Almost every interesting global project in the field of tokenization enjoys participation of tZERO. This firm now is what IBM was for the IT industry in the era of mainframes, a truly big player. Our Chief Editor talked to Saum Noursalehi, tZERO CEO.
Q) In the emerging tokenization industry, tZERO is one of the major players. How does it feel to be a big guy? What advantages and what challenges does this position bring?
We actually see ourselves as the innovator (“small guy”) challenging the juggernaut that is traditional capital markets. Our advantage is that we have a superior product, but our challenge is it is early-stage and we need get adoption.
Q) You deal with regular, as well as with tokenized assets. Tokenization, is it a new business or an expansion of the existing business onto blockchain?
It is both. The traditional smart order routing business was purchased both for its technology (i.e. matching engine and order management system), as well as for its connections into approximately 140 broker-dealers. This is useful for the security token platform for its exchange/ATS technology, and to create liquidity for security tokens by working to integrate these broker-dealers.
Q) What, in your opinion, is the main difference between a regular and a tokenized asset? What are the special features, pluses and minuses, of tokenized assets to a practitioner?
1. Customizable Securities with Tailored/ Mutable features
2. Rebuilds Capital Markets “Trust Ecosystem” with Reduced Intermediation Cost,
Inefficiency and Opaqueness with Checks and Balances Hardwired into Technology.
3. Reduced Friction and Intermediation Costs with “Reg-Aware” Tokens/Automated
4. Enhanced Secondary Liquidity
5. Democratized Access to Capital Formation and Asset Classes
6. Instant Settlement (no market manipulation via settlement delays or failure) 7. Transparency for Regulators
8. Issuers Maintain Control 9. 24/7 Trading
The challenge is that the technology and infrastructure (including regulatory perspective) still in the early stages, analogous to the internet in the early 90’s.
Q) What is your attitude to blockchain based assets without an underlying asset?
Blockchain-based securities provide benefits for a variety of businesses, assuming of course full regulatory, compliance, transparency and legitimate business purpose for the enterprise or project.
Q) You have recently launched a broker-dealer division, what functions will it perform with regards to tokenized assets?
We plan to file to be a broker-dealer with a suite of capabilities, including retail and investment banking. This would allow us to launch a mobile and web experience for trading digital and non-digital assets among other things.
Q) tZERO is to launch a trading app this June. Please tell our readers about it. Will you place security tokens there? Which ones? How will be app work?
Initially, the app will trade the cryptocurrencies, bitcoin and ethereum. In the future this app is expected to evolve to allow users to trade security tokens and traditional equities assuming (subject to regulatory approvals). The app is expected to use biometric authentication to allow investors to buy and sell crypto.
Q) Who will be able to use the app? Is it for US based authorised investors only?
Initially, it will only be in the US, but the plan to expand internationally soon after.
Q) How do you see the place of tZERO in the industry in the near future, mid-term and long term?
Near term, we see ourselves onboarding quality security tokens and improving the liquidity on the PRO Securities ATS which we own.
Medium term, we will have launched our joint venture with BOX Digital for the first national exchange for security tokens (BSTX) and have a significant number of tokens trading.
Long term, most assets expected to be digitized/tokenized and be tradable by everyone.
Q) What is your evaluation of the worldwide market cap of tokenized assets in three years from now?
Difficult to project, but likely in the billions, if you assume the pool of available business and assets to push for democratization of capital and other trends and benefits of blockchain-based securities.