This is a transcript of the Podcast – The Future Potential of Security Tokens with Marc Boiron – You can listen the audio here
Nye : What is going on everybody? What is going on? It is your boy, Nye and welcome to another episode of Evolvement. The financial podcast where we talk about Bitcoin, cryptocurrency, and the future of our financial systems.
Nye : I want to give a big thank you to Nexo for sponsoring our Security Token Series. Nexo is a blockchain-based overdraft system that allows users to make instant Crypto loans. At this moment, there’s no other way in which Crypto owners can use their assets other than selling and buying them. Nexo comes forth with a very lucrative business model where it allows Crypto owners use their holdings as collateral, then withdraw cash. The user maintains 100% access to their cryptocurrency while they have immediate access to cash as well. Check out Nexo at Nexo.io.
Nye : And I want to give a second shout out to our sponsors Veracity. Veracity helps solve the lack of transparency around advertisers abusing users’ data. Right now, video ads are intrusive for viewers and ineffective for advertisers. Veracity aims to solve this by allowing creators, viewers, advertisers, and brands to directly interact with one another. Learn more at Veracity.io.
Nye : Welcome to another episode of the Security Token Series. I started the series a couple of weeks ago to just educate people and mostly educate myself around the security tokens market, STOs and how this is going to play a big role in cryptocurrency and in the whole industry in general. And I’ve been able to meet some really, really cool people because of that. And one of those people is our guest today, Marc. Marc is a blockchain partner at FisherBroyles. He’s got a lot of experience with the security token industry. He’s actually going to be involved with the Security Token Summit, I believe, in the next couple of weeks up here in LA. So Marc, how are you doing my man?
Marc : I’m doing great. Thanks for having me on.
Nye : Hey man, glad to have you on as well. And we’re going to run through a couple of things today, dude. But we’re just going to talk a little bit about security tokens and really how they play a major role or a minor role or whatever role that might be in this industry and talk about tokenizing everything and stuff like that. But before we get into that, Marc, can you just give the audience and myself a little bit of background about who you are, what you do and how you got introduced into Crypto and blockchain.
Marc : Sure. So like you said, I’m a partner in the blockchain practice FisherBroyles. I got interested in blockchain in 2015, really just in the technology. And in year 2017, given my interest in it, and I think I fell down the rabbit hole like everyone else, said, why don’t I move my practice over into that space? And so since second quarter of 2017, pretty much all I’ve done is work in the blockchain space. Most of that has been in Crypto until maybe a year ago or so when a lot of the practice started moving over into the security token space. And now I spend a lot of time there to broadly speaking, help clients with any kind of token sale, whether that’s security tokens or otherwise, work with some exchanges, some mining operations, crypto funds, everything under the sun in the blockchain space and obviously do that with my partners at FisherBroyles. We’ve about 20 partners in the blockchain practice there. So it’s helpful to have support from all over the place.
Nye : Nice, man. That’s awesome. That’s awesome. And what got you interested into the Security token side of this whole thing. You’re helping companies get into STOs or how does that all work?
Marc : Yeah. I guess there’s two parts to it. One was just the natural evolution of clients who are trying to raise funds struggling and saying, hey, let’s look at the Security token space, which most of them realized, well, that’s not really the solution because it doesn’t magically cure any fundraising issues. But the second one was, I actually started my practice in Delaware. And the first probably two and a half years of my career, I spent representing Dell when Michael Dell was taking it private. And then same thing with Dole. Now, both of those are well cited cases for the reasons why you should have blockchain technology, at least in the public markets. Dell, the big issue was you had a [inaudible 00:04:38] price that ended up voting in favor of the merger.
Marc : What that did was it made everyone who had asked them to actually vote against the merger, not have rights to essentially, what’s referred to as appraisal. So essentially getting a different value for your securities than you thought. And the only reason that happened was simply because you had an intermediary in there that was the one doing what it was told to do instead of having those holders of Dell stock directly actually deciding what to do. So that should have never happened if we had a Security token there.
Marc : Dole was similar but different really. That one was simply when we went up to tally the votes on the merger, and this was in the litigation afterwards, you ended up having somewhere around 30% more votes than stock that actually existed. And that was simply because of the post settlement that happens in the securities markets and the post transaction settlements. And so in that case, if you had the stock traded on blockchain and every transaction is recorded on there, you really wouldn’t have that issue. So to me, there was just this, just based on my experience, this obvious need for a better solution and Security tokens gives you that or at least will give you that as it continues to evolve.
