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Paolo Ardoino, CTO of Bitfinex & Tether – Interview Series

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Paolo Ardoino, CTO of Bitfinex & Tether - Interview Series

Paolo Ardoino is the CTO of Bitfinex & Tether.

Bitfinex is a digital asset trading platform offering state-of-the-art services for digital currency traders and global liquidity providers.

Tether is the most widely used stablecoin in the world. They recently launched Tether Gold.

You’re currently the CTO of two of the most successful blockchain companies in the cryptocurrency space, Bitfinex and Tether. How did you find yourself in such an enviable position?

I started in the Bitcoin crypto space between 2012- 2013, not too early, not too late. I was able to enjoy quite a few runs in the space. At the time I was working in the traditional financial sector in London. I had my own startup, and my expertise was in building highly scalable applications as a part of computing and distributed systems. Of course, finance and scalable applications and what the system sees is a perfect match for Bitcoin. So as soon as I started reading about Bitcoin, I fell in love.

I was experimenting and getting more and more excited about Bitcoin. And then at the end of 2014, I had the opportunity to join Bitfinex. They had a problem with the matching engine. Given my expertise, I offered my help to build the matching engine to be more scalable, so we were able to achieve 1,000 times the previous number of transactions per second.

Then, I started getting a little bored with my company in London which was mired in traditional finance. The old, outdated protocols were no longer interesting and I wanted to do something that was related to Bitcoin and the crypto space. I saw this as a huge opportunity to do something that would matter in the long run — to help change the financial system itself and leverage the groundbreaking technologies based on blockchain.

In mid-2016 I became CTO of Bitfinex and worked hard to bring the platform to what is today. The beautiful interface, carefully designed and really robust, the matching engine and APIs were all a priority, as well as making it all highly scalable. This is basically still my role today. Apart from managing my team, I keep working on the core of the platform. In 2017, I became the CTO of Tether. Tether is the biggest stablecoin by market capitalization. It’s really one of the most amazing ideas in this sector. Everyone today talks about Tether, but it was really created by a group of visionaries and Bitcoin lovers in 2014. They had this great idea to solve the problem of arbitrage, especially efficient arbitrage across crypto exchanges. The arbitrage opportunities were really big, but the problem is that to exploit those, you have to move wires around different exchanges. It was really painful and really slow — it could take days! Tether was the solution for that and worked out beautifully.

 

Tether Gold is a token (XAU₮) that is pegged to physical gold. Where is this physical gold located and what’s the redemption process should an investor choose to redeem their tokens?

The physical gold is located in Switzerland and for security reasons I cannot give the exact location. In order to redeem Tether Gold, a holder must have enough tokens for a full bar of gold. In order to start the redemption process we normally ask that a customer have at least 430 Tether Gold tokens. We do that because 400 ounce gold bars aren’t actually 400 fine troy ounces — they vary in size from as small as 385 fine troy ounces and as big as 430 fine troy ounces.

When a holder wishes to redeem, we run an algorithm that “consolidates” their Tether Gold tokens onto one or more full gold bars. Those bars are then made available to the token holder for pick-up at the location of their choosing in Switzerland.  From there, they can bring the gold wherever they want, according to travel rules and transport mechanisms and various rules of Switzerland and their jurisdiction. Alternatively, the token holder can ask us to try to sell their gold bar to a purchaser in Switzerland. If we’re able to sell it, the token holder will get the proceeds from that sale, less our fees, instead of the physical gold bar.

 

Why do you believe that gold stablecoins are necessary for investors?

We are seeing a period of uncertainty in the market. Thus, gold represents an interesting alternative to fiat cash. When there’s a lot of uncertainty in the financial markets, usually hedge  funds go to cash, so they sell their assets and they try to minimize the volatility. They usually use cash for that, but gold is representing a sort of middle ground between keeping the investment in full — let’s say equities, stocks, cryptocurrency, whatever — that are super volatile and something that feels more volatile than cash of course that is more novel. Gold is this middle ground, and is also one of the assets we see becoming more active when there is geopolitical uncertainty.

 

Tether Gold recently surged to a $21 million market capitalization. Do you believe this is based on coronavirus fears? What else is driving this surge in interest?

