Tokenizing Real World Assets: A Deep Dive into Blockchain Integration and Legal Considerations

Transcript

hello everyone welcome to join this webinar and I really appreciate that we have two very excellent guests romandy and advin here to share their knowledge and expertise on topics of real world asset and tokenization and let me first introduce who are our guests today uh we have first is Adin Matata is that correct Matata just one mat oh sorry mat yeah yeah at Mata uh he is the CEO of bricken uh he is and also the co-founder of bricken a leading tokenization platform and a successful serial entrepreneur as a blockchain lawyer he combines legal and entrepreneurial expertise in web 3

ecosystem edwi also lectures at universities and business schools on blockchain tokenization and digital assets he advises startups in web three space leveraging his deep understanding of tokenization and real world assets to drive Innovation and growth in the digital Finance industry and then we have romantic goni he is the attorney at law and partner at mme and he's a financial Market law specialist advising finex Banks asset managers and other regulated entities on legal and Regulatory matters his expertise covers traditional Finance digital Finance fintech web 3 and ESG and as a co-founder of successful startup he

Blends entrepreneurial insights with legal knowledge he is a sought-after speaker regularly speaking at webinars lectures and articles and is a frequent panelist at industry events and contributing to the financial and digital Finance sectors so I'm very happy to have those two guests with me today and my name is yasi is the co-founder of market and it's a web three uh marketing agency and I'm also the co-chair of crypto value Association startup working group and on to today's topic is mainly about tokenization and we will give the panelist a list of questions at the beginning and then we will leave the second part of the session for Q&A so if you have any questions feel free to write it in the

chat box here we will um they will pick pick it up and answer those if it's relevant to what we talk about otherwise we will open the floor to questions and then those question can be answered at the end all right so thank you so much guys for being here and first let me hand it over to romandy will present top on the topic of real world asset oranization great thank you very much can you already see my screen yes awesome so as introduced I'm a lawyer at mme and we always look at the tokenization of real world asset from

legal and Regulatory perspective and I want to give you a brief overview of what it actually means to to toiz real world assets and what the regulatory implications are because often tokenization is used is used very often without people even understanding what it actually means so let me give you short overview so yeah tokenized assets I mean we've seen everything being tokenized uh watches Cars oil gold real estate literally everything and some people even say that everything will be in the future also tokenized so let's look at what tokenization actually means so to

tokenize stuff of course you need a token and you need a real world asset and we say a right in real world asset because we will see in a second it's not always the same that you get if you have a tokenized real world asset and then of course you need something that ties the token and the right in this read word asset together because what you want to do is you want to if you tokenize something you want to have a situation where if you transfer the token also the right in this real world asset is transferred to a new holder and not simply the token if we look at the rights in the real world assets I mean the most common one or what most people think about if

they hear tokenization of real world assets it's always the ownership or co-ownership in something so for example you have a diamond you tokenize it and always the holder of the token is also the owner of the diamond and then co-ownership that's more for example if you have uh things like Bank precious metals if you have a gold bar you can share co- ownership of that gold bar but it's not always ownership so sometimes you the token Al gives you merely a claim to receive a certain quantity here now of Bank precious metals and especially with gold bars for example you can say you can set

it up in a way that you say well the holder of the token is always the owner of the gold bar but you can also say hey the holder of the token has a right to receive a gold bar but you don't know which one and as we will see later it's a big difference how you set it up then other rights that you can also tokenize is participation in revenues usage rights or shares of company that holds the real world as um that's used mainly if you want to tokenize real estate so real estate is transferred by changing the land registry you can issue as many tokens as you want but as long as you don't change

the land registry the ownership in that land will not be transferred so what you do is you have a company an SPV in place that SPV buys the land is the owner of that land and then for example example the SPV can tokenize its shares so the tokens would then be shares in the SPV or the SPV can simply tokenize revenues so if the real estate is rented out then the revenues or parts of the revenues they go to token holders or what we've also seen in the past is that you give usage rights so that you tokenize indirectly this uh right to to use for example a villa somewhere

at the lake of ko and then if you hold the token you can go once a year you can go there in holidays but as you see tokenization doesn't always mean the same so you should really read the token terms and see what it is exactly that you get only because somebody says hey we tokenized real estate it's not actually ownership in the real estate that that is tokenized because and these token terms they actually also this bond between the token and the right in the real world asset if we look at the qualification of real world asset tokens I mean it's always relevant for the issuer but also for the holders later how does the token qualify because the qualification of the

token brings about the regulation that is applicable afterwards and finma has issued the guidance the Ico guidance guidelines already in 2018 where they made this distinguishment between payment tokens asset tokens and utility tokens and then also hybrid tokens and in the asset to token sections they mentioned that tokens which enable physical assets to be traded on the blockchain they also qualify as asset tokens so only based on this you would assume well every asset token real world asset token is also an asset token um and fim also said well asset tokens are

