Liquidity Solutions for Tokenized Real-World Asset l KBW2024

hello everyone so today we have the honor to present John Molen CEO of Mantra huge C please Julian Quan CEO of I swap and Stephen Richardson BP of product strategy at fireblocks welcome everyone how are you guys julan maybe start with you asking because maybe the public is not sure what do we mean when we say tokenize real world assets yes so the term rwa is fairly new it started uh predominantly about six years ago as the security token Market um there are different types of reward asset tokens a lot of them are securities but now I guess the definition encompasses the financial instruments uh like the tokenized money market funds uh shares of real estate funds shares of startups there are a subset of real asset tokens that aren't Securities um we're seeing people tokenize things like um whiskey barrels and I guess commodity tokens so it's a very broad um subset of sort of different assets that fall under it but a lot of them are um fall in the Securities bucket like equities and and there's also a lot of debt tokens as well so shouldn't we rename it from rwa to something a little bit better we need a new term a new name rwa is a it's old yeah in the trafi side it's rued assets and it just doesn't really work so let's say you have your your token as real world asset but then can you trade them among themselves yeah I think um there's uh a lot of uh different ways people trying to get these off the ground um if they are securities they're meant to be traded on platforms like iwap that has Securities licenses and has the technology um so yeah I think it's it's a growing infrastructure again it started six years ago so there's been broker dealers and exchangers and custodians uh working on this for quite some time it's just in the last year or two we've seen this explosion of tokenized treasuries money market funds all on chain as well so you can see the real growth and then that's why the crypto industry kind of adopted this asset class in the last year or two which is where we've got the rwa name from where it started with security tokens and somehow got rebranded rwa which some of the guys in trafi don't like um and now you know that's where we're at today it helps when uh Larry fin is shielding tokenization on uh C NBC every once in a while as well or and on public chain and on public blockchains that's right John which Industries have already embraced tokenization um so as Julian was mentioning you can really tokenize just about anything um we're seeing a lot of traction uh in a number of different sectors so at mantra's uh Focus which you know we're an agnostic uh provider or or or partner in the rwa space as a layer one blockchain solution so we can really tokenize anything um the the three areas that we're seeing the most kind of traction and pickup would be real estate um like kind of financial products so fund tokenization money markets private credit private Equity um Etc and I think another one that's quite interesting is IP um you know story protocol Korean project Korean us project um has come out and been fairly popular recently um and they're looking at IP as a as an as an asset to bring on on chain um so these are the three that we're seeing a lot in in terms of real estate you know we're we're primarily focused between the Middle East and and in Asia um so we're seeing a lot of traction um in in the UAE uh in Dubai particularly it's a very hot real estate market and there's a lot of you know institutional adoption there um at the developer level at the uh Sovereign government level um and you know we're happy to you know play a part of that so I think initially I thought real estate was kind of a boring asset to tokenize but um seeing the the pickup that's that it's having right now obviously the size is is massive you know literally trillions of ass of dollars of assets can be can be brought on chain um so I think that's kind of where we're seeing it we announced the largeest deal uh about a month or a half month and a half ago for $500 million to tokenize uh Off plan development in in the UAE in Dubai um and that's like the tip of the ice per it's one of the smaller ones we're looking at right now that's still a lot of money great thanks Stephen is there opportunity for Partnerships between traditional finance and crypto uh with tokenized real world assets yeah so I mean I think uh obviously as a launch point for these assets is a question of where they're going to go right and I think at least for me what's been interesting is looking at like tokenization of things like money market funds um and where we're seeing a combination of kind of uh that basis right so I think folks are looking at it from a yield basis and obviously they're like yield bearing stable coins and things like that but we're starting to see uh this idea of using these tokenized funds as like collateral for trading on exchanges right so I think until you have like the broader infrastructure would that would allow either retail or institutional investors to hold in a wallet infrastructure level or to do something with those assets in a real way and to kind of continue to generate some return on those assets this idea of leveraging the crypto native ecosystem is something that we think is really interesting because it's a question of where do these assets get distributed and to whom and then how will they utilize them in the same ways that they utilize them in the traditional space right so um what does it mean for potentially