Oscar Jofre  00:23

There was, like I said it, I did warn everybody in advance that it was gonna be funky. This is a new event management system we’re using.

Elliot Chun  01:08

That’s okay, though. If you’re not trying if you’re not trying Oscar, I mean, come on. What are you going to try? And do you got to get better every day?

Oscar Jofre  01:16

I hope you liked this one. I really liked the software. Like it’s, it’s a it’s got a lot of great features for everyone. So

Elliot Chun  01:25

So we look a little thinner. So that’s great. You’ve been working out some so.

Oscar Jofre  01:29

Well, I believe. Okay, so here we go. Lewis is there. So that’s the only thing. So you Lewis and Lewis here, you just need to turn your camera on, bud. And there we go. So

Lewis Cohen 01:48

I had it on before my apologies, everyone, no, it’s okay. There you go. You

Oscar Jofre  01:53

No its ok. There you go, and you are on.

Elliot Chun  01:54

Great. Well, thank you, Oscar. And the KoreConX team. As always, we really appreciate you having us as a part of driving digital securities forward  and today’s course on a topic on digital securities. We have the pleasure here of being joined with Lewis Cohen, co-founder of DLX Law. And Ravi, who I don’t want to mess your last name up, Ravi. So I’ll let you say that I was a partner at aka mono, aka Mona, excuse me. And the topic of my name is Elliot Chun, here. I’ve actually just rebranded so our name is now AP Crypto. And we focus on m&a, advisory, and strategic financing for companies in the digital asset space. And so we’re gonna have a robust conversation here on the topic of types of digital assets, which there’s a lot of them. But you know, we’ll talk stablecoins, NFT’s security tokens, and even some fractionalization. With that, I’ll pass it to Lewis for a quick intro on himself, Lewis.

Lewis Cohen 03:06

Hey, Elliot, thank you so much. It’s such a pleasure to be here with the whole KoreConX team and Oscar as well. So it’s a pleasure. My name is Lewis Cohen again, and I’m a partner and co founder at DLX Law, which is a boutique law firm focusing on digital securities and other digital asset transactions. Ravi.

Ravi Srivastava  03:27

Hi, my name is Ravi Srivastava. Nice to meet you all. And I am a partner at Akemona, it’s the first only 100% smart contract based funding portal.

Elliot Chun  03:43

Excellent. And then, Lewis, you and I guess we have been into this world for a while now. And, you know, from early days, 2017 2018. Now we’re in November of 2021. Man, a lots changed.

Lewis Cohen 04:05

And, you know, I give folks like, you know, KoreConX a lot of credit for, you know, I recall back in that period, talking to Oscar and saying compliance was going to really be a leading factor in business success. And a lot of people didn’t want to hear it back then Elliot, as you know, and the fact is, you know, the world goes around comes around, and we’re starting to see more and more, you know, market participants, issuers, broker dealers, such as yourselves, you know. Realizing that, you know, a hard focus on compliance is critically important. Now, the catch here is figure out exactly how you comply and with what you comply. But I think a compliance first technique is now something an approach that is absolutely, you know, critical and one of the biggest changes I see. Although I will say, as a lawyer in this space, we still get our fair share of calls from prospective clients saying, Well, how do we get around this, that or the other thing, and that’s obviously Something we do not put up with at all. Ravi, you I’ve just done what maybe pay a little bit of rugby here tossing the ball around. But I’ll toss over to you because you’re doing perhaps some of the most exciting work right now in the digital security space with your platform, and we’re prepping a little bit about it. But I think folks would want to know, your approach to compliance and how you’re trying to bridge the gap there.

Ravi Srivastava  05:24

Right, right. Thank you. I think that digital securities and digital assets they have, they have passed through a number of stages in this entire crypto tech, crypto technology. We believe that cryptocurrencies the that are the first wave. At some point of time, the first wave is going to give way, give space to the second wave. And second wave is going to be the digital securities and digital assets which are regulated and which are used by investment banks and by exchanges. And the reason is, if you look at the efficiency, the efficiency of data securities is at least we did a calculation, it’s 9x to 10x, more efficient than realized on an uncertificated security.

Elliot Chun  06:28

Nine to 10 times more efficient. I’m glad you put some quantification around that because I haven’t been able to do that, how we think about it, is that a factor of time is it a factor of different counterparties that are part of the process along the way? What goes into that number?