treated as security and that would be a bit an issue because you don't want tokens to be a security as we will see in a second so it's it's not that easy it's not only because something a real world asset is tokenized it's an asset token and it's a security um the things that are relevant when you decide well how does it actually qualify which regulations do apply you always have to look at that right that we said at the beginning is it ownership is it uh only a claim and you also have to look at the purpose so the yeah the tokenized rights we looked at them already like ownership claim participation in revenues usage rights and so forth and with regard to the

purpose it's actually mainly important if it's rather a collector item that you tokenize or if it's something that has more an investment purpose or a connection to Capital markets like for example uh gold bar will be more uh would would have a connection to the capital markets and then of course uh last um category here is the means of exchange we have seen real world aset to being tokenized not for the purpose of actually holding or being owner uh of this real world asset but the idea behind it was to um tie the value of the token to a real world asset so for

example diamonds have been tokenized gold has been tokenized and the idea behind it is that the token is stable compared to the value of gold or to to the value of um diamonds and that yeah if it's then more stable it should be used as a means of exchange if we look at the regulation as I said it's not that simple that you can say well real world asset tokens are asset tokens therefore Securities still security regulations they always apply apply if you have a claim so not ownership but a claim to something so for example if you claim have a claim to

receive one barrel of oil that will be a security um if you have a claim to a revenue share like the example with the uh real estate that that you rent out and then distribute the revenues of the real estate to the Token holders that would also be a typical secur security um if you have a share Shares are of course Securities so these are the parts where the security regulations apply and we will look at what that actually means uh on the next slide uh before that maybe let's just go through the other regulations that could apply so banking law uh is also something that can apply for example if you tokenize gold or

other bank precious metals and you only have a claim to receive that but you not the owner of it um then the banking law would apply and you would need actually a banking license to issue that token so you can already assume that that is not really something that is set up in that way so because um getting a banking license only to tokenize real world asset would be too expensive AML anti-money laundering laws they're always apply applicable if you if the token that you issue should you be used as a cur curency so that's usually to stable coins for example if you as I said at the beginning if you tokenize uh gold or diamonds or whatever

to make the price of the token stable and the token should then be used as a means of payment then AML will apply you have to kyc everyone that buys the token and so forth uh Le col that's the Swiss version of it but um if you tokenize real estate um you have in different jurisdictions different requirements for the holders of the real estate so not everybody can hold in Switzerland it's limited to residential property but you cannot simply tokenize um really Residential Properties in Switzerland and then sell them on on the open market because um people from abroad from other jurisdictions are not

allowed to hold them or only under certain conditions and the same is true in many other jurisdictions so if you want to tokenize real estate estate usually you have additional requirements to fulfill and then sanctions that's something that's forgotten often um actually in every business transaction you will be uh you would have to comply with sanctions and many projects if forget that so they sell their tokens to whomever they have no idea to whom they sell it um and that's a risk so if you sell it to someone that is on a on a sanction list um you may have an issue there and let's look at the security

regulations briefly because just to make you understand what the issue is there so um security if your token qualifies as a security your real world ass a token and you sell it on the primary market then you have to issue a prospectus you know that from IPOs so prospectus is document that describes the product and all the risk that comes with it um and should inform the investor and then also a key information document that's kind of the same but way shorter three pages describes it so that everyone can understand um this first part of security regulations is not such a big issue either you issue the prospectus

and the key information document or you can also make use of exemptions so for example if you sell um Securities of a value of below 8 million a year you're you don't have to issue the prospectus and there are other exemptions that could apply the thing is if you issue security token the secondary Market will be very painful so usually if you issue a token you want it to be listed on the regular exchanges binance K and coinbase and so forth but they don't hold the license to trade um or to offer the marketplace for these um so they need a licenses Stock Exchange MTF OTF or DLT trading system

um there is currently one one or two applications pending for DT trading system so I'm really curious to see um when they will go live here in Switzerland and the other thing is also I mean besides only the marketplace also professional Traders and financial service providers that provide Services regarding security tokens they are also regulated so in short you should really tokenize you should try to avoid the security qualification in any case and that can be done by tokenizing ownership of a specific gold bar and not only a claim to a specific amount of gold for example and the last one the vi

trap taxes apply to transfers in real world as tokens and the taxes that apply are always uh depending on what it is that is actually underlying the real world as a token so for example if you tokenize diamonds and you sell the token it's considered a sale of diamonds and then usually vat applies um So to avoid that you can put the diamonds in a Bonded Warehouse then it works without the tax or gold for example that's also a case where no vat applies that will be it from my side and okay thank you so much Mar uh we

