Making the Eiffel Tower investable via DLT? A converstion with Tom Rieder (ISP Group) [EN]

00:00:00: Does it really make sense to tokenize the Eiffel Tower?

00:00:04: And what's underlying business model for investors, so do they get any revenues or is just a status symbol that I own.

00:00:13: Is this collectible?

00:00:14: So we need to find out... The first step was called Business Alignment.

00:00:19: We don't want to tokenise anything just for the sake of tokenising it.

00:00:24: What i would like you can find out And how we could make that business better for you if we tokenize it.

00:00:34: Welcome to Inside Digital Assets, the podcast about the future of capital markets – tokenization digital assets and the technologies that power them.

00:00:47: Tom welcome to our podcast The Pleasure Having You.

00:00:50: Pleasure To Be Here.

00:00:51: Claudia thank you very much for your invitation.

00:00:53: Tom Reeder is the head of digital assets at ISP.

00:00:58: That's a securities firm in Switzerland and also internationally.

00:01:02: And you focus on securitization, trading digital assets... ...and Tom personally is one of the original gangsters here in Switzerland.

00:01:13: so super pleased to have you in tokenisation.

00:01:16: You built up one of first tokenisation platforms

00:01:20: Exactly!

00:01:23: You and the tokenization platform is with ISP Group.

00:01:26: And as a company, you are also one of first trading participants on big digital exchange.

00:01:34: so your pioneer in many many ways.

00:01:37: If you say so, then it is!

00:01:41: So this kind of the general intro.

00:01:43: but now let's maybe talk day-to-day business.

00:01:46: what are you coming from?

00:01:48: What keeps your busy at the moment?

00:01:50: hopefully not at night but during the day?

00:01:54: I have been in the organization space for the last eight years already and what they see today?

00:02:01: really use cases that work.

00:02:06: We do a showcase, we try to see how tokenization works.

00:02:09: So we really demand coming.

00:02:11: so there's lots more of issues that want to go into.

00:02:14: tokenization and big projects funds big real estate project And the one of them is in puzzle pieces was always this working secondary markets and they're you will come into the game with Ceturion and Beaks digital.

00:02:29: so very glad and optimistic That it finally takes off.

00:02:35: Wonderful.

00:02:35: So we're going into the next stage of adoption, you would say from kind more innovation to early adoption or maybe even mass proliferation?

00:02:46: Definitely, definitely.

00:02:47: I mean what we saw in the early days was a lot of self issuance token hold and self-hosted wallets, self custody whether it's cold wallets or hot wallets.

00:02:59: but now we see especially Switzerland more financial service providers that are offering custody services for their clients which really is to me the big sign.

00:03:15: for me is like the core feature you need to have, access tokens and get into crypto.

00:03:25: It's still a bit cumbersome if not so deep in technology but service providers or other financial services that offer you those services.

00:03:36: useability becomes more easy just like normal bank account to hold tokenized securities.

00:03:44: That's wonderful, and let's maybe take a step back.

00:03:49: Maybe not all the listeners are super deep in the topic yet And as we said initially you're one of the OGs in tokenization.

00:03:56: Let's start from there.

00:03:58: In your words what is tokenisation?

00:04:01: So actually tokenisation is digitisation of rights.

00:04:05: It can be value writes it can copyright or usage rights.

00:04:10: you use blockchain technology, decentralized ledger technology to wrap a right in the token that lives on the blockchain.

00:04:22: That makes it very easily transferable accessible and the rights are immutable and transparency is given through the technology itself.

00:04:34: And how's this different from todays world?

00:04:36: I mean one of the core concepts tokenization is that you use decentralized ledger technology.

00:04:43: So it's all about decentralization, so you don't have one central securities depository where one owns the database and everybody needs to interact with that.

00:04:58: through blockchain technology You do not have a central control instance anymore.

00:05:07: issue a smart contract and through the smart contract can also generate tokens that then can be easily transferable in between two parties without having any intermediaries.

00:05:19: It's just like you send right from one wallet to another, but you don't need to have an intermediary.

