Equity Capital Markets Blog

Everything you need to know about blockchain, ICOs, and securities tokens - Part 2

The second part of the webinar that dives into the world of blockchain and securities tokenization. You can check the first part here.

The webinar aims to help you get a better understanding of the different token types, the surrounding regulations, and actionable advice on how to use blockchain to grow your business.

Our CTO, Doug, who is working on Katipult Blockchain Solution, is joining Jor Law, one of the leading legal authorities in the blockchain field, and Igor Denisov from Polymath, creator of the Polymath securities token platform that aims to revolutionize the blockchain, to help you learn:

  • Is the security token right for you
  • How will security tokens disrupt industries such as finance, real estate, or crowdfunding
  • What's the difference between different types of tokens - security, utility, and coins
  • More insight into regulations surrounding the securities tokens, ICOs, and blockchain
  • How the partnership between Polymath and Katipult can help you and your business


You can read the full transcript here:

Katipult:  Welcome to the second part of the security token webinar. We have Jor Law from the Verify Investor on the line and we have Igor from Polymath. Doug from Katipult will join us as well. Hello guys, nice to meet you again. Lets dive into it.

Recapping a bit from last time, let’s talk about the difference between various tokens that are out there, security tokens, utility tokens etc. So what are the differences between security tokens, utility tokens  and if you want to say coins as well? Maybe this is for you Igor.

Igor (Polymath): Fundamentally the way we look at security tokens is, forget about the token moniker, think of them just as digital representations of traditional securities. While your utility tokens are going to be network access coins, where we haven’t established distributed network  this is what we use to access that network and coins typically acting as currency, usually utility tokens are built on the Ethereum blockchain although some of them are based on Neo and coins often have their own blockchain as well. As far as security tokens are concerned, just think of them as digital representations of something that is asset backed or backed by the equity of the company.

Jor (Homeier Law): Some people have said that the difference between the token and the coin really is that a coin is a type of token that has a denomination that goes up and down and nothing necessarily anything that goes beyond that. Other types of tokens might have other rights attached to it or other functionalities beyond just kind of functioning as a monetary unit so to speak.

I think this whole debate between utility and security tokens, and I am guilty of it as well, is kind of a shame. It really shouldn’t be ‘’Are you a utility token versus are you a security token’’, it should be ‘’Do you have utility or not and regardless of whether you have utility or not, are you a security or not?’’. That’s really how the framework should’ve been.

I think that when people were doing the analysis of security versus utility they were just trying to illustrate that utility was one format and that if you were 100% utility it would be less likely that you would be a security. Unfortunately I think it has been misinterpreted by the public in probably some fault due to authors of that security versus utility debate. I think it is misinterpreted by the public who think that if you have utility then you must not be a security.

You definitely can have utility and still be a security so I think for the purposes of what our security tokens, really what we should say, is this token security or not. SEC has indicated that most of the tokens sold through some sort of ICO for any investment purpose are probably securities under US laws.

Katipult:  Ok, so is there a clear line that defines security token from a utility token? So is it really just the lack of understanding that brought this whole conversation up? What is a security, what is a utility, when is it what?

Jor (Homeier Law): I think it’s really just because they were really complicated concepts actually, you could spend a whole semester or more in law school, you could have your entire career dedicated securities laws. Courts have argued what is a security and what is not.

When people are trying to explain this to a laic person, I think that they are forced to simplify it. One method of simplifying is to draw this concept of ‘’the more utility you are the less security you likely are going to be’’. I think that if you are not careful with something like that, when suddenly everyone starts attaching themselves to the terminology too much.

You’ve seen this done in other industries like crowdfunding, like what does crowdfunding really mean? That’s probably what happened here. You had someone who is very sophisticated, obviously new, what securities were and that utility was a factor. But then when trying to explain it might have created this dichotomy that the general public took out of proportion and that permeated through the industry. Now everyone is struggling to go back and say ’’No, just because you have utility, it doesn’t mean you are not a security’’.

Katipult: Can you talk about pros and cons regarding security tokens versus utility tokens because I read a couple of articles about that. The pros of it being a security token is the regulation, you need to follow that versus if it’s a utility token. There is of course a rule for that as well. Can you really just talk about pros and cons?

