Tokenizing the Real Economy: Commodities, Gold, Real Estate

Transcript

Please put your hands together for this amazing panel. Thank >> All right. Fantastic. Tokenizing the real economy. Uh it's been I think 10 years that we've been talking about uh this subject. So I'm looking forward to being able to bring a little bit touch of spice hopefully to it because I remember we're talking about security tokens, aspirate reference tokens, RWAs. There's a lot of acronyms. Hopefully uh we can get uh to it now with all the financial institutions in the room and uh those that we have here on this panel and I'm sure probably the audience is also wondering there are some big names and titles as well uh here on stage what do they actually have to do with

tokenization so maybe we can kick off and you could just individually introduce yourself quickly and maybe what you have uh to do with tokenization and your firm what maybe your firm is doing. U my name is Katrina Marinova. I'm a CFO and deputy co of Tradeex Bank. We are small boutique bank uh based in Switzerland. Uh surprisingly being a Swiss bank, we have no individual clients who work only with corporates and uh our key business in our DNA is commodity trade finance. So we finance physical flows of starting from energy product finishing with fertilizers and grain. And you know our business is very traditional let's put it this way it's really physical flows moving and we also

see the digital parts and today I think we're more in a stage we're trying to understand how to make the business case if there is a business case for our clients because we heard a lot today about stable coin and the payment I think this is out of question that's the case is there especially for crossber payments but how to do with the token and how you can make it together with a real flow which is coming. The panel before was mentioning how to find the right balance because at the end of the day you keep the token in your hand that is on blockchain everything is fine but in order to produce something you still need the physical to arrive. So we are more in trying to see what would be the future and to make sure that we are not

uh late in this journey. >> Thank you. >> Thank you Katina. Uh my name is Constantine Chry. Um I'm a managing director with LinksCap Investments um an investment firm Swiss investment firm based in SUK uh with multiple offices across um Europe and um who has um significant experience in investing across um debt instruments and um we are acquiring debt um in Europe for years now for decades and um it came so that one of our financing sources um is you know usual funding through listed bonds which we have on the

Luxembourg stock exchange um and with the development of RWA market we decided hm why don't we bring something that is already known to the market we tokenize it and we u kind of take out the u the volatility out of the some of the portfolios um of crypto portfolios of of of you know investors that are heavily invested into um crypto assets which are largely volatile. What we offer is something of a stable return over a period of time and um yeah it's been a journey for us and we are happy to share the insights into you know what we've

done and what's been difficult and what's been amazing and uh you know what are the benefits ultimately for the industry in developing the RWAS. >> Okay. >> Hello everyone. I'm Maxona head of product at Sikpa. Uh for those who don't know Sikba we are definitely not an instit financial institution. Um basically you all have one hour product in your into your wallet since we are producing mostly 90% of banknuts. I mean is there if you have a digital wallet yes we don't have one hour product obviously >> yet >> yet and thanks for the transition and why why does sikba has insight on

tokenization basically our job and our mission is to help government or central banks to let's say uh monitor their assets either in the digital or in the physical realm and that's where we come from because at one point the physical world meets the digital one means tokenization. toation is something that happened like since the beginning of computer uh let's say we are not talking about blockchain then uh but now and that's why we we're here today since we can now linked this capabilities of let's say fractionalizing

sorry for the new word but uh we can now fractionalize this kind of assets um and so we and open to market and financial market especially uh that's where we as Sikpa we could add that trust because we basically our trademark is P of creator of trust >> great thank you thank you Maxim so um I did mention I wanted to kind of add a little bit of a spice as well to the panel and somebody actually told me earlier today that they believe that tokenization doesn't create value it reorganizes trust which maybe is a bit ironic because you could consider that trust in today's societ society has value with everything that's going on in in the world. So I want to be able to

understand here if um tokenization actually improves how real assets are financed, verified and traded or if it's just digitalizing existing efficiencies. Um and maybe here we start with yourself uh Katrina from a trade finance uh perspective. So what would make a Zurich based bank comfortable financing a tokenized commodity position? Well, I think uh being a finance person, I will reply now like a lawyer because it's lawyers who always say it depends. Uh but overall, we all know that in a commodity trading world, there is a lot of frauds which usually happen with the fact that uh something happened with a product. So from that standpoint of view

