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Marko Hafez, President & CEO of Blockstation – Interview Series

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Marko is a serial entrepreneur and innovator who started his first company at the age of 19 and never looked back. His passion for blockchain technology and the transformative potential of tokenization for financial instruments led him to co-found Blockstation.

You were an early believer in digital securities, having launched Blockstation in 2014. What was it that made you a believer before everyone else?

I first learned about the Blockchain capabilities in 2010 and monitored the price of Bitcoin up through 2014. I did extensive research to understand how records on the Blockchain are immutable and how it enables us to transmit value across the globe in the fastest and most cost-efficient way possible. Those facts, plus how the price of Bitcoin demonstrated significant growth in just 4 years, were major validation points for me.

I reached out to my good friend Jai Waterman, a software expert and eventual co-founder and CTO of Blockstation, to start looking into the Blockchain and the opportunities that come with it.

What we found was that most crypto marketplaces were (and still are) unregulated and have no proper Risk Management Protocols (RMPs), insurance, or regulatory oversight to provide investor protection, promote market efficiency and integrity – a big problem for mainstream adoption. Of course where there’s a problem, there’s an opportunity!  There was so much money, so much volume going through these marketplaces that the traditional financial ecosystem had no way to access.

There was no doubt in our minds that regulation for this new digital asset space was just a matter of time. Regulated financial institutions were going to have to adopt Blockchain technology in order to enable the trading of digital assets and enter this exciting new market.

At the same time, nobody was building a turn-key solution that would meet all of the entire ecosystem’s needs. You saw people focusing on custody, focusing on trading, but nothing holistic. It was clear to us that Blockstation would be the company to bridge the divide between blockchain technology and regulated financial institutions.

https://www.youtube.com/watch?v=gCehm557X8w&t=14s

 

Can you share with us what Blockstation does?

To start, we are a Canadian FinTech company based out of Toronto that developed a compliant, Blockchain-driven, end-to-end platform for regulated stock exchanges and all their ecosystem  partners – brokers, depositories, regulators, market makers, everybody – to tokenize, list, trade, clear and settle digital assets and securities while fulfilling the same and functions they do for traditional assets.

In short: we enable the traditional financial ecosystem to get in on digital assets including Bitcoin, Ether, and Tokenized IPOs (Security Token Offerings, or STOs).

Our platform mirrors the traditional ecosystem but leverages smart digital processes and bolts on the blockchain to generate efficiencies, security and transparency, meeting Financial Action Task Force (FATF) requirements for Anti-Money Laundering (AML) and Counter-Terrorism Financing (CTF). It effectively lowers operational costs by optimizing workflow and processes for all stakeholders as well enabling investors to trade in a secure, reliable, and 100% insured environment.

 

In early 2019, Blockstation partnered with both the Barbados Stock Exchange and the Jamaica Stock Exchange in order to facilitate future Tokenized IPOs/STOs.  How did these relationships initially develop?

In 2017, a business development rep from the Jamaica Stock Exchange (JSE) heard about our platform and invited us to visit the JSE in Kingston, Jamaica, to demo our technology as well as provide some education about the blockchain and its benefits for the securities market.

Jai and I saw this as a great opportunity, as the JSE is the strongest stock exchange in the Caribbean and internationally recognized as well. It had just been named the world’s top-performing exchange by Bloomberg Businessweek in 2015. The JSE has continued to be a strong performer internationally and an ideal partner for Blockstation, again earning Bloomberg recognition for the same achievement in 2018.

After those first few meetings and demos with the JSE leadership team and the Financial Services Commission (FSC) of Jamaica, our visions were in alignment and the relationship progressed to launching a successful trading pilot in 2018 and a schedule go-live for early 2020.

During that same period, the Blockstation team grew to include talented people who brought existing relationships with institutions such as the Barbados Stock Exchange (BSE), and others. They provided valuable inroads for expansion to other markets, and we’ll be announcing partnerships with other exchanges throughout 2020.

 

What are some of the projects that will be launching on the Jamaican Stock Exchange?

As you know, the first four Tokenized IPOs to be listed on the JSE Digital Asset Trading Platform (DATP) were recently announced on stage at the JSE Investment and Capital Markets Conference 2020.

Also, our Smart Listing Accelerator Portal (SLAP) went live recently so issuers are now able to login and start creating their prospectus.