It reached $21 million, but for me this is just a start. I believe that in the next few months we’ll see additional growth. As I said, gold is not just a really useful hedging mechanism for traders. Gold is a good way to hedge part of the risk when you have your assets under management. Tether Gold is a good way to hold gold because you are not charged annual fees based on your holdings of Tether Gold. I believe that the $21 million Tether Gold is still a small amount. Our vision is that Tether Gold will become a preferred way to hold gold. As gold is used as a hedging mechanism for large funds, we expect Tether Gold will continue to grow in popularity. There will be the need of much more Tether Gold as a result. So we should see more and more users acquire Tether Gold.

 

Can you share with us the current plans of integrating Tether (USDT) on the lightning network?

Bitfinex and Tether are funding a project called RGB Spectrum that is meant to develop a protocol to issue digital assets on top of the Lightning network. I believe that the moment the protocol is live, stable, and well-tested Tether will be one of the first to utilize this new protocol. That’s because Bitfinex and Tether believe that Bitcoin and Lightning network are really important technologies and the network is really scalable, purely peer-to-peer. It’s as decentralized a protocol for micropayments as it should be. The RGB protocol will be ready to launch Tether on top of it because that will complete our vision of having Tether enable peer-to-peer micropayments.

 

Over the past year we have seen many new USD stablecoins. Why should investors continue to use Tether over some of these new options?

I believe that the reason is that Tether has some first mover advantage. It started in 2014, and the first big competitor started in 2018. Tether had four years of technological advancement and business advantage. One of the key qualities of a stablecoin should be cross-chain interoperability. Our major competitors are working mainly on Ethereum, while for us it is important to try and to serve as many communities as possible. Ethereum has a big community, EOS has a big community. Other blockchains that we support like Algorand, and Liquid, and Tron have big communities, so realize that for a stablecoin to be complete and to be really useful it needs to be the common ground of different blockchains. That is a huge advantage that we believe our competition hasn’t realized yet.

 

Bitfinex recently replaced IEOs with Bitfinex Token Sales which is digital assets offering and launch solution for high-quality crypto projects. Can you share with us what this platform is exactly, and why entrepreneurs should use it versus launching an IEO on Binance, KuCoin, or other competitors?

First of all, you can see that Bitfinex didn’t launch many IEOs. They didn’t launch many projects because we know that most of the projects that were launched had really bad performance. We don’t want to replicate the errors made by other platforms. We are more careful, and did an enormous amount of due diligence before deciding to launch a project through our Bitfinex token sales platform. I believe that our approach is more professional and more thorough. Projects that we’ll launch will be part of a really exclusive platform and will be fully considered as a high quality project just for the fact that we were able to complete our thorough evaluation process. We want to make sure that whatever we list is a quality project that respects the fair valuation, and has a high utility so that the Bitfinex customers that will be interested in participating in the offering will be protected. To achieve this, we’ll already have done a lot of due diligence for them.

 

What type of projects will be featured on this platform?

There’s a wide variety of projects. There are artificial intelligence-related projects. There are games. There are tokens that aim to bring banking to the unbanked in a poor region. There are new blockchains interested to get adoption and prove themselves through the process. It’s really a huge variety of projects.

 

Are there any new exciting projects in the pipeline at either Bitfinex or Tether that we should be aware of?

At Bitfinex, we are working on many new features that are really important for our customers. We are focusing on options when it comes to our derivatives platform. We are launching new integrations with third party providers in the near future around lending. And we are going to create an advanced version of our renowned peer-to-peer margin lending platform that has been powering our margin trading platform since 2013. So there are many projects that we are working on, plus launching additional pilot projects built on top of Lightning network to help market makers to try out how to improve their trading strategies, exploiting fast live network pay settlements.

 

Is there anything else that you would like to share about either Bitfinex or Tether?

As a general thought, Bitfinex is one of the key companies in the crypto space that for many years fought and allowed the industry that we’re all a part of to grow in a steady manner. Bitfinex shielded a lot of the problems to the crypto industry, especially being an on ramp to fiat and helping raise funds. Bitfinex built many interesting projects, a really solid trading platform that is home to a lot of traders. Experiment was the first to support the Lightning network, so basically Bitfinex is showing a lot of love to Bitcoin. We believe that Bitfinex is working for Bitcoin rather than using Bitcoin to just create profit.