Jor (Homeier Law): Igor do you want to take a stand here, I have controversial views here.

Igor (Polymath): We might agree more than we would disagree. To me there isn’t a pro or a con kind of argument here. I think the kind of decision tree that leads you down the path of choosing one or the other is not going to be about having these two things be interchangeable, unless you really look at the fundamental business model that you operate your project or your company under. If you really are aiming to create something that’s decentralized, some kind of a large platform that you want people to pay to access. The same way as if I were running a subway system, I would want utility tokens for accessing the subway.

But fundamentally I think that the security token will win more often because, looking at this pattern of how much time people are spending that have issued utility tokens to convince the regulators that they truly are a utility, trying to convince themselves as well. Just from the ‘’where do you want to spend the time’’ perspective, I think going with the security token route and really just using for a substitute for other kinds of financing is an easier and more honest way of fundraising for your project that doesn’t lock you into this service provider paradigm where your business model becomes fundamentally inflexible because you are always beholden to your token holders that need access to the network that you are building.

The security token approach also leaves you much more room for follow up raises just because it is much more conventional instrument, while with a lot of utility tokens the late stage realization is that It’s really a one-shot deal. There are some projects out there that have kept a lot of tokens ‘’at head office’’ and that will give them the ability to later on, down the line, liquidate some of them for additional proceeds, but fundamentally this is not a series ABCD and then public round kind of structure. For a lot of utility tokens their ICO or token offering, token distribution of them, that was the real one-shot.

To add my ex banker flavor to it, I also think that the reason why security tokens are more attractive is they are much more suited to M&A. When you build a project that can be a much more attractive piece of somebody else’s larger company, they can go out and acquire you. You can join that team and you realize that a lot of benefits to yourself and your team, to your token holders, while with the utility team it’s still very unclear how even two projects that would be very complimentary on a technological level, they might have complimentary user bases and still might not ever come together in a meaningful way because they have two separate utility tokens that don’t provide a common incentive.

Jor (Homeier Law): This is an area where you can look at it and say ‘’well here is a pro of this and here is a con of this’’, but fundamentally you should look at the use case and see what it gets you. If you are clearly a utility then there is no need to discuss whether you are security or not. If you are clearly a security, there is no need to discuss whether you are a utility or not. In a perfect world, if you really qualify you could be a utility token and you didn’t have to worry about being a security, you don’t have to worry about being a commodity, about being a money transmitter, then I think probably being a utility token would make things easier from a compliance perspective around the world.

Anytime you are a security, a commodity or anything like that you are a regulated instrument.  You are going to deal with regulations not just in the US but possibly around the world. If you have to say whether you would be one or the other, well, If I could be a clean utility token, basically as a product or a service, then probably that’s better. There are tax ramifications etc. that I have to take in account but it seems like it is better. The issue is going to be is for most of us is that you don’t really get to choose. It really depends on what your use case is and what your model is. If you build out the right model then yes, sure, you could have just utility or just security, you might be able to have both.

But if you are truly raising money, if you are using tokens as a digital representation of your true equity, then you are always a security. If you’re using tokens to raise capital for an investment then you are a security. There are no pros and cons of stretching a utility, you are essentially a security. That is something that people have to look into. Certainly there are ways to structure some things around it, but honestly if you are raising capital for investment purposes, it’s going to be quite difficult for you to come up with a token structure that puts you into a non security realm.

If you are not a security and are something else, maybe you would rather be a security.

There is certainly a number of folks that practice in commodity that say they would rather be a security than a commodity. It just depends on what kind of your risk tolerance is and which regulatory framework you want to operate under.

Katipult: If you have a plan and you want to do something with tokens and you want to go to an exchange, the only way a utility token can be traded on an exchange is as if it’s coins I’m guessing, otherwise it would be security tokens because it has to do with investments?

What if you invest in coins, does that make it a security token?

Jor (Homeier Law): Those are all good questions. Theoretically, any time you say “I invest” or someone goes ‘’Hey, invest in my thing’’, since Canada and US laws are similar, it would likely lead the SEC to think it is an investment and therefore a security.