Nye : That’s awesome, man. That’s awesome. Just in case this is the first episode that someone’s listening to in the Security Tokens Series, can we just dumb it down to really basic level and can you just describe what’s the difference between a Security token and a utility token?
Marc : Sure. Everybody describes this differently, and that’s part of the issue. My view is that a Security token is any token that is sold in compliance with securities laws. And not just in compliance but actually either registering yet like you have to or relying on an exemption. So I throw them into two categories. One of them you could think of them as what’s called a network token. So this is a token that is actually going to function in a distributed network. and it just happens that because of the way you’re going to sell it, it is still going to be a security. And the other one is something that represents what is already a security or another asset that is made into a security. So think of that as your stock or think of it as art that you’re now going to sell as a security so that people can make money off of it.
Marc : Utility tokens are basically, in my opinion, any other token that is not that. And for me, most of that are pretty much all of it is going to end up being what I refer to as a protocol token. Some kind of token that is necessary for a protocol to work. I think there’s probably very few [inaudible 00:07:38] that are going to have true utility tokens. Most of those will probably be considered to be security tokens.
Nye : Very interesting. Very interesting. Do you think that some of these ICOs that may have launched in 2017, 2018, do you think they’re going to have to restructure their models? I mean, we’ve seen it a little bit with the SEC coming down on a couple of these guys, and we even saw a few ICOs come forth before the SEC came down on them and say, hey, we’re going to return all of our funds to investors. We’re going to restructure as a Security token, x, y, Z, in this whole process. Do you think this is going to happen more? And if so, how do you think it’s going to affect the industry?
Marc : Yeah. I don’t think it’s going to happen as much as some people say it’s going to happen. And the reason for that is because I think the SEC has given a pass to anyone that was pre July 2017. So then you look at … And then you go post, let’s take March 2018 and the markets mostly been dead. So you really just have this period there of nine, 10 months or so where you had a lot going on. And there was a lot of going on. The reason I don’t think much is going to come from that is a few things. First of all, the transactions, a lot of them were structured, with the goal of being completely international. And not many of those actually achieve that goal, but at its surface, unless the SEC is going to expend ridiculous amount of resources, it would be pretty hard to figure out what actually happen in those sales.
Marc : And I think a lot of them are just going to get by the fact that they structured them pretty carefully. I think the other one, there’s a pretty good amount of them that were simply not very sophisticated, didn’t really use council, and frankly, don’t know any better even now. And then there’s the few who said, we’re really, really careful and we’re willing to take a bet on this. One of them for example, is Kin. With a Kik, with a kin token. They’ve basically said, we’re going to go battle the SEC on this. And I think everyone’s hoping that turns out well. And if it does, then I think that’s going to reduce even more the number of folks that we see come forward. But overall, I think you’re just layering one thing on top of the other. I think that very few people are going to say, I’m going to step forward. I think there’s only the ones who are talking to SEC already and already getting a hint that things won’t work too good for them. Those are the ones that are probably going to step forward.
Nye : Interesting. Interesting. Actually, I haven’t heard about this whole Kin situation. They’re trying to fight the SEC or what’s going on with that?
Marc : Yeah. So essentially what happened was, they got subpoenaed in, I think it was maybe 2017, I think maybe late 2017. And they’ve been in discussions for quite a while. Well, let me back up. So Kik is a mobile messaging service and I think they provide broader services than that, that essentially had a point system already. I don’t know that it was doing all that great and essentially started looking at crypto in it said well, we could replace our point system with a cryptocurrency. And I think they wanted to do a few more things than just that. But it went ahead and did a token sale. First it was a private sale of softs followed by public sale. I think they raised $93 million or so. And they then started having discussions with the SEC, with the SEC approaching them.
Marc : And what the SEC did was give them what they refer to as a Wells notice. Essentially, what that is is a notice that says, hey, we plan on bringing an enforcement action against you. Tell us why we shouldn’t. Kik responded, and Kik’s counsel, two very good law firms responded, laying out pretty much the exact arguments you’d expect them to lay out. The first one being, Kin a currency and currency is excluded from the definition of security. So it’s not a security. And then the next argument being, hey, if you walk through the Howey test, Kin was essentially sufficiently decentralized to walk through that whole, I think we’ve heard a lot about this sufficient decentralization concept from director Henman walk through that. Then at the end essentially said, we did things better than others.