like the development of things like repo markets that would come on chain with these Tok organiz assets and other things so I I think that's a really strong launching point for for kind of where these assets are going and the type of assets that are going to be tokenized and whether or not we can get them into the hands of folks that are trading to be used as things like collateral or or other kind of yield bearing basis uh I think that becomes a pretty interesting thing to explore okay and and what are the main regulatory challenges you're facing when dealing with tokenized uh real world assets look at least for me the benefit of tokenized real world assets is is this idea that there's like this very large basis for distribution and then for fractionalization right um the problem that you have is that compared to like the crypto native space with icos right where something was tokenized and then distributed through like centralized exchanges or through kind of like the broader investment Community um and we didn't so much care about like the broader regulation behind them this idea of tokenized assets still sit in very GEOS specific place right so depending on where you issue those assets there's the regulation around them and then kind of it defeats the purpose of it being onchain from a broader distribution perspective because you have to have things like accredited investors and other things that kind of limit the scope at least for me this idea of things like onchain identity coming into play become a very interesting thing to explore because if you can actually bring identity on chain either from an Institutional level or even potentially from a retail level then you expand the idea of distribution Behind These real world assets in in a in a closer to realtime way and allow people to then identify themselves as being able to take in the the kind of the distribution basis of the assets and then kind of how they get moved from one point to another I still think that's relatively early but I think if that challenge is solved and then in my mind some level of like coordination from a regulatory perspective in terms of how these onchain assets would be treated right and some kind of like harmonization there I think then like this idea of real world assets on chains becomes a pretty interesting thing to start to to think about I think we're still early but like it's happening at a local level which I think is interesting as we talk with Regulators globally uh they're thinking about that as well one of the one of the things with with licensing and regulation to Steph's point is like it is super localized and every Market is different right so um we kind of take a view we're in the process of getting licens in the UAE in Dubai under Vara um but even in in in the UAE there's multiple Regulators which is kind of crazy um but you have to take a bit of a view on like when you're Distributing assets a real world assets which countries are the absolute no goes and which ones are the ones like okay maybe this is a great area and um we're just going to maybe ask for forgiveness later rather than permission today um so that is definitely a Viewpoint of how you have to look at things um and in the end of the day the issuer is going to have to take responsibility and make sure that they're comfortable with whatever risk that they're going to take in terms of how they're Distributing the type of asset that they're that they're trying to issue um and obviously you know as Julian was mentioning like some of these things are you know borderline security maybe not um some of them are definitely Securities um and there's no clear consensus globally um which makes it a challenge so like you kind of have to go asset class by asset class jurisdiction by jurisdiction if you're going to issue these things and distribute them and obviously that's a challenge and then even more so um for the trading side of things so like I kind of see Ras in three phases today is you know supply side so bringing on high quality assets on chain tomorrow will be making sure there's actually deep liquid markets that these things can be actively traded you know globally and and then the third third piece to Steven's Point was more about this composability so how do you actually use them can they be used in defi can they be used as margin and collateral um can they be you know interacting cross chain cross you know cross jurisdiction so that's that's kind of the one of the unique challenges of rw's as compared to just pure crypto um and this like idea about how do we actually bring the market to people who maybe are looking for different types of assets right like native onchain users are you know looking at mem coins and you know 100x opportunities maybe not necessarily A 5% Black Rock money market fund Julian which opportunities you see for the industry in the near future yeah I think we used to say years ago that the rwa industry would really help crypto grow because a real use case um three of the five biggest cryptos you know US dollar stable coins um so couple of the challenge so that that's a key Point um and I think that um the real opportunities are in the private markets um you know you have black rock and and Franklin templon they're tokenizing um you know publicly traded assets and treasuries which is great it's a it's a key asset for the whole ecosystem but what's really interesting now is there's a split at the moment between people who are actually buying real world asset Equity tokens which