already saw um quite a lot of questions popping up in the window but before I uh jump into the questions I would like to First invite advin to talk about tokenization platform then we can come back to your questions okay guys so Edwin so you you guys run a tokenization platform so from your personal experience what are some of the challenges when it comes to make asset make a digital TRN of the asset on blockchain absolutely um I wouldn't even know where to start because there's so many moving variables into tokenization I think it's one of the hardest

verticals out there because uh compliance regul technology then you have the economic side of things I mean you actually bring in financial instruments and embedded into a whole new technology so um just to speak about my journey when I started in 2020 I come from studying organization in 2018 saw a couple of projects out there where I got interested into the whole scope um there was a lot of uncertainty for example in Spain in 2018 they even had to issue a document saying that they were not so sure that there were Securities but it Li that it was Securities but best not to use them because and it was very weird for our commissioner even to to say like I don't understanding what this

technolog is doing but they might be security this so as the time of evolution happened regulation started becoming more clear are we there at the perfect spot no but we have had a lot of uh advances for example even in some uh countries they using now that DT distributed layer technology it's embedded in the regul ation itself so that's kind of like it's a huge Advance it might sound like just three words how different it is but it's Paving the way so for us the tokenizers platform just having a more detail that we don't have to always be there in the great areas to hey we're doing everything by the book but some other people saying are you it's kind of like always the confrontational point of view so nowadays that's why I think we're having

more uh success that organizers me talking in as part of that group because what we have been studing for so many years is kind of like you can blend both things regulation can be technology can be tokenized let's let's call it like that so when you create a platform and you want to provide a software to a client you have to understand that uh technology is not the only thing that makes it compliant you actually maybe can fulfill 80% of the regulation with technology but the pending 20% it's sometimes pure bureaucracy it's documents it's agreements it's it's a white paper perspective that you have to submit and that's why when you enter in the tokenization phase you also need to

go Hand by hand with somebody that knows could be in house or could be some like redy here with mm I mean you really need to understand that this is not just a a random vertical that blog and play you right off the bat tokenizing so the the commitment that we tokenizer have to do is has to be aiding in that compliance layer be for kycs the wh list transaction understanding the movement of the money and all of that so the client itself is compliant but I think our main objective which is just the technology and those ability is providing a great user experience if you provide a great user experience it's easier for the client to on board themselves in that tokenization layer because what I just said now will

sound very scary romd spe perfect will sound very scary but it's the reality right because it's that regulation but this this has always been every that is regulated already scary by default what we can do is approximate the knowhow of people like him the knowhow of the technology the knowhow of the user experience how we're onboarding people into the blockchain and mix the three of of the mix mix the three so it's a very hard journey for the tokenization platforms so now it's kind of like we are moving all these variables and coding and modifying and updating as regulation of dayses we have to dat our El as more know how gets penetrated we have to dat ourselves as blockchain

technology evolves in making it more user experience friendly for people who don't want to know about blockchain and all of that so um The Journey itself is very hard but we're getting there uh talking about when I started in 2018 I remember trying to participate in an stto I never understood how to participate in the St fine I don't have the Kno how today but at that time I didn't even understand where my journey was like I had to go do so many things just to prly try to invest in an stto of I think it was a commercial building out in Germany so it was quite regulated and it was like oh wow I just want to invest it to test but I'm out of this and now we're seeing kind of like a more easier

user Journey where regulation is underlying but you also don't have to be blocked by the regulation where blockchain is being used but you don't have to be blocked by the technology so we trying to give that opportunity that yes financial instruments are definitely going to be embedded on chain it's a future financial markets I have no doubt they're going to end up running just because of efficiency and cost and there's so many things it's not just fractionalization it's not just uh a lot of things it's it's optimization so we have to let them know that we as organizers can be compliant our clients can be compliant their users can enter into a compliant environment security it's all over the place and usability is

also what has to be there so sorry for my long answer but we it's it was it just it's just a long question yeah yeah yeah I know it's a very big question um so I just like one question to you too maybe make a quick summary before jumping into the questions is from your point of view how would you name the top or the considerations that companies need to care about before they decide to tokenize anything it can be from from any aspect because the reason why I asked this question because when I talk to some of the clients in the past they they don't even know they need to talk to a blockchain lawyer you see there are things people just don't know they exist so from your point of view from either the technology side the legal side

compliance side setup side what are the aspects people need to consider yeah I mean from from a if I was a company entering into organization I need to understand where I I'm entering right what is the realm of real that I'm about to to engage is it I'm doing an initial public offering I have to comply with the same boarding as if I was doing an initial public offering so just because of you use technology doesn't mean that you switch or peot your whole legality behind so the same game you're trying to do or accomplish be be besides technology you have to fulfill that so it says you're you're doing a I don't know tokenizing Equity of a private company in a private Market maybe your first approach is to go to a