After listing on the utility exchange, putting aside commodities etc. I think the idea there is that if you are truly not a security you are just like a product of goods. Then listing on my exchange might be something similar to listing on an exchange where people can trade tangible good, like my laptop for your laptop, my bike for your care. The exchanged things are clearly not securities and then the SEC won’t mind quite as much. But if they are effectively trading things that were securities then the SEC is going to care, as well as many other regulators.

Katipult: I have one question before we go further. Why would a company choose to issue security tokens rather than, for example, raise venture capital or do it the old fashioned way?

Igor (Polymath): One major attraction of the current paradigm is that accessing pools of capital that are otherwise not accessible to you. With venture capital, there is a story with your West Coast VC’s that there is a small circle of really elite firms that you want them to invest, not just for the money but also for the ability to tell people that this or that company without naming any has invested in me.

The other VC’s are just pools of capital and they tend to be relatively high cost and if you were to play off that substitution game where, unless you are a brand name recognition and this kind of implied cosign from the very best in the world, all the other capital, any kind of cash is faceless, it’s fully fungible.

If that’s the basis that you make your decision you should start to look at lower cost of capital and some of that will come from pools of capital from let’s say Asia, that would love to get access to a project in North America that has entirely different risk return profile than they are used to or what is accessible to them now.

One of the major advantages of doing security tokens just now is this ability where you can access capital outside of your immediate circle geographically and you can do it easier than doing a multi-month roadshows and speaking with dozens of different VC’s to try to get yourself an upgrade from tier 3 to tier 2 to top tier.

In the long run we won’t see security tokens being this separate subdivision of ways to raise capital, in part because all capital will be raised through visual representations of shares or units and funds and any other kind of securities. That’s where the lines will blur and you’ll see more traditional players still doing issuances the same way we are trying to do them now.

Katipult: How do I stay compliant with Reg D, 506 C and Reg S for security tokens sale for a US startup? First I would like to hear your opinion Jor and then Doug afterwards so we can see how Katipult handles that for example.

Jor (Homeier Law): It’s important to understand that tokens do not change the rules. Reg D today in the blockchain world and in the tokenized economy is the same Reg D it was before and same with the Reg S. The compliance between tokenized asset or securities versus non-tokenized securities is the same. The difference is what does the tokenized technology allow, what other issues does it create.

The real question is what does it facilitate. If you had securities before, it theoretically could have traded on some sort of exchange as well. Unbeknownst to you, people trading shares themselves without knowledge or maybe with your knowledge. It would have been subject to the same restrictions etc.

The issue with tokenization is that you now have an easier way to trade these types of thing to the extent they are made tradable and then you also have an easier to make them not tradable if you choose to. So the question becomes ‘’do you have extra obligations to do that, to limit trading?’’.

To comply with Reg D is pretty simple, it’s a private offering, if you are doing a 506 B you are selling mainly to accredited investors but you could take some non-accredited investors, you can’t publicly solicit. But with 506 C, and that’s where we should focus most on because that’s what most ICOs use, you are soliciting the general public and you are selling and you can only sell to an accredited investor and the shares are supposed to be restricted. Now Reg S is just basically ‘’Hey, sell it outside of the US, don’t sell it to US people, don’t condition the market in the US, don’t hold seminars and investment programs in the US”. Basically show us that you are really targeting non US folks and you are only selling non US stocks. Those two basic rules still apply.

The interesting thing is that when things are so easily traded on the exchange, you as an issuer have an obligation to step up and block that, because you could program your smart contract to at least obfuscate that purpose. If you look at some of the existing legislation and rules, they didn’t really contemplate a world where these things would be so easily traded and transferred, so a lot of them would just say they are restricted and you will put a legend on a stock and that is supposed to give constructive notice to someone else that is trading like ‘’Huh, hold it, maybe I shouldn’t get this because it is restricted and I do not want something that is restricted, so we go talk to the issuer’’. It is supposed to cause that sort of behavior.

On a token you can attach a legend. How many people would actually go and read the legend on the token on the other hand, who knows. I guess that most people who are randomly trading and exchanging tokens through some sort of exchange are probably not looking at the underlying smart contracts that govern that token. I think a lot of people have probably thought that it is reasonable for the issuer to control and restrict the tradability of their tokens to the extent that their security tokens are supposed to be restricted.