is is usually the accredited investors the bigger investors crypto hedge funds Etc and then the actual crypto community and Deens who are buying the utility tokens of the rwa platforms we have one you guys have one EXs tokens the native utility token of thew platform it itself is not a real asset Equity token it's a crypto so half of the a larger percent of the crypto industry thinks that the real world asset tokens a subset as an industry are these utility tokens so it's it's an interesting situation um and so what the opportunities that we see is and and pointed out for a few points is you need to be able to get these into the hands of everyone and and as easy as cryptocurrency and that's one thing that we've spent three and a half years doing is getting a retail Securities license so you can buy an equity token on I swap with one usdt with a photo ID and there are jurisdictional issues thinking about issuing assets but like what we do is we we we leverage um regulation but it's Global product for Global Investors so a lot of the key issues that have been around for many years have being solved one by one by Us and other people we actually use fire blocks um Tech on the custody side and then the other thing that we've built is the first way to actually create liquidity pools so if you think about cryptocurrency in 201718 if you had a lot of money and you a big coin you could pay binance and coinbase to list on the centralized crypto exchange with market makers and life was great 10,000 altcoins had nothing so Along Came the development of the automated Market maker model which is essentially smart contract driven Crow crowdsourced Market making for any two tokens um we decided that in the real world asset space we believe everything will be tokenized it's a better system All The Regulators will want this every share every company will be a token format then the super majority of these want trading and there's going to be way too many there's going to be way more rwa than cryptocurrencies they're all going to want some tradability so see if we can build uh a system like Unis swap but we'll go get all the licenses so it's a legal way to create a pool and trade for real world asset tokens so there's and and the opportunity for that is that you can start a company and tokenize 10 thou $5,000 of equity and you can start a liquidity pull that that's at least one of the major opportunities that we're bringing to Market but we we think it's really exciting for all all the industry Stephen yeah I mean I think for us like that that's part of like the the interesting basis right because you have this idea of enabling folks to be able to access liquidity and deploy tokens in a way that makes sense but I think we're looking at folks like uh what securitized did with black rock and what the asset managers are doing I think they're looking at real world tokenization as a way to streamline and like optimize on a cost basis and increased potential of direct distribution right because at the end of the day uh today there's inherent cost in the development of these different funds offchain right and there's a question of whether or not you can break apart the value chain and work with different both exchanges or distribution Partners or transfer agents at a distributed level to kind of really cut out the cost and then in some ways bypass what you're doing potentially at a banking level right like if you look at what Black Rock did they didn't use a bank right they use securitized that had their ability to be able to deploy and execute on a transfer basis and so when we're talking to asset managers and folks that actually own these assets is a quick question of okay do can we cut out costs number one and then how do we think about like an evolved level of distribution because one would look at what's happened in the Ico phase and say crap like they were able to distribute assets and deploy them in really significant sums if there was value behind the asset that was being brought to on the Chain right and so imagine a world in which a Robin Hood or a revolute or a grab has ability to have some level of a Securities license or an ability to distribute and there's onchain identity what does that do to expand the basis of these different funds that are being brought onto a blockchain and then on a secondary Point how are then secondary liquidity venues created that allow a really easy uxui model for retail to be able to get into that right and so I think that's the potential of what we're looking at um both from like the largest funds in the world to the folks that are like starting up that need to kind of uh get Capital right and and think about like real estate projects and all of these other things so I think that kind of uh value chain model is still being developed but it's happening in a much more rapid way over the last year at least in in what we're seeing and and that's pretty exciting for for this kind of uh asset class that's being generated and how are your companies actually working with token and real world assets maybe John you would like to to give us a well so we're basically building a layer one blockchain so anyone a tokenization platform uh an app like swap could potentially you know build on Mantra um our main Net's coming soon um I said before the US election so you can kind of infer when that's happening um so I mean again we we are a it's almost like a B2B model right so we're working with app developers both on the web 3 native side as well as the the web two side or