Marc : So even if we didn’t do it perfectly, we did it pretty darn well. And that was essentially the argument. The Kik CEO came out and basically made that letter public and essentially said, “Pretty much we’re going to fight the SEC on this.” Now there’s the question of, what’s the sec going to do? Once the SEC received, the staff received that letter, what they would do is essentially go and give it to the SEC commissioners and then they’re going to vote on whether to bring an enforcement action that can be in court. It could be an administrative action, or they could say, wow, these guys really want to fight. It might be a close call. Maybe we don’t do anything about it. So we’re going to have to see how that plays out.
Nye : Very interesting. Very interesting. That’s some big news. We’ll see what happens with that. In terms of security tokens, you’ve got a very good perspective on this. I’m sure you have much more extensive knowledge than I have on the subject. Why are security tokens, in your opinion, important to the cryptocurrency industry? What role are they going to play and how is this whole creation of a new part of the industry going to affect retail investors?
Marc : Yeah. I don’t know if I’m the exception to this or not, but my view is that security tokens and Crypto should be viewed pretty separately in that it really is the … When you look at a Security token and it’s investment, if you look at it as an investment, it really question of what is the underlying asset being sold that you need to look at? So really a Security token is going to represent maybe stock or debt or art or real estate. So you’re going to look at that underlying asset to determine whether it is a good investment or not. And that looks a whole lot closer to a traditional securities market than Crypto. But if you try to link it to Crypto and say, well, how is it that it’s going to impact the cryptocurrency market?
Marc : Well, I think, if you get a lot of companies that do Security token offerings, what you’re starting to see is some of them providing options for holders of that Security token to receive distributions in cryptocurrencies. Most of those are stable coins right now that can be received. And so technically if you think about it, you’ve got enough security tokens that start actually distributing dividends, and they’re getting paid out in stable coins that helps increase adoption or more Bitcoin even better. But right now most are stable coins. So I think that’s probably the closest tie that I view to the cryptocurrency. Of course, there’s the option of having people purchase the security tokens and cryptocurrency. But given that we really don’t have that much interest from the Crypto community insecurity tokens as an investment, that really isn’t having much an impact.
Marc : Now, I could see if we’ve got Bitcoin prices go up to six, eight, 10,000. I could see a little bit of diversification being desired, especially after having felt the 80% or 90% downward pressure on prices may be some people start saying, hey, let’s diversify into these traditional assets that we can still hold in our wallets. That’s my view on the tie between security tokens and cryptocurrency. In terms of the impact of security tokens on retail investors, the interest, there really is none. A lot of people like to think that security tokens are going to democratize investment. Security tokens are still restricted by your traditional securities laws. And so there’s really no way to structure a Security token that gives more access to that investment to retail investors than it did before.
Marc : The one exception I’ll say to that is that in the traditional private securities markets, when you’ve tried to sell that security in the secondary market, it’s been really, really hard. And what’s happened is that if there are any resells, it’s usually going to be from one accredited investor to another. Once we start having a more vibrant security token market, some of these security tokens, even those issued under Reg D, which is the exemption that only accredited investors have access to those investments. After 12 months, those can be sold to just the retail investors. So they’ll actually have access in the secondary market to investments that they didn’t before, that the actual issuance is not going to be any different.
Marc : The one thing I’ll add is that that doesn’t mean that this isn’t going to help the retail investors in that primary issuance market. And the reason, and I actually [inaudible 00:17:27] the ICO market than anything else, but this whole boom over the past two years has really pushed the regulators to rethink things. The regulators, I’m using that broadly in addition to the SEC, also talking about Congress. Because what you’re starting to see is, there’s been more discussion again on the definition of an accredited investor, which right now is limited to dollar amounts, $200,000 if you’re single or $300,000 if you’re married, or you have a million dollar net worth excluding your primary residence.
