Tokenized Real World Assets - Real Estate and Bonds
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Episode Summary:

• Chintai x Chimera Wealth Interview
• Moon or Bust - To Play Moon or Bust) go to https://www.benzinga.com/markets/cryptocurrency)

Guests:

-Chintai is a Singapore-based company with offices in Germany that uses blockchain technology to modernize capital markets for asset managers, banks, and enterprises.

-Chimera Wealth is a registered investment advisory (RIA) firm focused on empowering clients to enjoy their lives today while designing their tomorrow.

Meet The Hosts:

Logan Ross

Blockchain Analyst @ Benzinga | President @ Wolverine Blockchain | Crypto investor and educator since 2016

https://twitter.com/logannross)

Ryan McNamara

Bought sub $90 ETH during the bear market | Liquidated on ByBit | Was into DeFi before it was cool | Ran ASIC mining operation in 2016 (sorry planet Earth) | $UNI Bag Holder

https://twitter.com/ryan15mcnamara)

Disclaimer: All of the information, material, and/or content contained in this program is for informational purposes only. Investing in stocks, options, and futures is risky and not suitable for all investors. Please consult your own independent financial adviser before making any investment decisions.

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Unedited Transcript:

GM zinger nation. My name is Logan Ross, and I'd like to welcome you back to moon or bust your home for all things, altcoins and DFI. We've got a great show prepared for you today. Uh, but how you doing Ryan? What what's going on? Well, GM Logan happy Thursday and happy Monday to our view. Yes indeed. So before we can get started, I want to let you guys know about a couple of things we have down in the description below.

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Uh, so without further ado, I would like to welcome AIJ and David to Mooner bust. How are you both doing today? Thanks for having me. Yup. Good to meet you. Yeah, pleasure is all ours. So let's just dive right into it. Um, David, you are the, the founder of the crypto project, chin tie, uh, and Asia you're coming from the investment side from Kymera wealth, uh, could starting with David, could you walk us through, you know, your background in crypto, how you found yourself, where you are.

Yeah. I mean, my background, uh, maybe isn't that uncommon, but it's certainly different from probably a lot of people who are in the crypto space right now. Um, particularly this current generation just coming in. I, uh, found my way in via a 20 year career in financial services, working for banks and asset managers.

And so I got to live through the 2008, nine financial crisis. Uh, from St seeing it from the very inside and, uh, and really got a sense of just how flawed the existing system was, um, that it really wasn't working for us generally. Um, and that, that led me to start looking in 20 15, 16 onwards to wards, uh, disruptive technologies that I could use allies to help, uh, improve prove the financial system in petite.

Um, so that, that led me down that first, uh, crypto rabbit hole. You know, I started looking at Ethereum, uh, beyond Bitcoin and getting a sense of what was possible with small contracts and, and beyond. Um, but, but really then, uh, that's what led us to, uh, creating Gentiles, which is a digital asset platform for dynamic forms of issuance and market creation.

And, and, uh, yeah, I mean, th the whole growth of the DFI sector over the last three years is a phenomenal, uh, illustration. I think of that potential. Awesome. An agent. Yeah. So I am a managing partner and chief investment officer of a registered investment advisory firm here in the United States. We're talking about my crypto expertise.

Well, I dabbled, you know, right when it became a bit popular in 2017, uh, not gotten to extensively until actually I was introduced to David and what their project is over I and tie. Uh, that's where not only for my own. Personal portfolio, but also as a firm, we've started to do well a bit more into the space, especially with clients nowadays on both sides of the spectrum, whether you have the younger generation or those who are nearing retirement, really just looking to diversify their assets and portfolios through different areas.

So, um, yeah, that's pretty much where my exposure came into this. Awesome mate, Jay, we're really happy to have both of you on here today. It's great to see both sides, uh, you know, both the builders and the investors. Uh, so we're going to get right into it. So, David, could you tell us what chin tie is from a very high.

Yeah. From, from a very high level. Um, we actually started out, I guess, in the defy space before he got called defy, um, back in, in 2017, we decided we were going to build out a full on chain, uh, order management system and an exchange, and actually try a new concept, which was trading of the utility of. Um, in this case, we started off with network capacity and, and it was a great initial use case, although it didn't last that long.

Um, but really once we actually spent all that time building that out, we started to realize the sheer amount of time and effort we'd spent issuing our own network, token, the checks. Um, uh, we, we did that post, the kind of ICO, boom, if you all recall back in 2017, and it was just around the time that the governments were starting to crack down on some of the scans that had had erupted throughout that period.

And we're starting to make noises like this is actually a security and things, and that really scared off a business and the promise of mass adoption for a couple of years, um, during that period. But nonetheless, we. Did a full issuance of the checks token, uh, during that period. And we built an exchange and we realized the entire process of doing that was incredibly complex, um, and very, very challenging for anybody else who really wanted to follow in our footsteps.

So it really, the moment you looked at every other project, though, they had a need by and large to issue some sort of. To deploy on a, on a secondary market and, uh, and have liquidity with it. And so that was the fundamental foundation, uh, underlying Gentile as a platform, which was to say we were going to provide a solution that would enable dynamic forms of issue and spit utility tokens, and NFTs write down.

Um, securities real estate. Um, so, so we've pursued licensing out of Singapore to ensure that we'll be able to, uh, do that type of thing with a fully compliant, uh, framework as well. And, uh, and that that's a fundamental differentiator too, between what we're doing at anything else in, in that everything is operating, um, on a compliance control framework so that, uh, whenever you've got an asset that's, that's red needs to be red compliant and, and handle that way.

It can have rules in place. Uh, while still interfacing, uh, long-term potentially with the defy system too. So we kind of, uh, tend to tend to describe it to two outsiders as we're building the regulatory bridge between traditional finance and defy, and we're going to enable that mass adoption curve. And so it's a, it's an exciting time because the networks, uh, about to launch next next month.