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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 also the founder of Unite.AI a news website for AI and Robotics, as well as Bitcoinlightning.com a news website focusing on the lightning network.

Exchanges

Hirander Misra, Chairman of GMEX Group & Chairman of SECDEX – Interview Series

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Hirander Misra, Chairman of GMEX Group & Chairman of SECDEX - Interview Series

Hirander Misra is the Chairman and CEO of GMEX Group (GMEX), offering innovative solutions for the creation & operation of electronic exchanges and post trade infrastructure in securities, FX, derivatives, commodities, crypto & digital assets.

He is also Chairman of SECDEX, the Seychelles based Securities, Commodities and Derivatives Exchange, which is a full ecosystem for digital and traditional assets enabled by blockchain technology.

Can you start by sharing what GMEX Group is?

GMEX Group (“GMEX”) is a global provider of innovative multi-asset exchange trading and post trade business solutions and technology ecosystems. As a market infrastructure vendor, we focus on technology and interconnectivity. Our solutions address the end to end regulatory and contract environment needs for issuance, trading, clearing and settlement of securities across exchanges, across all asset classes including traditional, alternative and digital assets, digital currencies as well as hybrid digital securitisation of traditional assets including derivatives.

GMEX’s focus is on digitally transforming global financial markets, enabling participants to launch new solutions, expand current operations and scale to meet market demands. We carry this out using two proven engagement mechanisms to enable our clients to use technology to achieve their commercial goals:

  • Market Advancement Programme (MAP), which delivers multi-asset Exchange and Post-trade enablement with an optimal combination of traditional and digital market infrastructure technology and services
  • Partnership-driven Approach, we do not just sell technology, rather we use a combination of FinTech, business and investment solutions empowering partnerships and ventures.

 

What sparked your interest initially in launching GMEX?

When we started out in 2012, the existing market infrastructure vendors were very much of the customer-supplier mindset, providing legacy technology at inflated prices without taking into account the real business and operational needs, including any commercial constraints which may exist. This was our opportunity to differentiate ourselves!

We provide business expertise, the latest technology, connectivity & operational expertise delivered through an aligned partnership driven approach for exchanges, trading venues, clearing houses, depositories, registries and warehouse receipt platforms. In many cases this also allows us to align interests by taking equity in the ventures we are working with, as and where such opportunities make sense.

In 2016 we were able to capitalise on the opportunities that blockchain presented, initially on provenance of commodities and subsequently within capital markets. We were surprised at how most projects just harnessed the technology in the same way that traditional technology was being used and thought, what is the point? That spurred us on to look at ways in which the technology could be leveraged to revolutionise and democratise the way capital markets and marketplaces for other asset classes operated.

 

Can you tell us about GMEX Investments, and what type of investments are made?

The investment focus for GMEX is early stage equity and token strategic investment in market infrastructure and related FinTech companies, which are synergistic with what GMEX does in terms of servicing and product capabilities. In addition, we also venture build our own initiatives.

Given the interesting pre Series-A FinTech opportunities we are coming across, we have also launched Digital Investment Fund PCC (“DIF”) in the Seychelles, which is the is the world’s first fully regulated tokenised hybrid fund. We have an interest in companies, which have genuine intellectual property in the blockchain and artificial Intelligence (“AI”) space within financial services, combined with early client traction.

 

Can you elaborate on the digital exchange trading and post trade technology offered by GMEX Technologies?

GMEX offers the first truly hybrid exchange and post trade ecosystem, Fusion, bridging the gap between traditional and digital assets underpinned by regulatory frameworks. This is quite analogous to interconnected telecommunications networks. We ensure our solutions are aligned with the business objectives of our clients and partners.  GMEX Fusion is a hybrid centralised & blockchain distributed ledger technology suite and middleware, which is deployed and trusted by multiple international regulated financial institutions around the globe. The suite includes:

  • ForumPortal, a tokenisation, registration and issuance platform;
  • Forum Trader, a secondary trading front-end and order management system;
  • ForumMatch, a high-performance exchange trading platform with integral matching engine;
  • ForumDetect, a market surveillance system;
  • ForumIndex, an index calculation and dissemination system;
  • ForumCustody, a digital custody platform for clearing and settlement;
  • ForumWallet, a wallet management platform, which can also interface with third party wallets;
  • ForumCCP, a clearing platform facilitating credit checking, position keep and margining;
  • ForumCSD, a central securities depository and registry platform facilitating settlement;
  • ForumPay, a simple and secure platform for making international payments, money transfer, withdrawals and deposits across multiple financial instruments.

