Tokenization & Future of Finance

Transcript

all right so thank you so much for joining uh everybody today we're going to be talking about the tokenization and the future of finance uh today with us we have jean-marc from realty fedor from lens and stein john from i am in olab and arno from so we'll go over um tokenization and the future of finance they have a lot to say about this i think the audience have a lot to ask as well so before we get into um the panel discussion we will um look a little bit into what is the crypto value association so we can give you a little bit about

ourselves a little bit of an idea of who we are and and why uh you should become part of this community and follow us through our journey of digitalization um as well so let me share my screen with you now all right so a little bit about us um our vision firstly is to enable blockchain and other cryptographic technologies we're here um as an infrastructure and ecosystem to be able to provide support to everybody around it and

be able to really grow your project to create partnerships and to create an environment which is friendly and allows you to to grow our mission is to become recognized as the global uh leading ecosystem for blockchain and cryptographic um technologies through our members and here you can see some of our core values of which is transparency and professionalism so a little bit of the timeline uh so as some of you some of you know the crypto valley was uh actually founded in uh 2013 so not the crypto values 15 itself the the crypto valley uh with actually the inception of um ethereum

by some of its founding partners um as well and so then uh due to the need of an association to support this ecosystem the crypto valley association was born in january 2017 so three years uh ago now it's quite uh we've come quite some far from that so that we also uh had a round table where we discussed with finma on token classifications i mean fun fact for you um switzerland was one of the first countries to bring out a standard for um for um classification of tokens being um and asset tokens payment tokens and utility tokens

um then in 2013 2019 we had the one of the first conferences um within the crypto valley 1200 attendees some of you might have been there it was a great event and then we launched the virtual um series which i'll be telling you more about later um it's an interesting uh one a little bit uh for our audience here that aren't from switzerland to see a little bit about our ecosystem here's some of the latest figures that came out from the cvc report um just recently actually definitely recommend uh you're going to check that out there's definitely some great uh details within that and here you can see the crypto valley which is based in zug

has 439 projects that are working with blockchain based technologies and you can see some of the others other cantons and regions and and how things are are dispersed a little bit around but you can see that the crypto valley has uh the most um so a little bit of our members our ecosystem is around 7 100 members around 900 of them being active and 150 corporate members as you can see here uh from from this list many uh many that you probably are familiar with so working groups and chapters i think

this is what drives our ecosystem this is one of the most important things probably for our viewers that might be interested to learn more about the regulation tax investing um cyber security they might even want to learn more about blockchain technology and we offer via our working groups the ability to converse with uh thought leaders and to be able to um if you're building a project to converse with potential partners and grow from this and even the potential to organize your own events um based on a project or topic that you're interested in and we have a new entry uh coming this season which is the startup so every startup wants to speak and understand from from others and network and communicate so

uh through this growing demand we decided to create a working group based on uh startups to help and support um them can't forget our chapters which which help um the different regions within switzerland as you all know switzerland is quite diverse with its many languages so our chapters uh help communicate um with our local um locally um essentially so the western chapter based in the french speaking part in southern um in in italy um and so the cva events here you can see a little bit about the crypto valley conference that we hosted some lovely uh photos unfortunately we couldn't do it um this year we had

some great events in the past in collaboration with some universities and then due to the covid uh 19 pandemic we had to go fully um digital so one of the great uh attractions here is actually uh the online portal that we have it's like a mini linkedin for uh for cryptocurrencies you can see all the people that are around uh in our uh in our network if you're within for example london for a day and you'd like to network and get a coffee with somebody that is crypto blockchain related you can find them on the map and directly message them uh we have some great features within that um live feed events news uh job portal um etc so i definitely recommend uh

checking that out and then of course we launched our virtual series some great events on stable coins enterprise blockchain the bitcoin halving which was great with a little after party after and then uh we we're moving on to the next series of virtual uh events which is going to be a blast so stay tuned for the next ones that are to come if you want to join us it's very simple uh individual memberships are 100 swiss francs per year and then corporates vary from 500 swiss francs to a little bit more depending on the size of your company to benefit from all the advantages uh said above so that being said i'm i'm here and available uh to support if

anybody needs uh anything any questions after the uh the webinar about the crypto valley association or anything related to what was discussed feel free to reach out uh to me personally and i'll be happy to support you with any needs that you may have so without any further ado we can get um started so if i give you a little bit of the gender uh for today we will go over um an introduction of each one of our panelists and their their companies so you can get to know them a little bit and then we will go on to um a q a whereby i will be asking some prominent questions about the tokenization space for our experts here

and at the end we will have 15 20 minutes for you all questions so feel free to do so um at your leisure as well so first person i invite to speak uh today is jean-marc please if you would like to unmute yourself good afternoon yes i'm jean-marc jacobson co-founder of realty inc real token along with my brother remy we founded realty in uh february 2019 and its purpose is the tokenization of real estate mostly american real estate is an american company

so we come initially from the real estate space that's what we've been working in for many decades early in 2012 we discovered blockchain bitcoin at the time that's mainly what they existed we became miners we created the first bitcoin embassy and we waited until the legals allowed us to join both passions together and realty was born from those two passions real estate and blockchain today we took a nice u.s real estate only we are trying and um to move to other jurisdictions and as we'll discuss legals are always