if we can get and there were a lot of fraud case which is um done through the documentation which follows the product like uh bill of ladying uh warehouse receipts etc. So if we're going to get something which give us more comfort so of course from the bank perspective it means that our risk is lower and that means that we would be able uh to finance it but that's not theization of the physical and this is a big difference. So we see a lot of cases which relates to the documents which accommodate the flow. But the question is what we do with the physical and with the physical from the blockchain technology what banks was looking for several years already is that um if you look to the grain the quality of the

grain heavily depends on the temperature on the um how dry was the storage etc. And actually if you have some kind of the token inside there or some blockchain technology which is giving us information. So actually you can see the quality and that's also should improve. Once again this is not tokenization of the physical flow itself. It's something around that. So from that stand points of view uh what we're trying to find as a bank we're trying to find the business case because gold is much more easier. It was discussed earlier today. I think with gold we're kind of used to have this physical allocated unallocated gold but with the with the commodities I think it's still the question. So what I

would say that we definitely would be more willing to finance than we can be sure that we have less risk and today this is more about documents which is signed the product and the quality of the product but we trying to understand what going to be the future and like in five years time how this business case may evolve and from that standpoint of view it's quite interesting to listen for the colleagues because you know banks we due to our regulations were unfortunately too much conservative and maybe we're just missing this uh case which is in front of us.

>> Thank you. Thanks. And let's double click on something that you said because I think that tokenization assumes the digital representation that's reflected in the physical asset. However, um it's not always the case. So maybe Maxim to yourself, how do you prevent the token from becoming detached uh from the the physical entity or asset that you're tokenizing? Yeah, interesting question. Um, I mean you obviously can uh there are like multiple token on the market right now that doesn't represent anything. I mean uh don't uh I mean there are rumors there have been rumors uh that let's say let's take for example that some asset backed

uh token where the gold has not been buff. So you definitely can. So how can we prevent that? Um that's what that's something that we do but there is also some actors on the market that do this also. Basically you have to and it's called it all comes down to reputation. You have to partner with and and meaning the physical part of uh of this trust. I mean I love that example about grain condition because basically you want to have the proper actors that know how to measure that and be able to trust that.

So to answer your question um let's say an eye level overview basically you have to find someone who is reliable and as let's say uh you know an oracle thing but an oracle in real life >> you have to be to trust that someone I mean it has to be his business to say if it I mean if he if it if it uh goes wrong that's I mean he don't have any interest of that doing wrong. But that's where uh we I mean we are building this let's say initial trust foundation to say okay you are do you you want to do this token I I I partner with all the

right let's say mineral surveyors mining companies that knows exactly what to do so you can invest in that token and it represent a real value in real life So if the verification layer fails, does tokenization then amplify the risk? Well, um I don't think there is a clear linear correlation between the two. For me, tokenization is is not about uh does not improve necessarily liquidity. It does improve accessibility.

Meaning uh if you take the example of gold or since we are in the gun house art u you can give access to multiple investor like retail investor to something that formerly they cannot invest in like in goods or real estate for that matter. Um so it does amplify that because it does have multiple societal repercussion that formerly were only let's say enclosed in the private I mean private company or private family office or banks. So now it's in the market open to everyone. So yes it does

quite a bit amplify that but not in the financial way. >> Okay. So accessibility rather than liquidity. I mean Constine what are your thoughts because liquidity is a big play for you. I guess >> it is. But I I would agree with Maxim here that accessibility is is is much more important. And um continuing on what um was presenting and building on that I and your question in my understanding, what do institutions require is actually um minimizing their underwriting risk in terms of the instruments they they invest into. um how do they make sure that whatever they

on board um is legit that is the um the the the the proper custodian in place the uh the what happens if something goes wrong? What's the timing to um to to cash or to to money to um realize the underlying real world asset if if something breaks in the chain? Um and and we've been always focused on that. I think in realizing our product, we spend 50% working on the IT side and 50% working with lawyers, regulators trying to understand how do we deliver the

project, you know, the product that is already like a trade trade pro product, right? It's it's a bond. We already have a um you know, a cash agent. We have a calculation agent. We have um um basically a third party that would manage the process if we fail to deliver on payments. On top of that, we have been adding additional uh level of security for the token. So every token is actually represented by an icing of the bond that is there. So it's it's it's basically the same terms and conditions. It just an access point for institutions that

didn't have that access point before and probably are not really willing to convert their say stable coins into fiat money, invest fiat money into bonds. They want to stay in the They want to stay in the um um in the crypto um basically world and it's actually cheaper for them to do that. It's faster for settlements. Accessibility is easier. So on that points we are not losing on oversight but we are providing additional benefits to um to a traditional or Let's put it let's put it this way.