And, uh, yeah, so we're delighted to have, uh, Comera wealth on board with us. Awesome. So AIG, I know Kymera wealth has a background in real estate. Could you tell me specifically what interested you in the chin type? Yeah. So before I forget, um, and we're, we're going to get into this later on. Uh, I do need to disclose that, uh, Kymera wealth, as well as myself and the partners do have an investment in shin, Thai, uh, as backers.

So, uh, yeah, just have to disclose that out there. But yeah, what really interested us is, as I mentioned, we're coming from the traditional financial space, right? There's kind of two aspects. One of those is acting as a fiduciary for our clients, really trying to develop a portfolio that's in their best interests.

And as we're getting into this even more complex economic environment, we're having to diversify our investments, not just from the traditional stocks, bonds mutual funds, right. But also in different. Classes. And that's where the digital asset space is growing, not just in popularity, but acting as a very beneficial, uh, diversification tool, regardless of if you believe.

Bitcoin or what have you and the fundamentals of it. It is acting as a diversifier for client portfolios, and I'm not talking about going 100%. Right. Uh, you can do something as small as one or five. And then so yeah, I come here a wealth, not all the way we're doing that aspect. And that's really what attracted us to, uh, what the team that shouldn't ties really do.

Providing that platform, but also the compliance and regulatory aspect. Uh, as I just mentioned earlier, right? I have to disclose that well, we're investors in shin Tai. And so our area is very heavily, regular. Especially following the global financial prices and it's for good things, it's for the protection of the investors.

And so that's really what attracted us is. We're seeing a lot of these projects out there and the digital asset and the crypto space, you know, initial issuance and such, but nothing really. That's kind of providing that regulatory or compliance framework and all that. David of course, top more in depth. I don't want to steal any thunder from him, but.

Uh, that's one component. And then the other side is yes. What we're working on on a private funding side. I can't give too much information, uh, but we do have some expertise in the real estate as well. Some of the venture capital area. So really partnering machine tie on providing that, uh, through this new asset class digital assets versus doing the traditional route of either bringing up a venture capital firm and only being able to.

Give that exposure to accredited investors and more towards the retail investor, right. The general population. And again, everything we want to do is in a compliant regulatory mindset. So having project like shin type to partner with is just perfect for us. Aja. I'm curious to know, did you receive any pushback from your big investors, uh, for moving into the crypto space where any of them kind of spooked by it?

Uh, and if so, how did you handle that? How did you explain it and did they come up. Yeah. So right now we haven't really gotten much pushback. Uh, I will say there are some clients that we have that, uh, it is a new space to them and really what we try to do. And this is an all aspects of how we deal with clients is really focused on the educational aspect.

Right. What I've found is most. Portion is just the financial literacy, whether you're talking about crypto or anything, stocks, bonds, and it's really our job to educate our clients that, Hey, this is a digital assets, uh, that we're really looking into, whether it's Bitcoin, Ethereum, a platform like shin tie or something that we're trying to privately issue.

Once you educate the client from my experience, it's a lot easier to get them to jump on board versus just saying, Hey, there's this hot trending? Token that's out there. I want to invest 10%. Right. Um, so that's really where we focus and we don't really typically get much pushback once we educate those clients on just informing them.

It's great to hear. So, David, my next question is for you, which blockchain does chin use and what does your multi chain architecture look like? Ooh, what a technical question. I mean, before that, I have to say again, I'm somewhat sheltered and being, pushing your clients into.

No, I wouldn't do that. No, no. I would say that might be wise from a long-term hold perspective, but who knows? So yeah, the underlying protocol. Um, so, um, one of the other lead investors in the round for us was Dijuan. The role team known for launching the ESI protocol. Um, however, um, we, we select start because it's highly scalable and configurable.

Um, and although it's had a bit of an interesting, uh, I think period over the last two and a half years, uh, since the original, uh, wider public blockchain was launched, uh, it's actually been very well maintained during that period. And it's is, I think there's some encouraging signs in that wider ecosystem, but.

What I generally look at now is what is the underlying linkage potential to multiple other protocols? And that's just a general demand. That's coming from all clients that we were talking to you. Now, they want to be able to have that flexibility to lest on the very best protocols and in the, in the best potential markets, or they want to be highly selective, maybe about what they do as well.

So, as an example, if you were to spend all the time going through an issuing a security token and putting controls around the marketplace, Who's a participant and maybe you're putting in place mandatory KYC, AML anti-money laundering checks in there as well. And so on and so forth. Uh, you defeat the whole purpose.

If you just decide you're going to go and list it on unit swap, for example, because at that moment you get the, the, the, one of the great aspects of defy, which is that it's decentralized in censorship resistant. But the problem with that too, is that at that point, frankly, you know, your securities could be going off and being used for money laundering or being sold.

You know, a country where somebody maybe is blacklisted elsewhere out of the business environment, because. The links to terrorism or something. So from an issuer point of view, this is where the they're more interested in other compliance solutions too, and saying it will be great to have options to connect in.

And so the good news there for us is that we've got a really strong partner. Um, the announcement will be going out soon. Which provides us conductivity full conductivity to about 30 different other blockchain protocols. And I think that's broadly the future that we're going to see, which reminds everybody.

I think, of the whole, uh, you know, underlying protocols of the internet itself, which is no one really. What's some of the technical connectivity issues are, you know, w w we're talking right now across this, and I know it's very easy to get really passionate about some of the blockchain protocols, the layer one stuff, but actually they can intercommunicate increasingly well, and, and I think from an end user perspective, you can imagine log-ins, you're on the line of account.

You see, you're asking. The fact that you might then go and choose to trade a sale on one exchange or another. And under the surface, it's actually transferring between those chains as part of that process really shouldn't matter to you. And that's broadly where we're moving towards, which is encouraging, I think.