a very important part of uh tokenization asset tokenization space so we look forward to having those discussions awesome thank you so much jean-marc um fedor would you like to take the stage sure thank you very very much and and thank you very much for the introduction about the importance of legal so we are the ones who block the the creativity so by way of introduction so i i'm a partner at lansing style and we're a law firm um swiss law firm based in geneva lausanne and zurich we are one of the largest swiss law firms where full service firms so we cover all areas

of law including real estate and fintech mom in my role as a partner within the firm i'm one of the partners in the banking and financial practice and also heading the fintech desk um you know if you want more information on the farm you might you can go to our website etc i will not bore you with that uh what is potentially more relevant to our today's discussion is um i'm also the acting secretary general of the capital markets and technology association which is a swiss association which we co-founded as a farm together with the swiss quote and temenos with the support of the epfl

um the the purpose of the cmta is we're not a competitor to the cva we're sort of a parallel association which aims more at trying to to build and work out standards um on an institutional level um and and then promote those standards to uh improve the the acceptance of the technology within the the industry uh division originally uh was uh the the region uh the division originally was to uh make sure that in capital markets transaction the benefits of blockchain technology and other technologies um by the same token can be ripped

without legal uh problems or obstacles and this is why in in april 18 looking at how some legal scholars and you know publications were advocating that it was not possible to let's say tokenized shares under swiss law because of certain legal obstacles um our thinking was a little bit different rather than saying that it's not possible we tried to craft a way which actually under the current law makes it possible and and also bring the legal basis and legal reasoning underpinning that and so that's how it all started essentially and on on that basis we managed to to issue a blueprint for

tokenization of securities which is public you can go on the cmta website and look at the blueprint um i think that that will be helpful and essentially once you have a blueprint for one type of asset you can build on that to to to tokenize other assets and you know why not why not real estate but obviously and as we'll discuss later legal and regulatory but also tax play a role in limiting the ability of what you can do despite the technological advances okay yeah very interesting thank you so much for that yeah i'm looking forward to discussing that in further detail um john

please tell us a little bit more about yourself hi everybody my name is john orthwine and i started my career as a software engineer working on distributed high availability systems and then i fell into uh the investment management world i worked at man investments and lgt capital partners in liquid alternatives and about around that time bitcoin was was starting out and i attended a number of the bitcoin meetups here in in zurich uh that was really the place to get uh some really first-hand information to figure out what is this new animal it was extremely interesting it really hit the nexus of my interests of

finance and and software engineering so that was a super interesting ride for a number of years and then i got the opportunity to join melonport which was a project to create blockchain based infrastructure for fund management and at mellenport i was working on the risk modules mostly and after that project which is now live after that project and then joined the iam innovation lab here in zurich and the idea behind the lab is to really be innovation and inspiration for asset managers

and investment managers um we do we don't only work with asset managers but that's kind of where our expertise is and where our historical backgrounds are we do ideation and prototyping and implementation of uh software projects and systems uh and we kind of try to focus on the on new kinds innovation in user experience and new business models and and blockchain and tokenization type of efforts so that's kind of where our our focus is uh we do this through some any any kind of combination of design thinking or classical project delivery um [Music]

yeah i think that that sums up very well right now great okay perfect thank you um so much john uh for that uh i know last but not least please hi charles thank you i'm arno salomon i'm the ceo and founder of montpellier originally my background is engineering and communication systems i studied at epfl in lausanne but i did all my career in finance mostly as a commodity and fx trader we actually i fell in love with bitcoin back in 2012.

for me that was a real discovery that was a real um slap in my face when i discovered it it was answering pretty much all the questions i had about what is money and uh since then it became an obsession um obviously as remark stated the underlying technology the blockchain is very interesting for the opportunities it offers for the financial world simply because at the end of the day and pretty much all financial assets all contracts and it can be somehow modeled uh in a way or another in the form of smart contracts so you can automate a lot of its um life cycle and we believe this is a very interesting topic to work on that's how mobile around was built um actually back in 2018

uh we did incorporate the share of mobile and scotland in two tokens together with fedor and then sanchez it was quite new at the time because it was already pretty much hype all the security tokens and stos et cetera but at that time they were mostly set up in in the form of a private contractor agreement between the company the issuer and the token holder yeah and therefore they were trying to mimic the shares and and and providing by contracts some kind of rights for the token holders such as consultative voting rights rights on future dividends so it was somehow mimicking the shares but legally speaking it was not

and at that time it was quite new to be able to really incorporate the share of a company into tokens and to distribute uh directly to the crowd so we did obviously crowdfunding this way and now we're working on building a new a new kind of financial institution we're based in geneva and we're very much and we are very much focused on tokenization frameworks how to bring compliance layers onto that how to make sure that we can enforce uh the same level of compliance that we have today within centralized ecosystem onto uh the tokenized world yeah and we believe this is crucial because through the usage of rule engine you can

really automate and have straight through processing as much as possible obviously there are always some issues that has to be dealt by human and that's why we came up with this comprehensive framework that includes compliance oracles meaning that some people can actually do this on off off chain unchained bridging world yeah and i believe this is what we're going to speak today yes exactly thank you so much um for that and we'll hear a little bit more from arnold and later on but you spoke a little about the tokenization of um your your equity and we hear a lot the tokenization of real estate being one of the the key use cases here so um maybe you can tell us a little bit