 

Why are cryptocurrency exchanges attracted to using GMEX?

Cryptocurrency and digital assets exchanges are attracted to using GMEX because they appreciate we have genuine proven solutions and a practical understanding of digital assets as opposed to the hype and vapourware that some are touting out in the market.

They like the fact that the technology stack is designed for the needs and quirks of cryptocurrency and digital asset markets, which can include 24 hour trading, 18 decimal places due to fractional ownership, high volume requirements and the need to offer tokenisation and digital custody services beyond just exchange solutions.

Importantly, as markets in this space become increasingly regulated, GMEX is able to support our clients with our regulatory and business expertise in operating markets across the globe, which is highly valued.

 

How scalable is GMEX technology?

Cryptocurrency and other types of digital asset exchanges are facing a very serious challenge with the increasing volumes of orders they need to cope with. Investors and speculators expect their orders to be executed within a few milliseconds especially in hectic market conditions i.e. when volumes are at their highest peak. Any slowness in order execution will cause loss of confidence and order flows to switch to other venues. Exchanges must ensure their technology can stay ahead of the fierce competition. Recent volatile cryptocurrency market conditions were a performance wake-up call for cryptocurrency exchanges.

Our technology stack is modular and component based and is designed to flexibly support multiple assets and numerous private and public blockchains. It also has the ability to easily interconnect many nodes, whether they are running our technology or are third party platforms. Our low-latency and high-throughput exchange solutions combined with high availability ensure successful operation in critical market infrastructure environments. Superior performance is also achieved by way of a low hardware footprint. We also include appropriate open source components to remove third party licence fees. The technology stack scales through use of virtualisation and cloud services, as an alternative to local deployment, where there is a need for a turnkey Software-as-a-Service (“SaaS”) model to be offered as an option.

 

You are also Chairman of the SECDEX, the Seychelles based Securities, Commodities and Derivatives Exchange. Could you tell us about the SECDEX and why it matters?

The SECDEX Group business consists of a regulated:

  • Exchange;
  • Central counterparty clearing house (CCP);
  • Central securities depository with registry;
  • Digital marketplace; and
  • Digital custodian.

SECDEX is unique as it is the first fully-regulated, multi-asset, hybrid market infrastructure ecosystem combining the benefits of a digital exchange with those of a traditional exchange to deliver seamless trading, clearing and settlement. It is based on the strengths of GMEX Group as a founding shareholder combined with the professional services of Digital Partners Network (DPN) as a co-founding shareholder. DPN services include specialist legal, finance, compliance, corporate structuring, finance, strategic consulting, technology-enabled digital transformation and potential investment through a digital fund.

This is game changing, as until now there have been too many intermediaries for these different services, and they have not been offered cost-effectively under a single umbrella. This means that in addition to the listing of traditional securities and derivatives, Security Token Offerings (STOs) can be undertaken in a regulated, trusted environment with issuance, full professional services support for the tokenisation process covering legal and valuations in addition to capital raising, with listing and secondary trading on the SECDEX Exchange.

 

It was also recently announced that the SECDEX group has welcomed a new addition to their ranks – SECDEX Digital Custodian (SDC). Could you tell us about this digital custodian solution?

SECDEX Digital Custodian Limited (SDC) is a regulated digital custodian offering cold storage and custodial services for cryptocurrencies, security tokens and other digital assets. SDC caters to retail, high net worth (HNW) and institutional users including exchanges, marketplaces, brokers, banks, payment service providers and traditional custodians.

SDC services include:

  • Safeguarding of digital assets
  • Transaction recording and reporting for its users
  • Automated transfers, balance confirmations and account related requests
  • Escrow services
  • A multi-signature authorisation protocol to ensure that no single party is able to initiate and complete a transaction within its custody. Furthermore, under its technological platform operated by the venue, each key is held with segregated accounts.

SDC, in a short space of time, has already attracted USD 544,718,948 of assets which it has tokenised with immutability and transparency on the Ethereum blockchain.

 

One of your other projects is promoting Blockchain solutions to drive financial inclusion across Africa. Could you share some of your views regarding this?