And it's a, it's, it's an exciting, uh, component we need to needed to collect a, we get over the line for achieving mass adoption. Yeah, I think that's a good take. Do you have any plans on integrating with Ethereum in the future? Uh, yes, we're, we're already able to connect to it. Um, so for example, uh, the checks token, uh, network token, uh, we had to be.

Limited by the initial listings. Uh, we are about to push a hat with listings or a number of, uh, Ethereum based, uh, exchanges. And, uh, and it's such a rich ecosystem that even though it has obviously some evident flaws, people talk about like the gas fee issue and so on. It's it's got an incredible number of talented developers in that pushing out some really innovative models, uh, related to everything from, you know, insurance to lending.

And I think it's that type of innovation, which is fantastic for the wider financial system, because it really, it gives ideas to the, the wider financial system on what's possible. Uh, even if you know, it is subsequent stage, we find that some regulatory controls maybe start to creep in from governments or, or maybe not.

Um, but, uh, yeah, I, I personally love what they've been doing over the last two years on the device space on, on the Ethereum. Totally me too, for sure. Uh, can you give us an overview of the process it takes to tokenize a real-world asset on the blockchain? Yeah, it's actually really easy. So, so from, from the perspective of actually tokenizing anything, it's a much over-hyped, uh, process in that it really is, is relatively straightforward.

So within our platform, for example, now we were on a life, uh, call, call with a client the other day where they, they set up the. Got registered and have configured in and tokenized and issued an asset within about five minutes. And it was live on the chain to their exact parameters and they were able to then deploy a secondary market and commence, active trading with other people.

Now that, that is all well and good, but the problem is if you're doing that with anything, that's actually like a, like a security, for example, with, with controls that need to be placed around that. This is where regulatory compliance and this other more complex side kicks in. And that's really where, um, I would say.

90% of the value app really kicks in because tokenization is, is inherently going to be something that we all have, uh, disposed increasingly. I mean, if you think about it with NFTs, what that's shown us is with things like open seas, anybody can issue a token, right? I mean, you guys could have, have a Benzinga token, right, right now in a variety of different forms and you could issue it out pretty fast.

Um, so the same really does apply here, but where it comes, uh, becomes really relevant. Ensuring that all the underlying controls and rules are put in place so that you can not only then say you've issued a security token, but that it actually combined and be handled in exactly the same way as the security.

And that's how we eventually moved to all of the financial system going digital, going to tokens and, uh, and all the associated benefits we'll get from that. And how does holding custody of these real world assets work? Uh, yeah, it's it. Can sorry, go on. Finish your question in the custody of the real world assets that are tokenized on the platform?

Uh, well, in, in the case of the regulatory ones, we've actually signed partnerships with several. Local and international, um, digital asset custodial solution providers. Um, again, there, there are announcements that are going to be going out very soon, um, on that side of things. However, when you get to things like utility tokens, um, we absolutely could be custodians as well.

I think it then becomes something of a network security issue generally. Um, so why should use as necessarily have to trust and throw, throw the dice with every single thing athletes are up to or particular. Uh, asset, it kind of generally makes sense that particularly when the, um, doing anything that involves cross chain, that there, that utilizing a provider who maybe has got aspects like insurance, um, and is a established player who's in type business is looking after your people, digital assets securely.

Now that doesn't mean that they couldn't still take control. You know, put them in their own wallet and maintain the key, but there are points in time where you are going to want to hand that off to somebody in a secure way and know that yes, it's moving around the underlying defy system here, but, but we're generally comfortable with it.

So where we were definitely very focused on partnering with firms of that kind of quality to ensure that our users have the maximum. Yeah, that's great to hear. It seems like custody is becoming more and more popular, which maybe the earliest adopters of crypto didn't always like, or, you know, see the need for.

But I think, you know, to get some sort of mass adoption events, Retail won't even realize they're interacting with blockchain and we'll all be taken care of for them. Uh, w which is, you know, it's good for some people in certain applications, especially when there's there's high value assets at stake. Uh, so speaking of those high value assets, can you tell us, uh, what, what is the main type of asset that, that Shantae is focused on tokenizing?

Um, and how is it bringing this type of asset to a new audience or a new market? Yeah, well, actually it's, it's entirely being client driven. So as an example, comment or wealth, um, I think, uh, agent, maybe you could speak to this, but I know, you know, for example, Definite interest in, in the fractionalization and tokenization of real estate, because it fundamentally disrupts an asset class like that and adds liquidity to, to an illiquid asset class for the first time, which is not to be underestimated, what a big deal that could be, but there's a variety of other things possible.

Um, and if you think about a firm like Kymera wealth, that's. Got back potential. It really, to some extent it's almost imagination is to, to is one of the core limits as well as what their client base might be. But I'm just broadly curious what you would say to that one in terms of what you think that the primary asset classes will be served for you over the next three years beyond real estate.

Yeah. So I mean, one of the things we've been exploring is of course, real estate, so tokenizing that aspect, and it's not just the physical real estate work, just mentioning it it's conversation, but also the forms of. Right. So if you actually look at financial markets, the bond market is a massive market.

Of course you can probably second me on this. It's it's bigger than what we have is this. So that's an area where also looking at Kymera as well. Um, whether it's into the mortgage real estate space or just in and of itself, just from my experience in my network, talking to other individuals as well, some of these businesses, uh, I think debt will probably be one option.

Ty's biggest players. Um, I know one who's doing. And I think David, I introduced them to you. I can't recall, but they're really looking at doing like a Def con reconsolidation right. And seeing if they can have somehow tokenize that there's other areas too. I think it's very interesting how innovative some of these entrepreneurs are being in regards to another one I had project I had run into is looking at doing the like solar energy credits and how that could somehow be tokenized to help incentivize individuals.

I Kymera wealth. I would say our biggest area is, as I mentioned, the real estate space, uh, that just seems to be where a lot of our clientele is kind of driving us and part of our network and in house as well as, as I mentioned, the loan space for the private debt dealing area. Yeah. And actually an interesting, uh, illustration of, of how difficult this is, is, is to predict is that I would have never predicted for example, that AF first go live market next month would be a carbon.