more about why we're hearing so much about uh real estate tokenization and why realty decided to get into the tokenization of real estate and not maybe art or something else for example um your needs of course i'd love to so we when we looked at as i said we come from real estate and we were trying to look at a solution to tokenize real estate for a long time and even today you cannot have a property directly tokenized it's impossible there's no land registry that will allow to write tokens and even if someone registries are on the blockchain now

there are a few of them they don't allow for tokenization so when we discovered that it was possible as arnold said just a few seconds ago to be able to tokenize a company to express the shareholding through tokens directly in the incorporation documents of that company then we understood that we had a way to tokenize ownership of real estate uh that meant that we have one company in the us we took one llc that purchased one asset exclusively so one llc one asset we tokenized the llc at its incorporation and then we could

distribute the tokens now it has a lot of advantages because the token is independent and exists on the blockchain actually on ethereum it's there so not only is there is there the intricate value of the real estate behind it but there's also the fact that it's a token that's usable in d5 you can use it uh for on that way later on you can use it uh to get the rent in usdc that you can put on compound etc so we really can leverage the uh power of the upcoming industry there are some drawbacks to tokenizations today that is today we have to do it through

an llc so when we receive rent and when we distribute it to the um owners token owners it's considered as it is clearly a security token it will be considered as a dividend payment therefore taxes come in um and it creates a lot of complexities from the securities point of view sec etc from the real estate point of view and accounting so in switzerland we looked very quickly at the possibilities of uh tokenizing real estate a main challenge came from the accounting side the possibility to give dividends

well the rent through dividends regularly before the year end was over one other where a good example of where the law doesn't really follow the technology at realty we can distribute before the gas when totally nuts we distributed the rent on a daily basis every day you received a fraction of the rent that you could see can't do that through dividends and shares you need first to close the accounting up for the period and then be able to issue the payments so all these are very interesting areas there remains a lot to be done in our but whether we are we are the forefront and i believe that realty is the only

one really today that allows to have an independent token that lives actually on the ethereum blockchain i think that's very important okay that's an it's an interesting one and uh you spoke a little bit about um the challenges so maybe fedor you can tell us a little bit more about that as you're representing one of switzerland's leading uh law firms what challenges do you see when it comes to tokenization of assets in switzerland and and globally speaking thank you thank you shiraz and angela thanks for the the description of what you are doing with real estate etc i think in a sense the challenges start with semantics when we talk about

tokenized using real estate as jean-marc rightly said it's not uh it's a misnomer it's this the the actual holding vehicle that is tokenized today so the shares in a holding vehicle are tokenized and in a sense it's just like what was the fad 10 15 years ago in terms of securitization the securitization wave covered real estate covered bonds portfolios of assets receivables credit card debt you know cars etc a lot of stuff and the situation was more or less the same so you have an asset transferred from an originator to the securitization vehicle the securitization vehicle

dumps securities on the market uh to transfer the risk on the market related to the the asset and the originator received the the purchase price it's a similar strategy here technically uh such this strategy can cover anything you could put art in that thing and then say with tokenized art it will just need to be kept involved by that securitization vehicle that's sort of the practical first aspect on structuring but then unfortunately you still have regulation and when you talk about tokenization the the the idea behind is to push the value of the assets to a large number of people

so the the boundary there between this and on the collective investment is very thin and a lot of regulators switzerland who is one of the first is very very protective of the investors and say if it's a collective investment scheme the threshold of regulation is here and no way you can meet that with a low-cost technological solution so that's one threshold you can overcome that in certain circumstances including with real estate then you will legal challenges just the pure legal challenge because you're doing it first and you have to distribute that to the investors and make sure that legally it works and the the assets will be transferred that's

solved more or less at least in switzerland it will be totally secure with the new law which has been now voted by both chambers of parliament there is a final vote and then referendum period and then we'll have a sort of fully secured transferability of those of those tokenized shares and on instruments so once that's sorted out you still have other obstacles for real estate you have for residential real estate the restrictions are on ownership foreigners you know cannot cannot invest etc well you can do it with commercial real estate potentially but that's that's a restriction you have tax if you do a swiss tokenization vehicle for real estate and you pay dividends as jean-marc described

you want to pay them first you know as soon as you know as often as possible that's difficult there might be solutions to circumvent that but you know it's difficult accounting will be a nightmare uh and taxes dividends from a swiss company you know attract 35 withholding tax so that's it you you practically can kill the project because of the tax friction uh for the same at the same time you know for the same piece of real estate or asset um a luxembourg securitization vehicle again you're using the old for the new they can tokenize whatever they they issue and that can sort of works whatever you could securitize at the time

you can tokenize today by just tokenizing those securities um and then ultimately not only from a legal regulatory perspective but more practical as well it's all well and good to have tokenized something but the missing bit until today has been the secondary market you know it's it has always been the problem with the on the roof for securities market and private equity deals and other liquid investments you know you're stuck with the investment until a liquidity event or the the investment goes bust now the tokenization allows to solve the first problem and creates a potential for liquidity

but you still need to have a marketplace an infrastructure where you can go and meet you know buyers meet sellers and transact so the there's a problem in terms of approach today's world is built around centralized systems so you have a centralized stock exchange and you have brokers dealers and everything pools and then they have the the meeting etcetera but that that's intermediaries and costs with blockchain the advantages you can have the partially or totally decentralized marketplaces however before you do that the regulators have to go through that wrap their head around market manipulation