Ravi Srivastava  06:49

Good, good question. So, here is what you can do, you can take the operating cost of the Depository or the depositories, you can take the operating cost of exchanges you can take all the operating cost of clearing agencies, add them together. These are publicly available numbers and then find out the total number of transactions executed on the exchanges, publicly available number. From by doing the simple mathematics, you will be able to find out what was the cost of each transaction that was executed on NASDAQ or New York exchange to largest exchanges. And once you have got that, you come to find out the total number of transactions were which are executed, what are the transactions, I mean, publicly available numbers, you compare those numbers, you, you will be surprised. And by the way, these numbers do not include the cost incurred by broker-dealers because those costs are not available. So we left out a big a big number. And then we looked at just the the cost of depositories, cost of clearinghouses, cost of exchanges and left out broker dealer and we found that this isn’t and when you

Elliot Chun  08:16

Is that a combination of cost and time?

Ravi Srivastava  08:21

No, we did not include time, we just cost we just included the cost because, again, you have a great point because on securities settlement there’s no difference between settlement and the transaction, they are one in the same. And with the uncertificated or Dematerialized securities there is a you have two days a takes the filter. So efficiency our belief is that that it’s always that something that more efficient technology comes in that will replace a less efficient technologies and we have seen this in history. This is the same example that, that Steve Jobs used to give of a difference between a human walking on foot versus a human using a bicycle. So a bicycle was a thousand times or something 100 times more efficient. And and I think that we are seeing the same change.

Lewis Cohen 09:22

Now driving a Lambo, you’re gonna get the guy on the bike.

Elliot Chun  09:28

Not even Lambos I’m talking flying taxis. I mean, we’re almost there yet, but we’re also joined by Dr. Kiran Garimella. How’re you doing, Doc?

Dr. Kiran Garimella  09:38

Hey, pretty excited to be here. Awesome.

Elliot Chun  09:42

We just had Ravi post a headline number of nine to 10% digital securities being nine to 10% more. Nine times. Yeah 9x to 10x more cost efficient. Then a What were you What were you calling a dematerial security was the was the phrase?

Ravi Srivastava  10:06

generally these uncertificated securities were, which are basically letter and phrase because if we go back to the time before it 1970s, I think they their paper securities were traded for securities are settled. And at that time, the big issue was that that securities will sit at brokers, places for four months before they were really mailed out. And that’s the reason the system was implemented, where all the securities are held at the depositories as ledger entry. And then theory, they go through all the clearing houses and exchanges, and then we went to this level. That’s it. That’s an expensive, expensive billions of dollars of infrastructure has been created, or that [uncertain]. Dematerialized security is something a security, which was a paper security, but it has been converted into a ledger entry.

Elliot Chun  11:08

Got it when we’re using securities, like everyone knows what that means. And haven’t been in the industry and seeing the transition of what is a security and what is not a security. I’ll go to Lewis, the lawyer here. Definitionally where are we when we say kind of what is the security as it relates to the digital component that we’re talking about now?

Lewis Cohen 11:37

Sure, that’s a great question. And you know, one thing about the whole what is a security question is that digital securities and other digital assets have really caused a lot of confusion, blurred the line. But it’s important to bear in mind that this question about what exactly is or is not a security has befuddled lawyers, you know, since the dawn of the securities laws, so this is not a new problem. The key thing is here in the US, we have a principles-based test for what is a security. So some sort of assets, the most obvious of which are stock in a company are unequivocably securities at all times, in all ways, etc. But other types of assets are may or may not be securities. For example, a note is listed by the SEC, excuse me, listed in the Securities Exchange Act of 1934. And the Securities Act of 1933, as a security when the context requires, but if I go to a bar with you, Elliot, and you spot me 50 bucks, and I write a little note afterwards and say I promised to pay Elliot Chun, you know, 50 bucks, you know, in three weeks when I have the money for it plus another 3% interest. That note, it is a note, it’s not a security. So determining when those instruments are not securities has befuddled people long before digital assets. Digital assets have made it much worse, because they’re even more blurry in terms of what they actually are, or are not. And, you know, the current SEC would like to adopt the sort of similar tests we have in the Supreme Court for obscenity. I know when I see it, I can’t define it. But I know it when I see it. And that’s the walk like a duck talk like a duck test. The problem for that is that there’s so much activity going on right now market participants sort of struggle to know when it’s a duck, and when it’s a platypus, because they have some similarities, right? They’ve got that, you know, you know, beaks and all but they have other things that are different. So it’s very challenging, as most folks at this point will know, in most cases, the Howey Test applies how he refers to a company WJ Howey. That tried to scheme to raise money, where they ostensibly sold orange groves and raise money through that. But in hindsight, it was viewed that really was nobody wanted the oranges. What they really wanted was to make money through management of the Howey company. And that’s really [uncertain] in most cases. So that’s, that’s kind of just a quick high-level overview, but it continues to vex us to this day. I think we’ll talk a bit about NFTs. I’ll circle back a little later as to why NFT’s can be complicated as well.

