The road to creating the global onchain securities market

Transcript

[Music] foreign okay I don't know why presentation is not okay perfect hello everyone um very very glad to be here uh my name is this chibo I'm the co-ceoed co-founder at fairmint so film it what we do is uh we let funders share their success with their community um so yeah you can find me uh on Twitter on podcaster on GitHub uh everything that I'm gonna say here uh I'm definitely not a lawyer

um I'm just an engineer who spend a little bit too much time talking to Securities lawyers so so yeah so no legal advice nothing uh also I'm particularly knowledgeable only in U.S Securities laws so these are like Securities laws are very country specific so don't don't try to interpret what I'm gonna say uh in uh in your own jurisdiction I'm very happy to be back because last time I was at uh at HCC was four years ago so it's been uh it's been quite some time uh lots of things have uh changed since then so I think I'm still as fat yeah so that didn't change

um so yeah today I wanted to talk about the road to creating the global unchain Securities Market um because today as you know like crypto is uh it's about tokens but UT tokens uh that's the easy to issue it's just like it's the first like low hanging fruit when we talk about transfer of value um but like most of uh the Assets in the world are actually Securities right Securities and Compass many different things from uh bonds derivatives equity and uh and today it's a very inefficient Market but first so if there's a road there's a

destination right so so what does the destination look like what do we want to achieve like because today okay you you can trade on Robin Hood okay it's uh it's a it's pretty good um so what is the vision at least that at Fairmont we want to achieve um what we want to do is we want companies ultimately to be able to go public on their own website that's like the goal the goal is so that you remove all intermediaries it reduces the cost dramatically for companies to like interact and issue trade their Securities with their community and everything should happen on their

website so imagine the next coinbase the next Airbnb all the best investors of these companies they are actually users they go on coinbase.com every day they go to airbnb.com every day and so in terms of user experience it would be tremendous in terms also for the company like today when you go public a company doesn't know his investors right like uh Charles Schwab knows that you invested maybe uh in coinbase but coinbase doesn't know like your your all Anonymous to coinbase if you hold coinbase talk so this is something that I think is very uh could bring tons of new use case tons of value creation

um and today it's impossible to do it's impossible to do for a very simple reason which is compliance today so when we deal with Securities like you have to deal with a lot of rules and complaints like uh for to protect investors and today compliance is achieved by intermediation right so there's a whole bunch of people and organizations that are in charge of making sure that issuing and trading Securities is compliant so Brokers so Brokers are the one executing your orders exchanges who are like providing like uh order books Clearinghouse we make sure that the transfer of money is

clearly uh is is done properly custodian who hold your Securities Transfer agents uh that set all their Securities and so all these people they are compliant they are regulated they have many people working for them and each one of them is trying to extract as much value as they can uh in in the in the flow of value so it's slow so to give you an example why it's slow so in the US like uh the settlement when you when you buy a convey share for example uh I have no affiliation with conversion but uh it's a easy example uh the settlement is t plus two meaning it takes two days between the moment that you buy your share and the moment that you actually

hold your share so that's t plus two so it's very it's very slow uh it's expensive for the reason I just uh said and it's also error prone like uh it's not this is something very often I I hear people say okay like all these people they are regulated so there's no error it's perfect uh no not at all like there's a lot of Heroes because there's a lot of things uh that are done um yeah in ways that uh are definitely not programmatic um and yeah just the example for example like what I what I like to to to take into an example we had like this uh Prime there was a custodian in the US that just blew up right they were regulated

everything was fine uh but turns out that uh the the funds there were on the key somewhere they lost half of the funds so they were regulated right so regulatory doesn't mean they're good just means that there's a stamp of approval uh from the government and so what we need to do we need to achieve compliance by programming right and so we need to rewrite the entire security stack uh by like programming it and so the tools at our disposal are only smart contracts wallets and open protocols and this is also important because there's a lot of people especially in the US um when they when they think about blockchain and bringing Securities to

blockchain the only thing they look at is okay that could be a little bit more efficient so they don't like they don't see like a high could change the industry they just say okay like now use t plus two the settlement we could make it more efficient and go to T like t plus one or even instant but I think the real achievement would be to really have an open not a collection of world Gardens where everybody has reproduced what happens in track 5 but only by changing the the base layer but actually by having a global investor network uh that is completely interoperable where people can can like trade on each on each website so

