welcome to security token insight brought to you by the security token Academy the security token industry is here and will provide a key foundation for the evolving financial internet the security token Academy provides insights about this new era for security token enthusiasts investors and issuers the security token industry is here and you can get involved hi I'm Adam chap Nick and I'm anyone coming up on today's episode of security token insight in your security token investing news details on a new partnership involving secure ties and Japan's security token association plus we've got an expert interview with the co-founder and CEO of token soft mason boertie and highlights from our security token meet up in New York City that and more is coming up on this episode of security token insight now it's time for your security token investing news crypto currency exchange operators coinbase Kraken and circle are teaming up to create the crypto raiding council it's a new organization which seeks to assist financial services companies in determining the legal status of various digital assets the new scale rates tokens from one to five with one indicating an asset has little to no traits of a security while five indicates a token that shares many traits with the security the new rating system would also help to determine whether or not a digital asset qualifies under US securities law by incorporating guidance from the SEC in other news FINRA has approved harbour Square investments a subsidiary of harbor to receive their broker dealer license harbors a tokenized securities platform Harbor CEO Josh Stein said now that harbor has secured their broker dealer license the company intends to become a one-stop shop for digital asset issuers and finally security token management platforms securitize has announced it raised fourteen million dollars from a group of investors which include Banco Santander Mitsubishi UFJ Financial Group and Nomura Holdings the recent raised by securitized reflects a heightened interest by banks in the digital securities market in addition to its latest raise securitize has also partnered with Japan's security token Association in order to further educate Japanese investors on digital securities by the way both securitize and harbor our gold corporate members of the security token academy to learn more go to our website security token academy.com click on the directory tab and then select corporate member have you listened to our latest podcast episode 7 of security token stories is out right now in this episode with Stas derek edward schloss douglas Pepe talks about how he approaches teaching blockchain topics to new students at the GW School of Law the current state of Security's guidance from the SEC for new and existing token projects and much more to listen to this podcast and many more go to our website security toget Academy comm click the interviews tab and select podcast the security token Academy is proud to present an expert interview with Mason boorda the co-founder and CEO of token soft token soft is a primary issuance and compliance platform enabling the issuance and distribution of tokenized securities the company is a gold corporate member of the security token academy i sat down with Mason to discuss token softs new feature KYB and its ERC 14:04 token and more in this expert interview take a look what is token soft and how did it come to be yeah so we're a technology platform and we help issuers of security tokens issues that are seeking to tokenized real estate funds equity I get through the primary issuance process and we provide technology that helps them get through the ongoing management and compliance of the security token as you know these tokens go to transfer out out in the world so yeah so that's that's that's what we do we're focused on cyber security compliance as well as scalability amazing ok so let's pick one of those and kind of drill into that you talked about compliance so how do you handle compliance at token soft yeah so I think one thing that's really interesting about security tokens is we're taking existing financial infrastructure and financial instruments and rebuilding them up on the Block train and one of the primary pieces of enabling that is compliance and making sure that you're following all the rules and regulations that you're supposed to as an issuer of a security and so we do that by speaking with our clients in-house compliance teams perhaps there will have speak with their law firm the professional services firms we have clients that work with Deloitte PwC we capture all of those regulatory requirements whether they're banking regulations securities regulations or tax regulations we package that into our platform and then it's it's automated from from there out to to a certain extent incredible okay so you guys recently coined a new term I think it's new KYB why don't you give us the big reveal of what is KYB why is it important and why did you guys sort of roll that out yeah so I think most people are familiar with with kyc right and so why do we have to do kyc there's a regulator out there called FinCEN that's enforcing a regulation called the the Bank Secrecy Act which requires banks to collect certain piece of information when they're onboarding individuals as clients so when you go sign up for account at a chase they're gonna ask for your driver's license maybe a utility bill because they can ensure that they know who you are and that you've got your your your money through legitimate means like by working at security token Academy all right and so that's kyc know your customer yeah and and that's that's very individual based and so recently FinCEN amended the bank secrecy secrecy act lists with something called the fencin the final c DD rule and so what that says is that if you're taking money from a financial institution you also have to perform similar diligence on that institution so you do have to make sure that it's a real entity that is valid that is you know up and running properly and you have to further ensure that you know who the beneficial owners of that entity are and so you have to kyc the beneficial owners of that entity it's very complex it's four manual it takes a long time to do when we went out and did a survey and looked at what services are out there because initially we didn't want to build it we found that on average it takes 10 days to process an entity through due diligence procedures and to do that verification and so we rolled out a service and actually initially in July of last year when the rule went to effect to streamline and automate some of the procedures that come into play when onboarding onboarding an entity and verifying those documents got it and so you call that in general KYB and that stands for know your business know your business okay