corporate lawyer because those are the ones that actually filling that are you doing an initial public offering then maybe go to a Securities lawyer you want to embed that technology now blockchain lawyers themselves are are are very diverse in their knowhow but they also know where to be but so obviously having the the validity behind and the security with a law firm or personal lawyer behind you it's it's it's it's I wouldn't say it's a most but it's considerably something that you may want to acknowledge so leg legality fine but also to to pinpoint all companies should have access to lawyers because we all have various things that we have to worry a pharmaceutical they already have a thousand lawyers so it's kind of like just because you need a lawyer for

organization doesn't mean that it switches your whole business idea you probably already engag with lawyers even a capital increase you're already engage with a corporate lawyer there's no fear when you go to the corporate lawyer and say hey I'm doing a capital increase a CA of 10 million you're already preemptively hiring a lawyer if you want to go for the same organization field as an alternative fun of Finance then you should always think about that it's not it's there shouldn't be added fear that's what I'm going to get to and then obviously you have the certainty the next one is the weird one if an issuer does not understand how to invest then run away from such tokenization platform because you are pushing that possibility to your Market to your investors so if

you cannot fulfill the Journey of understanding how it works where the digital asset can be bought how can I pass Maybe my kyc where can I transfer either Euros or stable coins if I don't understand any of that then you who are pushing something into the market then don't enter into tokenization either find somewhere where you can work or just stay away from it 100% because you are the one trying to get that into your market so besides having great uh back from a legal Serv I I strongly am a strong believer of user experience and I think it's drastic how much people forget that that's also a key denominator in

tokenization thank you um anything from your side redy that you would like to add what expects should any issuer to take into consideration before issuing real world asset tokens yeah no I I completely agree with Edwin I think I mean my advice would be if you go to a lawyer go to a blockchain lawyer because uh can go to an experienced one because uh the parts of uh corporate law and the financial Market law is anyways covered by a blockchain lawyer but the blockchain lawyer will have experience in setting it up knows how to avoid regulation and if you simply go to a regulatory lawyer he will tell you okay it's a security you have to comply with

this and that and uh if you have someone experienced in blockchain he might find ways how you can actually avoid uh regulation and I mean the the first question that the companies have to ask himself well what is it that I want to tokenize uh so which asset how do I want to tokenize it ownership claim whatever um who should be the buyer of it uh is it something that I want to offer only in Switzerland is it something that I want to offer worldwide uh is it something for accredit investors only should it be open to the retail market and uh who will take care of the secondary market and of the liquidity um because it's nice if you tokenize

something and you find buyers but uh they want to have a liquid asset in the end and for this you need a secondary market and probably also market makers um so that's something to have to consider not only the issuance but then the whole process of uh secondary Market yeah we haven't covered that yet the liquidity of reward assets but maybe someone will bring it up later but we have a few questions here I like to address so um Manuel said I'm wondering about the tax implications of an nft sale of a physical asset let's say you are tokenizing a real estate asset in planning that needs 20 million to build you are selling nfts and raise that

amount how do you properly navigate and optimize taxes in Switzerland and the buyers in Switzerland EU and RW I don't know what does it represent for it uh yeah I mean I'm not a tax lawyer so big caveat here and it depends a lot on how you tokenize it so if you tokenize for example Equity uh in a in a Swiss SPV that has this planned real estate you may have uh you have taxes especially if it's already 20 million you have taxes that you have to pay at the beginning in setting up the company everything above 1 million you have to tax um and then afterwards when you pay out dividends especially in this uh part

Switzerland would probably not be the best option because in Switzerland we have withholding tax that means that if you pay out dividends 35% of the dividends have to be paid to the tax authorities and as a Swiss resident you can get that back you can when you um have in your tax statement that you own these shares in this in this company you will receive them back if you're a resident from abroad uh you only receive something back if there is a double taxation treaty um and also there sometimes you may not receive back the whole amount but only uh 20% of the 35 and not 15 um so that's why if we have real estate projects U sometimes it

makes sense that we have everything in Switzerland but then the actual company that holds the real estate is for example based in Lenin where they don't have a withholding tax but it really depends on the setup okay yeah I would like to add something to him um notice how he never mentioned anything regarding the NFD um went to the consideration of the asset and that's super important because we sometimes think like oh because it's an N it's tradable or it has a different tax implication and he was going to the source which is how you treating the real estate who's the owner where are the ubo where is the state and everything because that's the answer I mean that's what I really want to

communicate as OB here the answer is not in the technology it's how you are first performing The Essence and asset a hard asset is it Equity is it debt is it real estate is it that's where you have to go look for the answer technology is how it is transmitted and transported when it's not the added layer that it changes the whole taxation field of everything so that's super crucial for me just can I just add maybe one one sentence I mean from a Swiss perspective the tech technology is actually you can forget about the technology how it's transferred or not it doesn't make a difference as edin said uh in other countries they're not so far yet I just read recently that in Italy for example

