Investors will soon be able to gain exposure to a new type of asset through an upcoming fund – Whiskey/Bourbon backed digital securities.
This endeavour is being undertaken by a trio of companies – Wilderness Trail Distillery, Wave Financial, and Vertalo. While the distillery will provide the product, Vertalo will provide the tech for tokenization, with Wave facilitating, and managing, the fund.
Naturally, as these Whiskey backed tokens function as digital securities, they are subject to strict compliance measures. Among other things, this means that only accredited investors may participate in the sale, and the tokens must be placed in an SEC enforced 1 year moratorium.
While Wave has not released any details surrounding future markets for trading, they indicate that they are in talks with various secondary exchanges. Ideally, investors will see their tokens supported on a variety of exchanges, upon being freed in 1 year.
Wave Kentucky Whiskey 2020 Digital Fund
This opportunity being afforded to investors is being called the ‘Wave Kentucky Whiskey 2020 Digital Fund’.
The following are a few details surrounding the fund.
- Up to 25,000 barrels
- Equates up to 4 million bottles of bourbon
- Worth up to $20 million
- Stored and maintained by the distillery
- Value calculated quarterly
While returns can never be guaranteed, Wave expects for their selected Bourbon to result in their fund providing investors a 20% internal rate of return, over a 6 year span.
Bourbon vs. Whiskey
Terminology surrounding alcoholic beverages is not as simple as one would think. For example,
- Champagne is sparkling wine, but not all sparkling wine is Champagne.
- Cognac is brandy, but not all brandy is Cognac.
- Bourbon is whiskey, but not all whiskey is bourbon.
Confused yet? Much of the subtleties surrounding terminology of these drinks is due to the region in which they are made, or subtle differences in composition.
With regards to Bourbon vs. Whiskey, there are a couple of key traits that distinguish the two from one another. While Bourbon is indeed under the Whiskey family tree, it is a specific subset which can only be designated as such if the following parameters are met:
- Made in the United States
- 51% corn
- Charred Oak barrels
- No Additives
- <160 proof upon distillation
- Barreled at 125 proof
- >80 proof upon bottling
If your ‘Bourbon’ doesn’t meet these parameters, you’re just drinking Whiskey.
As the digital securities sector continues to grow, and more people become aware of what it is, we are seeing an increasing amount of unique asset classes getting attention.
While real estate and debt instruments remain quite popular, we have covered various alternate assets over the past year. The following are just a few examples of this:
Basically, anything that is expected to either keep, or increase in, value over time, is now being given consideration for exposure through monitored funds. Whiskey is simply the latest in this trend.
Wilderness Trail Distillery
Operating out of Danville, Kentucky, Wilderness Trails Distillery offers premium handcrafted spirits. Their processes see their products distilled, aged, and bottled, on site. These products cover a variety of taste buds, for those looking for anything from Bourbon, to Vodka, Rum, Rye, and more.
While the bourbon to be tokenized in this fund is being provided by Wilderness Trail Distillery, the technical side of the process falls on the shoulders of, both, Wave and Vertalo.
As stated, these two companies have a history of working together. In an effort to demonstrate what this working relationship is able to offer potential clients, the pair recently hosted a webinar. In this live demonstration, the pair touched on the following, and more.
- Onboarding cap tables
- Tokenizing Assets
- Choosing token providers
To learn more, and see first-hand just how easy the tokenization process has become, make sure to peruse the following article.
Founded in 2018, Wave Financial maintains operations in Los Angeles, California. Here, they operate as an SEC Registered Investment Advisor (CRD# 305726).
Wave applies traditional investment strategies to digital assets and tokenized forms of real assets. Furthermore, they provide treasury management services and consultation to the digital asset ecosystem, alongside their digital asset fund products.
CEO, Dave Siemer, currently oversees company operations.
Germany – Crypto Custody License Receives Push-back from Banks
Germany’s crypto custody license was supposed to give blockchain-based firms access to the basic banking essentials. Despite this fact, stories continue to emerge of companies finding it very difficult to acquire banking services such as checking accounts. A closer look reveals some of the reasons why the German banking industry is still pushing back against crypto adoption.
Confusion, FUD – Crypto Custody License
One of the main reasons German banks are hesitating to provide crypto-related platforms service boils down to a lack of clarity in the space. Both crypto firms and institutions have uncertainties and concerns related to applying for the crypto custody license. Until Germany’s Federal Financial Supervisory Authority (BaFin) clarifies these issues, such as what type of activities would qualify as crypto custody, banks will still error on the side of caution.