market conduct how to localize that and what you know regulatory regime to apply to protect the investors um so that that's still a sort of hurdle i think in switzerland with the new law we'll reach a point where lightweight structures dlt based secondary marketplaces will be able to be licensed pretty easily at low cost and low capital uh adequacy requirements so that will be a good breakthrough because once you have the secondary market and you know that the cost of getting there to get into the liquidity and to your investors is sort of lower than doing obviously an ipo or a

private placement that sort of will channel deals to that structure and to tokenizing things so today it's sort of difficult that there are certain otfs that are about to be launched uh but it's still sort of next day etcetera i think by the end of the year it will be sorted and therefore you will have a full infrastructure chain to sort of do you know any capital market transaction globally it's a difficult one i obviously cannot comment on other laws but each jurisdiction looks at that from two angles one is oh i want to be competitive and track business the other i don't want to let you know shady stuff come in and and

you know have all that the the the transaction that that would attract bad press so they are sort of between uh the hammer and a hard place and they want to do the balancing act so balance the acc saying saying oh yes yes we want to do this but on the other hand they will not issue no action letters or not authorize a crypto fund or not authorize this or that or et cetera same with other regulators like the eu is pushing on maybe you've seen there is a leaked document on on dlt framework for the eu to create a sort of digital asset market a good read by the way but it's still you know getting there and i think it still needs to get enough regulation a little bit more absolutely um but i

would advise anyone to think about not going into the direction of saying regulation is doesn't apply to that it doesn't i'm laughing i'm sorry just i have to drop it because basically uh even though i'm in real estate and i'm from uh bitcoin in the beginning the first thing i spoke about in my introduction was the legals you described exactly the nightmare that we had to go through at the beginning of realty to go all through the hoops the legals the lawyers the probation the exemptions you have to do it with that that can you put exemption in a smart contract of course we can and then the auditor comes

and looks and said so how do you deal with that we show them the smart contract and you can see their eyes like in cartoons you know going spirals get rid of that nobody's gonna understand that so we have to go back to the old way i mean it's exactly how you describe it so maybe we can we can take uh the perspective of somebody that's uh done it uh now john i know uh you're from uh i am uh in our lab uh you've chosen to tokenize uh your equity maybe you can tell us why you decided to do this and some of the benefits and challenges you faced in a practical sense yeah sure sure does um well as our name suggests we're all about innovation we're really

dedicated and committed to helping big institutions try and innovate try and do new things because what we kind of see is that they're really their hands are tied in in many things in this inner innovation arena they have to they have to uh get approval from different apartment departments they have to get budgetary requirements approved and and they're they're very slow-moving um we kind of we kind of say they're they're these large tankers and our whole thesis is we wanted to be this speed boat that could move and execute projects very quickly for these large institutions to do things like prototypes and to show uh what can be achieved what

kinds of new business models can we can we look at by by doing this very quick innovative uh prototyping type projects um and we really believed that tokenization was an extremely uh really a groundbreaking social technology really and we we could talk about tokenization all day long but it just has a different weight if you do it yourself so we decided to take the the equity of our company and to go through that process and to to have a very careful process how we did it how we chose the technology and how we went about it and so we started out really by

looking to see if it's possible legally for that the cmta was very very interesting to read their their blueprint and to to take a lot from that and then we did many rounds with with different uh technology providers and different even considering doing doing our own standard but in the end what we really wanted was an extremely open technology one that let us be in control and one that um yeah was was freely transferable and didn't require kind of the uh uh a platform around it for doing things like asking permission to

to exchange or or to to transfer an asset from a to b and so we ended up talking to mom paladin and they had the bridge protocol which is an erc20 compliant standard but it has a lot more than that it's completely open and it left us in control of the token completely and it was all open source it was all very well executed and it had some really interesting things like this ability to upgrade because we often talk about this word immutable with smart contracts but um you know forever is a long time and things change and laws change so this idea of being able to upgrade a

smart contract was very interesting and and they used open zeppelin's uh upgradable proxy which was extremely interesting technology to learn about and to to look into um uh and they also have this rules engine so at the moment uh we we did use this technology to to do the tokenization we've issued and deployed this token um it's on the ethereum network right now and the interesting thing about it and it's wide open at the moment so anybody can buy this and transfer it to anybody else but we have the ability should the laws require to be able to uh put rules on top with their rules engine so we we found

that all very attractive and that's that's why we chose to go with them so it was really about the openness and the flexibility on the technical side and uh having them also worked with lens and stalin on the cmta blueprint that offered a very convenient package for for us to do that and again so the whole reason we did that was not to raise funds for a company but so that we could go through that whole experience from the legal side to the technical side to the deployment of the token and the eventual management so that whole life cycle really of uh issuing a token and tying it to this legal idea of a company's equity here at least at least for a swiss company yes

um so we were able to do that and and uh that went very well and the whole reason we wanted to do that is so that we could speak from experience so that we could really uh you know walk the talk everybody's talking about tokenization we actually did it we now know how to do it and and there's a lot of experience that we gathered along the way um and now going forward with that we we're looking and how can we use that now because it's really great to have this idea of wow i have a tokenized share now what right because really tokenization the big benefit is for something that needs to be extremely liquid right if you buy something and hold it for for 10 years