So, you know, I thought all expands would be real estate or it's bound to be securities or, or just the standard utility token. But no, it's actually the global carbon market is forecast, for example, to be, um, up to $50 trillion by 2050. Um, because obviously the, the, the issue related to. Um, climate change and so on.

And just the general challenges of the amount of carbon being dumped into the atmosphere is whether or not people fully agree with all of, all of that. And it's a relevant, because there's wider global consensus on the need to remove it, the statistical test written. So actually there's a huge potential that.

The global carbon market is a great example of why blockchain technology will gradually pervade and, uh, move into lots of other sectors beyond what we've seen so far, because it's a corrupt sector and the carbon credit market can be faked. And you can end up with stale credits being Retraded elsewhere, which is a great way of kind of saying, no one really can control this properly.

And it becomes somewhat meaningless. Uh, You know, your audience are gonna get it better than anybody, uh, that blockchain and be able to link some carbon directly removed and then burn those tokens. When they've actually been consumed, say by government to offset that that's a perfect use case for blockchain.

And so. If we've got that as our launch market, who knows actually what some of the other, you know, really big use cases out there will actually be. Um, I think it's, that's the exciting thing about digital assets is that it extends to really, almost anything in any way that we, we exchange value. Um, and that's, that's where it's going to be a fascinating one for us to watch how this evolves over the next one.

I want to touch on the tokenization of real estate a little bit more. How does tokenizing real estate benefit retail investors? So say one is providing greater access. Uh, so I had mentioned earlier, right? In regards to tokenizing, not just real estate, but other areas where it's only privy to, for, to give you an example, there's a.

Particular investments, basically a non-traded REIT, a real estate investment trust. Typically you have to have certain requirements that the investor meets, whether they're an accredited investor, meaning they have like a $1 million net worth or earn 200,000 a year. For the past two years, there are certain income requirements that.

So tokenizing some of these real estate's whole physical assets can provide greater access to retail investors versus, you know, other areas of the market where they weren't privy to. And that's, again, that's one of the reasons why, as I kind of hear our wealth is really interested in this area of.

Providing greater access on all these different areas, not just real estate, but those private companies who maybe want to tokenize their equity in some sort of form or fashion to give it to the people. And you're seeing that trend grow right. We have crowdfunding and stuff like that. They're even online platforms that have been doing these kinds of deals, just in a different method.

And so it's greater access for me that I would say is the biggest factor, David. I'm not sure what you would like to have. Uh, yeah, no, I think I broadly agree with everything you've said. I mean, really fundamentally to, um, tokenization of real estate. Uh, it doesn't have the potential to, to, uh, unlock access to an asset class that a huge proportion of the population right now, the, the, the younger adult population or affects will be priced out of.

We can argue whether or not it's actually a good time to do that, given that we're at cyclical, highs on everything. But, uh, outside of that, it's fundamentally. One of the few asset classes that has literally solid backing in terms of asset backing behind it. So it's fundamentally undervalued right now because of the liquidity issues and the, and the lack of access, uh, for, for many, to be able to trade in and out of it.

So for me, I just look at it as a way that, uh, people will be able to fundamentally change how they interact with real estate. They'll, there'll be. Utilize it and dip in and out of it in the same way we do it securities, um, over time. But also over time, I think it's going to disrupt how we have all the financing aspects of, of, uh, of, of real estate as well.

You know, that they'll, they'll come a time when the concept of a mortgage may end up becoming obsolete as we know it now, because there's the tokenized. I mean, if you can imagine owning a house, and this is looking ahead in the future of the potential of it, if you can tokenize it in, in sort of say a mil, a fraction of, uh, And each token, therefore is linked to one Millington of the property.

Well, the underlying market, um, would be able to effectively you, you could borrow those tokens off the market, in the form of leasing and pay the holders. The equivalent of view you, the way you pay the bank right now. And, uh, and over time you acquire through some special permissions, more and more of those tokens off the market to do eventually on the house.

If you want in such scenario. Now that's the type of mechanism that could come into play eventually as an alternative way of actually funding out something as simple as, uh, over some of these fundamental as a house. So. Um, yeah, I think it's not to be underestimated the potential of all of this. And again, it's really going to come down to a combination of the, the innovators coming out with these types of concepts and trying to deploy them.

And obviously the regulators and governments globally getting comfortable with such, such a design as well. AJ you mentioned, uh, that you suspect real estate bonds, and that may be one of Shanghai's biggest, you know, uh, platforms or applications in the future. Um, could one of you speak to, uh, you know, a little bit, little bit more detail on how this might work?

Well, I can talk about the mechanics of it. That's for sure. I mean, I definitely agree with AJS point that bonds is probably the. Biggest potential market of all digital assets. I mean, like it or not, there is a hell of a lot of debts watching around the world. And, uh, it's also fairly fundamental for the way that we, uh, we actually conduct different forms of, of, uh, commerce generally.

As well. Um, and it's actually very important. It's not always about a thing. So as an example, um, there are ways that if you, if you're a company, for example, you don't want to necessarily sell equity in your company, just because you need to access to investment capital, the idea that you could far more cheaply access and issue your own kind of corporate bond to, uh, to token holders, uh, backed by, you know, various fundamentals that you've provided related to cash flow and so on, and then pay them off over two or three.

And access that farm in a way that currently most small companies are priced out of as is the type of thing that's possible. I mean, even some, just a single use case like that is a huge deal. And, uh, so I do think that broadly it's going to be a big one, but as to how it mechanically works well, it's programmatically, not that dissimilar to the underlying permissions you have with things like a security, it's just the.

Whereas with a security, you might have things like voting rights and dividends and that type of permissioning built in and actions. Uh, with bonds, you just have bond blind ones instead. So you have coupon payments and you have the underlying dates related to them and you'll have certain default criteria.