It's an alternative to a traditional um you know financing instrument and I think the whole crypto universe is about that. >> I see. And so poking the bear a little bit here. I mean so are we building infrastructure for real demand or are we hoping that demand will appear once the infrastructure is there and maybe this kind of cross panel um >> uh we haven't seen the demand uh from the commodity traders yet uh we saw that some of them considering stable coin as a mean of payment uh but we haven't seen the request from their side and I honestly believe that most probably it wouldn't the uh commodity traders who

will come with the demand because for them I think they like this kind of physical world which gives them opportunity for arbitration. Uh but I believe that for the banks, for insurance company, for the logistics and for the warehouse, yeah, if the infrastructure players will start to say, okay guys, if you want to stay in the physical world, that will cost you more and it would be like this and if you move to the digital because we believe our risk is lower. So that may be how the market will move. >> Interesting. uh but at this point of time I would say it's more for the banks who is afraid of losing their money uh with the physical risk associated and having to see like what it might be. One

thing which I like today then I was uh listening to other panels was in the commodity world quite often banks we require our traders to hedge their risk. So they physically do uh certain derivatives straight to hedge the price of the commodity and we all know how it works in the classical world. So what we can see today is that at least this part of hedging will already bring us closer to the digital world and then most probably the physical part will follow. And um another thing I would say for me it's absolutely clear that I don't see that the banks and the crypto players should be against each other and we're like trying to compete. I think that it's a win-win story. Then the classical

banks who are regulated, who is trusted because of the fact that they are regulated and who already has all this uh uh classical financial setup and the rails will partner with the crypto players and together we would be able to offer much better um product proposition for our clients and we will still have a place for generating funds both banks and the crypto players. Yeah, if I might add to that, um there are definitely some interest, let's not say demand, uh clear demand, but some interest from government and central banks um but not for the let's say the quickness and the rapidity of the the

infrastructure much much more for the programmability part. uh we I mean we've been focused on western economies a lot but when you look at African countries and southeast Asian countries there is a thing that often we we forget like Islamic law basically and that's all have to do with the real world assets uh in this principle whether you agree or not uh they have to be I mean each financial operation has to be tied to a real world So basically that's what tokenization answers to. If you want to take a loan you have to buy an house to be backed by

an a real house etc. So for them and for especially for that part that's a very let's say huge use case for them. So they can ensure that yes it is not just paper based it's actual based with a token representing the actual asset the actual underlying asset. Yeah, thank you. Kim, would you like to to comment on that or >> um yeah, I think I think it's it's it's a bit um you know chicken and egg problem as as always but uh again just commenting from the experience that we had uh and we were the ones that actually in our firm

we decide well when crypto uh market has been growing and it was three four years ago when we approached certain banks even that that that that we're presenting today and uh we've approached certain platforms and um with the idea of tokenizing the bond bringing it to the broader audience. Um they said nah nah there is no demand for this product that is basically we don't want to invest into that. Um so we said okay the market is not ready. um approximately 2 years ago, we we were contacted by the platforms. We were the ones that received calls and we were asked, "Hey, remember we talked about

two years ago." Now, seems we have clients that are actually willing to to to build portfolios that are not all Bitcoin or Ethereum that that fluctuate like 50% on a monthly basis. They want to have something a real world that that you can actually assign a value to in a way like taking your cash flow, discounting it back, knowing what's worth and and and comparing it and and you know building part of the um part of the um uh of your portfolio based on these type of assets. And this has come from from from Switzerland. uh we we partnered here with U-Hogler who's been

uh a great help for us in promoting marketing the pro product here in uh Switzerland and in Europe and we've we've we've um attracted clients this way or investors this way. Um we have been reached by um the the exchanges in Asia in uh in u United Arab Emirates uh who basically came to us and said we need something like that. So yes there is demand. Um I think of course it's it's it's not the man like you know it's going to be bigger it's going to grow

and we need to help to develop these products to be basically investment grade and uh for for this demand to grow uh further and um you know with accessibility also growing the liquidity. Yeah. No, thank you for that. And I I I come back to what you mentioned at the very beginning, what you were saying that it is a little bit of a a chicken in the egg, right? And Kataterina mentioned kind of this whole ethos around well the the banks and the crypto folk should come together whereas maybe you know a decade ago it was you know let's break the wheel you know change the system. Um and it's maybe not the the case in more places. Yeah.