Marc : So there’s discussions regarding changing that to allow certain sophisticated people, whether that’s people who know finances well. I’d argued that in the Crypto space, people who know technology well, they should probably be, I don’t think that’ll end up happening but, but the bottom line is it’s pushed to rethink things. And I think the same thing is happening in the security token world is as we’re pushing the limits of what you’re allowed to do with secondary trading of private securities, it starts putting pressure on the SEC or at least causing SEC to rethink just how much of a secondary market may be able to exist in private securities.
Nye : Interesting. Very interesting. And when you say that it’s going to have no impact on retail investors, do you mean that retail investors aren’t going to be able to participate, or they aren’t going to want to be able to participate?
Marc : I’m saying they’re not going to be able to participate any more than they are able to participate now. So if you look how our retail investors able to participate now, essentially two exemptions, Reg CF and Reg A+. And the fact that we’re now selling those as security tokens doesn’t change that. And so those are the exact same opportunities that were available then and they’re going to be the exact same opportunities available now. So my point is only that we’re not broadening the opportunities for retail investors in that primary issuance market. That was my only point.
Nye : Okay, cool. Cool. And for continuing off the retail investor point for a second here, do you think this is going to be another big speculative bubble like the ICO phase was? Do you think that a bunch of people are going to come in and tokenize and create security tokens just based off of the potential hype they could be behind them? Or do you think that since this is a little bit more regulated and a little bit more governed, we’re not going to see something like that?
Marc : Yeah, I don’t think we’re going to see something like that because I think there’s a pretty good understanding that what you’re buying has a very well known intrinsic value. You go to utility tokens to, it was really hard. There’re some valuation models out there, but it was really hard to determine what the true value of utility token was and most of it was purely speculative But you’ve got a Security token and it represents a piece of art for example. Well, there’s really no reason that things ever going to run up massively in value. Maybe a little more than it would have otherwise if you have a lot of interest in a piece of art that retail investors have access to that they didn’t have access to before. But nothing crazy. And same thing with real estate and same thing with stock.
Marc : When Uber stock price run up on a little bit more than retail investors have access to it, sure. But that’s really no different than in the public markets right now. So bottom line, I don’t think we’re going to get some crazy hype. Look, there’s been a lot of excitement around security tokens already and people are having trouble selling security tokens. The reasons because the folks who were interested in buying it are, if anything, the institutional investors and they really are going to take a deep dive into what is this asset actually worth. They’re not just going to let it hype. I mean, they’re not going to just hype it up. I mean, maybe a little bit, the VCs tend to hype up some of the tech companies, but it’s not going to be anything different than what we’ve seen with securities in general.
Nye : Okay, cool. That makes sense. That definitely makes sense. I want to paint a picture for myself and for the audience here. How is this all going to work? So let’s specifically focus on tokenizing a specific asset. For example, maybe there’s a golf course in Los Angeles that decides to take a security token model. First off, let me know if this is not even feasible. And this is just a ridiculous example, but let’s say there’s a golf course that takes a security token model and they want to tokenize their golf course and they have 50 different people come in and buy part of the golf course. How does that work? First off, who can participate in something like that and after they have their tokenized assets, how do they sell or how do they trade that? Is that going to be over an exchange or OTC market or how is all that function?
Marc : Yeah. I’ll start off by saying there’s a whole lot of uncertainties in how some of that’s going to work. But some of it’s also pretty clear so we can walk through that. So you’ve got a golf course that says, hey, we want to tokenize the golf course and essentially the business of the golf course. And so they would take that golf course and put it into an entity. Maybe an LLC, maybe a corporation. It’s going to depend. And I’ll get back to how we’d ideally like it to happen. I’m just walking through how it is happening. So you’ll take that golf course, you’ll put it in that company, and then essentially what you’ll be doing is you’ll be selling shares of that company. And that is certainly exactly like selling equity of any other company.
Marc : So you would look at what exemptions are available. First you’re going to say, okay, I’m not going to do an IPO of a golf course. It’s too small. It doesn’t make sense. So what exemptions are available? You’re going to walk through and you were say, okay, there’s Reg CF, I can raise $1 million accredited or unaccredited investors. Great. There’s Reg A+, I’m going to raise up to $50 million from accredited or unaccredited investors. And then the tokens would be tradable immediately after that offering. But I need to go get file that with the SEC. And the SEC is really struggling with actually qualifying any of those, so maybe not. So then you’d look at, okay, well, what about Reg D? Well, if you want to go crowdfund this, you’re going to rely on Rule 506(c), but that only allows you to sell to accredited investors. And that’s pretty much the range of options.