so you gotta know your customer you gotta know it's good so tokens soft it has a new I think it's new the unique feature it's it's your token self consulting services yeah what what how is that related to what you do yeah so before we engage with a client we have to know exactly what they want so we have to know their compliance requirements the regulatory requirements we have to know the timing and structuring of their sale that's information they provide to us when we started working with larger financial institutions we found that process to be a lot more complex and so what our consulting services are are a set of services that we provide where we go a little bit deeper with a larger institution understand their requirements and taken to into accounts the various different departments that they have so we speak with all their folks internally capture the requirements and then package that into our services due to the complexity some of our services turn turn out a lot more complex or a lot more they end up looking a little bit different than than what we have today so we do have to take those requirements repackage our technology so that we can deploy in these larger institutions and so that's what it's about it's just making sure that we can meet the needs of these larger financial institutions just because they're a little bit more complex yeah that's it's important to be nimble when you're dealing with these sort of massive movable objects I think you're gonna need to be a little bit flexible to do with this helps you do that I think it's great so ok there's something called an ER C 1404 token what is it why do we care and why do you guys support it yeah so if you go out there and buy a stock in a company today when you when you purchase that stock if it feels very simple and seamless but in reality there's about ten different vendors in the back that enable that procedure to be seamless and they do that with the focus on compliance the transfer of that security has to go through a bunch of compliance checks and if it passes then you're the rightful owner and so when we started putting these securities on the blockchain we were into similar problems the token needed to follow all of these compliance requirements but there was no real way to do it so at the time there were a couple standards out on the market this was 2017 they were being talked about our token in early 2018 polymaths st 20 and so we took a look we did a survey we took our clients compliance requirements we looked at the standards realized we needed something slightly different something those a little more bespoke to the clients regulatory requirements and so we we made er C 1404 and all it does is it helps us enforce the compliance requirements of our clients and to do that through technology and that's whether its banking securities and tax regulations and whether it's domestic international one interesting thing that it can do is if you if for our clients that are launching our C for 2004 we can help them enforce the requirement that reg S securities do not transfer into the u.s.
into u.s. persons hands and so that's that's some of the interesting things that it can enforce yeah that's great so when people hear you talking about the ERC 1404 versus this other token versus this versus that some some of the people that watch are very versed in the regulations they know about finsih and they might know about reg S but when it comes to the token to the blockchains it's a little bit new for them so do you guys support any blockchain or there are certain chains that you guys support and if and if there's certain ones y-yeah so we're very client driven and so if we get certain demand for certain certain block chains then we're happy to help figure out how to make that happen we really see our role as sort of a technology layer in between block chains and regulations and so as long as we can help provide that mapping and provide that confidence and then we're happy to do so in terms of supporting different blockchains this is still sort of sort of an art and the reason is the the technology is still very young so when we started offering aetherium services to our clients we had to evaluate the blockchain and build a lot of the infrastructure to help make securities on the ethereum blockchain possible and that meant things like building Knox wallet our cold storage custody solution for security tokens that meant building out URC 1404 so we could have basically a permissioned network on a public blockchain because when you issue tokens you have to make sure that you kyc every person right giving tokens - yeah and so that's one of the things we look at is infrastructure there and if not can we build it another thing is the broader the broader adoption of the blockchain if we as a company are to support a certain blockchain we're basically putting our stamp of approval on it and so it's very important to us that this blockchain is also well received by the major infrastructure providers out there and there is broad support we have the full interview with Mason on our website be sure to check it out to learn more about our corporate member program visit our website security token Academy comm and click on the membership tab did you know that you can get the latest industry updates in our free weekly newsletter the security token edge the newsletter is packed full of insightful information about the security token industry to subscribe and get your free weekly copy go to our website security token academy.com we also invite you to check out the digital rapper on medium it's our new behind the scenes series with the teams building out the security token industry these are in-depth interviews covering a wide variety of topics you can view these when you follow us on medium you can find out more information on our website security token academy.com now live on the security token Academy's website a new expert video series global capital markets and security tokens with David Weald part one covers the state of the market David's the founder of wielding company and is the former vice chairman of Nasdaq he's also a 30-year veteran of Wall Street in this new series we cover the growing intersection of security tokens and traditional finance as well as the benefits of tokenization here is your preview one of the applications of security tokens how do they fit in with today's finance world well I think first and foremost I think where we're gonna be able to cut strip out costs from the issuance of securities and the trading of securities in general and when you do that you also enable certain kinds of securities that that heretofore have probably been cost prohibitive and what I mean by that is I think the frequency of distributions can be increased very significantly why is that important it's