For example, there is a lack of transparency around crypto exchange operations. Banks are curious about how functionalities such as staking and lockup periods could affect the custodial license of an exchange. Currently, the law states that any crypto firm with access to customer’s private keys is a custodian.
Crypto Custody License
Additionally, in March, BaFin released a guidance stating that tokens originating from security token offerings (STOs) can be custodied by a crypto custodian without the use of a depository bank. Shortly thereafter, regulators issued additional guidelines regarding the management, IT, and security requirements set for crypto-related businesses seeking licensing. Importantly, BaFin states it intends to create more rules focused on operational risks in the near future.
Stifling Bank Participation
This “to-be-announced” approach is enough to keep Germany’s major banking institutions on the sidelines for now. In fact, only tech-focused service providers contributed to the space so far. Next-generation banks, such as SolarisBank, continue to slowly propagate the sector. Solarisbank opened a location in Germany in December 2019.
Lack of Banking
In a recent interview, Matthias Winter, partner at Eversheds Sutherland Germany discussed how the lack of banking is a real issue facing the market. He explained that there is “no legal reason why” banks are hesitating to take on crypto clients. Winter described “confusion” as the main hurdle the industry needs to overcome. Additionally, he spoke on how banks function on a risk versus reward premises and opening a checking account for crypto-firm leaves them exposed to future regulatory changes
Notably, Winter also spoke on how the changes could affect the market. If, or rather when, BaFin clarifies these inconsistencies, there will be a gold rush to the market. In essence, banks would need to acquire crypto custody firms to gain access to the technology as fast as possible.
Crypto Storage Deutschland GMBH
To find examples of how this market confusion wreaks havoc on the industry, you need not look any further than Crypto Storage Deutschland GMBH. This firm underwent a real struggle when they decided to open a branch in Germany to take advantage of the new regulations. Executives went to no less than 15 different banks before they were able to get a basic checking account.
Discussing the tribulations, Stijn Vander Straeten, CEO of Crypto Storage AG cited a plethora of difficulties his firm encountered. Straeten described a scenario where you are up against the institutional banking arm. He explained that crypto companies aren’t “making them money by asking for checking accounts“, and as such, they are not a priority by any means.
White-Label Solution for Banks
Notably, Crypto Storage AG recognizes the need to secure digital assets. The firm currently offers a white-label solution for banks that want to offer the services to their clientele without taking on the risks associated with emerging markets.
Germany Moves Forward – Crypto Custody License
German regulators appear to be moving, albeit slowly, closer to the digitization of the markets. Every day that passes signals more growth and development in the country’s blockchain sector. Hopefully, in the coming months, BaFin provides banks with the specifics they need to give firms access to banking essentials. If not, Germany risks falling behind in the global race to tokenization.
Lawsuits Goes After Some of the Largest Names in Crypto
In what appears to be a broad swipe at the crypto sector this week, multiple lawsuits filed with the Southern District of New York claim wrongdoing against a myriad of blockchain-based firms. The class-action lawsuits allege wrongdoing on the part of crypto heavyweights such as Binance, Block.one, BitMEX, KayDex, BProtocol, Status and TRON Foundation, just to name a few.
According to court documents, the latest suit lists three plaintiffs – Chase Williams, Alexander Clifford, and Eric Lee. Interestingly, Roche Freedman is the firm heading the lawsuit. You may recognize the name from their recent lawsuits against Bitfinex and Tether. Additionally, they led the cases against Craig Wright and Bitfinex in the past.
Crypto Lawsuits – Details
The new lawsuit lists eleven companies in violation of regulations. These companies span the entire crypto sector. Tokens such as ELF, CVC, TRX, TOMO, SNT, and others are listed for their use of IEO and ICO models in the past. The suit claims these tokens are unregistered securities. As such, the token made agreements with exchanges in violation of Section 5 of the Exchange Act.
The violations also extend to the named exchanges. The lawsuit lists KuCoin, Block.one, Quantstamp, Civic, and Binance as exchanges who sold unregistered tokens. Plaintiffs argue that these exchanges didn’t possess the required broker-dealer license in the U.S. Importantly, the plaintiffs believe that the SEC clarified in the past that the listed tokens are securities.