what is that what is it what is the tokenization that get you so the point is with this tokenization of of real world things like company shares the interesting thing going forward will be what can we do with that now so we can think about uh you know putting this using this as collateral or lending it or using new structures to govern it like multi-sigs using these governance tools we can look at trading it on decentralized exchanges ammms like uni swap so these are all really interesting areas that we want to explore because that's our business our business is to help companies innovate

and to to uh kind of breed these new ideas with with tokens oh great uh great to hear and and i'm glad that you know we always have this bad perception right that crypto companies all they do is talk the talk but i'm glad that you've been able to walk the walk as well and now we get the opportunity to hear from um the man himself arnold ceo of montpellier maybe you can tell us a little bit more um about um this what building block tokenization solves um in uh the way you're trying to reinvent um financial institutions yeah thank you thank you very much john as think i would like also to start with

the first um i think it was clear from what everybody said but i believe it's it's it's important to emphasize on it is that the token um is not a new asset class a token is just as good as the underlying that you incorporate into and in this sense it's very different from the crypto world like bitcoin and ether because those are true new asset class yeah those those two new assets there is no well-identified issuer it's an open network everybody can join but when you actually issue token um actually the token is just a technological vehicle and the issuer is actually extremely well identified and he has to respect the existing rules and the rules actually applies to the underlying not

the token itself but the good thing is that this technological vehicle um can be programmed to behave exactly how it's supposed to and uh and that's what we believe um this is the future i mean we've been talking a lot about um equity tokenization and shares in particular and we truly believe here that in the companies will directly incorporate on the blockchain and manage their capital on chain um today it's different obviously today you create a traditional company then you have a board resolution to incorporate it into tokens you have to add some articles into the buy laws of the company and that's pretty much it and and but again this is this is a two-step process you first incorporated

the traditionally the company and then you can incorporate the shares into in the future we truly believe that even the commercial registry will offer that yeah they will actually uh offer the possibility for the companies to manage their capital onto a blockchain and to have all the governance tools as well as as well as the corporate actions and possible from you know that's exactly what was built you know like interfaces for companies to have a cockpit of management of the company to pilot actually the way you need the company to be to actually make um general meetings you know the annual general meetings where the uh the board meets the uh the shareholders and present the numbers present the report

uh present the vision of the future and also have people to vote yeah because this is important one when you're a shareholder you have rights attached to it yeah the social rights of footy and um that's why we came up with also this framework of having the wallet uh the idea of having it yet another wallet yes but the idea was also to incorporate into this wallet some um features of the securities world yeah such as the voting such as participating to a general meeting such as having uh all the corporate actions being readable in a human way uh uh and not being geeky to use and having like a restrictions of transferability that pops up in the in the form of error

2020 something etcetera yeah so this is really for us the the way forward and where we believe things uh are going forward um but that's again for shares of a company and this is straightforward but at the end of the day as i said at the beginning every banking asset every financial asset or contracts and it can be modeled in the form of smart contracts you can automate parts of this contract you can have its life cycle to be managed in a compliant way and to have actually reduced reduction of uh operational costs for the issue area and and and now if people also agree on the modalization of certain assets it can really become a game changer for

the financial industry because now they can have a kind of shared back office where they can mutualize the cost and and we believe this is really the best way for the swiss financial ecosystem to get to the next step yeah to reinvent itself okay well thank you thank you so much i'm looking forward to hearing more one of the important points there is that you you are essentially when you tokenize you don't create something new it's just data at the end of the day but you can mold anything into a programmable entity that can bring you enforced compliance directly embedded in the asset and you

can have either rules contractualize things etc you can smart contract with virtually anything the other question will be whether you should because there are some things you may not want to do but ultimately that will bring as arnold mentioned regulation directly in the asset which is a very new concept um and could you know if you tokenize the swiss franc and there is a new paper from the ichiha on the e-frank with a dual payment layer an underlying base layer with a with a blockchain you can with a programmable frank you can build a sort of a currency that is inherently aml resistant so all that talk about

crypto and digital assets being prone to increased aml risks will essentially go away because you build aml compliance in a way which makes it even better and more secure towards from that perspective than that normal transactions and normal bank to bank payments great thank you for that clarification tell us there is a big statement on on your website uh that says that real estate is the best investment you can make um we're here in the crypto space and we've been through some of the big uptrends of of bitcoin and and other digital uh assets so please tell us tell us why is this uh the best

investment we can make well it's a false statement i agree and and yet i profoundly believe in it um and by real estate i really meant residential real estate specifically multi-residential real estate keep in mind though that real estate is a very highly localized business and i come from the us and canada i'm canadian so when i when that statement was made it was geared towards u.s real estate if you look at it uh historically you take any 10 years multi-residential real estate outperformed stocks at perform bonds outperformed any other asset class not only do you have the yield

which is always very interesting you have the capital gains over the period of 10 years and it's not neglectable at all when you enter real estate it's usually a long-term investment and over 10 years the capital appreciation is very interesting and in addition to that you have all the that comes with owning real estate such as depreciation which can become a tax advantage there's always a special program that allows you to um defer your taxes or to have more liquidity in some way so i do believe that the asset class of is one of the better ones now i come

