# TOKEN2049 - Regtech for Security Tokens - Adam Vaziri (Blockpass)

- Channel: [TOKEN2049](https://streameth.org/token2049)
- Date: 2019-10-09
- Watch: https://streameth.org/watch/yt-FNKuHRB2b1U
- YouTube: https://www.youtube.com/watch?v=FNKuHRB2b1U

## Transcript

everyone good to be here I'm CEO of block Pass I'm actually a lawyer and worked in the blockchain industry since 2013 mainly from the UK then broaden out to other countries the main problem that I saw was that there was a lot of innovation in blockchain there's a lot of innovation in crypto but there wasn't so much innovation in compliance and the problem is that an industry that grows such as the Internet it needs to have certain guardrails in order for it to expand and as a market and the way that I view it is their lawyers are not guardrails regulators are not really guardrails they'll tell you what is wrong and what is right and you have to stick to those parameters but it's not very helpful if you're trying to build technology so we had a thin tech revolution taking place since the banking crisis of 2009 and there was you know a Cambrian event of many different startups trying to fix the problems with the financial system using technology but in order to be able to do that in order to be able to do that effectively you need regulatory technology to sit hand-in-hand and so for me at that time in 2015 I said rather than telling people what is right from wrong I'll go out and build those guardrails which are technological guardrails to support that industry and so that's what blocked pass is in effect why SEOs are a fantastic form of finance and they were pretty much since the dawn of the internet the most successful mechanism for raising money it's a much bigger industry than crowd funding it for crowdfunding just to give you an idea equity crowdfunding represents roughly about 400 million dollars a year Kickstarter is chizz rewards based crowdfunding is about two to three billion dollars a year the icos since 2017 you can look up the figures have averaged around 7 billion dollars a year so this is 3x rewards based crowdfunding and is is exponential compared to the size of equity based crowdfunding in terms of proportion out of seven billion dollars raised 7 billion of those 3 years of ICO crowdfunding 7 billion of that has been raised by 10 projects so certain projects have managed to raise an extreme amount of capital now what I find it's interesting is people are you know in this crypto winter that everyone is experiencing I was here last year in token 2049 there was certainly more of a buzz people are experiencing a bearish market and in a bearish market people are less willing to entertain the ICO as a form of fundraising and in fact anyone that goes down that route may be met with failure and part of the problem is that bubble has burst generally within the crypto market but part of the problem is that that industry didn't pay heed to some of the regulatory controls that are needed in order for that financing mechanism to be sustainable and so that's why last year the hype changed the hype changed it went from icos to st ODEs the hype changed and that transition was because of the need to add regulation into that field and you may have seen in the United States there were two unregistered security offerings that were subject to enforcement by the SEC arrogant and arefox though in fact ordered to refine the tokens that they sold back to their investors so what we want to see we want to see this financing mechanism being used we definitely want to see a seven billion dollar industry continuing to raise funds for startups but we also want to see regulatory technology there to support that industry in a sustainable manner and that is what block Pass is intending to do and to give you an idea it's not just about the unregulated nature of raising that capital it's also about the unaccountability of those raising capital and it has been said that roughly twenty percent of the seven billion dollars raised per year in the three years of icos was hacked so last year you may have seen there was roughly about 1 billion dollars that were stolen from exchanges but about 20 percent of what I see own money is money that is either been involved in an exit scam or has been hacked directly from the wallets of the issue is so there's a problem about cybersecurity and it was great to hear the lady before talking about Clara and that comes again to thinking about this in a serious manner let's make my CEOs sustainable let's make this form of finance available in the long term not just in the short term for a pump and dump so we see the future of i ciose to a certain degree being in the form of a security token offering now in the united states they take a very wide definition of what the security is in fact if i sell you any type of contract where you deem it to have a return on investment that may be a security nonetheless and you may have heard this week the sec mentioned that aetherium the token was no longer a security they do not consider it to be a security but that does not mean when etherion did the ICO three years ago that at that time it was not the security in fact was arguable at that time it was so the security token offering from a United States concept is that period of time when you are doing your IC o---- but the people who are backing you are effectively investing in you and for that period of time it will be considered security but over time as you build your decentralized infrastructure it will become less of a security to not becoming a security as is the case this week with ëthere IAM now there's also another angle to security tokens which is really about digitizing investment assets digitizing equity digitizing debt instruments digitizing paper-based investment contracts and that is obviously a major trend that we're seeing now for example we secure ties t0 some of the exchanges that have been built up but the good thing about a security token is that it comes with guardrails and needs to be regulated and reg tech is the key to unlock that and block pass has designed an identity system to support that so if you want to run an IC o---- as a security token or digitizing shares for example a system like block pass will allow you to onboard your users knowing full well that they have been verified that they are accredited that the the investment that they are about to make is appropriate and suitable to their investor profile that they are not on a sanctions list but at the same time you can offer a seamless experience for your investors they download the app get verified in a few minutes scan a QR code and then invest in your token cell and that's where technology comes in to address that barrier of entry when the I SEOs I don't know how long you guys have been in the industry but if any of you remember the first I SEOs they were just simply smart contract addresses where you just throw in money like a slot machine a global online slot machine that no one knows where the money is coming from but it's going in but the reason it was so successful was because it was so accessible