There are an estimated 700 million unbanked farmers in sub-Saharan Africa and every country has its own structures and complexities. At the heart of the problem is the lack of price transparency for farmers for their produce. Better prices would mean improved income, allowing them to better afford seeds, pesticides, fertilisers and even opening up credit.

FinComEco, the financial and commodities ecosystem, links agriculture to the latest financial technology down to the individual smallholder farmer level and beyond from origination to destination. This is achieved via a model which is adaptable to local requirements with an underlying ecosystem of technology, finance, exchanges, logistics, sourcing and supply chain infrastructure. Its aims are to:

  • Facilitate financial inclusion with social impact for smallholder farmers;
  • Bank the unbanked through facilitation of finance;
  • Facilitate cheaper inputs and access to warehouses; and
  • Provide commercial farmers better access to markets.

 

Is there anything else that you would like to share regarding either GMEX or SECDEX?

GMEX has collected feedback about digital asset deployments from securities exchanges who are

  • Conscious of the importance to offer digital assets for trading
  • Concerned by new technology investments
  • Uneasy with the Blockchain/DLT technology due to a few scandals and scams
  • Reluctant because of unknown legal and administrative implications

GMEX, DPN and SECDEX have responded by combining their strengths in a single value proposition with a multitude of technology, regulatory and services options to enhance the knowledge and associated business opportunities available to traditional securities exchanges.

With a growing number of jurisdictions recognising security token equivalence to traditional securities, it is now evident that exchange operators should embrace the transition to digital or, more appropriately, a hybrid integrated approach. Traditional exchanges, whether incumbent or challenger, are now acting under similar regulatory frameworks and are on the same level playing field with regard to digital assets. Early movers are taking advantage of this new territory. However, given the pace of change and anticipated exponential growth of the digital economy, firms should see this as a catalyst to re-engineer their objectives, processes, and strategies rather than just replace like for like. It is vital to act now to leverage this opportunity and to be part of the paradigm shift into this new era of digital exchanges and post trade, which ultimately can benefit investors, SMEs and the wider capital markets.

Thank you for the great interview answers. Readers who wish to learn more should visit:

GMEX Group (GMEX), offering innovative solutions for the creation & operation of electronic exchanges and post trade infrastructure in securities, FX, derivatives, commodities, crypto & digital tokenised assets.

SECDEX, the Seychelles based Securities, Commodities and Derivatives Exchange, which is a full ecosystem for digital and traditional assets enabled by blockchain technology.

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Crowdfunding

Andrew Adcock, CEO of Crowd for Angels – Interview Series

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Andrew Adcock, CEO of Crowd for Angels - Interview Series

Andrew is the Chief Executive Officer at Crowd for Angels an equity crowdfunding platform. He often attends and speaks at events on Crowdfunding, Alternative Finance and Investment. Previously, he worked at NinetyTen, a web application developer and provider of Private Social Networks, whose clients included Nokia, Channel 4 and Shop Direct

You were one of the original Co-Founders of Crowd for Angels. Can you discuss the inspiration behind launching this business?

I was indeed one of the Founding team at Crowd for Angels, but the inspiration for launching the company comes from our Director Tony de Nazareth, who combined his decades of financial knowledge with the ‘social media’ approach. This was to get the community involved when funding and supporting a business, thereby creating brand advocates that not only financially supported the aspirations of a company but also became a voice and customer of the company.

How much do you involve yourself in the pitch decks and packaging the deals that are found on Crowd for Angels?

I am involved in most companies that seek to list on Crowd for Angels. I take a genuine fascination in the lives of start-ups and companies looking to expand. Each has its own story and passion, which I am enthused by. Having raised funds for my own company and invested in many others, I hope to provide insight for the company.

What type of due diligence is performed on the companies that are listed?

A lot! Crowd for Angels breaks due diligence down into 3 key areas, firstly, we conduct factual checks such as KYC, AML, PEP, Credit Checks on the directors, reviewing accounts produced by the company and verifying facts stated on their pitch. Secondly, we conduct market checks, for instance, is the product available and as described, is there an addressable market, is the valuation reasonable, what legal challenges the company might face and is it ethical. The final check is one of sanity, which is not only tested by Crowd for Angels, but also by our Angels, who will ask the company their own questions.

