partner and will then be able to offer a full “one-stop shop” for tokenization. So not only a strong technical solution, but also provide a solution for the legal, regulatory, compliance, distribution and marketing/PR elements. All from one provider with know-how, quality and speed, really understanding true value proposition (liquidity provider) for both the issuer and investor. We’re still at the beginning of the era of tokenization and there are exciting times ahead of us!

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