For example, if you are selling outside of the US, how do you restrict them from flowing back to the US? If you are selling within the US to accredited investors and they are restricted, how do you prevent them from immediately trading with other people who are not supposed to get them? There is a lot of thought in the industry.

I know Katipult is working on stuff, Polymath is working on stuff, a number of other excellent players are working on things here. This is an area that is developing and I think it is important because their exchanges have been reluctant to list security tokens that have been traded accidently, even through no fault of the issuer. But exchanges are looking at these security tokens and some have said ‘’Oh, you accidentally traded, you don’t know who your owners are now. You might not have clean securities therefore I am not going to touch you because I, as the exchange, am the regulator’’.

Doug (Katipult): We have been doing the primary market for 506 C for quite some time now.  We are coming to three years of doing those raises and Katipult using FIAT currency. The 506 C regulated securities are tradable after a time period has elapsed.

What we are making in the Katipult platform is the capability of being able to create a token on the system and then be able to trade that with other investors on the platform. Just like Jor said, you can take your smart contract and change it a bit so that you basically add a permissioning system to see if someone has a permission to trade that for us, that permission is if they are an approved investor on that platform. I think that is really good for allowing stuff.

In some regulatory areas we have a restriction that there needs to be some sort of liquidity factor for an investor. This is either going to be done through an issuer buyback or a bulletin board of being able to buy and sell shares or tokens or some of the stock on the system.

Then there is a whole other idea of having an auction-based system as well, which requires more regulatory steps. Having a bulletin board system in place on platform solves the issue, in Italy and UK, of offering liquidity to the investors while still not being a full on exchange and taking on that regulatory burden. That is something that Katipult is rolling out, we just did a press release on that yesterday and we are really excited to get that going.

Now, the issue with that is that it’s restricted with that one platform and it’s not going to be achieving maximal volumes for investors that want to roll that out. So in 506 C for instance, if you want to make that tradable, you are going to want to have that in a place where a lot of people are participating. So you either have a platform that has many investors and you are getting lots of volume on it or you’ve got it listed on the exchange.

I see that Polymath is really offering something here, I’d like to hear more from you about this, but what we see is here’s a protocol and here’s a standard for how to write a smart contract that does the whitelisting and it creates methods that that exchange knows how to work with. You can just go and make your own security token, there are tutorials on how to do that on Ethereum’s website, then you could even bake into your own whitelisting feature, but if you were to go with that list to an exchange, not only would you have your listing fees but you would also have different technical implementation that you would have to tell the exchange about.

Otherwise you would have to go through a group like Polymath that already understands what all of those whitelisting procedures are and how to get different delegates in place on your system, then that is like a protocol that that exchange is going to need to know how to list. It’s like ‘’Yeah, we already know how to technically list Polymath tokens, you don’t need to go into that with them’’.

That’s what I think is really a great piece and I think that Katipult is going to be building that quite shortly here. It’s definitely on our roadmap for how to make Polymath tokens supportable. We are just waiting for the clients to come to us with that problem to solve.

Igor (Polymath): From the exchange integration perspective that’s exactly right. The idea is that primary issuance piece is not really the challenge. There have been some folks out there building platforms that lock investors into that platform so that you have a very managed pool of investors. Nobody is going to be escaping that system and trading their token somewhere else. That works until it doesn’t.

When you start trying to attract additional liquidity and you want to have secondary purchasers of these tokens, the real issue becomes continuous compliance and keeping the gears rolling, having new investors that want to come to the platform and buy these tokens. When I say platform it can also be an exchange, whether centralized or distributed.

The main challenge is maintaining the system and making sure that two or three years from now, your company if approached by a regulator with a question of what does your shareholder base look like, where are they from, what kind of geographical distribution are you getting, are you making sure they are all above board, you are running KYC and AML verification on all of them so you know there are no bad actors in the system… For that kind of reporting that’s where the real magic of integration comes in. That is much more challenging to do on a standalone basis for the clean sheet design, as opposed to coming to a platform like us that has great industry partners like Katipult, like some of the exchanges we are working with like Open Finance.

