RWA Tokenization | Cryptorsy Panel Discussion

21.02.2024

Gleb Specter

21 min

RELATED

On January 26, a significant event unfolded within the Cryptorsy ecosystem as we hosted a panel discussion on tokenization featuring industry leaders. Below is the lineup of speakers who contributed to this insightful event:

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Jordan Friske, CEO of Landshare
David Munoz, Vice President of Lumishare
Edwin Mata, CEO of Brickken
Ross Shemeliak, COO at Stobox
Ashish Sood, CPO of Polytrade
Teddy, CBO of Plume Network
Vlad Svitanko, CEO of Cryptorsy

Host: Gleb Specter, CMO at Cryptorsy

Now, let's delve into the heart of the matter – the discussion itself. All questions and answers from our esteemed speakers will be outlined below.

Ashish Sood | CPO of Polytrade

We believe that a robust RWA encompasses any asset tokenized and verified on the blockchain. While there has been significant growth in tokenized assets, totaling billions, there's a critical missing piece: user participation. Trust in the process, legal validation, and secondary market liquidity are crucial factors. Currently, most assets are illiquid or niche, like Pokémon cards or treasury bills. To truly propel RWA adoption, we need a secondary ecosystem where users can easily buy, sell, and exit their investments.

David Munoz | Vice President of Lumishare

In my view, looking ahead 10 years, we'll witness a shift where nearly everything will operate on blockchain. Whether it's today's sales or tomorrow's transactions, the efficiency of blockchain as a medium is undeniable. Adoption is on the rise, evidenced by last year's growth and the expected explosion in the next two years. Eventually, trillions of assets and everyday items will transition to blockchain, blurring the line between real-world assets and those on the blockchain. So, rather than a distinction, it's more a matter of timing.

Ross Shemeliak | COO at Stobox

From a definition standpoint, cryptocurrencies and RWA tokens are distinct. Cryptocurrencies like Bitcoin or Ethereum are one category, while RWA tokens encompass assets such as treasuries and equity shares. Despite both using blockchain technology, they operate under different regulatory frameworks. While cryptocurrencies remain firmly in the crypto space, RWA tokenization represents a more advanced stage, merging blockchain with deeper regulatory oversight. As financial instruments evolve, tokenization, especially in security tokens, will likely become more prevalent, bridging traditional finance with blockchain.

Vlad Svitanko | CEO of Cryptorsy

Over the past few years, we've witnessed a significant shift in business models, particularly in sectors like e-commerce, education, and globalized work. During this time, the concept of RWA tokens has gained traction, thanks to the dedication of passionate builders committed to creating a permissionless landscape. This consistency has led to a snowball effect, removing friction for investors and companies alike.

Unlike speculative cryptocurrencies, RWA tokens represent equity in businesses, offering a more robust use case. While there may be challenges with bad actors and inexperienced investors, RWA tokens enable rapid fundraising and provide essential building blocks for various business models. In the long run, discipline, consistency, and practicality outweigh emotional intensity, highlighting the importance of dedicated efforts in this space.

Edwin Mata | CEO of Brickken

The goal here is accessibility without overwhelming users with complex technology. While the blockchain space has evolved, it's still too intricate for the average person. Remembering my first experience with a security token in 2017, I felt lost. Now, with advancements like wallet abstraction, things are improving. However, we must not forget the simplicity of everyday transactions like Google sign-ins or credit card payments. We need to focus on delivering blockchain products that are as user-friendly as possible, aiming for mass adoption beyond just institutions. The goal is for blockchain to become a seamless part of everyday life, akin to any other technology we use without a second thought.

Ashish Sood | CPO of Polytrade

In essence, as we transitioned from Web 1 to Web 2, the focus shifted from technical details to user experience. Similarly, in the crypto market, advancements are happening rapidly, compressing decades of development into much shorter timelines. As the industry matures, we'll collectively streamline processes and establish standards, leading to widespread adoption. This evolution will eliminate basic questions and pave the way for mass adoption across various platforms and technologies.

Jordan Friske | CEO of Landshare

The key question we face is how to onboard individuals unfamiliar with crypto and web3. Currently, early adopters are mostly from within the crypto community. To expand beyond this, we must simplify the user experience by integrating blockchain technology into familiar tools like credit cards and Google sign-ins. This transition should make investing in tokenized RWA's as seamless as traditional investments, removing the need for users to grapple with concepts like self-custody and decentralized exchanges. Ultimately, the goal is for blockchain to operate invisibly in the background, enabling mainstream adoption without requiring users to navigate complex crypto infrastructure.

