Discussion from the Global Investor’s Conference: The Future of Assets is Digital (Part 1)

Featuring Gregg Kidd (GlobaliD), JP Thieriot (Uphold), Matthew Le Merle (Fifth Era), and Jamie Finn (Securitize)

by Karim Nurani, Chief Strategy Officer, Linqto

Introduction to The Panel

Matthew Le Merle, our moderator, introduced the panel of the day as “four of the most important digital asset figures in the world today.”  He explained that the discussion would center around “what they’re doing to drive forward digital assets into the future that we believe fully connected digitally enabled world of investing.”

Our moderator himself, Matthew Le Merle, is the co-founder and managing partner of Fifth Era, which manages BlockChain Co-Investor, the “world’s leading blockchain venture fund of funds.” As a managing partner of Keiretsu Capital as well, he aids in backing some 200 companies a year.  He also is chairman of Securitize, represented by another panelist.

Our first panelist introduced was Jamie Finn the President of Securitize, which is “the world’s leading digital asset platform.” Jamie co-founded the company with Carlos Domingo and has built a “fully compliant digital platform that allows any asset in any jurisdiction in the world to be tokenized or digitized.” His company is backed by some of the world’s leading financial institutions, including MUFG and Santander of Spain, Matthew noted.

Second, Gregg Kid, who is the former Chief Risk Officer at Ripple and the CEO of GlobalID, a “global identity solution that is easy to use, ties users to unique names and transcends border and institutions.”  With a background in federal finance, he was an early investor in the likes of Twitter, Ripple, Uphold, Linqto among others.  Matthew described Gregg as “renowned as one of the world’s leading thinkers about the future of access and identity and payments.”

Next, the conference’s host, Bill Sarris, who is also the co-founder and CEO of Linqto, joined the panel.  Matthew described Bill’s company Linqto as “the CoinBase for private investments.” What “Bill has built, based upon decades of experience working with leading fintechs here in Silicon Valley,” Matthew expressed, “is one of the easiest apps to enable you to get access to the equity of private investments, which is so difficult today.”

Finally, we had J.P. Thieriot, the CEO of Uphold, which is a “fully integrated platform that allows you to access, buy, convert, transfer, and share any asset in the world fiat currencies, [and] crypto assets.”  Matthew explained how this technology, allows individuals to access “the equity of public equity in public companies so that you could be an investor, for example, in Tesla and sends a unit of Tesla to your best friend in London or Uruguay or anywhere else.”

The Discussion: What are the benefits of moving any asset class from paper to a native digital format?

Jamie answered first, stating that “the ability to actually own the asset and be able to use it however you deem fit is one of the most important things that is being enabled.” He mentioned that in addition to “owning” an asset in this sense, he brought up liquidity as another benefit, stating that people are “looking for an ability to transact in their asset.” Bringing up a similar use-case that he helped to enable – the transfer of music from CDs to digital form – noting that initially many said, “a CD is just a good.” And similar to the way in which digital music platforms arose and replaced CDs, he said that a “whole ecosystem is going to develop around these digital assets.”  This new ecosystem of assets “will be much easier to manage. They require a lot less legal overhead.”

Gregg said firstly that digital assets answer the need for “financial inclusion.” For this reason, his company GlobalID has focused on “getting everybody a seat at the table.” In addition, he brought that there is an “access issue with getting every asset, every form of value at the table.” He envisions an “amazing transformation of society,” where “all sorts of thing, things that we didn’t used to think of as money, are now a form of money or an exchange.” And in this type of society, “if everything around us is liquid” it doesn’t matter whether your government is “communist or capitalist,” because “we all live in an exchange society,” Gregg concluded.  Illustrating with the analogy of a casino, he said, “while there’s [first] getting everyone a seat at the table, it’s [also] letting everything in the room be a chip on the table.”

Bill noted that the benefit lies in “the question of speed.”  Drawing a historic parallel, he noted how the “first paper making process was documented in the eastern time period, somewhere between 25 and 220 ad.”  But while this was “fast enough for Gutenberg” then, “in today’s digital world, paper just can’t process quickly enough or securely enough for modern assets.” Bill declared importantly that “most assets really have already begun to move to data digitization.” He anticipates that “with the help of people like [panelists] Jamie and Gregg and JP,” he is “predicting that all assets will be digitized in the next five to ten years.”

Echoing the sentiments of the other panelist, JP brought up the benefit of access and brought a specific example of a company he spoke to “that is essentially digitizing rental income apartments in New York,” which might be an “interesting investment category”  since “not everybody has a million and a half bucks to buy a rental income property.” So, the solution is to “fractionalize it,” which in turn, “makes it accessible to anyone.”  From his point of view, “if it’s a historically interesting engine of wealth creation, then it’s something that should be accessible by everyone.”  Imagining this in play he said, “so you’d be able to go from Tesla, to a unit of rental income, on I don’t know, Park Avenue, in one trade, and maybe pork bellies, or shares in private companies” in the next.

The Discussion: This isn’t the first time we’ve done this. What are the challenges to implementing digital assets?

Matthew reflected, “this isn’t a new thought, you know, 30 years ago, we digitized corporate public equities.” He asked the panelists, “What are the big challenges? What are the big barriers? What’s making this hard?”

Jamie answered that mindset is a hurdle, people are “comfortable with what they’re used to.”  He explained that today “everybody in a private investment kind of culture is thinking about paper.” They “think about signing a piece of paper, and then that’s their kind of ownership stake in it,” and they “think that this is the best way for them to hold it.” The challenge he faces “explaining to investors of the previous generation that actually a digital asset is better than paper.” The competition his company faces, as he describes, is actually paper, and the mindset around it.  He also brought up the technology around digital assets, which is “still a little bit to hard to use” for the wider population.

Gregg brought up the example of, when working for the federal reserve, there once existed “this fleet of Lear jets” that “wasn’t for people” but  “was flying checks around because you had to present the check where it came from to get settlement.” But then 9/11 happened, and we “suddenly realized with all the planes grounded that we weren’t going to be able to clear, because the jets couldn’t fly.” Someone brought up the idea “maybe we should just send the information on the checks around” and the new system was birthed, as a result of the crisis.  He compared today’s crisis of COVID-19 as a similar point in time, bringing “the transformation of what people are doing now and the fact that it seems like the new normal” to be “watching NASCAR or Hamilton in a digital format as opposed to going in person.”  Underscoring that “it is possible to take something that we took for granted doing in-person –going to work and seeing each other – and we’re doing this [conference call] now.”  This moment in time, he stated, “this accelerated all my expectations about digitalization.”

Bill, resonating with Jamie and Gregg’s points, stated the main barrier as inertia.  Having been in similar disruptions before, he offered that “disruptive change happens in a series of steps.” “First,” he said, “the brave, go forth and have to climb steep curves to make small inroad.” “Second,” he continued, “the talented see the future vision and they begin to make small profits.” “Third,” he described, “the strong come in and conquer the necessary markets.” And “finally, fourth,” he concluded, “the masses follow, turning disruption into what is the norm.” While is process “usually takes a long period of time” Bill explained that due to the pandemic, “this is all it’s just exponentially increasing the time it’s going to take for us to get through the disruption of this space, it will be happening totally within the next 5-10 years and not 20 years,” as he would have previously thought.