And what typically can happen, um, in, in a variety of other scenarios. They just get programmed in and then they get handled. Um, and of course, if it's a digital bond, well then you're logically also going to have to apply a different set of compliant compliance rules as well. So they'll have to be in coded and built around that to ensure that the, the market operates in it in a legitimate manner too.

But, um, yeah, other than that, it really is just one of another multitude of new digital asset classes. I think we're going to see in the, in the coming two or three. Yeah. The point you make about kind of requiring reporting of, of, uh, financial data and, you know, kind of putting on chain, the risk that's associated with certain bonds, I think is really interesting.

Um, I I'm by no means an expert in the real estate sector. But like, I know that that's one of the big things that led to the financial crisis of 2007, 2008, was that the, the, the debt ratings or like the risk ratings on these bonds, uh, were completely fraudulent. And, you know, synthetic bonds were created with, with just like never-ending leverage and, and an entire market was made out of basically thin air.

Right. Um, so. I see the huge need for this, uh, product and the service that you guys are providing with, with the regulation as well. Um, so maybe we could touch a little bit on the regulatory, uh, you know, position we find ourselves in, uh, across the world than in the us specifically. Um, what type of measures are you guys, you know, proactively taking to avoid security issues in the future?

Well, certainly speaking from perspective because compliance is one of the biggest areas we're focused on. Uh, it's kind of not a problem. Uh, how, however insane and restrictive a set of regulations may be passed by any given, uh, government gloves, but really there's still a set of rules that we can encode and feed into the rules engine, the compliance engine and enforce.

For example, at the most extreme level, we can enforce China's current rules on crypto, which is a complete ban and just simply block them from any utilization because you put mandatory KYC around the regulated markets. Right? And so there's a degree of that. That's not to say obviously, breaches couldn't take place, but you can do that now.

Um, it, it, it depends really in terms of how complex and difficult the system maintain on how frequently they change the underlying rules. Um, Typically regulators publish them out in a consultation period and make updates. And they don't tend to rock the boat and change rules too dramatically, too fast because they need time to see how they're going to play out.

And in terms of whether the intent behind the rule is actually what ends up playing out or not. Um, and just generally the way most regulators operate globally is, is through a kind of consultation. Um, a process with the underlying industry that they're operating and regulating. So, um, the, the, the, um, uh, a jurisdiction like Singapore is, is very, very high quality.

I would argue it's, it's comparable with London and New York as a financial center. And it's really, I think, set itself now as the premier, uh, APAC, uh, financial hub for me, which is why we selected it as our HQ. They've also got an, a regulator that's treading an interesting line between trying to ensure that everything's done the right way, but still trying not to stifle innovation and therefore pass rules that enable that too.

So from that perspective, um, you know, I find regulators like that very easy to work with. We can encode their rules and give them guidance. And feedback and help shape that process. I think when you get to the U S it's a slightly different case because the U S is it's got a lot of conflicting different perspectives, and obviously it's kind of federal too.

So it's got different states with different perspectives as well. Um, That makes it more challenging from, from an operational perspective, I think. And, uh, you know, I, I would hope that the U S will gradually get to a point where it has a cohesive set of rules that, that everybody can understand that if you're like a level playing field, even if it's not the absolute best.

Um, because right now, I think it's generally very challenging for a lot of the digital asset firms in the U S to, uh, to be able to not just meet every role, but, but also be able to be as competitive as some who are based on. Totally. And we saw that the sec went after, you know, swap for supporting tokenized stocks earlier this year.

Do you guys have any plans on tokenizing stocks as well? Or are you going to stay away from that? I mean, it's not on our roadmap right now. Um, but there is absolutely nothing to stop. Um, you know, an existing exchange for example, but may, maybe does do all that as part of its business, um, leveraging our platform to deploy out a digital version of.

Now, in fact, we, we certainly could in theory, do that, I suppose. Uh, I don't get that excited by the idea of tokenizing stock generally, because it's already fairly liquid, it's accessible and relatively cheap. I mean, you just need to look at the size of the equities market. And the average retail investor is in an able to trade in it almost as they ought to be more easily than they are with, with crypto right now.

So from that perspective, I think you have to ask the question, well, why generally have certain. Stop tokens appeared as a, as a concept or one is to kind of prove that you don't just have to tie something like a stable coin to the U S dollar. For example, you actually can tie it to something as dynamic as a security.

Um, but broadly is one. I do think that there is ideologically a very big group in the, in the crypto area who are generally, um, determined to try and completely upend and replace the financial system from the inside out. And. They are awesome in, in many ways, in terms of what they're looking to do, that the challenge with something like that is that if you just go out and flagrantly, ignore the regulators and just say, we're going to do that.

And we're going to have no controls in place. No KYC, no transaction monitoring, no anti money laundering controls. Eventually they, you know, you can imagine a scenario where they turn around and say, well, we've analyzed all this chain activity and we can see direct flows of capital going back to . Um, and that's where, you know, the, the DFI system won't do itself any favors.

So it, you know, I think there's ideologically some issues here between, uh, the, the pragmatic side, like ourselves who want to actually, you know, enable controls and mass adoption through that, and then gradually helping influence and change the system and allowing that disruptive technology to kind of do that as well.

And then there's another group that just generally want to stick two fingers up the entire system and just deploy everything out regardless. But, yeah, I mean, you only have to look at the likes of finance for the, they actually issued stock tokens as well, and had to pull them quite rapidly to see that, you know, even an exchange like that with, with a level of parent influence, it has, was unable to withstand pressure from growth global regulators.

So I think. What we're seeing with that level of innovation and experimentation is more likely to end up being adopted and pushed out by the rest of the financial system with some appropriate controls around that. Yeah. I was certainly two camps as far as like strict centralization and strict de-centralization for a long time.