00:05:27: You just enter the destination wallet address And then the token transfer can happen.

00:05:34: And the benefit of that?

00:05:36: Does it make things faster, cheaper more fun etc.

00:05:40: What do you see there?

00:05:42: I mean On the blueprint, everybody says it's faster.

00:05:46: It's more efficient its democratization of assets and you take out the middleman.

00:05:53: so there are concepts which technology allows but in reality we still see some gaps.

00:06:01: I mean yes definitely There is some efficiency gains if You have automated settlements DVP when you really are in a fully tokenized world.

00:06:13: Well, you have stable coins for money transfer where when you have tokens for the right transfers and everything can be automatized then you definitely have efficiency game.

00:06:26: so that is one part where I mean technology has proven that it works.

00:06:32: but still um In institutional setups You Have A Lot Of Manual control instances and sign off.

00:06:41: So it's not yet fully automatized, so that is one part.

00:06:44: but there are definitely some efficiency games.

00:06:47: the other thing is democratization of access or ease of cross-border transfers or payment without having to cut all the middleman?

00:06:59: That already works.

00:07:00: you can now transfer.

00:07:03: if your grandmother lives in Africa To have Western Union, they take up to ten percent of a fee.

00:07:12: If you send her stable coins it comes at no cost.

00:07:17: so there's definitely more access.

00:07:20: also the financial system for non-banked people.

00:07:24: So how could somebody not just save costs but like an intermediary or someone using this system But make some business?

00:07:36: Making more business, it's what a lot of people try.

00:07:41: But at the moment when I see technical infrastructure is not there yet for everybody.

00:07:49: so one of the most important pieces especially in Switzerland is an institutional adopted stablecoin.

00:08:00: i would say that will be one of corbeys.

00:08:02: you can transfer value and money from one person to another without having any middleman or credit card providers, or stripes of this nation which take up to five percent off the transfers.

00:08:20: And I guess there we need to take a further step into stable coin adoption.

00:08:25: in Switzerland and we see already quite a few stable coins that are adopted by institution.

00:08:35: that would be one of the paths where we can do a bigger move.

00:08:41: And then it's all about marketing, I mean if you wanna grow your business You need to have access to clients.

00:08:49: If its international and in global market or even if you're regional and you can access a big market without hurdles Then i mean will impact your businesses Very

00:09:02: interesting.

00:09:04: Now, assuming that this was now a bit let's say theoretical can you give a few really concrete examples?

00:09:09: That your maybe working on or that you have seen and are most excited about?

00:09:14: I mean at the moment what i'm very excited about is like tokenizing asset classes that usually are very difficult to access And we work on several projects.

00:09:28: it's mainly real estate project where were looking to partner up with a bigger communities of crypto communities which could have access having lower minimum investment amount.

00:09:47: so you can invest in big real estate projects already with a thousand Swiss francs which makes that access class more accessible than its private equity or pre-IPO stock, which are tokenized and usually just accessible for funds.

00:10:05: Which might offer to other investors a big opportunity and also democratization of asset access.

00:10:18: And do you see concrete examples now going through your pipeline in these use cases?

00:10:23: Yeah, we work with one partner that offers tokenized pre-IPO stocks.

00:10:30: That's super interesting case.

00:10:32: then We worked on two bigger real estate tokenization or even three real estate tokenization projects where you give access to those project through tokenization.

00:10:45: Yeah, I mean that are the ones which i'm really excited about.

00:10:49: and then it's also having more and more participating banks Also in your ecosystem with big digital where you see.

00:10:58: okay It also comes with distribution power.

00:11:00: So usually one of the big challenges were yes You can tokenize an asset.

00:11:06: Does it get better?

00:11:07: No.

00:11:08: Do you have more liquidity in it just because if it's tokenized, no and is it easier to reach More people?

00:11:16: theoretically yes but You need to have access To those People that own wallets That want to invest And they guess with more and more institution that offer those products to their clients, then we go step further down the route.

00:11:32: Wow!

00:11:32: That opens up many follow-up questions.

00:11:34: Let's maybe take a real estate example.