What are some of the main reasons behind companies being turned down for listing on the platform?

There can be a number of reasons but a few we find most common are as follows:

  • The valuation is simply too high in comparison to the companies position
  • The company does not provide documentation (business plan, management accounts, incorporation documents)
  • The product is too early-stage or not yet developed
  • The directors have no ‘Skin in the Game’

What are the biggest benefits of equity crowdfunding?

I personally believe the biggest benefit is the ability to create brand advocates, people who support your business financially and become active customers, drawing in others to check out your brand, whether that is through word of mouth or social media.

Could you give us a success story of a company that raised funds on the Crowd for Angels platform?

One of my favourites is a company called CNPPS. A young entrepreneur, who was studying engineering at university at the time had created a permeable pavement solution that used recycled aggregate. Now that might not sound as fascinating as an app, but our world is covered in roads and pavements. His solution, used 100% recycled aggregate and was carbon negative, furthermore, it allowed water to pass through. Working with the entrepreneur we were able to raise £100,000 for a phase of testing that has now led on to a commercial contract and further funding for the company.

What made it interesting was the ethical approach the company had took to change an old industry, the tenacity the entrepreneur showed never giving up and that a business can truly be grown from the ground up, out of university none-the-less. So far in a 2 year period, the company’s valuation has increased 4 fold, delivering a solid return for the Angels involved.

Crowd for Angels is one of the few crowdfunding platforms that accept bitcoin. How many investors use bitcoin, and where do most of these investors originate from?

Yes, we have been accepting cryptocurrency as a form of payment for investment since early 2016. At that time, we integrated this payment option to allow foreign investors to invest in UK companies without the costs and time associated with international bank transfers. Initially, we saw a number of Australians, Chinese and mainly Asian investors utilise this form of payment. However, as bitcoin and other cryptocurrencies gained in popularity, we did see growth in European investors utilising cryptocurrency. Partly this is due to the gains they might have experienced and I believe the convenience cryptos offered. Now, we have over 14,000 members registered with a cryptocurrency wallet on our platform, with many of them in Europe.

A few years ago, the ANGEL token was released. What are the use cases for this token?

The ANGEL token was released to drive down the user acquisition cost of investors whilst rewarding stakeholders for interacting with our platform. It is hoped that when users interact and share content in the network, say an investment they had just made in a fledgeling company, that they would be rewarded with ANGEL. Crowd for Angels has then committed to buy back and burn ANGEL linked to the revenue generated from our pitches, thus creating a virtuous circle. We hope in the future, our Angels will also be able to use the ANGEL token as a method of payment towards an investment.

How do you see digital assets and digital securities eventually merging with crowdfunding?

Crowdfunding utilises technology to allow the masses to invest small amounts into pitches, but the shares are usually held with a nominee and should you wish to sell them or give them to someone else, it is difficult. Therefore, the integration of digitalised assets should be a no brainer, because it potentially gives the control of the asset back to the investor and follows a set of rules, that can’t be broken. In a utopian world, you would allow investors to purchase, hold and trade any assets that they wish. With the blockchain, you benefit from an immutable ledger that would record these transactions, giving you efficiency and transparency. I believe we are only a stones throw away from some big changes.

Is there anything else that you would like to share about Crowd for Angels?

We are always open to ideas, a conversation can go a long way.

Thank you for the interview. Readers who wish to learn more may visit our Crowd for Angels business listing or the Crowd for Angels website.

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Interviews

Jim Dowd, Founder & Managing Director of North Capital – Interview Series

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Jim Dowd, Founder & Managing Director of North Capital - Interview Series

James Dowd is Founder and CEO of North Capital Private Securities (NCPS), a registered broker-dealer focused on origination, placement, and clearing of exempt securities; North Capital Investment Technology (NCIT), which provides technology for the exempt securities market; and North Capital Inc., a registered investment advisor. NCPS is the designated broker-dealer for many securities funding platforms in the early stage equity, real estate, private funds, and securities token markets.

North Capital recently completed the membership approval process with FINRA and achieved acceptance of Form ATS Initial Operations Report by the SEC. For those who are unfamiliar with this form, what makes it so important for North Capital and its clients?