Teddy | CBO of Plume Network

Yeah, I completely agree with what you've mentioned. Abstracting the complexity of blockchain technology is crucial to attract more participation and investment from the mainstream. We've already taken steps towards this by integrating platforms like Particle and Privy to simplify the user experience. It's essential for ushering in the next wave of users and engagement from the real world.

Ross Shemeliak | COO at Stobox

I'd like to discuss the tokenization of personal securities, specifically the tokenization of time, which allows individuals to directly monetize their time. People can sell their time tokens for various services like consulting, freelance work, or IT development. This concept enables individuals to issue their own shares, essentially investing in themselves rather than in businesses. Marina Mogilko, a prominent influencer with over 5 million subscribers, exemplifies this by selling 5% of the cumulative value of her online activities to investors. This showcases the potential for personal securities, particularly for individuals in creative fields who may struggle to make ends meet. Tokenizing time presents an opportunity for people to invest in themselves and pursue their passions more effectively. This concept is one of the intriguing projects that Stobox is currently working on.

Ashish Sood | CPO of Polytrade

I agree that the creator economy is expanding, especially with the rise of NFTs. Initially, NFTs empowered artists, and now other creators are following suit. We're exploring creator economy deals on the Polytrade marketplace, like owning a share of a YouTube channel. Another trend I've noticed is banks using tokenization to exchange documents. This isn't just for selling or securitizing assets but also for digitizing paperwork, such as loan documents. Some banks, including MasterCard, are adopting this approach, which is exciting to see.

Edwin Mata | CEO of Brickken

So, my background in restructuring companies in Europe was like solving a big puzzle. When I stumbled into tokenization while working in legal tech, I realized blockchain's streamlined processes could revolutionize capital movements and share transactions. I believe the future lies in tokenizing equity, with stock markets operating on blockchain infrastructure. As stable companies are increasingly tokenized, even legal tender is set to be digitized. Once companies and money are on-chain, the entire economy shifts. We're taking baby steps in tokenizing assets, but the potential is massive. From ETF Bitcoin booms to companies issuing stablecoins, a new paradigm is emerging. I'm excited for the next five years as we witness regulators testing blockchain integration, signaling a shift towards a fully on-chain economy. In the future, companies will be incorporated on-chain, leveraging the most efficient technology available. I envision a future where everything operates seamlessly on blockchain, providing unparalleled efficiency and innovation.

Ashish Sood | CPO of Polytrade

I believe tokenization goes beyond simply creating an image or an NFT; it carries the responsibility of ensuring the asset accurately represents its real-world counterpart. While it's true that almost anything can be tokenized and the underlying technology is straightforward, the associated complexities are often overlooked. For instance, custodians play a crucial role in securely holding assets, and legal considerations come into play in case of disputes. Tokenization requires a holistic approach to address these issues. Even on platforms like Polytrade, we don't allow users to tokenize assets arbitrarily. Instead, we require a thorough validation process through third-party verification and custodianship to ensure the legitimacy of off-chain assets before they can be tokenized.

Jordan Friske | CEO of Landshare

It'll be fascinating to see how the blockchain landscape evolves with various networks, some tailored for RWAs and others like Ethereum serving general purposes. While multiple blockchains offer flexibility, fragmentation remains a concern. Projects may choose mainstream public blockchains like Ethereum or specialized ones for RWAs. However, moving assets across networks raises legal questions. Embracing cross-chain interoperability is crucial as multi-chain adoption becomes inevitable. Besides, the lack of standardized identity verification poses challenges. Currently, users must undergo KYC processes repeatedly across ecosystems, affecting conversion rates. Solutions like Stobox's soulbound aim to address this issue, but standardization efforts are ongoing. As we navigate these complexities, understanding the implications of cross-chain securities remains a key area to watch.

Teddy | CBO of Plume Network

Multi-chain adoption is inevitable. Simplifying crypto for retail users should be a priority. At Plume, we're addressing this by focusing on an art-specific chain. We aim to host various assets within our ecosystem, facilitating easy investment across projects like Landshare. We're aware that navigating cross-chain securities is complex due to regulatory uncertainties. By leveraging modular L2 technology and collaborating with projects like Celestia, we're enhancing scalability and reducing gas fees. While multi-chain offers exposure, the user's and developer's preferences dictate its utility. We're committed to solving these challenges, but it's still early days in the art space. We're excited to collaborate with stakeholders like Landshare and others to collectively advance the sector.

David Munoz | Vice President of Lumishare

The challenges we face daily are like running into a brick wall; there's a lack of clarity and we're essentially forging the path as we go. User experience is crucial for success, as is aggregating liquidity to ensure efficient markets. However, one major hurdle in getting RWA on-chain is the local nature of these assets conflicting with global investor demand without clear regulatory guidelines. Despite this, the benefits of tokenizing assets are immense. By providing regulatory compliance and turnkey solutions, we offer access to assets like renewable energy, traditionally inaccessible to retail or institutional investors. This broadens the investor base, potentially lowering prices, improving market speed, and enhancing price discovery—all powerful incentives for firms looking to tokenize their assets through us.