Marc : You could technically look at Reg S as well and just sell outside of the US. So when you look at that, there’s a few decisions that you’d make. One is, how important is it to me to allow unaccredited investors to access this investment? And you’d look at that from two perspectives. One is just philosophical. Do you want unaccredited investors to have access to it? And second, how much can you actually raise from the unaccredited investors? If you choose that that’s a good path, then assuming you’re going to raise more than a million dollars, then you’d have to go down the Reg A path or Reg A+ path. You really don’t have another option. If you don’t then you, say, hey, this is just available on the credit investors, then you would go ahead and offer it to them.
Marc : So either one of those options, you’re essentially going to prepare either, which is a private placement memorandum or operating memorandum. You’d have a purchase agreement, potentially a few ancillary documents and you’d go ahead, and you’d go out and market this. If you plan on having lots of institutional investor, you might go work with a broker dealer whose job is to go find investors for you and you’re going to pay them a fee based on what they raise. Or you might go to a platform that essentially host crowdfunding offerings, and you would go ahead and try to raise capital in that way. You’d go out and market it publicly depending on what exemption you’re relying on and go forward from that. So then you’d go ahead, you’d raise the money that you want to raise and you’d close the offering. And then after that, you would go ahead and tokenize it.
Marc : So to get to that tokenization point, there’s a lot of planning that goes into it. So as you’re going through the process that I was describing about selling it and planning it and how you’re going to do that, what you’re probably going to do is start talking to one of the token issuance platforms as well as one of the compliance layers on top of that, which oftentimes is one and the same. The Securitizes, Secure NC, Harbors of the world, that kind of thing. And the reason you’re going to do that is not because you’re going to need to issue that token immediately after your offering is done, that’s not how it needs to work. The reason you want to do that is to make sure that you have disclosed what you need to disclose in your offering documents and that you’re aware of the limitations that are going to exist when you’re talking to investors.
Marc : Then what would happen is, like I said, you’re finished, you took the money in, now you go ahead and you start the planning process for actually issuing those security tokens. Usually the documents are going to be drafted to say, hey, we’re not going to give you this token immediately at closing. We’ll give it to you, I don’t know, three months, four months, five months after closing for this exact purpose is so that you can work with the issuance platforms, work through actually building in all that compliance that you need so that you can go ahead and issue the tokens. And once you issue the tokens, the ideal thing will be that you go list it on what’s referred to as an alternative trading system. That’s where you would list it right now.
Marc : When you want to go list a security on what people broadly know is an exchange, you essentially have two options. One is what’s referred to as a National Securities Exchange. Think of that is as Nasdaq, which doesn’t exist right now in the security tokens world. But it’s something that tZERO has been public about working on. Or you need to go to an alternative trading system, which is something that we have seen open finance, SharesPost, tZERO has that already. Templum, I believe. So there’s a few of them out there. So you would go ahead and you would essentially less those tokens on that alternative trading system. And once those tokens are listed on the alternative trading system, the holders can then go ahead and sell them based on any restrictions that are built into them.
Marc : So if you’ve done a Reg D offering for example, for 12 months you’re not going to be able to actually transfer that security token. If you did a Reg A+ offering that got qualified, then you could transfer it immediately. The how you can transfer it in the secondary market is going to depend on a lot of things. But from a US perspective, it’s going to entirely depend, like what I was touching on, on the exemption that you rely on. Reg A+, pretty much you’re going to allow anybody in the US to buy it. a Reg D, there’re some options for potentially selling it before 12 months is up to another accredited investor. But most of the time you’re going to have to wait 12 months to go ahead and actually transfer it. And then the market, you’d go on any exchange, and you’d go and buy and sell it on open finance for example, just the way you would anywhere else. And then hopefully the market develops from there.
Marc : We need things to pop up to actually help with that. So right now you want to go on open finance and buy blockchain capitals token. You see B cap there and you go, okay, this is a great investment. Except I have no idea why I think it’s a great investment. And the reason is because there’s no information available. So there’s things like, hey, aren’t we going to create some disclosure rules even voluntarily as a company so that investors actually know whether they want to buy yourself the security. There’s things like that that needs to be figured out. But as the market develops, there’s going to be more and more things that change.