they are considering nfds own assets that are to be treated differently but uh probably sooner or later they will find out that that that that doesn't make much sense because then you can simply put something in nft and have make tax optimizations which are actually not fair in the end thank you uh let's move on to the next question I hope that answer you question Manuel uh what about Dow membership is that considered the equivalent of a share I think it's a very good question what do you got think should I because Dows are yeah I mean Dows are THS are Dows um you have many different ways of how

you can structure it out um you can either just sell tokens th participants they hold tokens and they can vote um on specific tokens maybe they even have a treasury to distribute and so forth um but you can also wrap it out into a legal entity like an association uh you could also make a dow actually an Company Limited by shares tokenize the shares um so there isn't really an answer to this question if you tokenize the shares and say this this is my down now because you can uh transfer this participation right with the token then it's simply normal sh um if it's if there is no entity if the

Dow is not wrapped into an entity um then it might qualify as a simple partnership um that's a case by case assessment that they have to look at um but usually we do not recommend to have unwrapped Dows simple Partnerships they have liability uh issues for token holders so usually we wrap the Dow into um so iation Foundation whatever can you elaborate a little bit more what do you mean by a rra dow as Association and a foundation um you can set it up for example doubt that the token holders are then members of the association so instead of

having physical General Assembly you would then simply vote via token uh voting um you but there is really tons you can play around to these structures you can for example also have an association that has a normal General Assembly but then in addition it also has a DA and that Dow is like an organ of that uh Association and you can give them I don't know voting rights certain topics you can play around with it okay um next qu Ed we do you have anything to add or we move to next yeah that I think that the that the Dow as people think exist it does not exist because at the end the nature of the legality of the of

of the link between the people is through something that people understand it's it a corporation is it an association is it a partnership and just that on on that what we were talking about for example in Florida I think two years ago there was a lawsuit against a famous da and they went for the token holders and they were like no I'm a part of a DA and the judge was like so you're a partnership and your your liability is fully responsible against all your Holdings because you don't have the legal entity protecting you with limited liability so I think the concept of the that was uh it's a more of a marketing concept but when you enter into the realm of hey how do I cond do this without me getting affected for my with my wealth or my decisions or block

through a limited liability company that is why you have to do it with a grab which in the end now it's the technology but it mimics what we already know is it a corporation is it an association is there even bylaws that they call it yeah you can call those so the answer is always kind of like you always need to focus on what you're doing by analogy and setting that up because in the end whatever you want to say what we're that we decentralized nobody knows who we are the reality is when there's a problem the only thing that matters is the judge saying hey I don't understand so I'm going to put you under this column and I'm going to say you are that yeah so actually for token holders they also need to pay attention to this St if they're part of it

right let's move I me usually you know for token holders like you and me it's probably not such a big deal but if you want to have the big VCS um institutional investors I mean the judge will not go after us or I don't know how your bank account looks but um they will not come after me but they will go after the big VCS um because that's the place where they can get the money and uh if you want to have a successful Dow at some point you need to have the big players on board so you should give them um the the comfort that they need okay understand yeah uh I have another question from Rong he asked can we discuss the concept of valid dat or real world asset Administration Management

distribution resale and servicing and how that gets fitted into this real world asset even in assets that are being begin such as art of Beni such as art precious metals Collectibles Etc um I'm not sure if I understand the question correctly but maybe you have a dow you tokenize an ESS and let's say you tokenize a Picasso because he wrote Art um that Picaso has to be somewhere in a warehouse and so the custodian of the art uh would then be instructed by

every token transfer that he holds the art now for the new token holder so usually it's the company that issues the token they take care of custody either they do it themselves or they have a professional custodian that does it for them and uh insurance and yeah the resell servicing and everything you can govern it in the token terms for example you can say well if more than 70% decide that we want to sell the Picasso now because the value went up um you can actually govern that in the terms and conditions of the re World aset token I have a follow up question about this for adwin so from your tokenization

platform design how can you make sure that okay this C custodian part the validat part is the wrong ask is embedded into the process into issuing Insurance process yeah so with that we're testing some technologies called proof of resarch where you have to really embed in the code where the I don't know the custodian is so for example if it's a the in the Swiss B you have to get the audit or expert Creator establishing certain terms and you can embed those but even if you go all the way to that the foundation of every single business we do is trust because right now I can tell you I own a Picasso please send money to this Ivan and you

can still send it and maybe I don't even own the Picasso so what I'm saying is even the tech ology we're never going to be 100% certain with certain things especially with physical assets because there the physical asset still embedded on the physical world and the technology world will never be interconnected because it don't it doesn't work like that it's not the same as embedding something already digital so for example Equity doesn't have weight it can be easier to embed for example logs you can create already companies fully on chain there's other countries trying to mimic that so that already kind of like pre-existent establishes how it works but when you have a physical asset there's a discordance so you create kind