Elliot Chun  14:07

Yeah, and it just it just lays a foundation and we talked about this at the outset is one around compliance. And, you know, four or five years ago, it was “Do not put this stuff in, it is counterculture to why this technology exists. We don’t want to go that route.” And as we evolved through various stages from you know, ICOs, utility tokens, you know, even yield generating defi. Today, credit on crypto, lending is the returns or the yield that you’re receiving considered a security if so, then what’s the difference between that and what a bank does? All these things are getting actually more and more complex. And by the way, a year ago, we weren’t having these conversations with defi, or NFT’s. I mean, they existed, but nowhere near the level that they are at now. So it’s almost like the velocity of innovation is happening so fast that definitionally the industry is even having a hard times struggling with identifying what is something and what is not something. But I think what we’re coming to is that the compliance and the KYC component of it the compliance, a KYC, and AML component of it is starting to come out as well, yeah. We need to have if we have that base layer, then the activities that we were talking about defi and NTS, stablecoins, whatnot, we feel a little bit better about them being more regulated, versus, versus not being totally anonymous and not having that level of counterparty management of fun. Dr. Kiran any insight on? You know, as you’ve seen this kind of evolution around around that kind of key point at the in the process?

Dr. Kiran Garimella  16:13

No, absolutely. I mean, this whole notion that Ravi we mentioned about dematerialization, dematerialized securities, that’s like home to me, because, you know, I invest in international markets. And when my broker called and said, you know, Kiran, we’re going tode materialize all your securities. You know, I went into, you know, kind of a, I said, Oh, my God, what’s happening? What do you mean dematerializing by securities, you can’t do that. And so he can explain what that actually meant. And this was several years ago. And what’s happening now is that when you supposedly dematerialize certain securities all you basically do get making making a bunch of electrons and electronic records somewhere, right? But now with Blockchain, it almost feels like, you know, if I may give extended analogy, we re materializing all that in a much more solidified form on a blockchain, right? It’s even more immutable, then even the old material paper based securities that we had before. Right? But with that flexibility, I think we’re seeing the innovation being pushed in so many different ways. It’s unbelievable. You know, I think there’s a convergence now, of not just blockchain, but also artificial intelligence, what happens to all of the data that goes with it, right? So people have this big innovation, and I think this is the most fantastic space to be in. Because if I think about, you know, how we are headed in the next 10 years or so, the the finance, the sea of finance is going to change dramatically, you know. I think we’ll have many more stable coins, more branded coins will have non fungible tokens running around, we’ll have securities or [uncertain] types, you know. Lewis, you mentioned promissory notes and debt instruments and so on. I mean, we’re going to see a lot of that, and we see day in and day out when we talk to some of the issuers. You know, what, what are the different types of innovations that are actually possible in pure, share based securities themselves? And it’s unbelievable. So I’m really looking forward to this one. And, you know, I don’t think any person is going to have all the answers, it is really going to be a very, very collaborative effort.

Ravi Srivastava  18:17

Right, and just one thing, I feel that we have an obligation, also the those who are in the blockchain industry, those who are joining in the blockchain industry, we have to make sure that we leverage the strengths of the blockchain to create transparency. Because what has been lacking on the wall spring is a transparency. And if there was a full disclosure, if there was full transparency Wayneoff would not have been able to do fraud with billions of dollars. And the only reason he could do because the there was no transparency about the transactions that he was executing. So I think that just because this blockchain could be used digital securities could be used in a way that may not create the right level of transparency, or it could be used in a way that creates full transparency. And I think that there is an obligation to make sure that we create more transparency then and significantly more transparency than what was available.

Dr. Kiran Garimella  19:30

100% agreement that Ravi and I think, you know, transparency always clashes with the privacy. People say, you know, hey, how transparent do you really want to be? And I think our next Resurgence is really going to be in the space of zero knowledge proofs, and Oracle’s you know, promising credentialing certificates and so on. I mean, I think that we’re going to see a lot happening in that space.

Lewis Cohen 19:52

There’s also just to pick up you know, Ravi, you you you gave a great overview, especially as a non lawyer for kind of the paperwork crisis which led to the transition from paper based securities to the DTC being formed and having a central clearing agency. There was another big step forward then after that, which was the revisions to our state laws, Article eight, in particular, to allow for another type of legal interest known as a security entitlement. And one of the challenges we’ve seen as lawyers is sort of we have this very tangled web of current laws that kind of are designed for an intermediated system, and not so much more disintermediated, because there’s definitely some speed work to be done along the way. Elliott, also an important thing for broker-dealers is the customer protection rule. And right, the SEC is very, very concerned about that, if a broker-dealer is going to hold digital assets on behalf of the customer, perhaps as a prime broker to provide leverage to the customer, then it has to be held in a good control location. And that, in turn, means a bank. So there’s a lot of different, you know, pieces that are gonna have to be stitched together here, you know, we have to remember that.