from crypto as well i was there in 2012 remember so i went through i went through the whole thing i was a minor we were minors we were uh we did people points of sales we did a lot of things the the embassies and i do believe that this new asset class of cryptocurrencies and of tokens even though tokens are nothing new in the sense that they just digitalize what exists it creates some added advantages that will develop into an evolution of the old classes well as much as i believe that this is fantastic and great and phenomenal i do believe that the asset that the real estate tokenized is even more phenomenal

because it will have interesting value of the asset and of the liquidity and features provided by uh the tokenization mostly through the dapps and the d5 that's coming swap was mentioned by john there are many others to come and with the controls that we can have through montpellier's application seriously i think that the future is nearly here all the pieces are together and we're at the beginning of a um of a revolution that will be very quick okay look at what's going on today for for that i think a big a big piece of that puzzle is are actually um

nfts and something uh it's really touched upon uh but maybe john you can give us some insight into nfts non-fundable tokens for those um that aren't aware of what they are special type of tokens which represent something unique um so maybe tell us uh john why why are these tokens so special in the context of tokenization yeah sure i'd love to i just want to make one comment first on something arno also said where he talked about tokens being a rapper but um we haven't talked about uh tokens that are actually natively valuable in some way so for the first one that comes to my mind is is ether for example which is valuable because it's a resource where

you can get you can use so that you can execute smart contract instructions um so these are digitally native so we don't really have that issue um of of of wrapping real world things in that sense and so it's very closer to this idea of defy i just wanted to just wanted to throw that one out there um okay yeah it's it's really interesting because um we we initially thought that a lot of what we did would be uh helping institutions to understand what what this blockchain thing is and what tokenization is but what we're what we're hearing a lot in the past half year

is a lot of questions around what is defy what's going on there and what is what is this thing nft what is that and so it's really interesting that that's what's uh piquing interest right now nfts are it's non-fungible tokens so what it means is if i have if i have a uh a dollar bill uh you're indifferent between which dollar bill i give you right so those two things are fungible it doesn't matter which one you get because they both have the same value in your eyes but if um if i would have for example two different stamps and one is a very valuable stamp and the other's not even though they have the same value as a stamp

there's a definitely a preference for one because uh there's something special about it it's unique and that's what non-fungible tokens are they're unique tokens so each one is the same uh sorry each one is is different uh and they're used in many different ways um the the art scene is seeing a big uh upswing right now in tokenized art so the the fact that you might own the right to something through a token through an nft and you're able to trade that um this is all uh that you can use a token to verify authenticity of something these are all new use cases new ways to

use the blockchain um in in ways that we haven't really thought about before because we're so used to thinking about i'm transferring bitcoin from a to b but um it doesn't matter which bitcoin i give you because they're fungible so this idea of having differentiable tokens nfts is is really interesting and i think it's it's peaking a lot of interest from people in terms of collectibles and uh and and other things yeah yeah okay i've had a lot of i've had a lot of questions regarding nfts recently mostly in the art scene like you said john and muslim digital art art that lives on the um on the just

digitally on your screen basically yeah and i'm not sure how that works well one thing that's interesting there is that for some reason there's there's something really interesting going on in human psychology and when it comes to this idea of something is scarce something is limited that's triggering something in human psychology and people want to say i'm the owner of it so it's one thing to also say i'm the owner of it and i can prove it but it's the another thing to say if i choose to sell it i have a right to that cash flow and those two things together i think are what's firing up this this art scene in nfts okay thank you wonderful thanks so much so

that's true i have to keep in mind the legal aspects of that because tokenizing real estate it's all well and good but you still have someone physically in possession of the art so selling the token and transferring that is works for as long as you can trust the one who physically holds the the asset and that that's for me one of the practical challenges of tokenization yeah that's useful for things like art that's true of physical art yes but what we're talking about now is is digital art and that gets back to the idea of i mean how does this work because if it's digital i can surely copy it that's true but we're talking about

really having the right to own it and the right to transfer it and that's wrapped up in this idea of an nft token and uh it's it kind of goes really well with this idea of digital scarcity which is kind of the big idea behind what tokens actually are right that's that's we never figured that out until we had the blockchain and i would like also to add that you know in the um nft world the cryptokitties they were very an interesting use case i mean they were you could breed them to create new and when you have like some scars father and mother you can breed a new one that would be you know somehow even more valuable etc and this can be you know this whole

cryptokitties world can even apply to other real world use cases such as take the example of horses you know the entire horse industry you know if you can put the horse in the form of a token that has attributes and then you can have all the parents the grandparents and all the uh the generation to be linked together because now you have like obviously you need as fedor said you need some central point of trust that will certify it the fact that this force is actually in line with all the attributes that were put on chain et cetera but it creates also a way to have now a market for people to actually buy and sell

and have the ownership of those courses and and and have like provable oracles to track all the performance and all the the you know the winning races etc etc there are a lot of new concepts that can be applied to this nft from the real world as well yeah it's uh there's there's an actually a very interesting new development right now the the lending platform ave they have released something called avagoches which kind of is a take on um tamagotchis right so these are small nfts that actually have a yield bearing asset embedded inside of them so they're appealing to the collector side and

they're appealing to the financial side of people so that's that's a you know really really interesting new hybrid types of vehicles even if it's like a mini vehicle that we're seeing come to life because of blockchain technology and we couldn't have even dreamed that something like this was possible in the traditional world wow okay and maybe just adding on to uh i know you're speaking about the tokenization um of horses um and this is a question to to all of you is is there a limitation of tokenization where we reach an ethical boundary right i mean if you're tokenizing horses and then you're breeding them and then it's more looked at in terms of data and