important because retail in particular values higher frequency distributions so if you look at a traditional bond it may pay twice a year if you look at a closed-end bond fund there are two forms ones that pay quarterly distributions versus monthly the monthly ones that trade on the New York Stock Exchange and Nasdaq actually traded about a four or five percent premium to those that pay on a quarterly basis so I suspect that what we're going to see is the the tokenization of certain kinds of assets in a way that they will pay weekly distributions maybe even daily distributions at some point that's interesting it'll be interesting to see how that curve is shaped when you go from quarterly to monthly to weekly to daily in terms of the premium you were describing what do you think of that well I you know it if you're you know if you're a retiree you're gonna you're gonna live week to week you're managing your budget that way so having something actually hit your account a distribution hit your account on a weekly basis is something that I think that retirees would really value so I I think it will happen I think it's just a question of time and I think that that it will it will be highly valued by at least some subset of the market yeah no doubt so why is this a preferred method as opposed to issuance of traditional securities what would benefits did the security token have over a traditional security well you can you can hold it directly in a in a cyber wallet if you so choose as opposed to through a security you know traditional security account which would be held by a broker dealer but I think that the real advantage is that there are a number of in certain markets there's an application layer that is wedded to the token and so for example you can automate all of the legal and compliance checks that are done in private markets to be able to trade securities in private markets stripping out a lot of the cost and some of the constipation from you know having tokens where securities if you will move from the hands of one investor to another so so there's a you know a big uptick in in ease and efficiency for certain kinds of applications and so my suspicion is is that that's where we're going to see most of the most of the early adoption what are some of the real world uses where security tokens offer an advantage over traditional securities well if I would is to apply it to asset classes if you drive down the cost of tokenize and your securitizing an asset for instance we might be able to we've already actually seen the beginning of this tokenized a a particular building and you know it would have then allow instead of somebody having to buy a basket of buildings through a real estate investment trust you might be able to actually say okay here's an interest directly in the Empire State Building or in in in you know in a you know Tower the Sears Tower you know so you can then in the old cliche which is you know location location location it will actually allow investors then to put together portfolios that are very much low Haitian based type of real estate so for example whether it's warehouse facilities or multifamily office or multi-family residential or office properties and and so as a consequence I think it will create greater overall efficiency of active capital allocation to the real estate market so I think it's the beginning or the dawn of a brave new world in certain types of asset classes as opposed to forcing you to buy a big basket of properties where you don't have control over the actual building selection within a portfolio got it now when it comes to issuers what do you generally recommend that an issue or issue a security token or start with a traditional security and maybe tokenize later be sure to check out this new video series on our website security token academy.com the security token Academy held another successful meet-up this time in New York City and we want to thank everyone who attempted we had a big crowd inside the sunset terrace at Chelsea Piers security token experts and financial services professionals were on hand for an evening of informative discussions networking food and drinks I also moderated a panel discussion that included our professional and corporate members here are your highlights from that panel discussion hi everybody my name is Amy Wong I am host of security tokens insights hopefully some of you guys have seen the show and I'm also CEO stage wise we have an incredible panel here tonight with you know regulatory and legal experts they all know so much more than myself so I am going to allow you guys to basically go down the row and if you could give us 60 seconds about yourself and your company yeah sure ari Freeman counsel at seedinvest we're an online leading equity crowdfunding platform in the u.s.
we operate through broker dealers so we help issuers looking to fundraise raise capital through req dreg a reg CF and various offering exemptions that are available here in the US we have an investor base of about two hundred seventy-five thousand investors made up with credit non-accredited investors and credited including you know you know average angel investors institutional retail and family offices and you know we're also very active in the digital asset space hey i'm data adams i'm a senior associate at the perchance clifford chance is a is a international law firm we've got offices at here in new york also in DC our main office is in london and then we have offices throughout Europe and the Middle East I think that the firm has realized what an incredible opportunity digital assets are including skin securities tokens in particular and that because you're dealing in a digital medium that crosses borders all around the world that you need support all around the world as well in the form of legal advice and whatnot my spec my specific focus is on broker dealer and investment advisor regulatory issues I also do a fair amount on alternative trading systems exchanges etc and then also a little bit on the enforcement side dealing with pregnant primarily we'll call them ICO issuers who you know took a chance to be gamble and it didn't hasn't worked out particularly well for them so I think that that's what the with the security token Academy here really brings to the table is doing things in a regulatory compliant way I will first of all just thank you so much for inviting me to be here tonight Amy to be a this is spectacular space and I'm really happy about the number of friends that I have in the room my name is Robin sahs now I'm a corporate and securities lawyer here in New York City I've had my practice for the last five years we work with issuers broker dealers and funding portals in an effort to help them raise capital or deal with regulatory compliance issues I'm really focused on the JOBS Act so we do