00:11:37: Can you take us step by step through this process?

00:11:40: So let's assume I have the Eiffel Tower And now when they make it accessible so everybody can get a piece of the tower What is the process?

00:11:50: First, we need to find out why you want to tokenize it.

00:11:52: Does it really make sense?

00:11:54: To tokenize the Eiffel Tower?

00:11:56: and what's on the underlying business model for investors?

00:12:00: so do they get any revenues or is just a status symbol that I own in?

00:12:05: Is this collectible?

00:12:07: We have to find our first step called Business Alignment.

00:12:11: So don't wanna tokenize anything just because of tokenizing why you want to do it, and how we could make that business better for you if we tokenize.

00:12:26: But sometimes people wanna tokenize an asset And then in the first discussion We find out hey It might be easier To just securitized it Make it bankable Give it a Swiss Eisen Then every big body can have it In their depot.

00:12:44: So don't wanna just tokenize For doing so.

00:12:50: How does it make the life of you as an issuer better, faster and cheaper?

00:12:56: And then also for investors.

00:12:58: Why should they buy a token?

00:13:02: Could they have easier access through a bankable

00:13:07: asset?".

00:13:08: That's what we try to find out in the first step which is call business alignment.

00:13:13: once would be suited for tokenization, we need to discuss of what will the best structure and that heavily depends on target investors you can reach.

00:13:26: So

00:13:27: if

00:13:28: some investors have already committed or are interested in holding tokenized assets then it's a plus.

00:13:36: so usually as with every asset distribution is key whether you securitize it or tokenize.

00:13:45: You need to find the investors that want to hold your asset, that wants to invest in your assets and having a liquid secondary market is definitely one of the USPs with working secondary markets that offer big digital.

00:14:06: That's what we say.

00:14:08: hey!

00:14:09: We tokenized it easier access to secondary markets.

00:14:14: You can list your asset there, you also need to provide liquidity.

00:14:19: so it doesn't work without liquidity and you need to have a market maker.

00:14:23: but There's the one you where you can offer Secondary trading and also investors.

00:14:30: if they want to get out early then they have a liquid market.

00:14:33: So recap, so there is first kind of an analysis phase like a business alignment phase from the issuer side.

00:14:40: Then there's kind of target profiling on investor site and then comes technical piece?

00:14:46: Yes correctly how does

00:14:48: that work?

00:14:48: yeah correct I left it one out.

00:14:53: actually once we have defined them what is this tokenization strategy, which investors we're going to target?

00:15:00: How are we gonna reach those investors?

00:15:03: whether we go only the institutional way or where you wanna have a launchpad for self issuance.

00:15:10: And once that has been defined We would start with the technical part.

00:15:14: That always involves The token design and What kind of token standard it is.

00:15:25: Blockchain, we're gonna work on also depending a bit of the secondary markets you want to be on.

00:15:31: So if you wanna trade in Switzerland most usually it is... We build an Ethereum blockchain with CMTAT smart contracts.

00:15:39: If you wanna be listed in other jurisdictions maybe Other token standards and other block chain might be more suitable.

00:15:47: And so once you have done set up the smart contract.

00:15:55: We could mint on behalf of the issuer as a securities firm or if The issue wants to have a self issuance to retail investors and take care of all the KYC and AML steps, then we can set up those Those tools that investor onboarding.

00:16:16: And they can Self-issue tokens and onboard their investors directly.

00:16:22: Or we could do them if they want to trade in the institutional space with regulated banks, and list it on a regulated exchange as peak-stichel.

00:16:32: Then we would provide those services... We will issue the tokens then distribute those to investors that are subscribed in private markets.

00:16:44: Let's double down on the investor.

00:16:45: So how I find these investors?

00:16:47: You mentioned before maybe you already know some of them But maybe I don't.

00:16:52: In today's world, banks play a big role in running order books

00:16:57: etc.,

00:16:59: what do you see there?

00:17:02: That challenge hasn't been solved through tokenization.

00:17:06: You have more venues especially the primary market to reach investors.

00:17:20: also want to offer more and more access to tokenized securities.