Marc : So for example, and I’m sorry this is such a long answer. At the very beginning I mentioned that you’d take the golf course, and you’d put it in a corporation or an LLC. Well, hopefully we get one day to a point where we can put that in a Dow, for example, in which now you have all the security token holders that can actually be involved in a way they can hardly be involved now in the governance. You wouldn’t want to do that now because if you form a Dow, you’re essentially forming a general partnership, which means unlimited liability for everybody from a legal perspective and that’s a terrible idea. Hopefully we see better solutions or more developed solutions for the secondary market. Right now we’re white listing wallets off chain to hold information of each investor.
Marc : And then we go ahead and check those white wallets. Well, that creates a very siloed approach where there’s those white listed wallets have, Securitize has its information, Harbor has its information and there’s no real interoperability there. And then you need to go ahead and get verified as an accredited investor or just give your information in 50 different places. The hope is that we can get to a point where all that gets streamlined so that we get closer to what the utility token market was like. But we’re never going to get as far over there because there’s always going to be some regulations.
Nye : Okay. That’s super interesting. I know it was long, but I appreciate you explaining all of that. One of the things you pointed out is that it may take up to a year, if not longer, for liquidity to occur. I’m wondering if you could explain that a little bit more. Because I’ve heard both have different perspectives on this. I’ve heard one of the benefits of security tokens is the fact that it’s instant liquidity. But you’re saying something different and I’m just want to clarify and see if maybe I made a mistake somewhere or what’s going on?
Marc : Yeah. I’ll just clarify. When I use the term liquidity, I don’t mean that you actually have the liquidity because having liquidity is different than the potential for liquidity. Once you can start trading, you have the potential for liquidity. You don’t necessarily have a lot of liquidity. But the potential for liquidity and when you can transfer it is all governed by the laws that apply to the offering that you did. So if you did a Reg A+ offering, you could immediately transfer it and you get that liquidity right away just the way you were saying. But if you do a Reg CF offering or a Reg D offering, you don’t get that right away. In a Reg D offering, what you’re issuing is something that’s referred to as a restricted security. And restricted securities are subject to what’s referred to as Rule 144. 144 then tells you what you’re allowed to do with the restricted security and what you’re not allowed to do with the restricted security.
Marc : If you’re dealing with, what’s referred to as a non reporting company. A company that’s not, think of it as a public company. If you’re not in dealing with one of those, then you have to wait 12 months before you can ever transfer that security. And so that’s where that one year number is coming up is because you got to wait that one year before you can transfer it if you’re doing a Reg D offering, which is the most popular type of offering.
Nye : Okay, cool. Cool. That makes sense. And really, I’ve got one final topic that I want to touch on and then I may break this up in multiple questions. We’ll see. There’s a phrase that’s become popular. I think popularized it if I’m not mistaken. It’s the tokenize everything. Do you think that’s realistic? Do you think we will tokenize everything and specifically, do you think we even need to tokenize everything?
Marc : Yeah. Well, I think it’s fun. I love the technology. I would love to tokenize everything. But when I really step back and I think about it logically, I’m like, does it make sense to tokenize everything? In the interest, probably, no. There’s things like art. I think that when you look at the fact that you are paying 30 to 40%, I think the numbers are to an intermediary to help you sell that. If you can go and pay a fraction of that to an exchange where you’ve listed it, that’s probably a good thing. And so in that instance it makes sense. But when you talk about, I’m going to go ahead and tokenize my house, a debt maybe, in certain instances somebody might do it. But why everybody would tokenize their house, I don’t get it.
Marc : There’s just not enough reason to do that. Maybe you’re able to get debt at a lower interest rate, although we get them at a pretty low interest rates already. Maybe you’re able to sell some equity in your house without selling the entire house. So maybe for some people that makes sense, but frankly, given how a little that’s going to happen, you don’t need to tokenize it. So if right now I wanted to sell somebody 10% of the equity in my house, I can do it without tokenizing it subject to my lender having an issue with that. I could go ahead and do it. And given that very few people are going to say, oh, I really, really want to buy Marc’s house, and I really want to buy 10% of it. Having it in a liquid or potentially liquid market, just isn’t necessary.
