Discussion from the Global Investor’s Conference: Panel on Tokenization

Featuring Nisa Amoils, Dave Hendricks, Stephane de Baets, and Antonio Vitti

by Karim Nurani, Chief Strategy Officer, Linqto


The second panel of our recent Global Investor’s Conference included a conversation with some of the leaders in the digital asset sector.  Our panel was moderated by Nisa Amoils, the founder of Grasshopper Capital.  She began her career as a corporate/securities lawyer and was involved early in tokenization.  Grasshopper Capital was an early investor in Ripple and Securitize, the latter of which was represented in another panel in our conference.

Joining Nisa as a panelist was Stephane de Baets, the CEO and Founder of Elevated Returns (ER), which is an asset management company established in 2014.  It became a pioneer in real estate tokenization by completing the private placement of the St. Regis Aspen hotel token in 2018.  ER currently owns investments in regulated ICO (Initial Coin Offering) portals and digital exchanges in Southeast Asia and holds other strategic positions in the digital space and real estate space.

Next, we had Antonio Vitti, who is the CEO and Founder of Pontoro, which he describes as a group of “institutional financial executives who have particular expertise in large-scale infrastructure project finance.”  Their work involves facilitating underwriting banks’ financing of “large scale power plants, roads, bridges” and similar projects “both domestically and internationally.”  Pontoro is developing a “structured finance platform” which is “digitally native” and uses a tokenization structure to allow a greater spectrum of institutional investors to access these infrastructure assets.

Finally, we had Dave Hendricks, the CEO of Vertalo, an SEC(Securities and Exchange Commission)-registered (digital) transfer agent, which, since issuing one of the first Regulation-D approved STOs (Security Token Offerings) in 2018, is now currently focused on its digital transfer agent role and its capitalization table platform that is “building connections between custodians, ATSs (Alternative Trading System), broker-dealers, issuers, and investors.”


One of the first topics our panel discussed was the promise of secondary liquidity and how far we have progressed thus far in tokenization as a means to this end.  Dave commented that early on, his team took “technology and ideas from the world of ICOs.” Trying to bring ICOs in as regulated securities, however, proved very difficult as “early forays in the security token ecosystem did not comply with SEC and FINRA regulations.” As Dave put it, at this point “these rails weren’t fully built” to allow for the tokenized securities to be “thrown onto ATSs”.   So, although hundreds of actual security tokens were “produced or created” there was “not certainty on how data [was] transited” and questions such as, “who order matches?” and “who settles?” arose.  Recently, Vertalo has helped to forge connections between “lots of players,” citing the SEC and FINRA, as well as investors attending the conference, in order to “normalize the way the data moves between these systems.”  According to Dave, once this “big tiny problem gets solved” it is true that the “market is ripe for massive adoption.” He noted that both his team and Stephane’s are working on various solutions to allow for this. Dave concluded, “It takes time, determination, investment and patience,” but “it is coming.”


To allow for the adoption that Dave referred to, Stephane explained that “the infrastructure in the US needs to be mature to deal with the market,” in terms of the “regulatory environment” and although it is “getting there” it is “not there yet.”  Nevertheless, he went on to explain that “even if you solve infrastructure, you still need to have a market.”  To have a market, Stephane noted, requires “market players” and investors that “read [in] the newspaper that people are making money investing in STOs (Security Token Offering)” He said that “it’s going to take ten to twenty good deals” to make this a reality, but that “the minute good deals without any challenge from the regulator anywhere in the world take place,” people will be “jumping on it.” He predicts this is a “2020/2021 type of wave.”

In addition to good deals, Antonio pointed out the need for platforms capable of accommodating the liquidity and access needs of the “institutional world.” He noted that to achieve secondary liquidity there are three problems that need to be addressed. He explained the first barrier to liquidity is “the type of assets being tokenized,” by the digital asset sector, which are “mostly retail-like assets,” which “tend to be volatile assets with very wide bid-ask spreads.” This “[significantly impedes] secondary liquidity.” As an alternative, his team at Pontoro is “focusing on high quality [institutional-grade] infrastructure assets” which “are not correlated to the credit cycle” and “are not volatile in price.” The second barrier he noted was the “type of investors,” which in his intended case are “high quality institutional investors” that “tend to want to buy and hold assets for longer periods of time” as compared to retail investors, which tend to have shorter investment time horizons. Institutional investors are “looking for secondary liquidity” so he and his team are “adding value to high quality infrastructure assets” where there is no secondary market or “market-makers,” and then “facilitating new bi-lateral liquidity” for this asset class. The third problem is the lack of “true financial product innovation” in the digital asset sector which as Antonio described, should “take a private asset and create value by transforming the asset into something more investable and liquid via some sort of structured finance vehicle,” as opposed to tokens that only “digitally point to existing private securities.”