Elliot Chun  21:04

So let’s, let’s talk a little bit about actual use cases because we’ve talked about digital securities, we talked about some of the important compliance and regulatory around it. But this is the exciting part, what what are people looking to use it for? And Ravi had mentioned cryptocurrency being the very first use case of that. So Bitcoin being the first use case of blockchain, the technology and then we have all these different protocols where other groups are building on, we’re going to take all those to the side, and we’ll just call them that’s kind of gen one. And now as we transition to a gen two, we have things like stable coins, security tokens, and NFTs. So let’s get into some of those use case those cool use cases that we’re seeing and talk about how they are maybe bringing the nine to 10x efficiencies into how they’re being applied to what exists currently.

Ravi Srivastava  22:05

Right. And good question. And I think that the next generation next evolution of blockchain is to be in digital assets. For example, like securities, stocks, bonds, particularly the bond market is not very transparent. So if the bond market could become transparent, then that would be a huge evolution and huge value of blockchain. And we we have been listened to a hearing that, in fact, feds are looking at creating a digital daughter. And that is the daughter could really create a huge transformation, because the benefit is you don’t need to really go to a bank to transfer money, you could transfer money directly without going through the visa network go make that transfer. And so we are seeing the evolution of stable points, we are seeing the data with stocks and bonds. The benefit again, the queue, there is a huge benefit, because as Kiran said, we are seeing re materialization. And people are getting the custody when they had paper securities, which was in their custody, they lost that, that custody and the transparency that came with those paper securities, when these were dematerialized and turned into an electronic ledger entry. Now they are re materializing. And, and we are seeing that people are getting the custody back. So people don’t have to really go to someone in order to sell their securities. They can say I have the custody, of course, there are challenges come in because those who are holding securities eventually there, they will need to have some kind of insurance on their wallet, and somebody will have to provide that insurance so that if they are lost. But we are seeing really the next significant change. And that’s going to be the second evolution second wave.

Lewis Cohen 24:21

Yeah, maybe Elliot if you want me to talk about something else that I find super exciting with the idea of digital securities and digital asset. Is the line between where you have a business and where you have a group of people that are, you know, engaged in something that’s a little differentiated from that. And so, some of you may be aware in the area of NFT’s. There are a number of series of NFT’s that are each differentiated from each other, but they’re all kind of have some commonality to them. One of the most popular is the Bored Ape Yacht Club. What we’ve seen more recently now is people acquiring some of these NFT’s. And then forming businesses around the open-source, intellectual property here. So previously, if someone had intellectual property, whether it’s the Coca-Cola brand, or Walt Disney’s Mickey Mouse or anything like that. They guarded that very carefully. And they didn’t allow others to exploit that IP, we’re now seeing blockchain technology being used to start new businesses, which may well do you know, for example, a Reg CF offering of digital securities, but around this open-source IP. And so that’s, that’s, that’s really interesting, as we see these two worlds of digital securities and non securities kind of blending again. So I think what blockchain technology allows is this kind of blurring of the line of, you know, one type of thing and another. And that’s, that’s very exciting.

Elliot Chun  25:53

So when in Ravi’s use case, we’re talking about making capital markets more efficient, right? Equities, stocks, bonds, those things that currently exist in our world, putting them into a digital wrapper, and then enjoying the efficiencies that come from that, Lewis, when you’re talking about here with the bored ape club, that use cases, to me is very much around a different way to engage with your consumers, who may also be your investors. Yeah. But but more importantly, kind of fan and consumer engagement, being able to create connections to those and be them be able to tie you to a certain value that you can deliver to them are aligning much more aligning interests there. 

Dr. Kiran Garimella  26:51

So if I mentioned a couple of, you know, insights into this one, I have some thoughts around this. So anytime, you know, we always think about the blockchain and digital securities as being much more fluid, and much more efficient, right? And that’s a great play. I mean, that is a big disruptor by itself in the financial markets. But one of the things that we also have recognized that when things get more efficient and fast, people think of very new use cases as well, right. So when you have a when you’re riding on a bike, and then you have a powerful Ferrari car, you are going from point A to point B faster. Yes, that is true. But it also adds so many other use cases so that you don’t use now a Ferrari to pick up milk at the grocery store, right? I mean, you have the NASCAR’s you participate. There’s a Hi Speed days, and really, this whole excitement around the whole thing, I think. And I mean, even blockchain and digital security is an empty space. You know, it was mentioned a great example of, you know, NFTs. I mean, you know, if you think about it, security is basically you representing a pool of assets, in this NFTs case, it just happens to be one asset. That is irreplace able with another kind, one of a kind, right. The other part is also stable coins, if you look at stable coins as a mechanism for making your financial transactions much more efficient. But now think about people, watch companies equals cable coins that represent their brand, right? You have so many of these ecosystems out there, you have clubs, you have communities, you know, ethnicities, and so on. And now they can produce their own stable coin, which is now branded, there’s a pride of ownership of a stable coin and being able to use that. And there’s a lot of use cases that can come off of that. And if you guys have any thoughts on that,

