Welcome to our comprehensive interview series – Humans of Blockchain™ where we get the best in the business to answer a diverse set of questions.
This series will clear the air of doubt in the blockchain space today by focusing on bringing more transparency to the readers.
Not wasting much time, let’s hear it out from Darren himself.
1. Hi Darren! We would love to know how did you get into the blockchain space and what was the main turning point?
I got into crypto early and I guess I was at the right place at the right time. I met some expats at a barbecue in Chile and they ended up starting one of the world’s first crypto exchanges called TradeHill. I got first pitch about Bitcoin which was Bitorrent crypto anarchy for money and I had no idea about it. I searched online and after studying and researching, I told them I’m in. So, it’s just a matter of being at the right place at the right time. Basically if you disrupt money, you disrupt everything.
2. What are your views about the STO market?
So, basically the question is that what happens after the ICO market, the ICO market boomed in later 2017 and we are in a bear market now. But STOs is what people are talking about these days. STO is offering a digital token for a security and it’s in a regulated space which provides a lot of opportunities but also a set of challenges. So, the question is that will the STOs follow a similar route as ICOs i.e a crazy fundraising mechanism for projects. What would be the timelines, regulations etc. An STO can be for a non tech company too like a brick and mortar company. STOs give us the ability to put the securities on a secondary market efficiently. So, this can change markets like VC, Investment Banking, Wealth Management etc.
3. What is the scope of work for Security Token Network? (The vision and mission of the organisation).
Security Token Network is basically a portal where you can come and you can find relevant information about Security Token space. We have Security Token 101 which is focused on education for investors, retail, you can find more about the space, you can find what security token offerings are going on, we also have a list of providers and we just want something called the WhiteDeck, which can become an industry standard document for fundraising. It shows how to present your project to investors, you need to show in term of getting traction, what an investor is looking for, what kind of disclosures you need in a regulated environment to show that
1) Your business is viable. They should understand what you’re doing clearly.
2) Tokenomics is something that is widely misunderstood. It’s something that is quite experimental.
So, you need to merge these two things that is a traditional VC pitchdeck and the Whitepaper and bring together both the business side (tokenomics) and more transparency.
4. Realising the actual price of an underlying security is a challenge for tokenisation? How do you think that can be overcome?
Tokenomics in asset backed securities like real estate is something like people buying gold. Are they actually picking up actual bricks of gold? So, you have a securitized offering for something and in terms of asset backed securities, there is real estate, fine arts, diamonds etc. Basically, a digital asset that has one to one representation. So, you can then trade them where the token represents your ownership. You still need to rely on real world inputs to that. You need to prove that the underlying asset exists.
If you talk about real estate, you have to make sure that you are not tokenizing the same property twice. There still is a trust and infrastructure barrier that needs to be overcome. Once you can solve that then the tokenisation allows you to break that into smaller pieces and allow some form of transportability which depends on the regulations of the Jurisdiction you are based in. You can create new financial products and derivatives of that token.
5. What is the regulatory status pertaining to STOs in the U.S and what role do you think other offshore targets are going to play?
In the US there is more clarity and more challenges related to security tokens because it is one of the largest markets. The SEC stepped up to put enforcement against ICOs but has invited companies in to discuss what a better framework can be in form of Security Tokens. We know that this tokenization of securities is already in process. The big question is that will they be in a framework that works. And if yes, it’ll become a big market and if not, you may see projects moving to other jusirsdictions. Here we are in Singapore where people are ahead of the game in terms of projects and trying to get progressive regulations. You have offshore centers in Europe like Malta and Gibralter looking at it. But the question is that from these offshore targets can you get investors from other EU countries.
6. We saw many people take up the role of ICO advisors in the past. What role do you think that STOs advisory will have to play in the growth of startups?
It depends on what you mean by STO advisor. If you have someone coming over from ICO advisory to STO advisory, its not much of a value add and its probably going to get us into more trouble than its worth. Advisory is something that you need to add value. Basically, an advisor gives something to the project (Connections, work, wisdom, capital etc.) and the project gives something to the advisor.
A lot of advisors in the ICO space were leveraging their name to raise funds. Also many advisors were not open with their connection with the project and compensation. But, in a regulated market, these things don’t fly. So, you will need advisory to understand the regulations i.e legal advisory, you need advisory in tokenomics etc.
7. What do you think the year 2019 holds for STOs?
We have learned from ICOs is that many people don’t actually care about decentralisation, but they are looking for a way on the investment side to speculate and grow. On the project side, potentially to raise funds faster. These things are not going to last forever so, STOs become a bridge between traditional VC and ICOs where you have more clarity around regulation which in my opinion should be embraced. You get a potentially faster access to funds and you get liquidity in a secondary market. We have to see how it develops.