a tremendous amount of regulation crowdfunding work reg D 506 C and reg 8 plus I'm also the author of the crowd crypto news newsletter which goes out weekly if you're interested let me know I'll sign you up and I'm also my firm is a joint venture partner in a law firm called digital securities law group that focuses on helping private companies tokenized ownership and sell it through private placements hi everyone my name is Jason Gottlieb I'm a partner at Morrison Cohen LLP a mid-sized law firm here in New York City we are a full-service law firm doing all sorts of things my own practice focuses on regulatory enforcement and litigation issues and these days as many of you are aware some some of you perhaps more painfully than others regulatory enforcement in the crypto space has been sort of a hot topic so I typically handle SEC or CFTC subpoenas document requests and even litigations I'm lead counsel in one of the earliest actions that the SEC brought against an IC o---- issuer so you know if any of you are in trouble with the SEC or our conversations are privileged no one else will know about it if you are in trouble you might want to talk to him outside we don't want to say lead a conversation well thank you everybody thank you so much for you know donating your time and your knowledge tonight so let's start off with this question you know back in 2017 2018 there was a huge appetite for these so-called utility tokens that were not being treated as securities and as the space has evolved the appetite for that seems to have decreased and there's this evolution towards now tokenizing equity as opposed to you know some sort of network utility token why has that been the trend this this tokenizing equity thing and is there still even an appetite for utility tokens why don't we start with Robin and then we can all jump in sure so in my practice we we've certainly experienced that shift and interest I think one rationale or argument would be that it's a much safer route to take if you're a non blockchain business and you're looking to raise capital but you see the value proposition of digital asset securities then pursuing a capital raise in reliance on a traditional exemption like reg D 506 C or even reg CF it's just a much more conservative approach to take while still bringing a blockchain element into your capital raising strategy yeah I mean I'm happy to go I think that the biggest thing that I see is that basically regulators started to take notice and it's not the wild wild west anymore and so I think it's not a bad thing well it's like in the short term everybody you know panicked and there was this downturn in the crypto space but I think what's happening is the markets maturing people are taking a step back and figure out ok how how could we do this come compliantly and so people in this space as well as regulators and the larger players take this take the digital asset space seriously and so people are trying to figure that out and work with regulators and the people are thinking it from a long-term approach and trying to achieve long-term success versus short-term gains are taking that approach and so some of that takes time unfortunately and it takes more time than people would like but you know you can't do it without getting some of the key stakeholders on board yeah I always found the concept of a quote-unquote tier Utility token to be interesting because I at the end of the day I think it was very difficult to distinguish utility token just from something from an investment and they you weren't getting much utility from some of these tokens that were out there and you were also not really getting any sort of equity position so I think that people started to think about it a little bit and they were like wait a minute this is not really a like what do we actually get in here and I think that the SEC is because you note it also started to take notice and started to say well we haven't really seen a token out there that isn't a security because they all look like you're building enterprises to us so I think that the the it's less if there aren't sticky like utility tokens that people are still playing with I mean you have you have some no action letters that have come out that would seem to be really pure utility tokens I think the question has been like a the narrative has shifted the sec has spoken and people have started to kind of take notice of that and say okay well we're gonna have to be in a little bit in a regulated space which is what many people have been saying for a very long time but I think sometimes got drowned out in some of the other noise interestingly for a litigator and regulatory enforcement perspective I'm actually gonna take a business case this one I think early on a lot of people didn't quite know what to do with utility tokens people would introduce them and say well okay do we actually need this thing it's it's it's you know real estate on the blockchain it's coffee but on the blockchain people were struggling with what the the business use case was and and summer are very compelling and some are not so much but when you come at it from the other side when you look at assets that may already exist and the the securitization of those in a digital concept it's easier for conservative businesses who are trying to adapt to it to understand oh it's a security but it's going to be in a slightly different form and that may be easier to approach for institutional actors and and other bigger businesses then coming at it with an entirely new approach to businesses that were already existing you can view the entire panel discussion on our website security token academy.com a big thank you to everyone who attended the event be sure to check out the token estate right up on our Meetup I want to remind our viewers that if you have any questions about security tokens be sure to email us and we could answer them right here on a future episode of security token insight the address is in sight at security token academy.com be sure to include your name with your question one more time the address is in sight at security token academy.com all right that's it for today's episode be sure to follow us on Twitter Facebook telegram and medium and don't forget to subscribe to our YouTube page so you don't miss out on any of our videos and expert interviews and a big thank you to our platinum corporate member Merrill Lynch and all of our gold corporate members as well we invite you to learn more about our corporate members by clicking on the directory tab and click corporate member I'm ami WAN and I'm Adam chap Nick for everyone here at security token Academy thanks so much for watching [Music] you want to learn more about our corporate members visit our website security token academy.com click on the directory tab and select corporate member