Lewis Cohen 28:40

I do. I just quickly, just jump in on the regulatory side. I couldn’t agree more. That being said, as you probably are aware, the President’s working group came out with a report about two weeks ago or so which definitely was rolling in the other direction. So we’ll we’re gonna have to see how that goes. So, so the President’s working group was concerned that these type of stable coins could become significant, systemically significant, and so took the position that only an insured depository institution or IDI, basically a bank could issue stable coins. Now, that does not mean that we will not see partnerships along the lines of what you’re seeing between sort of brands and stable coins, as we would put a you know, a kind of a white label service. So we see a number of banks, Signature Bank, Cross River bank, you know, a number of others that are providing services to the [uncertain]. Basically, basically insured depository institutions providing but it is going to become interesting to see how the requirement that a bank is involved plays out in this space for sure.

Dr. Kiran Garimella  29:44

Oh, absolutely. If somebody is going to put out a stable coin and people had better be sure it is in fact. I mean, we have fiascos with you know, some with tether and some of the other stable coins, right? We do want to absolutely avoid something like that. No, no,

Lewis Cohen 29:59

Thats right, the great irony is that an insured depository institution engages in fractional reserve banking. And so by pushing stable coins into a fractional reserve status, they actually are, you know, kind of counter intuitive. But look, there’s I think we can all agree there’s a lot yet to be determined. But I think on your point, really just picking up on that is there’s there’s going to be a need for different stable coins in different settings. And we’ll see symbiosis between brands and banks or issuers creating all kinds of new and interesting products.

Elliot Chun  30:32

Is it too late for us to change the name of stable coins, because it just feels like it’s just a misnomer. And it gets people confused. And it was a very early with, like smart contracts, it was really early that we coined it yet it you know, stable coin, and it, it makes it, it helps. I don’t know what what to call it, but it’s the vernacular has been tough.

Lewis Cohen 30:58

E-money, you know. So that’s like a term, they have that term, it’s E-money. And that’s an interesting different term to your point, it doesn’t use tokens. But I think it’s a great point, I’ll just throw in my support.

Elliot Chun  31:09

Well, because the use case of them is so important, but it’s important to us, because we’re in the infrastructure in terms of building this out. It’s less important when you talk about the everyday consumer, that doesn’t necessarily need to understand exactly what’s happening under the covers. But they should be confident that whatever is happening under the covers is done in a manner in which there is a framework, there is structure. And most importantly, there’s accountability. If it doesn’t do what it says it’s going to do, and it you know, and it breaks all of a sudden, right. And I think that is one of the biggest challenge. Well, that’s probably one of the biggest psychological differences in the in the world of blockchain and crypto from five years ago to now, which is I think, now we’re starting to get regulators up to speed. And we’re starting to see approvals happen for a broader set of use cases than we did before. And I think now we’re saying, Okay, this is the path forward, but, you know, just changing briefly, the Staples Center is now renamed crypto.com. I mean, yeah, that is a, that’s not a minor. That’s not a minor thing, particularly anyone in LA and Hollywood, and where the Lakers and the Clippers play. So what but, you know, if we start going down into talking about stable coins and securities, the common person is we’re going to, they’re going to get lost, and what I hope doesn’t happen is the strength of the use case that is seeking to be adopted, gets caught up in, in the quagmire of stuff.

Ravi Srivastava  33:06

Right, that’s the, so, here is always the end, I agree with you that stable coin is a misnomer. And the reason is, we there is no transparency regarding the assets held by the issuer of a stable coin to support the stable coin. So we have no idea if this stable coin is backed by $10 million, or whether 10 million stable coins are backed by $10. We don’t know that. And so, and that that’s where there is clearly in need of for creating more transparency, because sometimes the issuers of stable coins they they they appear to be behaving like a bank. And some of them in fact, they have who are who consider their obligation seriously they have a they have voluntarily adopted all the regulations which apply to banks. And there are others who are not really clearly disclosing and how much assets they are holding and where though they are holding those asset. So that there is a challenge with the stable coin and I agree with you I don’t think that’s a given point in the right name.