The five lead companies are:

Wipay from Trinidad (Money Transfer)

BRED from Toronto, Canada (Real Estate)

Lotus Energy from Australia (Energy sector)

VeleV Capital from Toronto, Canada (Mortgage Investment Corporation)

Connoisseur Culture (CBDMS)  from Montreal, Canada (Cannabis)

Other sectors in the pipeline include bio-health, video game publishing, music, sports, and mining.

Our full list of upcoming listings is available here

 

Do we have a date yet for when the first project in Barbados will launch and what are these projects?

We received interest from several issuers with the desire to initiate their tokenized IPO on the BSE.  We don’t have a specific time on this launch but everything is moving in forward and we look to potentially go live this year.

 

You’re based in Toronto, Canada, home of Ethereum and many more exciting blockchain projects. Do you feel that being based out of Toronto has been beneficial to Blockstation?

Toronto is home to a lot of people who are talented and knowledgeable about the blockchain and capital markets, plus it’s a hub of international commerce. We’ve made a lot of fantastic connections just by being located where we are, some of whom are on the Blockstation team right now.

 

In November 2019, you announced joining and taking a leadership role in the Crypto Asset Working Group organized by IIROC, a Canadian self-regulatory body. What are the goals of this organization?

The ball has been rolling in Canada for a while now, helped along by the mid-2019 release of the FATF report, which recommended a global standard for digital assets including the same AML and CTF requirements for Digital Asset Service Providers as for traditional financial institutions.

IIROC’s Crypto Asset Working Group (CWG) was created in late 2019 with the goal of developing a regulatory framework for crypto assets while addressing market integrity and investor protection. It’s highly collaborative, with representation from financial institutions and technology companies from every aspect of the industry – including Blockstation team member Linda Montgomery.

Our participation on this working group speaks to Blockstation’s status as a leader in compliant digital assets for the regulated marketplace, particularly as it relates to our ChainWatch AML/CTF tool. Our regulation-first approach is one of the major reasons we received a no objection letter from the Financial Services Commission of Jamaica and are able to move forward with the JSE.

We’re excited to be part of the IIROC working group and look forward to leveraging our successful partnerships with other securities regulators to develop a framework that works for the Canadian marketplace.

 

What are some of the other projects that BlockStation is working on?

It’s 2020 – it’s time that regulated digital assets became an everyday, mainstream reality in Canada and the US. While both markets have taken baby steps with some degree of licensing for service providers and a handful of institutions like Fidelity or Bakkt making headlines, we just aren’t there yet.

At Blockstation, we feel the time is right to build on regulatory efforts so far and bring industry participants together to demonstrate exactly what a full framework for a compliant, end-to-end digital asset ecosystem could look like in action.

In Canada, that means a live digital asset trading pilot to complement and inform the efforts of the IIROC working group. I can confirm that we already have interest from a number of motivated ecosystem participants including brokers, stock exchanges and even depositories, and we’re excited to move forward with a pilot in our own backyard.

In the United States, we’re working to unveil a new service offering entirely: end-to-end broker and issuer support for STOs in full compliance with securities regulations.

Issuers will benefit from the same tools for disclosure documentation, token issuance, and lifecycle management while being able to reformat their filings for various regulators in different jurisdiction. For brokers though, it’s a real game-changer. Once they’re on board, they’ll have centralized access to the full database of issuers, complete with an intelligent risk-profile matching engine that connects them with the opportunities that best match their needs.

 

Is there anything else that you would like to share about Blockstation?

Blockstation is more than a FinTech company. Our team brings years of expertise in compliance, risk management, and capital markets. We’re always thinking years ahead to ensure that technology for traditional financial institutions is ready and waiting when regulations come into effect.

We do this successfully by having extensive and productive discussions with central banks, regulators, stock exchanges, custodians, brokers, issuers, and investors from across the globe. This collective data gives us an edge and a clear vision on what direction to take in developing the right technology at the right time.

We are blessed to have a great team with the right experience to execute on our current and future goals, and we look forward to a bright 2020 for Blockstation.

Antoine Tardif is the founding partner of Securities.io, the CEO of BlockVentures.com, and has invested in over 50 blockchain & AI projects. He is the founder of Unite.AI a news website for AI and Robotics. He is also a member of the Forbes Technology Council.

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