Real World Assets in DeFi by Erwan Mismaque (@erwan_backed)

Transcript

these last few days so no PowerPoints um it'll be just me talking and I'll try and make it as interesting as possible so I work at backed um pact is um Swiss startup we tokenize real world assets or Some people prefer to say off-chain assets whatever you prefer and we focus on listed publicly listed securities so blue chip assets like the S P 500 U.S treasury bills or bonds anything that basically is popular and useful in the real world or of chain

World we're aiming to bring on chain because we think they should be useful as well on chain um today I just want to first start by giving maybe a high level overview of of real world assets and crypto um owas have been like the subject of discussions for for a while now and it may seem to a lot of you pretty disappointing I remember in 2017 how everybody was talking about you know tokenizing the world from wine to real estate to shares and it you know

nothing really material um happens so it's been a bit disappointing on that front but to be honest it's pretty normal um like things usually happen in steps logical steps and um yeah so we think wine or I don't know whiskey it will happen but probably further down the line however real world assets already and they've already been in crypto for for a while and I've been successful and the the best example is is stable coins uh stable coins are the first off-chain

asset real world asset that's been tokenized and it's been super successful um first one was usdt now for you know follow closely by usdc and then there's been a few few attempts um like synthetics or mirror FTX I'm not gonna dwell too much on on what happened there but um but yeah there's been already like some some decent um experiments and and definitely like successes um there um long term yeah we definitely believe that

um crypto you know leads to more efficient trading and more efficient settlements um I think you know that's why we're all here but this is very much like for again for the long term uh it won't happen today uh unfortunately um but we can definitely see it on the horizon for now what we think will happen and and uh the problem that we are trying to solve is um an accessibility problem so we're trying to bring those off-chain assets first to crypto natives

uh you can think of you know make a Dao they've been leading the charge there they now hold about 600 million of um us treasury bills and bonds in the forms of ETFs and we've just actually tokenized those two ETFs that they are that they hold um but yeah so bringing those off-chain assets to crypto institutions like maker and smaller ones um to high net worth individuals in crypto that you know for example got a bit scared with usdc um you know when you're holding usdc you've got some counterparty risk

whereas when you're holding book entry Securities essentially you mitigate that risk or you kind of remove it um so yeah short term bringing those assets to um to crypto natives it's likely further down the line um it's about like bringing as well those popular um you know assets S P 500 us treasury bills and bonds two the underbanked people in in South America Africa Southeast Asia uh where for them it's you know for some populations it's actually easier to buy

a Tesla car than it is to buy a Tesla stock um yeah and and the way we approach things was to I mean we've tried to solve the what we call the the trilemma um by bringing assets that are like first safe um I.E like we back them uh by the actual underlying um that their compliance um were based in Switzerland leveraging the DLT act um the Swiss have been very Innovative in their legislation and and also file the prospectus in in Lichtenstein to again make these these tokens retail grade

um security tokens and and the third like um I'd say attributes that's been really missing uh with um you know in the previous attempts of other projects is is that the the tokens are freely transferable uh we think that's that's what's you know that's what really matters if if there's no point tokenizing I don't know U.S treasury Bowser bonds if they if they are limited to being uh to to live in a closed Garden like what's the point why why would the same guys that are able to access that that close Garden are also able to access like to to be

banked why would they why would they you know get exposure um on U.S treasury bonds via close guard and crypto closed Garden when they can just like do it with their Bank um so yeah really like real full transferabilities is is uh is super important um assets that we uh we actually tokenize like the tokens themselves they're playing erc20 tokens uh again the idea is to Leverage uh everything that's been built already in in crypto and D5 um and um yeah so what what does it mean um what's the

what does it mean for crypto what's the potential there uh when you look at crypto right now it's uh one trillion industry um like the the global public equities Market is 100 100 trillion so it's got the potential to like grow defying crypto by a factor of uh 100x um that's that's what we um we think then you can use those tokens and Define general whether it's to you know trade them 24 7 lend them do all sorts of uh d-gen stuff that that's been done with utility tokens

um it also matters to like Financial like the traditional financial markets um and it will mean that price Discovery um would happen on crypto during off-market hours so I don't see a reason why and it's not so distant future the NASDAQ Traders will actually look at you know crypto secondary markets to actually gauge where Securities like Tesla share or the S P 500 or U.S treasury bills should open which is you know pretty pretty cool and it also means like a whole new

a whole new market um available new population whether it's like crypto natives or again underbanked population so um I think there's there's great stuff to um um there's a great future and and great benefits for for both like uh crypto and traditional Finance um if you have any questions feel free um otherwise enjoy the rest of your day but yeah go ahead sorry yep um