Lewis Cohen 34:32

Yeah, I was just gonna add one more thing, you know, around stable coins that’s a potential challenge. The SEC has made some noises about whether some or many or maybe even all might be considered securities. That then raises you know, other questions in terms of how that stable coin is traded, not as easily be traded on, you know, digital asset exchanges that are intended for non securities and could have have a variety of other sort of implications. So there’s some, some really interesting aspects, knock on aspects there.

Elliot Chun  35:09

Ravi, you had a really interesting use case you were talking about earlier in terms of a car and a digital form of a car being bought and sold and how that could happen. And, you know, probably five years less than that, you know, from an everyday user perspective, can you talk a little bit about that use case?

Ravi Srivastava  35:32

Right, right. So the concept, which we were talking about is, was that when, when the trade takes place, and the property you are holding. So if you have invested in a security, and then it’s your property, but here’s right now, because the securities are not held by you, held by another, and by broker-dealer in form of a ledger entry. It is controlled, broadly controlled by another person, once it is in the form of a token in your custody, then like a car, you can sell it to another party. Now, the the second part is that all the cars need to get registered, registered at some place so the ownership has to be registered. So once you have traded the securities, once you are sold the security to other party, that other party needs to go to the transfer agent to register their ownership. And they can say is that because the security is in my wallet, therefore, now I’m the owner and register my name. And the transfer agent can say is that okay? Let me verify from the previous owner, or transfer agent, there are some gray areas here. Or the transfer agent can say, because it is in your custody, you are the owner, and therefore, I’m going to register you without even following up with other first with the original owner. And I will do a KYC AML. And after that, I’ll do [uncertain]. So that’s it, the remodel that you car, you get the ownership of the car and get registered user asked the question, that was a very good question. What if the person who has bought the security does not pass the KYC? AML? And that’s a good question. Because if they do not pass the KYC AML it transfer agent cannot register them. So they have to say with like the DMV model, the car has a certain defect, it may not be registered. So the person who has bought needs to go back to the person from whom they had purchased the security, and they need to resolve the issue with with with that person. So that now there are some number of I’m sure that leaves a lot of legal issues around that. So maybe take, take off from here and help us what would be the legal issues around?

Lewis Cohen 38:13

I think it’s not we’ve, I think we’ll put all of our friends and colleagues listening in to sleep. If I start rambling on about Article eight of the Uniform Commercial Code, we’ll surely lose, folks. But I think to suffice to say, Ravi, you know, there are, you know, you know, technicalities that can be quite important to this, but the principles you’ve laid out, you know, are really good high level principles. And I think that’s, that’s what’s great. And I think, you know, you know, Kiran and Elliott, people, you know, sort of excited about the space. But maybe I’ll turn the question back to you, Elliot, which is, you know, isn’t probably the, in my mind, the single most important driver here, you know, the technology can give you that nine or 10 times efficiency gain. But at the end of day, it’s garbage in garbage out. So we need good issuers to kind of come on the platforms and engage and really, you know, start to say, Hey, I’m selecting things in this way, not because I can’t do it otherwise, but because this is the best possible way to issue securities. But I’d love to hear your take on some of the folks that you know, you talk to about that, Elliot. Because that’s, to me, the quality issuer is that, you know, [uncertain] of success here.

Elliot Chun  39:24

Yeah, and it’s been the one of the biggest challenges particularly for digital securities today. Because we don’t have enough good examples to point to, to say, hey, you see what they did. This is this is a very well run process from a great company that had options to go with, they selected this option, and now they are reaping the benefits of their decision. The initial use cases that we have are primarily in the real estate side, right And and it’s mostly because we go back to education. I know that’s a part of the theme. It’s not just education of the issuer, but it’s education of investor. And that has also been a significant friction point. Meaning it’s almost easier for me today to not take the risk of owning involving digital security, when I’ve got a piece of paper, and I’m okay with having my paper version of this of the same security, essentially. So people, why why would I take the risk of trying to do something that’s on, quote, unquote, unproven, or I’m not seeing good examples of when I can just have my paper version here. And so I can’t tell you the number of conversations, particularly with lawyers, where they would sit there and say, Oh, well, okay, now you have additional security trades in the secondary market? Yes, you have access to your capital. But what if there’s no market there? And, and, and, and I’d rather be locked up then have access to access to sell my position, right. So these are real-world questions that we are fielding from investors on a near-daily basis. And it’s fine, because that’s just the education curve that we’re going to need to as an industry to be able to implement. But look, what ideally, what happens is, you know, Tesla issues some round in a digital security structure, and then it’s game over, like. It’s just going to open the floodgates, and people are gonna say, Well, what I can own Tesla in this digital form, and it’s a security like, I’m in. And then people are going to do their comparison to Well, wait a minute, this version of this security can do all of this stuff. And this old version of my security can only do this stuff. Why would we ever do the two, but the problem is, is we just haven’t hit traction yet. And had enough of those good examples to point to. So people can shake, nod their head and say, Ah, I get it. Yeah, but it’s events like these that really helped push now.