The suit also lists several crypto stars specifically. For example, Changpeng Zhao (CEO Binance), Vinny Lingham (CEO Civic), Justin Sun (TRON), Brendan Blumer (Block.one) and Dan Larimer (EOS) are all named in the suit.
The allegations are not trivial, For example, the trio argues that tokens such as TRX deceived investors about their purpose and level of decentralization. The suit claims that the centralization was “not apparent at that time.” It was only after the passage of time that investors gained the necessary insight to determine this. The suit states that there was a clear delay before the “issuer’s intent, the process of management, and success in allowing decentralization to arise” become apparent. In this way, the allegations state investors were “misled into believing that TRX was something other than security when it was a security.”
Taking on the Crypto Industry
This case appears to be an attack on some of the most important firms, exchanges, tokens, and people in the crypto sector. The large scope of allegations and the global nature of the case will cause delays along the way. Consequently, it could be a while before this trial makes its way to the courtroom.
Lawsuits for the Stars
It’s hard to imagine a scenario in which the plaintiffs win this case. They would need to establish numerous precedents during the trial. These new rulings could stifle innovation in the US blockchain sector for years to come. As such, you can expect to see a measured response to this lawsuit in the coming weeks.
STOMarket Adds Mt Pelerin – MPS Token
This week, the research and analytics firm, the STOMarket announced the addition of the first international security token to its tracker. Importantly, researches chose the Swiss tokenization platform, Mt Pelerin Group as the project to receive this honor. Now, potential, and current MPS token investors can monitor market developments easier than ever before.
Currently, the STOMarket hosts the largest repository of live security token data available globally. The firm has held on to this title since it first entered the market in 2018. Importantly, the group was the first data aggregator in the digital securities industry. As such, STOMarket researchers gathered primary offering data for over 300 STOs to date.
Mt Pelerin Group SA Tokenized Shares
The decision to list MPS tokens makes sense for a number of reasons. Primarily, the Mt Pelerin Group SA is one of the first tokenized shares to provide direct and full ownership to token holders. This strategy differs greatly from companies that utilize tokens simply as a form of tethered ownership rights. In this instance, the token is the actual share.
As part of the strategy, the Mt Pelerin Group tokenized its 2018 cap table. Interestingly, 5% of these tokenized shares were sold at a public offering. Importantly, no US investors were permitted to participate in the event. Notably, the group chose to make MPS tokens ERC-20 compliant.
Currently, Ethereum host the largest number of security tokens in the market. As such, ERC-20 compliant tokens enjoy added interoperability when compared to other protocols in the space. This interoperability comes in the form of more wallets, Dapps, and platform options. Already, the MPS token trades on the Uniswap Decentralized Exchange.
Mt Pelerin Joins the Ranks – STOMarket
Discussing the important milestone, Arnaud Salomon, CEO of Mt Pelerin stated that his team was “thrilled” to see the MPS token listed on stomarket.com. He described how this decision places his project in line with other “industry trailblazers.” Lastly, he described how the addition allows investors and analysts to monitor this unique token’s growth.
Not surprisingly, the STOMarket continues to expand its role in the market. For example, in 2019, the firm launched support for secondary trading transactions. Immediately, investors gained access to important data on the six largest security tokens in the market. Since then, the group has added multiple tokens. Today, the firm is building advanced support for hourly security token pricing, trading volume, and market cap updates internationally.
As part of the STOMarket’s early response strategy, the company works closely with security token issuance platforms and exchanges. Notably, the firm has data partnerships with MERJ, BlockStation, Tokenise, just to name a few. Discussing the important role the company plays, Marko M. Hafez, Co-Founder and CEO of Blockstation explained how researchers took the “initiative to centralize and publicize STO and Tokenized IPO listing.”
STO Data Access
Providing the STO market with live trading data continues to be a critical role in the space. Thankfully, the STOMarket makes it easy for anyone to monitor and share data on developments in the industry. You can expect to see these researchers play a more pivotal role in the market as STO adoption continues to expand in the coming months.
- Multiple Canadian Securities Regulators Warn Against Halifax & Associates
- Germany – Crypto Custody License Receives Push-back from Banks
- Central Bank of South Korea to Host 22mth Pilot for Potential CBDC
- Japanese Government Introduces New STO Regulations
- Lawsuits Goes After Some of the Largest Names in Crypto