With offices in the US, the UK, France, with clients on five continents, this Luxembourg-based platform quickly becomes a major player in tokenization. Luk Falempin, Tokeny CEO, discloses the secrets behind this amazing growth.
Q) Tokenized assets is a hot topic now, many talk about them, but mean different things. What is a tokenized asset to you? What would be its main features?
Perhaps the best way to define this would be to define tokenization. Tokenization is the process of representing rights of an asset into a token that can be traded and stored on a blockchain system. This process makes the trading of these assets a far more seamless process than we currently see today. Buyers today trade paper or unsecured digital files that represent some or all of the asset. Tokenized assets are stored on the immutable blockchain infrastructure and can be transferred and settled in minutes, 24/7/365, in direct peer-to-peer trading.
2) What place in size and functions will tokenized assets take in 5 years time? In 10 years?
Likewise tokenization will start in private markets because most of them don’t have easy access to the right infrastructure and tools to organize a secondary market. Equity represents half of this market so of course companies will start tokenizing their shares. However, tokenization is more interesting for companies too large to get easily acquired and too small to do an IPO, rather than for startups. Therefore we can easily imagine that debt products will be the first ones to emerge. Any financial instruments, asset-backed, with a good and regular yield will be interesting for investors. Thanks to tokenization, new models will emerge and processes will be automated. It will become easier to manage transfers and to apply corporate actions, even with investors all around the world.
Q) How shall the mindset of an institutional investor change to go big time into tokenized assets?I think it needs to be understood that Security Token Offerings (STOs) are centralized, even if they benefit from a decentralized infrastructure. Therefore the investors get legal guarantees from the issuer. Also, tokenized securities are not necessarily related to cryptocurrencies and the scandal that is inevitably associated in this world. There are many credible projects and
innovations, and a lot of education that needs to take place before institutional mindsets change. For example, investors can participate in a STO with fiat currencies as normal. They do not have to use a cryptocurrency. Moreover, if someone loses their keys to access their wallet, it doesn’t mean they are losing their shares. The technology is there to trace the ownership of the securities, the lost tokens can be destroyed by the issuer and new tokens can be minted by following a compliant process where the investors will prove his identity. The blockchain is used as a registration of ownership and the history cannot be changed. However, the reality is that as long as scandal and fraud are present in the crypto-world, institutional investors will be sceptical. And rightly so. This is why regulation is key, once more and more financial bodies make their position clearer and see the advantages of DLT, this will help form the new financial ecosystem and, in turn, help drive mass adoption.
Q) What does this technology mean for retail investors?
STOs are securities offerings and therefore issuers have to respect strict distribution rules. Some exemptions exist in most countries to target retail investors. All of them are limited to protect investors (maximum amount, maximum number of investors, etc.). However, these exemptions are cumulative and it is possible to enforce these rules during the fundraising process. The blockchain is global by definition so it will probably help regulators to make the regulations evolve but there is no other reason that retail investors become more accessible. Distributors like banks and broker-dealers will remain important players. The only difference is the underlying infrastructure.
5) Who does Tokeny target and how do you try to attract them?
We can help anyone wanting to achieve capital investment. We’re a technology solution, so issuers come to us wanting to achieve capital for their asset, fund, equity or service, and we provide the solutions to facilitate the process on the blockchain. Our solutions fit mostly with mid-cap companies, closed-end funds, asset managers and investment banks. We connect our clients with all the necessary partners needed for such an offering, such as legal advisors, marketing and custodians and we focus on the end-to-end technology solution. We receive over 100 projects a month and we choose the projects that are the most sustainable to work with.
Q) Is Tokeny more for the European, the American or the Asian market? Do you see any difference?
We have offices in London, Paris, Minneapolis and our Headquarters is in Luxembourg so of course our main market is Europe. However, Tokeny already provides its services worldwide and has clients on 5 continents. The US, European and Asian markets are very different to one another in terms of regulations. Securities rules in the US are clear and pretty easy to automate. In Europe it is a mutualised investment market but the rules are mostly based on principles and guidelines so issuers need to understand them in details to be compliant.
Q) Where do you see Tokeny in 3, then 5, then 10 years?
Tokeny will become a tokenization hub, the go-to company to connect key players of the new financial ecosystem to provide the best-in-class solutions. We will continue to help funds and mid-cap companies to represent their assets on the blockchain. Some standardized tokenized securities will emerge and tokeny will provide the needed tools to scale issuance and management for multi-issuers such as asset managers, fund of funds, real estate promoters,
Q) What do you see as your unique selling point, your unique value? What makes you standout?
Tokeny is the only tokenization platform to use a decentralized validator system for token
ownership transfers. This validatator system is part of the T-REX (Token for Regulated Exchanges), a decentralized set of global tools, based on the Ethereum blockchain, to allow for
the interoperable, frictionless and compliant transfer of tokenized securities. We’re cognizant that there have been problems related to fraud and scandal surrounding blockchain technology.
By coming up with a set of solutions that enable our clients to effectively process KYC and AML checks and issue and manage their tokens compliantly, we are addressing those pain points and helping form this new financial ecosystem. Tokeny is also one of the most comprehensive solutions and the European leader in terms of number of customers and connected investors.