Having this integration already in place saves you a lot of time and effort and you can make sure that you are not missing any critical pieces because they have already been thought of and implemented correctly.

Katipult: Great, thanks for that guys. I am going to jump in with a few audience’s questions, they are a bit more specific, or specific use cases. This is for you Doug: is it possible to use Katipult to issue many ICOs, instead of crowdfunding campaigns? Are they able to use the Katipuls system for a project like that?

Doug (Katipult): If it is a cryptocurrency or a FIAT currency, in our technical terms it is just another currency in the system. We have platforms looking to go live using USD, Euro, Bitcoin and Ethereum. The person would be able to pay in either one of those currencies.

It doesn’t need to be an ICO in order to take Bitcoin Ethereum, it’s just another way of paying on the platform. What’s interesting with multi currency setups is , because we have this lag time, in terms of the amount of time it takes to raise the funds, it could be maybe a thirty day campaign, you can have one currency value in the beginning and you can have another currency value at the end. There needs to be a way to basically plug in those values of what the currency is converted at. So whether you convert it as soon as the funds come in or you convert it when you close the deal, there is a bit of a shift there and how that’s done.

We’ve been handling that problem since our first client. He was dealing with South African Rand, Zimbabwe US dollar and Botswana pula. We have been dealing with those multi currency issues since then so if you want to make it so that the result of one of those is an ICO, you can do that, of you want to make it so that the result of one of those is a normal 506 C and all of the Ethereum is just converted to US dollars to buy some commercial property, you can do that as well. Those are all possibilities on the Katipult platform.

Katipult: A quick follow-up question, where is the cap table saved? is it saved internally or on the blockchain?

Doug (Katipult): Previously any trading we would just have it stored on the system so all your initial investment would be on the Katipult system. When it comes to trading it’s the questions of whether or not the trading is all internal to Katipult customers or whether that goes out to an exchange.

If it is internal to Katipult secondary market system then all of that would be listed in the system and all of that would be something that you can just pull up in one of the dashboards. If it goes out to an exchange, well, we’ll see, we still do not have any exchanges integrated and do not know all the challenges there yet. It would require some communication with the exchanges to figure out what the cap table says.

Jor (Homeier Law): Yes, technically, whether you have the cap table on chain or off chain, that’s theoretically a decision that the market can make for itself. The technology supports both, so you could do it both ways.

I think what Doug said that was important to know is that that you do not have to have an ICO to raise funds through Bitcoin or Ether and similarly, if you do have an ICO, you could just accept US dollars as investment if you wanted to. You are not forced to do an ICO only with Bitcoin or Ether or some sort of token. Similarly you are not forced to do an ICO just because you took that sort of money.

It is important to note that your legal documents  might change a little bit, you might want some additional mechanisms there, in the subscription agreement, in the disclosures etc., to deal with different types of consideration that you will be accepting. You will just want to make sure that your boards are up to speed on how to draft those into traditional documents.

Katipult: Thanks for that. A second one here, can distributed ledger technologies prevent theft and cryptocurrency exchanges?

Igor (Polymath): When we are dealing with security tokens that problem is solved very elegantly. Because we are dealing with non bearer assets. To explain, bearer assets are like cash. If I hold $20 or if I hold 10 Ether in my wallet or in my hand, that’s mine. As soon as you have it, physically or you have the private key, it’s yours.

The whole aim is to make security tokens non bearer, what can be done is that, if you do report a loss or theft of your security tokens, it’s possible that the issuer or the transfer agent or the exchange to just post that your old tokens are taken off the whitelist and effectively frozen in place, frozen from transfer, because no counterparty will be allowed to accept the transfer of those tokens from that stolen address. You can just get a new set of equivalent tokens issued from the ‘’top of the stack’’, as long as you are below your total supply number for your tokens which typically you would be. That solves the issue of theft very elegantly.

It’s the same as you saying ‘’I have a bank account and I have some shares in it and somebody hacked me and stole these shares’’. You can go and reconcile it and if you make that attestation that you lost control of that account or some of your security tokens have been stolen you can return them. This is a key mechanic that I believe the regulators want to see implemented.