Marc : Anyone who wants to buy 10% of my house can come knock on my door and say, I want to buy 10% of your house and then we’ll draft the documents and you could buy 10% of my house. I don’t need to list it on exchange because it’s very unlikely that that person who bought it is then going to have another person who says, oh, I really want to buy 10% of that house as well. And that that’s going to be happening with houses all over the world. Just unlikely. So for that reason, I think that there’s going to be big markets, equity securities just in general, real estate above x dollar amount, art above x dollar amount, debt, almost all debt probably make sense. A lot of the benefit for me in the debt has to do with actually tracking.
Marc : I think we get to a point where debt is all tokenized, and I mean pretty much all tokenized. And where you want your payments, whether it’s the repayment of principal, or any kind of interest payments that you want that paid and stable coins or in any other cryptocurrency. And that what you’re then going to do is you’re actually going to require people to slowly, to either pay you every day a certain percentage, or to set aside in a wallet the address that each lender has a certain amount of dollars that makes it clear that you are continuing to accumulate the dollars that you need to be able to transparently verify that you are not going broke and you’re going to be able to repay that debt. Essentially what that does is it now gives you a real time indication of, oh, this person’s suddenly struggling.
Marc : They didn’t move the $1 they were supposed to move into that wallet yesterday even though it’s automated, which means that somehow that money just wasn’t available where it was supposed to be, so clearly there’s some kind of issue. Let me call and find out what’s happening to see if there’s any action that I need to take. If this happens for a couple of days rather than waiting till whenever my distribution was supposed to be and finding out that the person suddenly can’t pay and has been doing x, y, z over the last few months, they could have addressed if I had known it.
Nye : That’s really interesting. That’s really interesting. Can you explain more about the secured, like tokenizing debt? I don’t think I fully comprehend that. How’s that going to work and not even just how’s it going to work, but why is it important, why would it be relevant? I’m not fully [crosstalk 00:38:38].
Marc : Yeah. So right now either that is essentially a piece of paper that says you owe me $100,000 and you’re going to pay me 5% interest on that every month, and you’re going to repay the whole $300,000 in five years. A hundred thousand dollars in five years. That is a really easy thing to just have built into a token. It’s unsecured, so you’re just giving that out, hoping they’re going to pay you back. That’s really easy to have a token that represents that debt. And anyone who, let’s say I made that loan, then I now hold that token in the wallet in which I hold it is the wallet in which I’m going to go ahead and receive repayments for that debt. Again, I can track everything transparently, especially when it comes to the distributions.
Marc : But now take that $100,000 debt and now put that through to a hundred different people each holding $1,000 of the debt. A, that should be super easy to issue in tokenized form. B, you can suddenly start to automate all the payments to those thousand people who are all going to essentially, every month or again, every day, automatically the smart contracts going to pay 1% of that debt to each of those people. And suddenly now you’re tracking everything transparently. You’re automating what is a really easy thing to automate. It’s just a natural fit for blockchain.
Nye : I love it, bro. That makes sense. That really makes sense. Man, thank you for coming on. This has been a highly educational. I can tell you, you are very, very experienced in this realm of things and I appreciate coming on and sharing your knowledge and specifically, I appreciate your reaching out to me on Twitter and I’m glad that we got connected.
Marc : Yeah, super happy we connected and thanks for having me. It’s been a lot of fun.
Nye : Yeah, of course, man. And I’ll see pretty soon over at the Security Token Summit. It should be fun in LA.
Marc : Yeah. I’m looking forward to it.
Nye : Awesome, man. Before we go, do you want to plug anything where people can find you on Twitter, where people can learn more about your ventures and FisherBroyles and things like that?
Marc : Sure. So on LinkedIn, if you just type in Marc Boiron, you’ll find me. Just Google me, that’ll work as well. On Twitter, I’m @boironattorney. And if you want to check up FisherBroyles, it’s FisherBroyles.com. F-I-S-H-E-R B-R-O-Y-L-E-S.com.
Nye : Awesome, my man. Thank you again. I appreciate it.
Marc : [crosstalk 00:41:36]. Thank you.
Nye : And everyone, that has been another episode of the Evolvement Podcast where we talk about Bitcoin, cryptocurrency and the future of our financial systems. Thank you guys for tuning in and we will catch it next time. Peace.