Uh, and this market cycle, we've seen a whole bunch of products pop up. They kind of embrace both sides and find some middle ground, uh, you know, with an acceptable level of decentralization for the application. So they've uh, could you talk about how decentralized exactly shouldn't have. Yeah. And, and I think we're a very good example of exactly that kind of a thing that's coming out.

So, um, on network launch, we've made a conscious decision to operate on a permission chain, which is effectively a private chain, uh, at this stage. And the reason we've done that is because there are a lot of benefits to launching a network and a project of this nature. With, with centralization. Um, so having gone from the inside, out of a network, a blockchain network launched the, went for the full decentralized option.

The problem is that decision-making is extremely challenging in those environments. And, and I would argue. Uh, decentralized governance is probably one of the big unsolved challenges for crypto over the next five years. It's something that still hasn't been necessarily mastered. We're still trying different types of governance models.

Um, but the intent certainly for, since I longer-term, that is to actually decentralize our bus network and chain and govern. Working with the underlying users and clients to find a model that works for everybody. So one example of that could be that all the largest, uh, clients become no validators on that.

And gradually, and obviously, um, take part in that or that you can end up with a proposal system related to how upgrades to the network and enhancements are made. That that becomes a vote based system. I mean, these, these are things that we see you're already operating on on other kinds of downtime structures.

But that's that's, you know, certainly the longer-term vision, there will be a de-centralization of the network, um, fundamentally over time, but it needs to be done in a way that also the regulators generally are happy with it as well. Um, so for them, they may want to say, well, if you're going to wish you and, and do all of these regulated products, we still need to have some central point where we can effectively say you're accountable.

And therefore, you know, we know who we're talking to because one of the big problems with dowels in general, Yeah. People then resigned from the whistle positions and no one's clear who, who actually runs it. And people have a habit thinking that means they're no longer, there's no liability risk. But of course, what actually happens is that the regulators can just go after anybody.

Who's a public figure for that network could be the, the validators. It could be the, the governance people, or it could be the developers. And as soon as they apply pressure at that level, you, you realize that actually decentralization as a concept. Quite malleable. And once, uh, once all authorities put a degree of pressure on you, you can see these things actually.

I'm not, not proving to be quite as resistant as perhaps when we first thought, do you think that this level of regulation is bad for innovation or causes capital flight? Uh, yeah. I mean, I definitely think that, uh, the smartest thing that broadly governments could do with the defensive. Um, it's only cracked down on, on areas where they can see absolute flagrant examples, um, that are, that are having a negative impact.

So an example of that, they cracked down on the ICO. Boom. Now it was innovative, but with zero controls in place, we saw massive. People being ripped off access scams. We saw wine, we needed some, some rules in place to, to keep it open and honest. So that's an example that where I think fine, but, uh, when you're getting experimental token models, uh, trying out a variety of different things and the, the pace of innovation, if anything is accelerating to me, it's, it's not healthy to try and impose rules on something.

Moving that fast. It's actually more interesting and probably wiser generally to step back and let it evolve. For say another couple of years. And then one, as it looks to be starting to mature and maybe problems that are more clearly identified, then you can start to actually put in place controls. Um, I do think that generally, if you over-regulate, you end up stifling innovation and so.

I, I very much hope that the more light touch approach generally with regards to digital asset rent regulation is something that regulators globally continue to push for. And I think in many cases they are, but, uh, you do get some who, for example, can't even do something as basic as differentiate between a utility token and a security token.

And when we're not doing that fast, a good adoptive stifling innovation couldn't agree more. Ryan. I think you have the next question here. Oh yeah. So how does single-sided liquidity provision work? Because it's, double-sided on stuff like unit swap, right? You're providing two assets with single sided.

You're just providing one, correct? That's absolutely correct. Yeah. Um, so it's been, uh, something of a holy grail for a long time and different types of groups that have come from. Approaches to try and remove this concept of impermanent loss. So for those not familiar, when you act as a liquidity provider on something like Eunice, SWAT, you inject liquidity on both sides of the pool.

So it could be, you know, let's say Bitcoin on one side and the, the uni token that it's paired to on the other side. Now the problem with that is as inherently, whichever way the market moves. Whether it goes one way or the other, you, you then suffer something called in permanent loss and it's, um, it's something that only then gets realized when you take you up a seat back end of the market, but you can end up in that loser to quite substantial amounts, um, in terms of what you end up getting.

Without going into specifics as to why. And therefore, the only way that, that, that, that is generally handled is by paying very high amounts of the liquidity providers, which actually makes liquidity provision more expensive than it needs to be. Um, if you look at ways around this one example is insurance whereby um, collective groups will provide a degree of, uh, that they will take the impermanent loss when realized, but they will, um, broadly give you coverage for a certain.

So that you, you've got a degree of certainty, you'll get back what you are that you're, you're going to accept that there's an inherent cost to that as well. Um, that is okay. But actual one side of the Quincy is possible. If you actually create an underlying, uh, automated market-making algorithm that can happen.

Um, I won't go to the specifics of it, but we patented a, um, a mathematical algorithm we developed in house on that front. Um, and it checks out and broadly what that means is it introduces two concepts or, um, impermanent loss still exists as a possibility for LPs, but so there's a concept called impermanent game.

And you can therefore, as a liquidity provider, Choose whether or not you could lock in an impermanent game and actually realize a gain or simply a loss, uh, and they will, they will do so in response to market conditions and, uh, things like the underlying rates being provided well, PS, um, it's going to add some interesting dynamics to that, but what that fundamentally means from a, you know, the perspective of define, for example, is that provided we get full interfacing.

With our regulatory markets to define the future as well, which is that the long-term goal you'd be able to onboard your, your. Collateral from somewhere else in the defy system, the same way we move it around right now, you build to then inject liquidity into just one side of the protocol and you build to get that amount back out again as well, but you'd be able to effectively, you know, um, access additional yields, but what they should do, uh, is also broadly, uh, reduce the fees that actually, uh, LPs need to be paid because they're not taking as much risk anymore.