numbers is there a limit to what we can do with the digitalization um of of the world is there a certain barrier where we'll be like okay well we should not digitalize this specific asset or entity um well for me pretty much everything can be tokenized as fedor said the question is not if but if it's a good idea or if it's actually valuable to do it in some cases it is in some cases it is not but we truly believe that for the financial world in this case this is actually game changer and you can really a way to have a new decentralized markets where you can have on the same

network um the institutions the fintechs the smes as well as the average draw the retail and every um rule is embedded into the token itself meaning that if an asset can be distributed by law you know it can be only distributable to a certain geographical uh uh area only for europeans or maybe to the entire world but excluding some country or maybe your asset there is some very complex structure that is risky and therefore it's under my feet rules you have to make sure that each and every owners of that token or um have the correct risk profile you know discovers mistaker or the financials all that you know can be really coded into it and that actually is really

uh going to reduce the operational cost of managing it and having less intermediaries and having basically all those intermediaries to be brought down into the network layer you know to have those intermediaries to just a commodity that everybody use they're not intermediaries anymore they're smart contracts that actually act as they should because it's pre-programmed and if you think of exchanges as fedor said you know it's something that in the will become a network commodity yeah today we need this external point of trust because on one side i will deposit my security on the other side you will deposit the cash we will be able to trade then there is a settlement and we can get back ownership but this is something that in the future will be

a future of the network simply because on the network you will have a shared order book where everybody can put orders limit orders and you can grant some allowance to such a network saying like i allow this network to actually take into my wallet up to 1 thousand ten thousand whatever you place your orders when there is a match disappear to pierce one which will be that this is the future of the decentralization and having all those external bodies to be commoditized into the network layer itself and i'd like to even forget further than what anno said he mentioned all these intermediaries that would basically have a lower role because they'll be part of the smart contract same is true with

respect of regulations anything unethical well what i think is what's legal normally all the legalities will be embedded in the smart contracts which means that some operations that we can do that can be done illegally today through some stock manipulations and all this and where the law enforcement comes after the fact chances are that within the near mid future those would be impossible because they would be prevented from being done by their smart contract itself so also there you would have more effects actually on the markets it would be more trustable because all of the um smart contracts would have to be audited verified for certain rules

and there would be a big criminality element that would be prevented from happening that's how i see it yeah i'm not sure about that um i mean what i think is i mean this is this is a technology it's a it's a social technology and it's a tool and we as a society we choose to use certain tools or not and we choose how to use them and that kind of determines you know what's ethical and and legality and ethical uh ethical is is not always is does not always overlap perfectly um i think that in terms of hard-coding laws inside of smart contracts sure you can do that but this kind of interaction on the

blockchain will be purely an opt-in type of activity because there will always be those because laws in general represent a friction and a cost right this is always the case it's some kind of constraint so you can have this and these will be opt-in things but there will always be a version of it where this is forked out because it's more efficient it's cheaper it's faster etc that's that's how i see that playing out uh it'll be you choose to opt into okay thank you so much um hopefully everyone will choose to obtain into compliance but i think the other questions that this raises is the

question of transparency versus privacy who controls the data and i i don't have the answers um i mean there are proponents who say it should be private fully private um that's fine um and i think there is merit in having the user the data subject being in control of his own data and that can reverse a number of business models and you know revert to more ethical things like mining data on social networks etc but on the other hand it's in the interest of everybody and globally of the system that illegal behaviors

be weeded out and i would disagree that an opt-in system is the only way to go i think the the best way would be to have a consensus on the standards and to put to push those standards as mainstream and obviously they will be on the fringe people that disagree and they will have you know the freedom to use something else but the mainstream should be secure and i think the the the sole reason why it is it will not be moving as fast as one can expect is it has a cost who will spend money developing a regulatory system that will be as as john mentioned be perceived as as a business killer so either either

regulators will come to up to speed and there will be a huge educational effort before that happens and they will spend money on bringing certain minimum standards saying this is one how you can transact you securities that organize securities and this is the minimum things you need to implement and then you have you have regulated markets yeah and otherwise you will have chaos thank you so much um for that fedor and as we're reaching the end uh now or we've passed the end um even and there's a few questions um here as well um i think we won't have time to answer all of them but since we have um the tokenization and the future

of finance as our core uh topic here maybe we can close off this session by each of you just giving your perspective on the future um here in very short so that we can close off this session without keeping people uh too long so maybe um jean-marc if you'd like to stop well i think i gave a few uh pointers as to how i see the immediate future i think that we're seeing a real boom in the d5 and that's not about to go away it's not a trend it's a profound change uh governance and the way that we will have more transparency to asset organizations and through smart contracts will make i believe uh

legals yes it's a challenge just at the cost but i do believe that camo said that in the near future it will make a reduction of costs and more easier to be liquid and exchangeable if it's within the right time frame of course and i do believe that it won't be opt-in it will be necessary there will be always this element but if you want to have the security of knowing that you own something really it will be uh there will be a standard somehow with the legal spill then thank you um john would you like to continue on that no sure i'm definitely very bullish on the for for tokenization and blockchain of course a lot of that relies on scalability how do we get this