As an example of one asset being tokenized at present, Dave explained that Vertalo has recently began a real estate arm. Dave noted that there is interest in tokenization in markets such as the real estate for the promise of secondary liquidity, as Antonio discussed, but also for the collateralization opportunity it represents. Predicting that the “so-called security token technology is going to intersect with DeFi” (Decentralized Finance), Dave noted that in future, “you will see real assets being collateralized” and they can be used then as a “basis for borrowing and lending and the creation of instruments and derivatives” in addition to a place where “you can pair off debt.” And as for the equity, “you can pay a coupon on part of it”, while meanwhile “some other part of it can appreciate.”  In addition, per Dave, the real estate market could be improved upon through this technology by creating ways to “normalize and digitize the underlying stakeholder data and reduce the cost of redemption,” noting that real estate is “fragmented” and “not a great investor experience” at present. Using real estate as an example, he sees potential for tokenization, stating that “At the bottom of a market, there’s a lot more you can do with this technology than just make it secondarily liquid.”


Stephane pointed out next that “when you want a market or when you want a product, you need to look at what’s in it for both sides.”  Observing that “accessibility to a trophy asset or quality” is enticing to “investors that are looking to yield for money preservation.” As an example, he cited that buying a “quality piece of real estate that has a yield attached” is “very attractive.” With security tokens, therefore, even if “you know you’ll get 6% capital preservation through inflation protection, that’s great but [the] key question is, if I need money tomorrow, how do I exit?” According to Stephane, this will require creativity. He asked questions such as, “what else can I do with [this] instrument?” for example, “can you use this instrument to pay your rent?” or “is there a market that is liquid enough where you can find a very narrow bid-ask spread and liquify? In conclusion, Stephane noted that “when we design tokens, therefore, we first look at where market demand is. Because if you have a great product but you can’t sell it, there’s no use to it.”


Observing that two out of the four panelists has adopted Tezos, Nisa then asked the panel about technology standards and asked why the panelists decided to work with Tezos.

Stephane noted that they made the decision to work with Tezos early on, and that everyone asked why.  He explained that his team felt the people behind the technology were “credible enough” and that the technology was “young enough that you could actually tweak it so that you [could] match what the regulator want[ed] to see.”  He finds it problematic “if you take a product that already exists, and you try to make it fit to a developing regulatory environment.” And, in addition to a malleable product, he was persuaded by the “dynamic group of people that understands that you need to deliver something that will be accepted by the regulator.”

Dave echoed that Vertalo was attracted to Tezos for the same reasons.  The fact that is was “not a centralized project,” it had “amazing teams working to improve the ecosystem,” and the “governance model is a lot cleaner than some of the other blockchains,” all drew his team to utilize their technology.  Overall, he found the “[block]chain itself was well-thought-out and self-upgrading.” 

Antonio spoke on behalf of Pontoro, adding that “we’re big fans of Tezos and their technology” as well.  Similar to Stephane and Dave, he found the “FA2 protocol is compelling, in addition to their governance models.” In terms of adoption, Antonio described his team, noting that “we’re financial engineers, structured finance people, so we have a very specific use-case.”  He further noted that Pontoro’s standards are determined by what “would accommodate the needs of our institutional investors.” But, he noted, “at the same time, I will say Tezos does check a lot of those boxes for what we’re evaluating right now.”

Our Chief Strategy Officer at Linqto, Karim Nurani, posed a final question to the panel, asking them to predict what financial trends would come to pass in the next 12 to 24 months. 

Stephane commented that based on the printing of “trillions of dollars” by the US government and several European governments as well, there would inevitably be inflation. Clarifying his understanding of the word, he said “people talk about inflation, but I think they get inflation wrong,” saying that in reality “the true definition is expansion of monetary supply.” He said that “inflation is already there” due to the excess of printing, and interest on loans cannot be paid for by banks, and therefore, there will be a “major banking shock.” Due to this, Stephane believes that “people will change their perspective to life and rather than own possessions and financial assets, they will own a utility in the future.  And that could be the right to food, the right to energy, the right to lodging,” or even “the right to health care.” He concluded that, rather than “having your assets sitting in the bank,” future assets will be “sitting in an account” referring to a comment made earlier by another panelist, Jamie Finn of Securitize.  Stephane claimed finally that the wallet will, “give you basically access to a future necessity” opining that “I think blockchain technology is great for that.”

To experience our next panel of experts – please join us for the next Global Investor’s Conference, presented by Linqto in mid-September.  We will have more updates to come on date and time.