of like the digital twin or how it has to be embedded with one thing but it's not as optimal because for example in this custodian what happens if the art piece of art moves from Switzerland to the custodian in Norway and he gets lost in the way how do you tell all token holders about that and that creates kind like those scenarios where you have to preemptively saying hey you know the value house drop because the art go up or something happen with it so it's not as clean and this is kind of like the whole problem with technology embedding things on chain when they're already physical hard assets so um I'm not saying that they shouldn't be tokenized there's a lot of good things about it well for me that I think uh that the

tokenization at this best possibility is with those assets of financial instruments that don't have a body like de it's a contract it doesn't have a body it can be created online uh Equity the same but when playing with other assets there's a lot of things that can just add more problems to it what are some of the solutions then to address this if people toize real world assets that is tangible but they need to have um you know control at least some transparency knowledge about what's the condition of it where is it how it is where is it stored what are some of the Solutions there for people to token holders to have like a control

over it yeah I would like to jump here first um just because of what I we recommend to our clients and it's how would you do that without technology you will set up a company have a management uh I don't know board of directors and shareholders and then through that you will understand how to manage the Picasso right or or the real estate building worth 20 million I I think that we're trying to invent something that has not working so we have corporations for hundreds of years right and that's a reason for it there's the been optimizing vehicles for management of assets wealth and whatnot so just the fact that we are adding technology we should not break the bounds of what has been done for a specific reason with

that what I'm saying is don't think about the asset think about how you're going to structure the management of the asset if you want to tokenize 20 million don't think about bringing 20 million people with one Euro and you have a partnership of 20 million people what you will do is what every single corporate or wealth or asset manager will do create a structure where the asset belongs to it's in the accountant books it's part of the company then tokenize the equity or tokenize the debt because you want to buy the building so focus on what structure you already can use without technology what Financial instrument has already been done and then technology comes second because your business is not technology you're

not selling technology what you're selling is either okay com to my company because you're going to have dividends come to my company because you're going to have from this depth interest so that's how we're going to make the business the underlying it's always the profit how am I going to generate profit for you but it's not about the asset per se right right so basically people need to take a step back look at how it's going to be done like in the real world and then configure it in a way that is comp compatible with the digital world um do you if I can just jump in you have as said I mean you have to do everything

the same way as you did it until now if you wanted to have let's say co- ownership or co- shareholders ship you had to do the same things um take care of insurance take care of C custody and everything manage your shareholders or St holders the only thing that's different now if you tokenize them you have to find a link from The Real World into the digital world to the blockchain so you need somehow an oracle uh that says well uh I have received now this uh painting and therefore I'm issuing the tokens so okay all right and I I hope this answer this this question is answered uh

let's move on to the next question is can overseas company issue a DLT Security in Switzerland yeah well the law has changed so we are able now to issue Securities back in the days you could only issue them in the form of certificates so piece of paper where it said what share number seven of company X um and then at some point they said well there are also uncertificated Securities and there you didn't have a certificate at all you simply had for example the um the company that had the share registry and that would that mean that you own the the security that's uncertificated security and now they created this Ledger based security so

you can issue tokens and these tokens they reflect the share and also here again it's about the token terms that Define one token is one share for example and you can tokenize um Securities from other jurisdictions um but you're limited when it comes to Equity because Equity usually the comp the other jurisdictions they usually have rules how Equity can be put into a certificate and if they say well you can issue a certificate that reflects the the share doesn't mean that you can also issue a token under Swiss law so Equity is tricky but uh debt so if you say well

you tokenize the revenues from that uh part then it's not a problem and if you tokenize ownership so company from Germany can have uh gold bars that they want to tokenize and they can put that under Swiss law so that's possible okay I have another question from the audience um maybe it's very straightforward for you guys uh what happens if I lose the private key of my wallet that holds the token what if I send it to the wrong address by accident should I do you want Adin uh yeah I'm gonna be the guy you

start how you do and then I say how be unfortunately you cannot do anything there's uh right now there's well I want to bring more about what is been built because right now when you lose your private seed or your private key it cannot be recovered will take you millions of years to even try to break the wallet because of where we are right now and if you send the Run transactions uh they are contracts now where you can recover but it depends if it's like a stable coin usdc usdt impossible but now for example in security tokenization there's claiming back functions that you can push back the the transaction if if if such occur