Moreover, tokenization significantly reduces time to market, especially for repeat issuers with established reputations in the market. With a larger capital base and streamlined processes, it becomes easier, faster, and cheaper to raise capital for projects like renewable energy infrastructure, which requires trillions of dollars in investment over the next few decades. Tokenization also offers investors a diversified risk exposure, allowing them to tailor their investment portfolios to their desired risk and reward profiles, which is crucial in attracting a global investor base.

Teddy | CBO of Plume Network

When it comes to crypto, many see it as a speculative venture, akin to gambling. However, amidst the volatility, the rise of RWA brings stability. Unlike DeFi assets, which often lack tangible backing, RWAs offer security and reliable yields rooted in real-world assets like collectibles, green energy, and real estate. These assets yield returns ranging from 5 to 15%, providing stability within the crypto ecosystem. RWAs balance out the speculative nature of crypto, attracting investors seeking more secure investments. As the RWA space continues to evolve, it offers a promising solution to crypto's volatility, although there's still much to develop in this realm.

David Munoz | Vice President of Lumishare

I completely agree with the study's findings. The volatility of a real-world asset should align with the cash flow it generates. For instance, the volatility of US Treasury bonds or corporate debt differs significantly from that of utility tokens, which lack cash flow. Assets like real estate, with explicit yields, should exhibit volatility in line with their underlying value. Following this principle, as Teddy suggests, can help mitigate overall volatility and change perceptions within the space.

Ashish Sood | CPO of Polytrade

I believe the inherent volatility of cryptocurrencies doesn't directly affect real-world assets because, in practice, I haven't seen anyone selling a house or a table using Ethereum, for example. Instead, stablecoins are typically used for transactions involving real-world assets, serving as the primary currency backbone for many. Therefore, I see the realm of real-world assets as somewhat insulated from volatility, primarily due to our reliance on stablecoins as the underlying currency. This provides a stable starting point for transactions in this space.

David Munoz | Vice President of Lumishare

When considering traditional finance, it's incredibly challenging for someone in an emerging market to invest in US stocks. This difficulty has fueled the growth of businesses like eToro, which cater to emerging market investors by offering representations of US stocks. However, the concept of tokenization expands far beyond traditional capital markets. Essentially, any asset imaginable can be tokenized and sold globally, provided regulatory requirements are met. This means that individuals from any country will have the opportunity to invest, just like those in New York or London. This accessibility is remarkable, considering the limitations imposed by traditional finance infrastructure such as brokers, central clearing counterparties, and custodians. Tokenization represents a beautiful evolution, enabling broader participation in investment opportunities for everyone.

Ross Shemeliak | COO at Stobox

In general, tokenization democratizes access to common markets. For instance, consider the tokenization of investment funds. Typically, such funds have high entry thresholds, requiring a minimum investment, say $100,000. Managing physical documents and meeting investors in person can be challenging for both parties. However, tokenization streamlines this process, making it simpler, faster, and more accessible. In Africa, we observe a growing tech ecosystem, enabling more people to participate in offerings directly from their mobile phones. This eliminates the need for certain financial intermediaries, provided that your jurisdiction permits it. Tokenization removes borders, facilitating access to lucrative offerings in real estate and other real-world assets across the African region.

Jordan Friske | CEO of Landshare

The blockchain serves as a powerful equalizer, granting everyone access to the same assets, currencies, and investment opportunities as never before. Many wonder about the benefits of tokenized investments over traditional ones. The key lies in accessibility. Tokenization breaks down barriers such as geographic restrictions, currency conversions, and limited banking access. It opens up markets to investors worldwide, offering opportunities that were once out of reach. Whether you're in emerging markets or established ones like the US or Europe, tokenization presents unique investment avenues. Platforms like Landshare attract users from diverse backgrounds globally, showcasing the transformative potential of tokenization in democratizing finance. This accessibility is tokenization's standout advantage.

Edwin Mata | CEO of Brickken

We have a client from Argentina struggling to secure funds locally. They see tokenization as a way to expand beyond their country's limitations. Tokenization not only allows retail investors to access assets from different countries but also offers opportunities for diverse projects to raise funds. It's a flexible option that complies with regulations and provides an alternative to traditional fundraising methods like IPOs or venture capital.

Thank you all for being a part of this enriching panel discussion. We trust that you found it both insightful and enjoyable.

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