00:17:25: So that definitely works, you have more distribution channels but at the end of day you wanna have a liquid product than the liquid asset.

00:17:34: therefore in this strategy you need to have balls.

00:17:38: so the primary market is one thing.

00:17:41: success factors are already.

00:17:44: investors want to subscribe bigger tickets.

00:17:47: Like an anchor investor

00:17:49: or so that has a

00:17:50: visibility effect?

00:17:51: That definitely helps, then find partners which wants to distribute and then third really have partner in the secondary market and also partner with participating banks.

00:18:07: I mean it's a bit like in the traditional world you still need where you have your investors.

00:18:16: So some things never change, but there might be new tools that can be added into the process and maybe facilitate some new

00:18:25: channels?

00:18:25: Definitely!

00:18:26: There are new channels or new opportunities... New applications especially the nail banks which offer distribution power.

00:18:35: now

00:18:36: That's an interesting point.

00:18:37: I mean do you see the banks kind of taking this up?

00:18:40: is their a digital investment bank on the line?

00:18:45: I see more when we look what's happening in United States with Robin Hoods and also, with big crypto exchanges such as Kraken.

00:18:57: They don't care if it is traditional security or tokenized securities.

00:19:01: they want to offer access to investments for their clients.

00:19:05: so at end of day I guess the tech stack will not be important anymore or the user, investor shouldn't care about whether it's tokenized.

00:19:16: He just wants to have access through an investment opportunity and I guess its part of solution for financial service providers.

00:19:29: make that access easy so they don't need keys or whatever.

00:19:39: It's just I invest in a security and it can be tokenized, or it could be traditional security... And i just get access to it!

00:19:50: So you expect big investment banks like Goldman Sachs etc.

00:19:54: that they at some point would implement the tech stack?

00:20:01: They already doing it, but they're doing on purpose to have efficiency gain in administration and management and transfers.

00:20:09: So that's all.

00:20:10: the big players are going into tokenization either on public protocols or launching their own blockchains to profit from those efficiency games.

00:20:23: So, once you found the primary investors comes to secondary market.

00:20:26: You mentioned that before and you talked about liquidity

00:20:29: etc.,

00:20:30: let's take go back to real estate example.

00:20:32: how do I create liquidity for a tokenized Eiffel Tower?

00:20:38: So usually we ask the issuers to provide that liquidity because yes there are they're marketers which could also bring into.

00:20:52: We use one of the allowed and regulated market makers on that venue to offer that service, which might trade in its own risk.

00:21:02: Its own book is one part.

00:21:04: or then if you don't find those You need to provide liquidity yourself And than have a service provider such as ISP Which would provide That liquidity management service for you

00:21:19: Interesting.

00:21:20: You now mentioned ISP.

00:21:23: And I said before that ISP is one of the first trading members on BX Digital, what's your hope?

00:21:30: It's not a hope but it's like the way capital markets are at the beginning and in the next ten years We'll see the technology shift and it's just a natural thing to be part of that.

00:21:55: I mean, we are doing paying agent for more than ninety percent of the ETP is listed on on six For example so that business will shift in future.

00:22:07: So we want to be the first that also our In the starting blocks To offer that service in the tokenized infrastructure.

00:22:17: So very much looking forward to these new investment opportunities.

00:22:21: What's now that we are at the end of this podcast, your very next thing you're running up too?

00:22:26: How can people stay in touch with you as well on your outlook and things?

00:22:30: so You could always if you were interested in tokenizing assets you can reach out through me to link them Tom Reader or through our website ispgroup.com, so happy to connect with you.

00:22:44: and I mean one of the big things we're working now is really bringing the first tokenized assets on the second remarket together with a big digital and very happy that we can make it happen.

00:22:57: wonderful!

00:22:57: Very much looking forward to that.

00:22:59: many thanks Tom for having been here.

00:23:00: hey

00:23:01: thank you for having me Claudia.

00:23:03: This was Inside Digital Assets, a joint project by Biggs Digital and Ceturion.

00:23:09: If you enjoyed this episode subscribe to our podcast and feel free share with others!