Interesting. So this, uh, impermanent gain, it does not come from the. No, it comes from the movements of the, of the, of the market in the same way as impermanent loss does. So, um, you've got a given exchange rate, let's say between, uh, Bitcoin and the checks like an athlete, and then checks appreciates by a certain amount versus Bitcoin.

And at that point, when you, you, as the LP, Um, so, so you've gone on the, uh, on the check side, you suffer or you, you get you, uh, having permanent game. If you've gone on the Bitcoin side, you'd, you'd have some internet loss in that example without the balance. Um, but likewise, it, it provides you with a way of actually making a decision as to whether or not you think that that movement in the market is law short term.

And you can effectively as a, an LP participate in the market by making those decisions yourself and saying, I'm going to. Uh, our exposure, um, as a liquidity provider here, because I think actually this is just a short-term spike. So we're locking the impermanent, uh, gain hit, and then we'll, we'll actually inject more liquidity back then when we feel it's reached a more balanced level again.

So these are interesting dynamics or what it will require instead is for higher rates to be paid, to maintain the depth of the pool. Now, uh, we're going to be quite interested to see how some of these dynamics play out, but, um, broadly it's, it's definitely uncharted territory in terms of. Uh, this is going to walk right across the market.

Yeah, most definitely. And I don't want to dwell on this for too long, but I know this is a complicated topic. So I'd like to show a quick example on unit swap. So this is an LP position that I have, it's represented by an NFT, and you can see as providing liquidity between the east and Manoj pair, uh, of which my Manor was drained as it took off against Eve.

Uh, and so I may have made $300 from fees, but I definitely lost money and missing out on all of the gains that men have made in the media. Um, yeah. So that is the kind of impermanent loss that we're referring to here. Yeah. That's a good example of, uh, well that one's also partly opportunity costs. So. It could be just even if you ignored, um, something like staking rewards and the fee side of things.

If, if you get a movement in that market and then took it back out, you might end up with less money than you put in, in that scenario, for example. And that's another side to impermanent loss. Um, that is yeah. Generally going to be, you know, an interesting one. I think it's quite a complex area that the average defy user generally struggles to fully understand.

And, uh, that in itself is kind of unhelpful because what people really want is a degree of certainty. They want to know that I'm putting in I'm contributing, say liquidity services, and therefore I'm going to get reasonably well paid for it. And I have some high degree of certainty as to what I'm going to get paid for it.

They don't really want to sit there and go might work out really well. It could be a complete disaster for me. That's never really a, you know, a helpful model. And that's, I think, again, it shows points to the innovation of defy, but also the continued innovation as we're stopping. Try out different, uh, configurations that could enhance that further.

Most definitely. So, uh, one of the big arguments I see long-term for the success of crypto and tokenization is purely for the sake of capital efficiencies alone. So could you talk about how you're able to reduce overhead by over 50% through digital asset issuance? Yeah, I mean, this, this is, um, I think reasonably well understood by a lot of the, uh, the defy community, but maybe not.

Um, as somebody who's a more casual crypto user, who's, who's just dabbling. The different token markets, they probably don't fully appreciate the efficiency gains that come from blockchain generally. Um, because they, they won't necessarily understand the existing structure of the, the, uh, the current financial system.

So if you think about every different, um, asset manager and bank global, To varying degrees, they are going to be operating their own internal systems. They're going to have their own, uh, teams that, that carry out different forms of, uh, checks. And they're going to have to reconcile that with anybody that they, who was a counterparty that they tried with on the markets, or if they're going through a broker, they're still going to have to go through that same underlying process.

So if you, if you think about what that sucks up in terms of time, energy jobs, resources, It's actually astronomical. I mean, we're talking hundreds of thousands, probably millions of white collar jobs, which are means people earning well over a hundred thousand dollars a year. And their job is to check data and to make up for the inefficiencies of the fact that we're all sitting around with lots of different computer systems, arguing over what the positions are on databases that can be corrupted and not reflect properly.

Now, you know, a distributed database, I a block. That sits in the central event, on my process, dramatically lows, all of those costs and adds massive efficiency. So really, um, the best estimates are from the likes of Accenture, um, are that between 50 and 70% of the back office, which is the side that handle all of these reconciliation of positions and settlement can be completely removed out of the global financial system by, uh, embracing blockchain.

So that is probably why we're also seeing some. Substantial, um, adoption, uh, and the interest in adoption amongst financial institutions, even though they're not participating with us yet in the don't defy side, they can see the underlying potential for them just to shoo this into their existing, um, structures in a, in a more efficient way.

Yeah. And I can second that just coming from a financial services firm, right. We have to do audits third party audits. And the maternal or the partners, and I do the accounting. So having this kind of platform where it'll speed up the process, not only saved time and hours with what we prepare ourselves or an associate, but also just having a trusted, full blockchain in this scenario.

Sorry, one thing I was thinking that there is an interesting, other perspective on this, which from a regulator perspective too, they don't really know what the hell is going on in the financial system. So they're relying on people sending them reports and, and, you know, data dumps of their positions. And then they sort of retroactively may analyze it, or may not.

If you think about a blockchain though, where they have site permissioned access and can see. And it's the central golden source of truth throughout the trade life cycle for a given market. It gives them a very powerful position because they can get instant preemptive reporting. They can keep a very close eye on things and they don't need to go back.

And I'll say AGA and Carnera wealth to send things through. They can just generate it themselves and look at it themselves too. And that I think is a fundamental change in how regulators are gonna be able to, um, interact in, in the system. So on a kind of related tangent, we see these automations in blockchain, these automations in AI machine learning self-driving cars self-driving or not self-driving, but you know, you see these checkout kiosks at McDonald's there's no longer like the people needed a and the greater trend towards automation.