so we want to make that possible in the same way at that scale but with regulatory technology so we've actually built a system on unchain verification system so that you can run an open smart contract and receive monies from all over the world but they are from verified users effectively a global whitelist of verified users and that is the role of our token the pass token it's to essentially distribute verified identities on different block chains we're currently working on the ethereal train but we are also collaborating with other chains so this is just to give you an idea the types of points of data that we receive we do not retain any data on the user so our vision is a decentralized vision we are not trying to create a honeypot of data storing personal details of everyone the only details that we have on a server are different seals and those seals are effectively hash records they are not personal data we do not store personal data at all we do not monetize personal data by any means the user is in control of their identity the user gets verified it is a self sovereign identity system for the merchant the person that wants to onboard the investors is that it's so simple just a simple API they connect to it and they can collect verified profiles and seconds and our token the role of our token as I mentioned is to create this global public whitelist of verified addresses meaning you can program smart contract that can receive investment from all over the world but only from verified users pre-vetted users we have a number of partners our first partner was BitFenix you may know the brand ether next you could in fact go to their website and see the integration there and we have a series of other partners we have also a research center in Scotland the Block past identity lab that is researching zero knowledge proof so it's the ability to prove something about yourself without revealing your personal data which is what we believe the future of identity verification will be that you will not always need to disclose all your personal data dump your data on service providers but we can be more nuanced nuanced about protecting the privacy of the user but also achieving financial services compliance this is the app you can download it from the App Store you can get verified today you can could have got verified last summer it's been available for quite a long time so please do download it so this is just to give you a quick overview of the process you download the app you're entering your credentials you then have access to the verification requirements there which is just a button for you to click you send your data out and you register with that verifier the verifier then processes that verification and once it processed the verification generates a certificate for you that certificate is on your device only it is not stored anywhere else only on your phone at that point the data is deleted from the verify server and from our server and you are the only person containing that signed certificate and so this certificate will show you for example possible authenticity different aspects of the document that have been checked such as data consistency checking against government templates of documents etc and this is an example this is for example the Ethan X integration that we did the user once verified and inside the app inside the phone simply scans the QR code clicks a button and they're done on the merchant side so this is on the side of beef NX or any of the other merchants they receive the data they can design a automated rule which is if that person has three certificates and they are verified and it matches the input data then they can be auto on board it where the data does not match and there may be a discrepancy they go into what we call the quarantine system and this is a quarantine example where you can review or re review the data here on the dashboard and any of the data that you have a problem with you can send back to the user directly on their phone that particular credential that you have a problem with for example you say I'm sorry your pre for address does not match the a dress that you have been provided user receives a notification they remedy that problem and resubmit directly from the phone no emails whatsoever no dispersed dispersing of data across different servers and so what's the magic of block pass the magic is essentially that we can verify people but it can be decentralized it means that the user can have their data can have their certificates can share their data but the merchant can prove that the user did not manipulate any of that data and the reason they can do that is because they can verify with us the state of the data once they receive it and that's using the verification on the hashes and the last thing is we believe that identity is something that accumulates that you build in increments so we give the ability to the merchants themselves to help enhance the identity of the user so a merchant that has on boarded a user has the ability to generate a certificate for the user himself so for example I onboard a user I am a bank I am happy with them I generate a certificate to say this is a customer of mine and then that certificate can be shared with other parties to enhance the reputation of that user so if you want to look at some of our practical integrations if you're interested in building your own integration on the block pass API you can have a look at f of X you can also look at a deep integration into a wallet which is with infinite o wallet where we've integrated the block pass application into a wallet and more web-based application you can look at the hold X platform it's one of our good partners who's here today so Haldex the application that they have built on block pass is essentially an sto platform so you can use block pass as the verification mechanism for that sto platform and roll out your own sto with your own branding using the whole Dex web app infinite oh this is the deep integration into the wallet so this is where we're white listing addresses as they are being transferred so here you can see a wallet a normal wallet has send and receive but it also has verification so a red line to say your not verified you have to get verified and it integrates Phi the SDK to the block pass application and that's our world first decentralized kyc use case which was with Ethan X we ran three token cells with them last year that's one of the examples the dusk ico so for all of you who are here today we have an event tomorrow if you're still sticking around in town it's over at cyberport if you'd like to attend please come along we've got some great speakers Simon Dixon from banks of future by always there and some other great luminaries Anton Lewis over there from r3 and I hope you'll enjoy that and I hope it's been a very productive week for you but in summary block pass is the missing regulatory technology to make the ico industry which is a seven billion dollar financing industry sustainable and this is the solution a regulatory technology not regulation but technology thank you for your time [Applause]