so from a technology point of view if there are contracts out there that you can claim back certain transactions but that's very used for very specific cases all right but luckily for the state-ofthe-art right now it's uh they we we Weir as in we but I'm not a wallet Creator now creating a more advanced wallets where you can store private sees inside an email to baate kind of like the loose of the cers because it's quite complex not a lot of people know how to write 24 uh words in a paper or this gets distributed somewhere I mean if if people lose Powers passwords every day on absolutely everything right but luckily for everyone now there there's been advances because this is kind of like a huge barrier all right even for

me you have no idea how sweaty I get when I have to do a transaction on blockchain and I'm in the blockchain I review copy paste a 100 times because if you don't do it correctly you lose you lose it so me in this field I understand that but luckily for everybody uh there's been a great advances in in wallet management that I have no doubt in the future we just going to have a nice go signing and don't forget that everything and with the transactions verifications there's a lot of now uh metamax is pushing you hey review the transaction there are other uh software out there that is kind of like hey are you sure is this one aren't you sure and then kind of like reviewing and

everything uh but in the end it's um unfortunately it's not like the bank transfer but even in the bank you have problems I I received I sent one transaction wrongly to a bank when I was like I don't know like 3 years ago and it took me a long time to recover my money because I had to say like no it was wrong I made a mistake so it was not even that simple but at least I got it back but in blockchain that transaction is it's unfortunately lost yeah when it comes to shares for example you have the possibility to declare them invalid uh but you have to go to the court you have to make your case that uh that the token has really been lost that you have been holding the token before it has been lost um so there are possibilities how to

structure it but it is a very burdensome uh process uh you mean when it comes to tokens yeah uh yeah if you I mean and also you can foreseen the terms for example if you tokenize uh gold or ownership in a gold bar um we have also foreseen sometimes you know in the terms and conditions that users who lose their um tokens that they can also go to the issuer make case that they have lost it and then for example you can publish hey these tokens are claimed that they have

been lost if somebody if no one challenges it over a certain period of time uh new tokens will be issued but it's always a bit uh a question do you want to be extremely decent ized and say hey there should be no one who can issue additional tokens or say hey this token is invalid then you will go the other route and if you say hey it's more important that people if they lose the tokens still get access to to their their assets then you go the roundout that I the route that I just explained but that's a bit the Yeah question of of how decentralized that you want to be yeah so in summary basically you want not going to get your asset back when

you lose the private key so you but there are ways nowadays with the updated technology and the legal way so you can claim it from token issue might be there's a possibility you can get it back so just make sure that you have your private key save and don't lose it and you have to kind of decide which route you want to go you want to give them the possibility or not because issue centralization Maxes will not be very happy with you issuing new issuing new tokens yeah correct uh we have a question from Henry it's a little bit long let me read it uh thanks for hosting such insightful session okay in my opinion SSI and especially a globally recognized digital identity that is

linked to the digital wallet of an individual SL organization is required to help compliance Regulatory and taxes to be applied correctly to tokenize assets as they are transferred either peer-to-peer c2b or B2B yeah what's your opinion on this um yeah I mean it definitely helps if you have a self Sovereign identity and are not reliant on uh a trusted party to hold your data and but and it helps to fulfill compliance regulatory requirements so you could for example if you know if you have information of the

token holders you could for example say as I mentioned in the example with the real estate if you know he only Swiss or at least 70% of the token holders should be Swiss you could have a a setup in place where you allow only transactions until the 30% of foreign Nationals is reached and after that the transaction would fail for example so yeah it's definitely something that could help and do you have any comments on this D wow yeah I could go hear ours because it's one of those things that I'm not so sure that it's completely how it is sold um first with SSI we don't

even know who's going to be the validator we know the European with I to it's going to come up with how kind of like that happen but what about the private entities and if it's a private entity supplying you with the SSI where is it supplying it to who's going to validate that who's going to accept that information who's going to accept that kyc so we have into the second layer icept the SSI and then the B I don't know the the the commissioner of security of money laundry of a given country request me information I cannot just say hey it's an SSI I don't have the information they will be like yeah but you're uh doing transaction with security so I need information of of this user and then I was like oh I don't have the kyc there's so many questions around SSI from my perspective personal

of course that I think it's not as clean as people think just because you have a sales suring identity does not mean that first of all you're going to get accepted by all private entities that such private entities if they get required to get information around you who are they going to supply um the transactions that you can make just because you have it on the N side doesn't mean that now you're they're valid I mean you with an SSI you can still perform transactions on tornado cash so do that's make that SSI completely invalid and illegal there's so many variables there that my personal perspective and I don't want to be a hate on the theme it's just that it's more um pure it's more idealistic than than what we that we wna

well that it's actually going to be working at least for the foreseeable time actually this question is linked to the next one because we talk about to have a digital identity uh then linked to a wallet then when you buy and sell tokenized assets you know the things kind of fulfill the regulatory requirement but on the other hand uh asked by gzi that are token holders comfortable having all their transactions and balances visible to anyone on public blockchain some are some aren't um and yeah I mean you can say it's not public it's pseudonymous but still I mean with a chain analys analysis tools often you