Uh, a lot of people think that this presents, uh, an issue. Um, but there's also the counter. That there may be metaverse jobs opening up to replace these. And I've heard people like Gary V say the potentially long-term, uh, there could be more jobs in the metaverse than in the real world. Do you guys see this as a possible outcome?

What do you think? I mean, if time has shown us anything, I think when we have innovative technology, Right. It's really just coming down to adoption. Right? As we have things that are automating, that take a factories right now, we're training those who had those industrial jobs into other aspects of our society.

Whether it's going to be metaverse is going to take place more than the physical that I don't know, maybe David, you can provide some clarity there, but I think in the long run it all, just come to where we adopt as a system. Yeah. I mean, my perspective on it broadly is that nothing that Facebook now called Matta, that what they presented was original, um, or hasn't already been largely put together in different forms by the VR community already, um, on a, on a variety of levels.

So even the concept of LFTs, although are tokenization digital assets of existing. In gaming environments, um, with some quite high value secondary markets for a long time, as well, as well as skins and other things like that. Now, um, the, the, the question is how can it actually fundamentally disrupt how we, we engage with each other, particularly in a remote world, you know?

Um, and, and I'm definitely bought into that idea. We could, you know, my team is, is located primarily in Germany and Singapore, and I'm on the east coast of the U S the idea that I can actually sit in a virtual office space with them for meetings, where we actually feel like we're, we're in the presence of one another and just engage in a much more, uh, dynamic way than we are right now with four squares on, on a, on a little screen staring at it.

Um, that definitely appeals to me. And I think it will appeal to a lot of other. And probably the way therefore the will be able to interact, not just in business, but other forms of, uh, um, sports and other things too. It could feed into those two for sure. And certainly gaming is a given. Um, so I think that personally, therefore it will overtake the real world from a commerce perspective, undoubtedly, um, because you'll be able to do things more efficient.

In that environment too, you won't be constrained by physics and other aspects of it. Um, and, and therefore, I think we will see a point where people prefer doing business in, in that metaverse concept. Um, but the real world is not going to lose its place. Right. I mean, we're, we're still gonna want to get out and walk on the beach and get fresh air and need to look out for our health and sunshine.

And frankly, No, no, no. My back a few beers, virtual beer doesn't sound as good to me as real. So, you know, I think that you, people have to be realistic about this. There has to be, uh, you know, just like we say, there has to be work life balance that will have to be met a real real-world balance. I think, uh, in that, in that future too.

And people will realize that it's not healthy to just sit there and one is in front of a screen all day. Um, but yeah, I, I think broadly it has the potential to fundamentally disrupt, um, You know, crypto itself will form the under arching backbone that enables the, of that to function. Certainly a crazy world and metaverse that we live in right now.

Um, I know that we are getting close to running out of time. Uh, so I wanna thank you, both David and AIG for stopping by today. Um, but before we wrap it up, I'd just like to give you both the chance. If there's anything else you want to mention, let the people know where to connect with you, where to follow along with, with your respective, uh, projects.

The floor is yours. Yeah, I'll go first and then I'll let you close. But, uh, yeah, if anyone wants to contact me, my email is [email protected]. All I would say is just as an investor perspective, right? Always conduct your due diligence. We were joking about me and coins and stuff like that.

Um, from the perspective of a financial services, I definitely agree that we are getting to a point where, especially in the United States into a transitionary period, Crypto or digital assets will be massively adoptive. Uh, I don't know how that will look like. Um, luckily not one of those people that makes the rules, but I think we are getting into that position.

So a platform like shin Tai, those firms like Conger wealth, um, and those individuals who are trying to be innovative to have. Provide greater access. How I mentioned earlier to the retail investor, whether it is tokenized assets of real estate or debt issuance, another form of equity, um, just always conduct your due diligence.

Uh, whether you talk with a financial advisor like us, or just hit Reddit as much as possible to find that information. Yeah. And from our side, um, you can follow us on Twitter app, chin time network. Um, and we're also on telegram with that same handle actions I network. Um, but yeah, I think for anybody in, in the crypto space, who's interested in mass adoption and wants to see where the regulatory compliant, digital assets side.

So things like where tokenized real estate. And securities and funds and other types of bonds and those types of products, if they want to follow and see that starting to actually emerge in real, tangible, blockchain based markets, give us a follow. Um, and likewise, if the passionate about it as we are about this idea of bridging between defy and.

You know, um, the underline checks token is going to play a core role to that. Then again, um, I encourage them to come and join the community and, um, we are definitely going to be having an interesting six to 12 months. So, uh, we hope to see more of your all right. Thank you guys. Both so much great talking with you.

We'd love to have you back on in the future. Um, but yeah, that's it. Thanks guys. Thank you.

Alrighty, Ryan, that is it for this episode of moon or bust. I thought that was one of our best conversations ever on the show. I know you're personally really interested in real estate. Uh, so what did you think about that? Yeah, I thought it was so cool. And there's so many far reaching ideas that they brought up with tokenization of real estate and bonds.

It reminded me of radical markets. I know we've both read that book and I need to read it again. Now after this interview, most definitely. If you guys tuned in after the start, we want to point out the Benzinga crypto channel top link in the description below. If you're new, around Benzinga or moon or bust, I'd like to say welcome, uh, and make sure you're subscribed to the main channel and also smash the like button while you're down there.

Um, but that's all we have for you today. Ryan, do you have any closing thoughts for. You know what I'm about to say, what follow you on Twitter? Check me out on Twitter. I still don't have as many followers as Logan. It's cause I'm cooler than you, man. It's that simple, I guess. Oh, well you do have a Bitcoin license plate though.

So that's gotta be where it's something. Hopefully one day. Maybe one day. Alright, that's enough. Let's get out of here. All right. Visa guys. Support this podcast at — https://redcircle.com/moon-or-bust/donations)Advertising Inquiries: https://redcircle.com/brands)Privacy & Opt-Out: https://redcircle.com/privacy)