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.
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.
Canadian Companies Involved in Digital Securities
July 1st represents Canada Day in the Great White North. As such, we thought that a quick look at a few Canadian companies involved in digital securities would be appropriate today.
To date, Canada has been one of the leading countries surrounding anything blockchain related. We have seen government adoption, the creation of Ethereum, the first Bitcoin fund listed on a major exchange, and rumblings of a potential central bank digital currency. The following are a few examples of Canadian based endeavours.
Bank of Canada
The Bank of Canada is one of the few of its kind to release official statements regarding the release of a CBDC. It has been established that, while there are no immediate plans for the release of a CBDC, the bank fully intends on being prepared for this, eventuality. This was first made apparent through job postings, such as ‘CBDC Project Manager’, but later through direct commentary.
In recent weeks, the Bank of Canada has gone so far as releasing an ‘analytical note’, which discusses the privacy needs of a potential CBDC. While they note that the goal is to attain privacy, akin to what cash affords its users, currently technology, such as zero-knowledge proofs, are not appropriate, and that both maturation and national-scale implementation first need to occur.
While it may be years before a Canadian CBDC is actually launched, the Bank of Canada is at least making sure the nation is ready for that day.
Operating out of Toronto, Blockstation is a young company, rife with potential. The team behind Blockstation has developed a suite of services which leverage blockchain technology. These services were built to allow “…the traditional financial ecosystem to get in on digital assets, including Bitcoin, Ether, and Tokenized IPOs (Security Token Offerings, or STOs)”
The hard work that went in to establishing these capabilities has not gone unnoticed, as Blockstation has successfully partnered with multiple stock exchanges. One such pilot will soon see the launch of at least 4 tokenized IPOs on the Jamaica Stock Exchange.
To learn about Blockstation in more detail, make sure to peruse our exclusive interview with CEO, Marko Hafez.
This Canadian outfit has recently received the greenlight by the regulatory body ‘Ontario Securities Commission (OSC)’, for the launch of a secondary marketplace.
Dubbed FreedomX, this anticipated marketplace will be one of the first of its kind in Canada. It will offer a home for digital securities to actively be traded, providing higher levels of asset liquidity in the process.
Beyond just operating a regulated secondary marketplace, TokenGX is also working to establish, and deploy, a stablecoin. This will be utilized as the primary means of settlement on FreedomX, and would be tethered to the Canadian Dollar.
The first release by Canada Stablecorp is known as QCAD. This is a CAD backed digital asset, which was structured as such for 3 main reasons.
- Provide its users with easy access to a digital asset, which can provide a reprieve from market volatility.
- Give Canadians a ‘home-grown’ variant; A trait which should appeal to Canadian investors looking to support Canadian companies.
- Leveraging the strength, and stability, of CAD. The Canadian dollar is typically accepted on a world stage, and benefits from a nation which typically remains removed from divisive world events.
While QCAD has not established itself to the extent shown by Tether, GUSD, and USDC, the potential is there.
Onwards and Upwards
Unfortunately, not all of the promising companies coming out of Canada could be discussed here today. Those discussed represent a fraction of the activity taking place in the great white north.
If one thing is clear from this activity, it is that Canada has been/is playing an important role in the forwarding of blockchain and the digital securities sector.
Happy Canada Day!
Monaco Chooses Tokeny as Sole Provider for Tokenization Services
While a tiny nation, endorsement and usage from the Government of Monaco is a huge step for Tokeny; It validates the work they have been doing, and the potential of what they are yet to achieve.
As it stands, the agreement between Monaco and Tokeny exists as a memorandum of understanding (MOU). While not a binding contract, the MOU essentially means that formal documents have been signed by each of the parties, indicating their intent to work together.
Upon announcing this new development, representatives from each, Tokeny and the Principality of Monaco, took the time to comment.
Luc Falempin, CEO of Tokeny Solutions, stated,
“The lack of high quality tokenized assets has been a stumbling block in the tokenization industry. With the mandatory label, projects selected by the Principality of Monaco will be easily recognized by investors as serious and quality investment opportunities. Then, the rights of investors will be guaranteed by their onchain identity. For the issuer, AML and KYC will be automatically enforced in any transfer.”
Frédéric Genta, Delegate for Digital of affairs Chief Digital Officer of the Principality of Monaco, stated,
“Monaco is moving towards its ambition to become a funding nation for progress with our STO framework. Two key milestones were achieved; a dedicated STO law was voted by the National Council and we are welcoming Tokeny to the Principality to operate our STOs.”