can find out a lot of information that was also the reason why they introduced mixers now unfortunately we cannot use them anymore because then are funds will be tainted um it is a problem and that's maybe also why the reason why probably the next or that's just my opinion but I think the next big blockchain uh star will be one that includes privacy preserving me measures such as seek and knowledge proofs I think absolutely proof is a Hot Topic nowadays um yeah we have a new question popping up by Sebastian we still have a

couple minutes here uh he asked private assets private Equity Real Estate Etc have demonstrated Superior alpha performance to public over decades on the back of better governance and well-managed agency issues when shareholders are more concentrated and qualified if tokenization brings more liquidity for example broader investor base doesn't it create agency issues that could deter the performance of the asset class are you aware of any study solutions to tackle this issue I love that question it's super educated I want to know who is please send me a message because that's that's like he must be an asset manager so no on my perspective all right um we

shouldn't think one um completely changing the other one it's an added layer both can coexist it's a new form so you can mix offline with online in forms of capitalization you can open just to qualified investors and maybe give a chunk to retail this is a new new game where you just want to have different paths right of of finance of management and anything but we should never think that just because you choose a certain P you neglect absolutely everything else so the performance of the asset itself does not rely on the inv but maybe could because he who could be thinking you know I have now a thousand investors who I don't know how they control versus just little volume

of five family offices who I know they're my LPS and that's a management and they know how the asset performs and they're not going to sell cheap or whatever so so yes but that's what I'm like I really struggle with my clients sometimes for for them to comprehend that really the game here is not changing absolutely everything it's just a new added layer that can coexist with your pre-existing forms of management of capitalization just to leverage that technology and slowly start pivoting but there's going to be a point where this question is probably in the in the form of tokenization you can really have just a few LPS not just because they tell you oh a 100 EUR for real estate on tokenization yeah but you can sell a

token for a million euros if you want it so uh I think the broad the broad sense here is kind of like just understanding that now with this technology you have an added that can benefit you or not but that's kind of like let's not change the whole Spectrum it's just an evolution it's not a revolution we're not going to absolutely change everything we're just updating a legacy system with technology um do you have anything to add Redi or should I move on to next question I think he summarized very well the only risk that I see a bit uh also if I read this question is if you only have sales to a PL public crowd that

doesn't have any idea about the asset then I agree that it might be more risky than if you have few Venture Capital firms that really do their due diligence uh and thoroughly assess the whole company before they buy into something but as as Edwin said I mean it's not that you do one or the other but you can combine it you could for example do an invest around to the big vs but then at the same time also allow the public to to to join in okay but yeah always watch out in what you invest uh if you have a couple more minutes then we can take the last question from Bri basically is related to the um digital identity question is that okay just a couple more minutes so

he asked that um yeah he agreed with Edwin that SSI being in complete so he thinks that you still need a trust registry or credential issue Authority that the ecos system lawyers government Etc agrees as being valid so do you see a play with verifiable credentials for trust registry seen battle adoption which gets us closer to some of the Notions of SSI yeah so here um it goes against probably the the theory that decentralization is uh non-governmental like self govern and kind of like this which is a it's a nice idea but there's certain things that I think we should

still trust the the main foundation so the state and with identity I think that the Registries so who has been governing our identities our birth certificates our marital status our University diplomas I mean there's some registry that I think it's best for the everyone to be held by public entities because let's put an example that you go with a private entity with a private entity there's so many yeah you can audit everything but a private entity can be incentivized by money transfer so you never know if you can actually start buying your own identities and then create everything because if we go and privatize certain factors that are I

mean there's more uncertainty I rather trust and and me as as a lawyer I was specializing in identities and electronic signators with AA so I saw a lot of this that you have to create even cert centralized certificate authorities for the ISS of certificates to be able to say that person online was that and I and I struggle to believe that private entities were better than public entities they are faster but faster does not mean good so when when you're put to the perspective that you have be in front of you a passport issued by a state uh country and an identity on a phone issue by I want to make it a stupid example for say

Facebook I don't know who you're going to trust but I know who I am going to trust so I do believe that centralized authorities in certain cases are are most thank you so much uh yeah of we didn't know that you have the background especially in this domain in the past um great so I don't know if there are other questions from the audience uh there are several requests of Roman that if you can share the slides with the audience sure okay I send it to you and then you can distribute okay sure and then we'll try to so who so those for those of you who have registered I think we can find out a way to send out to everyone so

thank you guys so much for attending this webinar and thank you so much R and at wi your uh your attendance and giving out so much experience and knowledge to our crypto valy Association members and really appreciate your time thanks a lot thank you very much have a nice evening it was very nice yes by bye everyone byebye bye