Tokenization of Real World Assets: Latest from Japan - TOKEN2049 Dubai 2024

hi good morning all right guys um to start off we're going to be talking about tokenization a very hot topic recently I think there's a lot of conference a lot of meetings this uh this week about real world assets organization and we're going to talk specifically from the angle of Japan but before we get into it I want to first talk about where we are in this kind of crypto blockchain Evolution I think it's always important to know in terms of historical context you know where where we where do we come from where are we headed this is just my own personal kind of way of uh splitting up the phases of the the crypto Evolution for me after the uh you know the the great financial crisis in 2009 the first six seven years was the Inception phase I think a lot of us agree that we didn't really know what's going on with crypto I was at Le brothers and I'd never imagined that Bitcoin was being invented in the midst of the financial crisis and for the first 6 years from 2009 to 2015 this is when Mount gox was formed lots of limited interest but lots of stuff going on in the background and things started to change from 2016 onwards in my opinion regulation started to come in it's when I noticed about crypto as well you I started really paying attention around 2016 2017 and I call this phase the speculation phase it's when this there's a lot of exchanges propping up uh regulation coming into line uh lots of different products cfds options everything is being uh you know implemented and ultimately as we know we had a major implosion at FTX in 2022 and then we kind of went back into crypto winter so I like to call that the speculation phase the question is where are we right now and I think right now is the time we need to find utility in space A lot of people are interested there's lots of projects lots of tokens going around but what's the real utility in a lot of these projects and tokens and I think from 2023 2024 onwards that's going to be the next phase and that's why we see so many realwood asset tokenization stto conversations going on even at token 2049 before we get into this utility phase a little bit of backdrop because I get asked this all the time ETF issuance a lot of people say what do you what do you think Phil what do you think is uh the ETF issuance is this going to just you know rocket the crypto to the Moon one thing that's really important um I speak to a lot of chairman you know that that that runs crypto exchanges like in Japan now the tax laws the regulation laws between spot crypto and ETFs differ at the moment the fact that crypto ETF is now uh introduced to the market I think means that we're going to have a standardization of lots of these weird regulations and tax laws in crypto because you can't have a retail customer that can buy uh crypto through an ETF but when you buy Spot crypto crypto or other kind of crypto derivatives you get taxed differently you get treated differently so major implication about ETF issuance it's not just about increasing speculation market cap but it's also going to standardize the rules uh for people to trade crypto the other thing is FTX you know I don't want to necessarily you know Point their name out too much but there is an implication and the implication is credit risk so when I used to be the chairman of btc2 everything was bilateral you know we used to trade directly with the clients those days are rapidly coming to an end there's going to be credit intermediaries Prime brokerage service and these are going to be the backdrops that we're in right now in this utility phase and real quick it's important to talk about the utility phase because we we need to answer the fundamental question why is crypto going up why is the market cap continuing to increase and and the truth is there is utility in crypto right now as everybody knows Bitcoin is a great way to send money uh stable coin as well and then you have Smart contract and programmable money but there's so many different projects and a lot of times we can't answer well why is the value going up in some of these projects to me it's very simple we had covid we had Central Bank expanded QE wow governments issued tons of handouts over stimulated economy we're in an inflationary phase and now believe it or not even though central banks are trying to cut back on QE governments are still issuing handouts and you can see that throughout the RO where we are right now I find it very significant that last last week the president of the United States literally said we're going to cut rates after very high inflation print so what do we do in a situation like this and why is this happening the bottom line is that deficits are blowing up all over the world and soon interest payments interest repayments by government alone is going to be the biggest expenditure so no matter what country you're from government is going to start talking about cutting rates and then we're going to be scratching our head and say well wait a minute inflation is going through the roof why are we cutting rates in this backdrop and the reason is too much fiscal spending and now we're get headed to this weird stagflation or massive inflationary phase why is this important because now everyone's thinking okay well I need to hedge against this what do you do do you buy euro do you buy dollar do you buy gold maybe but also crypto and that's the invisible kind of pressure for all the crypto ecosystem in the market cap to go up we've actually seen this before the country that's experienced this Japan since the 1990s Japan has spent so much on fiscal stimulus the government's in massively in debt I think you guys can just quickly Google the debt to GDP Japan just stands out and they've been lowering interest rates to negative interest rates for decades now they're starting to actually normalize that I've spoken to macro Traders you know well-known macro Traders and they find it really interesting that in this backdrop where a lot of the gr the developed markets are going to start cutting rates Japan started normalizing interest rates why does this matter it matters for two reasons number one Japan is the biggest creditor nation in the world what Japan does actually matters a lot in the financial system if they start normalizing interest rates this is going to have a massive implication to the financial markets and the second is given that it's a creditor Nation the government is now looking in and lots of corporates are looking at incentivized to to try to get us a little bit more utility out of all the assets on their balance sheet what does that mean for us it means that securitization stos are going to really start picking up with countries like Japan and let's think about this you know at the end of