social technology to scale up to where the world can actually use it you know the world is becoming digital everything's becoming digital all this infrastructure is reaching into areas of the world that that traditionally have been have been left behind so all this onboarding is going to happen through smartphones and and this type of of infrastructure um i think the idea of of sovereignty is going to is going to hit home very soon people are going to uh i mean i see this in in this idea of nfts that people they want to own it they want to have it themselves they don't want to have it an account that someone is taking care of a custody

they want to have it on their phone know that they're in control of it and i think that will kind of spill over into traditional assets also this idea that hey you know it's on my phone this is really mine i'm in control because i own it i can transfer it that's super compelling and i think it'll it won't be long before that that starts to become mainstream okay thank you um arnold please your closing words um yeah like john i'm super bullish from the um on the fact that in the future we will see um more and more usage of tokenization as fedor said it will require

standardization it will require people to use the same standard that's why i believe the work of cmta is crucial to produce those blueprints where then the tech framework can be different or anyone can come with its own interpretation and implementation but at least to follow these same principles and guidelines obviously in the future we will have a tendency to see that some institutions will adopt uh some standard more than another simply because they will need to have the proper interoperability with the way they work internally with this and that

it will become just a commodity that's why we believe that this entire tech world is um uh open source is here to to be used by anyone uh to be uh it's it's not that important right so the tech part is definitely not that important the the importance here is really to help companies to embrace this new world to bring new interfaces that makes it easy to understand easy to use it on a daily basis that is not too geeky too complex to use i mean just as a as a quick example here today there was the so-called distribution of uni token from

unison it's it's crazy because i received probably 20 phone calls from france who actually used uni swap in the past but wanted to claim their tokens and they were not sure how did they do it was not working from their wallet and they had to sign transactions from metamask and and you know import the seat that they had in another wallet into mitamas to do it the whole scene here is um is is quite geeky to use it's quite complex so we need to bring this simplification we need to uh you know when you move a token you need to have heater to pay the gas so we need to embed that you know when you want to do a tokenized swiss franc you you should pay the gas fee in the

form of swiss franc yeah you sent 10 francs and maybe five cents would be taken five cents will be taken from and the recipient will receive only 9.95 so that you don't even need to know that there is either paid on the back you know it's used using gas stations or whatever so these are the next steps for the general adoption to have proper wallets that looks more like an e-banking than a geeky wallet with you know signing transactions and that that this and that yeah thank you and and that actually answered daniel's question that he had about um the uni token um maybe fedor um i think you you had some closing words and maybe there was a question that you wanted to answer in

yeah i think in terms of closing wars i i will not repeat everything that has been said but i think the key part is infrastructure and for most parts of the infrastructure it's already here it's already here in in you know in material parts the last bit which which are the the regulated exchange exchanges they are already a couple ready like swiss code has one well dara has one that is functioning within their own closed loop system which for me it sort of defeats the purpose in a bit because i'm i'm more of a proponent of an open source nature and open banking etc sdx has a project others have announced projects so

it's it's getting there although last i think last year predicted that by the end of 2019 the infrastructure would be there well then it came and and we're we're set back by one year but i think end of this year early next year we'll have functioning exchanges with tokenized securities which will create an incentive for issues to actually use that and the more it's it will be used the easier it will become and the cheaper it will become and so i think it may be in two three years four years from now no one will be talking about blockchain or something it will be taken for granted like no one actually talks about the technicalities of how their car is is running you don't

care it just runs i mean you can drive it you you see it there and that's it that will be the same probably for issuance now people will have you know blueprints you you plug and play you issue your things and that's it and that's where it will be you know have reached the peak of adoption i think another challenge which will it's more global is digital identity and ownership of data because from my perspective this whole thing will drive a change in paradigm in terms of ownership of data which should become more user-centric in the sense that it's not the data processor that collects data and sits on a huge

data lake but each user is a sovereign entity or maybe multiple digital identities for each user and can lend that data when we switch to that model the networking effect can be huge and it will be a different methodology but we're not there yet so there are things to to evolve and perhaps i think i answered a couple of questions already on the on the exchange thing so swiss code has already won it has been tested the the test run which which we did with cmta and a couple of banks actually had us as cmta issuing tokenized shares from from our company cmta labs um this was purchased by banks

that then traded them among themselves using the swiss code trading platform and then you know the shares were retransferred back to the to the issue so there is a real life example that has been you know reviewed by by auditors as well and you can go to the cmta website there is a link you can review the blockchain data etc so it essentially works and so next is just you know to to have a functioning market you need issues so i mean issuers were waiting for a market and the market was waiting for the issue a little bit of a chicken chicken and the egg problem right yeah and the answer is amazon was before you can order both on amazon um but no the the bottom line for me is

the the programmer programmable asset and on embedded compliance coupled together with self-sovereignty and ownership of own data which can come in hand-in-hand with privacy as well would be the driver to my mind although obviously governments will probably see differently well thank you so much for that i think we we haven't been very swiss uh within the panel as we're 13 minutes over time but it was very entertaining and time flies when you're having fun all right so um thank you um all for for joining um today we will put a recap um of this uh this session online on our social media channels as well

um we hope that everybody enjoyed uh this session i think as much as our panelists uh did and yeah thank you all for joining once again and uh we hope to see you soon thank you very much thank you shana thank you everybody thank you for us thank you all thank you