More than Promise
News of this newly established MOU goes beyond just promise, though. Tokeny has announced that they already have companies lined up, waiting to capitalize on their services and friendly regulations.
The first example of which, is IceBreaker. This production company hopes to leverage the benefits of hosting an STO, in order to fund and monetize content such as films and exhibits. IceBreaker is spearheaded by, Acadamy award winning filmmaker, Luc Jacquet.
He commented on plans at IceBreaker, stating,
“IceBreaker intends to leverage blockchain technology to facilitate the financing of meaningful content production while retaining all associated rights enabling new monetization opportunities via films, exhibitions, etc. March of the Penguins and the subsequent Antarctica exhibition have demonstrated that the model can be a profitable one making it appealing to investors while preserving the freedom to express my creativity and promoting the virtuous value of the projects I carry”.
With a population of roughly 40,000, and a geographical footprint of just <1sq mile, Monaco holds the title of the second smallest country on Earth. Despite this, it remains one of the wealthiest nations, as well, with over 30% of the population being millionaires.
Founded in 2017, Tokeny is based out of Luxembourg. Above all, the team at Tokeny has been working to develop, and spur adoption of, a suite of services tailored towards the digital securities sector.
CEO, Luc Falempin, currently oversees company operations.
Speaking with Luc
If interested in learning more about Tokeny, and what the company has to offer, make sure to peruse our past interview with CEO, Luc Falempin. In this discussion Luc Falempin touches on his personal discovery of blockchain, and what makes Tokeny special.
Real Estate Increasingly Popular within Digital Securities – Vertalo and Tokensoft each Launch New Platforms
On The Hunt
Blockchain based endeavours, such as cryptocurrencies, are only now beginning to grasp where they can thrive. It has taken a decade, but there are finally a crop of ‘killer applications’ being developed. This is most recently evident through the growth of decentralized finance (DeFi).
Digital securities are a step behind cryptocurrencies, and are still in the searching phase. With the sector first being distinguished only a few years ago, it is still in its infancy. In time, will it be tokenized art that catches on? Or maybe it will be supercars?
Multiple companies believe that they have determined the best use case for digital securities, and their accompanying services – Real Estate.
There are a variety of reasons which make real estate the perfect asset class to undergo restructuring with digital securities.
- Traditionally, real estate suffers from low-liquidity
- High fees and various ‘middlemen’
- Restrictive access
While each of these issues may not stand out as being blatantly detrimental, they most certainly hold back the potential of an industry, ripe for change.
Through the use and implementation of digital securities, each of these points can be addressed. In doing so, opportunities will arise where there were none before; All the while, giving more people access to a newly liquid asset class.
To learn more about why digital securities and real estate are a perfect fit, check out Vertalo’s FAQ on the subject HERE.
In the past week, we have seen two big announcements surrounding digital securities and real estate. These have come from a pair of U.S. based companies, each quickly becoming leaders within their space – Austin based, Vertalo, and San Francisco based, TokenSoft.
Vertalo Real Estate
An influx of digital securities into real estate has shown enough promise, that Vertalo has just formed/launched an entire new branch of their company named Vertalo Real Estate (VRE).
In order to hit the ground running, Vertalo hired the full team at Advantage Blockchain. With this experienced team spearheading the new endeavour, there will, surely, be new and positive developments announced in the coming months.
Among the talent coming on board from Advantage is RECM President, Gary Brandeis. In this new position Brandeis will operate as the President of Vertalo Real Estate.
This new branch is described as being “focused on transforming ownership structures for the commercial real estate market…throughout the United States.”
While initial focus may remain on commercial opportunities, the end goal is to expand into real estate opportunities of all sizes.
“…the hiring of the Advantage Blockchain team reflects the dramatic increase in interest from commercial real estate owners for increased efficiency and secondary liquidity. Vertalo has always considered commercial real estate – and eventually residential portfolios of all sizes – to be an ideal target market for digital transformation.”
TokenSoft Real Estate
Much like Vertalo, the merits of digital securities merging with real estate has not escaped the attention of TokenSoft. This young company has just announced the launch of a ‘private label marketplace for real estate’.
The purpose of this new platform is a simple, but lofty, goal – enable secondary sales of real estate based private equity. Beyond secondary sales, Tokensoft offers a full suite of services made possible through partnerships with companies, such as Signature Bank and Inveniam Capital Partners
“Real estate investments like these are traditionally illiquid for several years. Leveraging a combination of regulatory automation by use of the blockchain, we’ve been able to bring a much needed liquidity solution to market.”
In Other News
To learn more about why such importance is placed on liquidity, make sure to peruse Borys Pikalov’s thoughts in the following article.