trafi side to have different products that you can actually either bring on chain trade on chain interact with on chain Etc um you know at and at the same time we're also going through a licensing process in the UAE to have an onchain exchange product uh that allows for trading of these uh rwas that could also be you know another liquidity venue that could potentially have I ex swap tokens trade on it in the UAE context um we need more V like this that have licensing in a local jurisdiction um because there's just not that many of them I mean literally I think you guys might be the only ones um so you need more venues like that where you can have almost this ability to have maybe not a completely permissionless uh issuance but a semi- permissionless model where at least you have some idea about who is behind the product who is you know the creator of the token what is it backed by what are the you know General details um rather than like you know the ability to Just Launch any token on pump. fun um and then get rugged instantly yeah so issuing most of these real world asset security tokens um require a similar process issuing any security now you've got to find also the technology stack so the history's been lit with people doing one thing and when you had to find a broker dealer or exchange custodian and and a Tech Insurance token Insurance platform protocols it was all separated it was way too hard and that's why it was one of the biggest issues for the industry so we stuck it all together so you just push a button come to I swap we got a license Tech and wallets and payment systems and secondary trading and make it very very easy for everyone and that's been a mission that we've been on for many years continue on the other thing um that I want to say about the opportunity I missed I miss this uh thought process very important so um one of the the major challenges of the industry up until recently was it was just call it traditional Finance people trying to tokenize an existing asset just for the sake of it no change no differential uh maybe even on a private chain which no one cares about um and there was there's there wasn't really changing the game the actual real excitement and the real opportunity if you're thinking about reward asset tokens is to build towards the def5 space right we're not here to try and build stuff and sell to Black Rock right Black Rock sells its own stuff to its own people and it's a world garden and that's how they operate and they're not going to change and none of the banks are going to change the real excitement is building towards coinbase bybit binance the defi protocols hundreds of millions of users already on chain actually 2021 bitfinex FTX binance they started launching tokenized stocks uh illegally no license pulling down um interesting tokenized stocks most people in the room probably can buy them but actually if you're Emerging Market you can't so a hundreds of millions of people target market they did it the wrong way now it's round two coinbase is building an rwa exchange in Abu Dhabi um you know groups like ours have all got the licenses so the real exciting opportunity is not to try and build something and sell it to a bank who doesn't want to who doesn't care is to build it to all the guys who don't have the assets don't have the licenses but they're already in the space and that's the defi that's the defi side of the whole the whole industry Stephen how is fire blocks working with airya tokens yeah look I I think as a technology provider our our view is to be relatively agnostic like we we do have views that probably say are pretty similar to Julian but like I I think for us uh we provide everything from the custody to technology that sits behind people that are developing wallets like we think uxui is really important it's somewhat complicated for people to engage with blockchain today so people that offer a full stack and make it easy for someone to onboard uh that's what we want to support and hopefully they're using our wallets to do that uh we have a tokenization engine that manages things uh for folks that are tokenizing assets and managing smart contracts and we have a team that develops smart contracts as well right so our view is to be kind of the background infrastructure we're not on the Forefront of what's happening but we're hoping to power people that are are coming up with the the concepts and ideas that we think make a lot of sense uh to Julian's point I I do think like at the end of the day like what coinbase and and okx and others have done is they've created a very easy uxui for people to engage in crypto right and so uh that access point and accessibility point is like very fundamentally important I think the people that are ALS so key to watch for me are like the finex right um and e-commerce platforms and what they're trying to do I think they have very ambitious plans in the real world tokenization space um and they're not bound to the same constraints as banks are and I think are a little forward thinking so I think this combination will be quite interesting to watch probably in the next like 18 24 months at least from what we're seeing uh in terms of you know what they feel is like an Open Marketplace concept for them to go after right well thank you very much the session has ended and I guess so tokenization real world assets it's not something from the future right well we're early but it's something from from the present thank you very much thank you to our panel for that engaging discussion