the goal here is like to make this system fast right with a smart contract cheap and reliable so where to start and this is where there's been a lot of mistake in the industry because most of the people in the industry started by going after a license they said okay like uh we are going to trade Securities we are going to issue Securities first thing first we need to get regulated but the problem is that it led to complete catastrophe because um if you are getting regulated from Day Zero like uh getting regulated doesn't build a business it doesn't mean you solve any problem like if you're getting regulated it's going to take a long time and I can tell you by experience because

we actually looked at it at some point and when you're regulated that means that the moment you want to change your product you have like a 50 60 year old guy who every time you want to change your product is poking you on the on the shoulder saying can you explain to me why like this change in in in in your product complies with like this law and so so basically once you're regulated it becomes very very hard to iterate and to find product Market fit so what we say in Tech like the fallacy that is built it and they will come in the Securities Law it's it's like secure license and they will come never happened it did not happen like every um every company who tried to to do that like for example so I don't want to name

them but this is a this is a company that secured a 100 million dollar in funding uh a long time ago they are regulated they they have all the licenses and they have like so I could not put the fifth one but they have five tokens and this is just zero volume nothing so that means that they don't have a product they have a license but they don't have a problem they don't have a product so the only approach as we're rewriting the entire security stack the only approach is a bottom-up approach because you cannot say I'm gonna I'm gonna rewrite everything from scratch and uh and it's gonna it's gonna work like the only way to rebuild the system from scratch in a way that is more open more inclusive that will

enable companies to um go public on their on their own website is a bottom up and so it's fair means like this is femi's approach so everybody does its own like uh uh its own thing but the problem that I wanted they wanted to solve that family to us to make Community ownership easy today there's a lot of funders that wants to share like that to give skin in the game to their community and it's very hard to do for many reasons that uh we're not explaining this uh this presentation and so what we focused on is first like build a delightful product for real customers so that means that like if you're using fairmint you're using famine because you want to be able to issue Equity passively basically you put an invest

Now button on your website and ever anybody who comes across your product or service is able to click on that invest Now button and in a fully compliant way using the firming stack the investor is going to be able to invest in your company without the CFO or the CEO like even have to answer a phone call so it's it's very it's like passive fundraising it works it works pretty well so the interface like obviously so we enable you to Grant Equity to to receive fundraising uh there's a there's a live captable module and all of this still is the vision that it happens on your website right so this is what the investor button you put it wherever you want on your website you don't have to Market it basically every time you

communicate every time you do any sort of marketing you expose the fact that people can invest in your company to your to your community and without middlemen so if you use fairmint we automated everything so there's no um lawyer needed unless you want to bring your own legal uh there's no SPV there's no you don't need to have a to have a captable management tool and customers love it right so so that you can you can see it like it's very easy like the the holy the holy moment always arrive at the same time is when like our customers receive like a 10 000 plus uh uh investment and if possible like from somebody that didn't pitch and overnight

and this is this is the moment where we receive this type of of messages this is what I call like passive fundraising and so now like what what's the stage that we are right now now we are going to push to really put as much equity on chain as possible because putting as much equity on chain as possible will also put as much investors on chain as possible and now becomes the the critical part where instead of recreating a war garden now we're starting to collaborate so basically ferment in the background like um all the the set of smart contracts everything was being like thought for being opened up and used by other people and now we're working on as we grow

we're working on standardizing so unchain compliance the the Unchained Capital representation and like the kyc data sharing so all all the things that will enable other companies other partners to plug it into the network and be able to leverage uh like our network of investors and we don't do that alone uh we're very fortunate to have found other people who believe like in the same vision as as us namely a company called poet Network and so we're working already like uh at several Partners to standardize this so if here like you have also a company or your

founder in the field and you're working on securities please reach out to us because uh so I I this is still um this is still not announced but we already have like a working group and uh and we're making great progress into standardizing like um everything that I'm uh that I'm showing here so so yeah so we think this is very important and funny enough Securities the field of Securities on chain is is uh sometimes the characters I characterize it like this is that a lot of people in crypto are very young and so they they kind of afraid or they don't want to talk to lawyers and so they don't come up with solution for Securities and most of the people who

went after like creating solutions for Securities are quite old and so the only thing they want to do is they want to recreate what exists today and uh but put it on chain and I think there's the the the the potential for the Unchained Securities Market is much bigger than this and we need to rethink how it works but in a pure defy way right so by defy I mean open way we're not here to recreate close Garden uh we're here to open up and share um like create standards so that uh security is trading and securities issue influence can like be standards that are used by everybody

I think I'm way over so I will I'll take question I use the real time so okay thank you thank you [Music] [Music]