so I'll try and speak you know from uh our position uh whenever like we issue or redeem tokens we have to uh do AML on these tokens and so if they go through tornado cash that will raise the the risk quite significantly um we'll also have to enforce like ofak sanction addresses um so it could be possible that you know on secondary markets they they end up you know trading uh but definitely on the primary markets that's that's going to be more complex can you buy them uh yeah they're available on the premier

markets like our our platform um you know further down the line of few weeks months you know there'll be also hopefully secondary markets where all of you could you know get exposure to those assets sure with a debit the dividends from the companies how do you treat that if they if they're in the D5 space you don't know who's holding them so how is the dividends distributed do you keep them are the tokens actually cfds yeah so the question is is about dividends how do we

how do we pass dividends um obviously like sending value to unknown addresses is a as an email fraud so it's a no-go uh we will not be able to do that so the way we've um we've solved that issue is that at first we're looking at we're tokenizing assets that either accumulate so in the case of ETFs they don't distribute they accumulate so basically the yield is in is in the asset in in the product or it's gross stocks and those stocks they don't pay a dividend now if you know in the future we could also like set up like a facility where you could do some like

kyc to be able to get the dividend you could you could still like trade it like you could either like kyc with us and and get the dividend or actually like sell it on the secondary markets uh before dividend you know and before it gets it goes active who custody is the actual asset absolutely the company the human custody to them so when you're talking about like customing the assets I I assume you're talking about the underlyings that we we actually purchase uh we're not regulated custodians so how we do it we actually

have a commercial relationship with a bank that actually cost these those assets one thing you know I would like to emphasize again like compared to cash when you when you deposit cash at your bank you actually lend money to a bank um that money is not yours anymore if the bank goes bankrupt you know you're you have to go in line in in bankruptcy proceedings when you hold Securities book entry Securities um and it's being custody by by a bank they actually custody in a segregated from the balance sheet that's that's a lot safer it removes counterparty risk yeah so

the question is is when you hold the token what do you actually owned like what is it so the reason why we registered the company in Switzerland was because of the dld act the dlti the Swiss they're basically with the DLT act recognize tokens as a valid form of a security so whether you hold a security in the form of a token or a banknote it's the same thing for the Swiss when you hold our token you actually you're a shareholder like you own a piece of a structured product and that structured product without going to too many like details it's it's um it's a note which tracks

the underlying one underlying with the underlying being pledged as collateral to the Token order so it's a very safe structure and yeah it also involves a third-party a security agent which is tasked to actually look at our balance sheet and make sure that there's no funny business um he has to you know step in and actually take control of the custody account if he sees that for example assets are below liabilities yeah please so do we have any Commodities do we

offer Commodities or precious metals at the moment no we we our first um the first five assets that we've tokenized that were first like the S P 500 coinbase um new a Chinese uh Tech stock and now two uh U.S treasury bills and bonds ETF but yeah sure the way we've structured the the product is very scalable and so we can tokenize any potentially any book entry security right now like shares so like ETFs we could tokenize definitely like commodity commodity ETFs very easily we don't really have an agenda and as to

like which asset we should tokenize um we're basically like listening to to you guys the market um and you know wherever there's there's demand uh we'll we'll issue ETF sure so benefits of owning the the token version of the ETF versus the betf um I'd say if you're if you're able to if you have a bank account and you're able to hold the ETF not not so much at the moment like the

added benefits are are nil um but for crypto natives you know dials um really like there's there's it's very difficult for these guys to actually uh hold these assets so it makes sense um further down like in in the future um when there's utility for these Assets in in D5 you could actually see people prefer holding the tokens because they can there's there's added utility with those tokens you can lend them you can earn a yield on them whereas right now in your Robinhood account it's pretty tough like they won't give

you uh that that yield please so I'm I'm not sure taxes to tax any different taxes um it it depends on yourself where your base which which jurisdiction so for example I'm a French national um in France if you keep like if you make profit and keep it in crypto even if it's stable coins

um you're not taxed on that so potentially like that's that's down to you down to where you're with uh not not for not not for shares no yes please there is a withholding tax subject to treasuries in in Switzerland that's what we got a bit delayed on on issuing our our treasury product and um we're launching the product and then we'll be basically moving it uh before the um

fiscal and year of the product to another jurisdiction right now we're opening new issuers and a few different jurisdiction where there isn't such a a problem with uh with all the withholding tax cool thanks very much for uh making it entertaining