Dr. Kiran Garimella  42:24

Yeah, Elliot, I think it’s going to be a spectrum of people, you know, that are some early adopters and innovators will say, No, hey, I’m gonna try that, because I can see very specific use cases. And because some people are more visionary than others, well, which they are. The more important caution is that some rules, some have some preferences and risk profiles that are different from others, right? Some people are risk takers, and they want to push this envelopes a little bit. Right. And the classic example to your point, I mean, you raised a fantastic idea about stable coins. I mean, should we even call them stable coins? I mean, if they’re not going to be stable, then why call them stable coins. But you’re gonna run with this idea. And I’ve been thinking about this one we’ve been talking about this stuff internally, too, is that you remember SDR, the Special Drawing Rights that the International Monetary Fund put out, right? And why did they put this out because you had different currencies. And because of the exchange rates, and the inefficiencies in pulling money across countries and for governmental purposes. So they use SDRs as a claim against the basket of currencies right now. Just think about having a claim, a stable coin, you should like a private drawing, right? If you would like a PDR. But it’s a claim on not just one company, but its partners, and it reflects the credibility of the basket of partners. And it’s a claim on their credibility, right. I mean, the it can be used like that, I think I’d go to see quite a bit of innovation in this space.

Elliot Chun  43:48

So then, I mean, a year ago, we a year ago, defi was just getting started. And NFT’s were just starting to like NBA top Shots was just starting to get in the market. You fast forward now. And both I mean, I don’t know what total value locks, which is another horrible term, but TVL in defi is like in the billions, right? And it’s a bad number. I think it’s gonna bust at some point, but that the point is, people have appetite for the innovation. It is happening today. NFT’s if you look at weekly volumes, some weeks it’s 100 million. Again, the data is not the greatest, but let’s just go with what’s available right now. You’re seeing 100 million in NFT’s trade on particular marketplaces and exchanges. These are these are very, that’s a week that’s per week. These are huge, huge, huge numbers. What does that indicate? That indicates that there is a level of. Oh, and the other part is gaming. You’re seeing these NFT’s from play to earn. They are just exploding now. So the appetite to participate in innovative products is there. Why is it not happening in the quote unquote, security side? And it just happens to be because we can point fingers or whatnot. But the regulation is not there. I mean, well, we have the ETF signed off, right? Like, how long did it actually take to get that and they’re still pushing back? So there’s there’s just a significant amount of pushback and friction in regulatory markets. But we’re seeing what happens. And again, I just want to clarify, yes, it’s great that defies got a lot of activity, and fts. But in the way that its current state is, it’s it’s going to combust at some point. And it’s because the regulation isn’t there. So I know we’re walking, we’re walking this line?

Dr. Kiran Garimella  45:56

Well, I think, you know, I think the crucial fact in all of this is I think, Lewis, hit it right on the head. It has to be a compliance driven, compliance first process. Right. And one of the biggest areas, you know, I think we all as an ecosystem are looking at is how to make these things much more compliant. And all part of the answer just goes back to the question of smart contracts. And, you know, we think of smart contracts are smart and they’re contracts, but technically, they are not. So we had to make them smarter, they would make them even stronger in terms of being contractually obligated for compliance, right? I mean, that base really should not go. Once we lose our eye on. People don’t like compliance, because I think it’s a regulatory burden and unnecessary bureaucracy. But at the end of the day, it is for the safety and security of all the parties involved. And if you make it much more fluid, and take on all the inefficiencies in in compliance, I think that has to be the firm base for going forward.

Lewis Cohen 47:00

I know we need to wrap up shortly. But Oscar, we had a question from the audience.

Oscar Jofre  47:07

Great questions. I like them, you want to take it on? 

Lewis Cohen47:10

The first one, at least on decentralizing deeds from real estate, deeds that are used in real estate? Oh, yeah. That’s such a great question. Um, a lot of people wondered about that. It’s very interesting. I actually, coincidentally had worked on one of the earliest projects to achieve this the second largest Register of Deeds in the country, as many may know, real estate is transferred at county level, registrar’s and Cook County and Chicago, did a pilot program where they sought to use the Bitcoin Blockchain to transfer real estate deeds. And so I was just looking for it, I may be able to just quickly drop the final report into the chat to share with everybody, you know. Their conclusions were there were some really interesting things about this approach. but with deeds to protect somebody’s house, you know, transferring that on on an open public blockchain will be difficult for many the same reasons that, you know, Ravi, you pointed out with securities, you know, nobody wants to wake up one day and find that somebody hacked their wallet, and now they don’t own their house, you know, that doesn’t really work very well. So it’s I think there are going to be some really interesting blockchain use cases around real estate, probably, like decentralizing it is going to be difficult because again, people have rather strong feelings about their home and finding out that their home has just become a bearer asset. But I’ll try and drop the, the report. Right now. Somebody else answered the other question.