the day why do we need to even focus about Japan well from 2009 2015 I mentioned Inception phase where was the biggest Exchange in the RO it was in Japan 70 to 80% of all crypto trading was in Japan I mean that's you know it's it's incredible right Mount gax I'm sure a lot of people have heard that was in Shibuya in Japan and that was where everybody was trading crypto from 2016 to 2022 what happened there was a major hack at coin Che and it was one of the first major uh markets to just come in and lay out the regulatory framework what happened in Japan then started getting copied in Singapore UK ultimately the US everybody started putting together a vast regime uh tax codes regulation so there's a huge implication there so let's ask ourselves if if these were the kind of the lead indicators and a lot of these movements happen in Japan I think what's going on right now in the stto and real world asset tokenization in Japan is going to have a major implication for the rest of the world it's it's a first mover thing right you know who's going to actually take the first step to actually look at tokenization in a serious way and I think in that sense we need to pay attention to what's going on obviously from Real World asset uh tokenization side uh for anyone who's unfamiliar there are many things that we can tokenize we have the arts collectibles intellectual properties as one we have real estate debt alternative Investments and this is where it's really picking up right now in Japan real estate um uh tokenization and also equity and venture capital I find this to be a fascinating fascinating uh topic and I think this is something that we all have to think about because now when you launch a business the traditional way of financing was to go out to VCS friends and family you know whoever say hey we need this Capital to to to to run this business now you have a business plan you tokenize your business and then raise money and the key question is what are the rules and regulations around you know issuing stos because as everybody knows SEC and other uh other bodies are not too fond of just tokenizing all business but when we look at the benefits we have cost effective fundraising you can embed utility into your business through the token issuance uh you have massive broad investor access to both primary and secondary uh issuance uh liquidity the ability to trade instance settlements all of these things is going to be an invisible hand where people are going to start looking seriously at this space and what I noticed right now is that specifically with respect to Japan stto real world asset organization their methodology that are coming into play now it's legal framework that allows people to actually tokenize your your business one of the things that I've seen so far is just you know separation of entities you could be under JSC or SEC rules in certain uh regulation uh regulatory District but you set up the issuance and the crypto trading and the crypto uh operation on a different Juris dition so you have two three separate jurisdiction which all works together to provide the token issuance and the utility the BuyBacks and everything else the second thing that I found really interesting and I I from what I'm hearing it's also happening in Dubai as well is that you have actual limited partnership Corporation or a traditional uh you know corporation that you set up and you convert the shares into token that are then available to trade at respective security firms this is what's also happening uh right now so if we were in Japan and we come up with a great idea to say launch a franchise coffee business anything then we can come up with a business plan it's a it's a debt issuance through the token now where can you raise the money you can actually raise the money at designated investment Banks and other security uh shops this is all legal now and the Japanese government has said from an stto perspective no problem at all now there's still Divergence between you know what we're used to with coinbase and binance and other kind of crypto markets but at least the government has realized that lots of corporations are pushing for this and they basically said sure the green light is there this is how we're going to start we've really got to pay attention here because I'm sure everybody has thought about running their own business fundraising or whatever you like to do and this is going to be the new form and I think stos in real world asset is going to be what creates utility the massive utility in this space so I'm here representing Tokyo token who is now spearheading a lot of these efforts and they've worked on a lot of uh a lot of projects with large large names large corporates so jasm token is one of the largest crypto uh launch that was done in Japan they worked very closely with Sony um they also for anybody who's been into Japan they also work very closely with uh Tokyo Tower which has a large large kind of a uh virtual reality AR um a uh kind of a like a conference area at the base of Tokyo Tower and right now they're working on a token called LTT which is linking to travel agencies in Japan again companies are going to companies like Tokyo token and say hey tokenize my business we're already publicly listed we don't we can't you know do an we don't want to do Equity issurance we don't want to do depth issuance we want to come up with a clever new way to fund projects that they have and what Tokyo token does they consult they work with The Regulators they work with the uh law firms and then they issue these coins on both secondary market and also through uh the investment bank and other security licensed security uh houses as I mentioned so we have some of the Tokyo token teams uh attending the conference uh sasakian who's sitting uh right in front of me and uh kaan if you guys are interested in learning more about tokenization space specifically in Japan highly recommend to sit down and speak to the members at token token it's a fascinating topic and I think everybody needs to kind of understand what's going on in the different jurisdictions so that we get a holistic picture of where we're headed regarded stos now from my side uh I also have my partner Nick so we are partners with Tokyo token we introduce uh companies to Japan So for anybody who's interested in working and getting clients or investors in Japan or happy to sit down and talk to you guys we can handhold the process we can make the introduction um we both have set up many companies in Japan so this is something that if it's of interest for yourself or anybody you know please come up to us after this talk and then we can sit down and discuss uh next steps so that was a quick 15minute uh chat and I've got 10 seconds left so thank you very much and I hope you guys have a great day