If there is some small retail investor who has a lot of their wealth locked up in these security tokens, they want them to be able to reverse some of these transactions. They want them to be able to get their property back if they had been scammed.

Jor (Homeier Law): That question is actually kind of interesting because just using distributed ledger technology, a big value there is that you don’t have to trust just one party keeping its ledger. That has its pros and cons too. While it protect against fraud in that case, what happens if the distributed ledger starts recording wrong transactions? Like Igor has mentioned, now you might need the centralized party to go back and say ‘’Wait, hold it, these were wrong’’, unless you find some consensus mechanism whereby everyone that is keeping a distributed ledger agrees that something went wrong.

One more important thing to note is that just because you are distributed ledger technology it doesn’t mean you automatically solve that problem. You have to code for that, you have to support that. It’s not like ‘’I am DLT, therefore it’s fine. Fraud is prevented, theft is prevented’’. For you to take proper tools to support that, they have to be created and implemented for that token.

Doug (Katipult): I think you have to bring up when this kind of question comes up the obligatory paradox situation, where you’ve got the currency exchange that doesn’t report if there was a theft that happened or if there was a bad player operating as an exchange. I think we are going to see more exchanges that keep their own DLT’s in place.

For instance I’ve got a little bit of stuff stored on Kraken, I just keep it on there instead of keeping in my paper wallet or Nano Ledger S. If Kraken were to just disappear that would be gone and there could be theft, maybe they have some unscrupulous player in the background of Kraken that causes an issue. I think that we should also be seeing exchanges where the funds I have stored in my Kraken wallet are like things that I can control with private key on as well. I do not know any exchanges that do that, I’m not always shopping for that but I think that those are the things to watch out for coming up.

But then, I didn’t know what Igor was saying about having to be a bearer piece, but basically the issue of a beacon in a non bearer token, that can’t really be done on the distributed ledger. I don’t know, there needs to be more thought about it. I think that is an area to think about and another way to think about that question.

Katipult: Thanks. I have a few questions that I think are mostly the same. They are about how you connect property ownership with tokens, but maybe we can go into how you can connect assets with tokens. Maybe that’s the broader question that answers a lot of the questions here.

Jor (Homeier Law): You just do it. There is always this gap between how you physically connect an asset to a token. If you have a pot of gold, how do you say that this token represents this pot of gold? That’s actually the same problem you have when you have a pot of gold, you issue some shares and you say ‘’These non-tokenized shares in my company represent this pot of gold’’. You will always have that kind of a fundamental leap. You need some sort of mechanism to deal with that or some trust. Once you have that, then it’s much the same.

If I form a company and say ‘’Here is a million dollars worth of gold and therefore my company is worth a million dollars and I am going to issue out shares, 100% of which would be worth a million dollars’’. Now, I could do the exact same thing and just say ’ Here is a million dollars worth of gold, here’s a million dollars worth of tokens’’. They represent each other. I could also take the intermediary step of saying ‘’Here’s a million dollars of gold, here is a company that is worth a million dollars, here are tokens that represent the interest of the company’’.

Either way you’ve got that initial leap of faith where you need some sort of trust that bridges the physical world and the digital world. Beyond that I think it is pretty simple. There are the same principles that guide trading of tokens or securities that would apply.

Katipult: Great. A problem I had at first is how do you really connect something that doesn’t really exist in there. I think that’s the way a lot of people think. If you just imagine how you do it in everyday life, how you would do that manually…

Jor (Homeier Law): That’s why you see a lot of these supply chain blockchain applications where they start saying ‘’We’ll be able to source this livestock so that you know it comes from this farm. It’s sustainable’’ and things like that. But really, you can’t breed sheep in another continent and it’s automatically tracked by a token. There is some sort of trust mechanism. When the sheep is born, you attach some sort of code and you link it to a token.

There is always some sort of trust mechanism there, which I am not sure we will ever get around unless it is a digital good. If you create a digital good you can immediately attach it to a token. If it is not a digital good, you will always have that one trust mechanism. People love to say how ELT is this trustless application, but for it to really work a great deal of trust is still required.