Oscar Jofre  48:42

Thank you, Lewis. Actually, you know what, that is a real you know, one of the things I want to tell everyone and Lewis has been on the leading edge of this in advocating from a different perspective in the legal. And that is that nothing is saying that one part can be decentralized. And the other part can be centralized. I think we need to, we need to start thinking about, we need to mix the models because there are so many different regulated components to this. They’re not going to go away. Real estate is a regulated activity. I think we all agree on that. Perfect, fantastic. There’s banks involved this all that. So I think anybody getting involved with this, you just need to understand that puzzle just got a little bit different than it was a few years ago. It’s not just simply saying, Hey, I’m going to do decentralized real estate, I’m going to you know, fractionalize. Make no mistake. fractionalization has always been there. Anybody who’s, you know, Elliott, remind me of that. David Weild tells me. It’s always been there. Blockchain just makes it more efficient. It makes it doable. It makes it practical, and and you need to understand, so when you understand how difficult it is to do it, boom. There are some there is one question in here of obviously, Elliot, this is for you, and Ravi and Kiran, of course, can anyone share their experience on launching an STO? And what are the key steps to prepare and one? So it starts obviously with people like Elliot and the lawyers. But Elliott, please.

Elliot Chun  50:07

Yeah, I mean it, I think the the first thing to consider is what are your objectives? Right? And that’s always the key. You don’t want to go into something just because it is new, you need to establish what are your objectives? And then you come and say, what are the structures that can allow us to have gives us the best chance for us to succeed in meeting our objectives. So so that’s one, because we saw this in the ICO move, that when people tried to do raise capital, in a structure that worked for them, but didn’t work for their investors, or they’re the people that were along with them on the journey, it’s going to break in the long term. So it’s very important to make sure that there is an alignment of interest and you’re doing it, you’re thinking that through properly. So that’s the first step with STOs, then the second becomes the who, who am I reaching out to? Who do I expect to engage with me and become an investor into what am I whatever I’m issuing, that’s a very important step to because if you are doing something that is consumer based, yes, that may have a lot of alignment to what your consumers or your customers are thinking, and then they can come and invest into what you were, whatever your you’re participating. But if it’s if investors may be kind of your more traditional groups, you may turn them off, because that may not be what they are seeking for. It may not align to their investment objectives, or they may have documentation that doesn’t even allow them to invest into a digital security. So the successful security token offerings have been ones that think of do a lot of the thinking up front. Think about alignment of interests, and then construct the story in a messaging so that you are making it as simple as possible. Very, very bad to say, I am doing this digital security, because it’s the newest thing, and it allows for things like liquidity. Now, that doesn’t work focus on what is the story, what is what is your value proposition, and then you hit them with, and you can own this in something that is more capital efficient, something that is helping the way. That shows to you that I’m thinking about you as a long term person that’s coming with me on this journey. And so that that’s a lot of the things that we think about at the early stages, when people are talking about digital securities and STOs.

Oscar Jofre  53:02

You know, I, you know, it’s a great summary to that. And one thing that Elliott did not tell anyone, we do not use the word liquidity in private market right Elliot? We use the word monetization, because we need to be honest with the market, Elliot did a session for us. And we, he was the first to bring it up, I think in the middle of the year, we were talking about because he, you know, secondary market opened up and you can hear about it. And this whole thing is liquidity. liquidity. Liquidity does not exist in the private markets the way it does in public. And it was a great, you’re going to learn about that later. So, okay, so here’s what’s gonna happen. We’re gonna we’re getting better at this. So the session is going to end what that means that everybody’s going to be moved over to the lounge speakers. On the top right hand corner, there’s going to be an arrow that you click on that arrow, it’s going to push you back there. There’s already tables ready for you. There’s some people there like Chuck, Macar and Matt that have additional questions. I’m sure they’re going to be reaching out to you and of course, others. Thank you so much, everyone. We’ll have the KorePartner lounge break, and then we will be back in about 10 minutes. Thank you.

Elliot Chun  54:08

Thank you, Oscar. Thanks, guys. Thank you.

Lewis Cohen 54:10

Thank you, Oscar. Thanks, bye