Great question.  Our customers and many other issuers, investors and intermediaries who are involved in private securities markets want to see more transparency and liquidity in private markets.  Investing in  private deals has traditionally involved a minimum 7 to 10 year capital commitment, since there is typically no interim liquidity and no definitive exit plan.  I have one private investment that has been outstanding for 19 years, another that has been alive for 14 years, not to mention the many investments that did not work out.  Once someone makes a private investment, if they have second thoughts or change their opinion, it’s too late.  Almost every investor who allocates to private deals knows or should know this, and most would like to have liquidity and real price discovery for the private securities in their portfolios.  We hope our ATS will help to realize this vision, at least for the issuers, investors and intermediaries who share it.

 

The launch of this ATS serves as a natural extension to North Capital’s existing private securities infrastructure, TransactCloud. What is TransactCloud?

TransactCloud is our API-first technology stack that facilitates primary offerings of exempt securities.  We work with issuers and professional intermediaries — broker-dealers, RIAs, and funding platforms — to allow the offering, transaction, document processing, escrow, payments and clearing of exempt securities online.

 

Can you clarify North Digital’s stance on digital assets such as bitcoin, or in digital securities such as security tokens?

To be clear on this point, we ourselves are not investing in digital assets;  we are providing infrastructure to allow trading of digital asset securities through our regulated marketplace, the PPEX ATS.  We will not be trading cryptocurrency or utility tokens.  The SEC regulations related to alternative trading systems are very clear:  ATSs are for the trading of securities only.  We also will be listing and trading non-digital exempt securities.

 

North Capital also offers investment opportunities which are deemed as “frontier alternatives”. Could you share some details on what you would consider frontier alternatives?

“Frontier” in the context of investment management refers to the most emerging of emerging markets.   We coined the term “frontier alternative” to convey the same idea ~ some examples would be investments in art, collectibles, fine wine, litigation pools, digital currency, race horses, athletes, etc.   I fully expect that in ten years, some of these will have become mainstream alternatives.  Private credit is a good example ~ ten years ago, private credit was considered exotic;  today there are registered funds that invest in private credit and it’s considered a mainstream alternative asset class.

 

North Capital has been involved in over 1,000 primary offerings totaling $1.9 billion. What are some of these notable offerings?

It’s difficult to single out specific deals.  We have so many great partners who are doing innovative work.  Groups like Jamestown, Crowdstreet, RealtyMogul, RichUncles, Securitize, SportBLX, Exponential, Roofstock, Mythic Markets, Otis, Commonwealth, SeedInvest.  Quadrant Biosciences has a Reg A+ offering that we’re working on right now ~ our first collaboration with WeFunder.  Metaurus is one of our partners, run by a talented team led by Rick Sandulli and Jamie Greenwald, who I worked with 30 years ago at Bankers Trust.  They have two listed ETF-style products that are patent-protected and could revolutionize the way equity investors take risk.  I know I am leaving somebody out so I’ll apologize in advance.

 

Could you share some of the Broker/Dealer services that are offered by your firm?

We are a full-service broker-dealer for private and other exempt offerings, along with investment companies such as mutual funds and ETFs.  We also are an escrow agent for private offerings including serving as a qualified third party for Reg CF offerings.  Compliance support is integral to all of our activities — we help issuers and platforms to comply with securities laws.  Last year we were approved to broker EB5 deals, but that market is shuttered for now, given the COVID-19 pandemic.

 

What type of custody services are offered?

Today we custody cash, private securities, and mutual fund shares.  It’s still early days for our custody business, and we have deliberately limited our rollout to allow us to test systems and procedures.  But this is a high growth segment of our business.

 

Could you also share some details regarding the advisory services that are offered?

The advisory part of our business is done through a separate, SEC-registered investment advisor.  It’s a technology-enabled financial planning and wealth management business, along with a bespoke, consultative advisory practice for family offices and business owners.

 

The firm also offers technology-based investment solutions to broker-dealers, banks, fund managers, funding platforms, and private issuers. What are some of these solutions?

On the advisory side, the evisor platform is an online financial planning and wealth management platform.  We’re currently working with one bank on a pilot program, and we’re integrating it into our broader advisory and 401k business.  On the exempt offerings / broker-dealer side of our business, TransactCloud is a collection of products and services used by issuers and professional intermediaries for online securities offerings.

Thank you for taking the time to answer our questions. Readers who wish to learn more should visit of North Capital Private Securities.

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