By Matthew Dove (Senior Editor)
On April 11 at 6:30pm, SpaceX successfully launched the world’s most powerful operational rocket. Following its maiden flight, the Falcon Heavy touched down safely on a drone ship named ‘Of Course I Still Love You’ in the Atlantic Ocean. Meanwhile, on the other side of the pond another innovation was getting ready for takeoff…
At Barclays Rise on April 16, “The Power of Tokenisation – More Money for More People?” saw five champions of digitised assets convene to wax lyrical about the current state of the nascent token economy.
Considering they’re all on the same team, event sponsor Jeffrey Sweeney (US Capital Global), Nancy Fechnay (Bedrock X), Scott Davies (Torca), Simon Barnby (Archax) and Phil Mochan (Koine Finance) found plenty to bicker about! Good job then that TFT’s own Katia Lang was on hand to moderate proceedings.
The crux of the debate centred not so much on whether tokenisation is the next big thing (each panellist having already supped merrily from the Kool-Aid) but rather when and in what form it will ascend.
The evening’s discourse also brought strongly to mind words allegedly spoken by Marie Antoinnette, “There is nothing new except what is forgotten.” The last Queen of France had quite the head on her shoulders until, well, she didn’t and her words are as true today as they were in the 1780s.
Tuesday’s event saw Madame Deficit’s words breathed new life on the avuncular lips of US Capital Global’s CEO Jeffrey Sweeney. The affable Californian bravely admitted to an audience of handpicked industry insiders that, “there are no new products here.”
Such an assertion proves doubly accurate when one considers US Capital Global’s first tokenised products, which include pre-IPO shares in Elon Musk’s aforementioned celestial cab company. Space travel is nothing new (even dogs have done it!) and neither is leveraging the opportunity to break earth’s surly bonds for commercial gain. It’s not the products that are changing but the customers.
“there are no new products here.” – Jeffrey sweeney
So, who exactly are the intended investors for such high risk securities?
According to Barnby, chief marketing officer at Archax, the ideal token investor is anyone and everyone, the economy token being nothing less than an exercise in “democratisation.”
“Tokenisation allows a global audience to get access to global issuances that they don’t currently get and so it nurtures liquidity in things where liquidity doesn’t exist currently.”
Bedrock X’s Fechnay agreed but added a substantial caveat emptor;
“I’m of the stance that only highly-educated investors should be investing in early-stage high-risk assets.”
Sweeney reiterated that only tokenisation can lower barriers sufficiently to allow retail customers entry to the juiciest new investments, SpaceX for example!
“We manage about 10 million Space X and we have fractionalised one of the OP units out of the BVI (British Virgin Islands) and that’s available in Asia for about 200 bucks a shot as a derivative … That’s a tokenised offering, a marquee security. I assume some day you’ll make money on that thing!”
He continued by saying;
“That’s accessible to a low entry point investor but it’s a marquee asset that, through tokenisation and using a derivative product, is accessible.”
Given Torca’s focus on regulatory services, it’s no surprise that Scott Davies lent the occasion a healthy, albeit mild, dose of scepticism, asking Sweeney;
“Jeff, do you think an asset in something like SpaceX should be available to an investor?”
To which US Cap’s CEO responded;
“Well, that’s a suitability question. Suitability is primarily a function of what percentage of one’s assets are allocated to a risky investment. Since the fractionalisation [of US Capital Global’s SpaceX offering] is relatively small … and since it will be a small part of anyone’s portfolio, it’ll be okay for a retail investor.”
Like hard liquor then, SpaceX tokens may be fine in moderation, heavy diluted, but too stiff a drink may leave your head pounding and your pockets empty (the Musked Crusader himself has conceded that investors in the project may have to wait at least 15 years to see any tangible returns).
“Jeff, do you think an asset in something like SpaceX should be available to an investor?” – scott davies
Such considerations, however, did little to dampen the panel’s enthusiasm for all things tokenised. Huge growth is coming, we were told, opinion only diverged over when and where it’s coming from.
Phil Mochan bore the standard of the major funds, as you’d expect from an “institutional-grade custodian.”
He argued that tokenisation’s real strength lies in the facilitation of “new distribution models for financial assets … It opens up a wider range of asset classes which will lead to higher level of trading but most of that will be in traditional incumbent banks. It can be said that tokenisation is primarily about cost reduction post-trade and in risk management for portfolios.”
Fechnay thinks the true value of digitising assets will manifest in venture capital, unsurprisingly given Bedrock X’s remit of “disrupting the way that the future of innovation is funded.”
“Within the VC community and the early stage investment community there hasn’t been a lot of liquidity and it’s getting further and further from the mark as we build bigger companies that don’t exit.”
Areas of early growth may remain up for debate but one point on which the panel seemed happy to concur was product design. Predictably enough, the quintet of financiers decided that they should handle initial token development and not the lawyers. As Sweeney triumphantly confirmed;
“Hire a banker first, not the attorney!”
Once again, the key here was the order in which processes occur rather than the processes themselves. Sweeney went on to explain his product-first-comply-later approach;
“If you give all the money to those guys first, you’re not going to have enough for us to do the job correctly. What we’ll do is build the product … do the valuation, the term sheet and all that. Then we’ll reach out to the attorneys and have them doc it up so you don’t go to jail.”
The mere mention of “the slammer” elicited a titter of nervous laughter from attendees and what Sweeney said next nearly brought the house down…
“The second thing attorneys can’t give you that investment bankers do is the solicitation requirements, because what you say in the marketplace for your offering affects your jail-time!”
Zing! And the crowd goes wild….
As the spirited dialogue wound down, it was clear that these five horses may have different backers but are very much stablemates. There were plenty of big opinions on show but only regarding the fine detail. It was left to the collection’s most moderate voice, Davies, to wrap things up so everyone could hit the bar and swap business cards.
When Lang asked the man from Torca for his final thoughts, he breathed a deep sigh of resignation, one eye on the clock, and deadpanned;
“I agree with Jeff…”