>> Yeah. I I I think I have this thought that bugs me and and I apologize. I I'll probably offend most of the people in this room now, including myself. Um but just looking at the social media platforms, you know, we we had we had Facebook, then we had Instagram, then now we have Tik Tok. And and I'm looking at my son who is 17 now. He's all about Tik Tok. He's he he doesn't know what Facebook is. and and he follows this new trend and I think RWAS and and and the whole crypto is not for you know people in this room yes we going to facilitate the development of it but it's for the

generation that is actually graduating now in the universities now that you know you go to um you go to Asia and uh I've seen so many people involved in that industry young people that you know they are don't dress like us they they all wear t-shirts and shorts and and and it's it's it's it's it's a completely different kind but I think the interest is there major interest and there is a shift in the whole structure of the economic or finance world a development not a revolution a development a normal development and we are you know helping

it happen we are here to foster it and So >> yeah. No, I understand. I'm I'm wearing sneakers. I'm trying to stay up with the times at least a little bit. >> I've seen those very nice ones. >> Um and and so look, we have four minutes left and I had a different kind of concluding question, but maybe let's stay on the same thought that you had, right? Um I was actually speaking to someone uh before that we had the same thought actually as you is that actually it's a generational change. It's much harder for people to understand how the internet or certain digital assets are going to be used because, you know, if you didn't grow up with the internet or kind of a smartphone and you've not been able to use it as, let's say, an inherent native of it, it's very hard

for you maybe to see behind behind that screen. Um, and so let's say the agism to a certain extent is is a prominent factor. So, you know, people in this room are here in this room because they do want to make a change, they do want to do something. What could you recommend to to the audience here that maybe not be the the the the users or the endgame users if we look at a couple of decades uh beyond digital assets? But what can they do today in this room or outside their room uh tomorrow when they go back to work in their offices to make a change for the future generations with regards to this this industry? What can be done today for tomorrow? So maybe you know a quick

minute uh each and then we wrap up. >> Uh very quick. Um I think it's a perfect momentum. Let's say I said I'm working in a boring bank with a commodity trade finance. So we know that sometimes then things are not easy and the volatile people want to go to the roots and uh people uh may say okay I want to earn some physical which I believe and it might be not only oil there is a metal in place uh there are other things so today being the individual you can't invest into that and most probably young generation who going to get as we heard already a heritage from uh the elder one uh maybe they will get advice from the

elder parents saying like okay what about physical what about oil what about metal and you can't do it but if we tokenize that we actually giving them opportunity and we're saying okay we still will need to have a physical world we still want to invest into that we don't know how to do it so let's do let's try to make tokenize and you may have it like fraction which you can't afford so what I'm trying to say like if we all try to see how we can bring what we have today forward to this digital and maybe start small thing because I think one of the problem was that we were trying to jump from old world to the new world and that's why maybe

sometimes it doesn't work why not to try to build up the bridge so all of us today returning back to our office tomorrow and if we start to build up the bridge all together step by step that will bring us to the bright future I believe >> wonderful thank you um Maxim Yeah. Um, uh, thanks for the for the question about that. I think it all comes down to accessibility. uh when you have young people I'm wondering I am part of the old in your guard but anyway uh we have I mean there is nothing much more frightening than saying it's a crypto-based token

wrapped into a blockchain settled by stable coin nobody understands that I mean except from people in this room and and I think to bridge that gap it's not only to bridge that gap to new generation but also to bridge that gap to let's say less financial uh lit literary people and from doing that items we can do that right now with our actual clients I think we can lay a proper foundation for tomorrow's growth >> thank you yeah using a digital asset like a nice bank note that we all have in our in our wallets um did you want to

say >> I would appreciate this is a kind of humble ask to the banks and some of them were presenting today again um and when you go to the web page of the bank as an individual you know the the one of the claims was there are the deposits the crypto deposits are not um there is no demand for them actually when you go to the banks the most of the Swiss banks you can't find it in the product product offering I I mean if there is no offer then of course there is no I mean active demand. We have to build it. We have to build the infrastructure but we have to also promote explain and um and um you know make this um crypto universe more

accessible uh and including the RWA uh products more accessible to the uh to the market to the uh potential investors. >> Fantastic. Building the bridges of tomorrow through tokenization. Thank you all for listening.