Katipult: Yes, thank you. We are already on 45 minutes so as ending remarks I’d like to hear from all three of you, what are you doing to make this world better with tokens, security tokens or blockchain, however you want to phrase it? Let’s start with you Doug.

Doug (Katipult): I think I’ll just use the time to mention the Katipult’s integration to Polymath and how we are really excited to see that moving along on our side. We are also doing some upgrades to Katipult platform. We are going to make it so the issuers can go in and they can see any investor who has applied to invest with them. They can basically see the results of that application if they want to whitelist that person. Once they whitelist it, that person is added to Polymath contract as someone who is able to invest and then the investor is invited to invest in a deal when they are ready to fund it.

We are doing all that work on our side to link through the Polymath system, putting various smart contracts in place and I am super excited for the first deal we put through with this and just to get all these investors onboarded in a way that they don’t have to keep entering their information every time they want to invest in a Polymath deal. They just have to enter it once and get it approved by every issuer.

Igor (Polymath): I definitely echo the sentiment about how great the integration process has been so far and where we think it’s going. From our perspective at Polymath we’ve been working hard not only on our core system and building out all the modules for the specific asks that we have had form certain issuers around, how do you dividend payouts, how do you structure a token that qualifies as a REIT and there are a lot of stick diagrams out there on different Medium pages and there are a lot of white papers out, but to see actual code come together and the actual sort of nuances of all these problems get covered and resolved was very encouraging and eye opening to see, to see how deep the rabbit-hole goes when you are trying to categorically solve a problem as opposed to having just a pathway to a solution.

We are also excited with not only the Katipult integration, but are also working with some fine folks that opened Finance Network and a few other exchanges that are in different stages of starting up. We see the secondary markets as being a major driver of value in this ecosystem. They will unlock the multiples from the evaluation perspective, they will also let people consider completely novel ways of structuring some of those investments. Namely things like Evergreen funds so that you are not concerned with having to redistribute the capital back out to your investors, you can just perpetually reinvest it and compound the returns.

Lastly, we are also excited about some of the custody options that we have coming through. I can say this openly, I am working with Beco on some of their solutions, we are also in touch with several providers that are going to be qualified custodians using that technology.

We think that is really a major catalyst for having institutional investors come into the space and certainly with institutional investors you tend to see the benefit of much higher flows of capital. Once these critical pieces are all in place, we should really see the maturation of this market happen, as the processes get ironed out and we have precedents to rely on in terms of structuring so we are not rediscovering how to do a deal every time we do a deal.

Finally, having the serious capital come into the mix, we should definitely then see that capital tracked. A lot of quality products, a lot of traditional ‘’real world projects’’ as opposed to sort of high tech and kind of crypto oriented companies. I think that that all drives the adoption of the security token paradigm. So yeah, stoked about that.

Jor (Homeier Law): There is a gap between the physical world and digital world and how you bridge that. I noticed that there is a gap between the lawyers, regulators and the business folk that are in finance and the developers that are building products for them.

On one hand you have lawyers that are practicing law and business folk that are trying to use tokenized technology to further business, but neither of them understands that technology that well to be able to build advanced products or fully take advantage of that.

On the other hand you have highly technical and highly skilled developers and entrepreneurs in a blockchain space but they don’t fully know the regulations or they haven’t had enough experience in financial capital markets etc,. to build a product. They are all on the same side so they are trying to talk and they need kind of a translator so to speak.

I’ve been active in almost all of these ecosystems. As you know I sit on a board above a S current custody trust company. I advise in integrating to several platforms similar to Polymath. I work with T0 and I am hoping to work with some other exchanges as well.

Throughout all of these things I think the value I have been bringing has been trying to bridge the gap between what the lawyers want, what the finance folk want and helping both sides to understand the limitations of technology and the workarounds that are required from the business or legal side to address those gaps. And then on the technology side, what sort of things they can do to minimize the gap that will probably always exist to some extent.

Katipult: Great, thanks. Now you are of course thinking what I am going to do to make this world a better in the blockchain environment and that is of course guiding those interested in Katipult to the right solutions for them. I thank you all for joining today, it’s been a pleasure.