SMART VALOR is the world’s first security token exchange for alternative investments operating out of Switzerland. Our mission is to deploy blockchain technology to securitize alternative investments, creating a more efficient secondary market and enabling access to great opportunities to a wider audience of investors around the world.
In today’s financial markets, burdened by an army of intermediaries and heavy regulation, the best investment opportunities are not directly accessible to most investors around the world. To solve this problem, SMART VALOR will tokenize assets to create a more liquid and accessible direct market for shares in exciting early-stage companies, tech-oriented venture capital funds, real estate and other assets.
Starting off 2017 in the Thomson Reuters Incubator in the Swiss Crypto Valley, SMART VALOR is proud to announce that it has achieved all of its operational targets set for 2018. The SMART VALOR platform is ready to be launched. On the technology side, the exchange is implemented and fully functional with an integrated enterprise-grade custody solution. On the regulatory side, SMART VALOR has received regulatory approval in Switzerland as Financial Intermediary and has registered its crypto-fiat exchange in neighboring Liechtenstein. In terms of branding and community, Crypto Summit was launched and became the largest blockchain/fintech conference in Switzerland running for the third time in October 2018. This enabled SMART VALOR to achieve great community engagement without spending much on marketing.
The operational targets for 2019 are set high. This includes the launch of the SMART VALOR platform with initial listings of cryptocurrencies as well as payment and utility tokens. The spectrum of tokens traded on the platform will be extended to include security tokens upon receival of the banking license for which the company has applied for in October. The pipeline of tokenized security offerings includes venture capital funds, real estate and early-stage tech companies. Some announcements have already been made, such as an upcoming tokenized VC fund — SpaceFund.
In terms of funding, SMART VALOR has received support from well-known investors in Switzerland such as Stephane Pictet, serial entrepreneur and investor who hails from one of the most respected and oldest private banks in Switzerland, the Pictet Group. This year, further contributors joined during the pre-sale of the platform’s native cryptocurrency VALOR, representing eight venture capital firms from Europe, US and Asia.
Why this is a great opportunity?
SMART VALOR is launching the first global, fully compliant security token exchange operated out of Switzerland. Security tokens are the next big thing in finance and will disrupt Wall Street. Exchanges, custodian banks, clearing agents, broker-dealers, retail banks — soon many of them will no longer be needed to invest in companies or funds. The size of the tokenized assets will dwarf the crypto market cap. The World Economic Forum estimates that 10% of global GDP, some USD 14–16 trillion of assets, will be stored on the blockchain by 2027.
Apart from the sheer size of this opportunity, the current profitability of this business segment is staggering. A report by Accenture found that cryptocurrency exchanges are the most profitable business in the whole industry, overtaking traditional competitors by multiple two in terms of the profit margins (29% vs 64%). This is the current state of the industry where the tokenization of real assets is not yet factored in. First movers, such as SMART VALOR, who will start to securitize and trade real assets, will be the biggest beneficiaries of this mega shift in institutional landscape.
Lastly, despite the cryptocurrency bear market, the high profitability and steep growth outlooks are mirrored today in the valuation of crypto businesses like Coinbase at 8 billion USD and Kraken at 4 billion USD. This confirms the continued interest on the investor side.
Currently the Early Access Program has been open but will be limited to only first 5000 users. These people will have the unique opportunity to experience the new way to invest and own digital assets. Real estate, venture capital funds and early-stage tech companies — all of this can be acquired and traded in the form of a token. This is a call for all innovators in the fintech space who are eager to lead the tokenized revolution in finance.
ICOs are bad and over — why still do one?
Contrary to the current sentiment about ICOs, there is a lot of research which supports the notion that a tokenomics can provide the unique setting for aligning the interest of the users and investors. Especially in platform business models such as SMART VALOR, the right token design can incentivize users to contribute value or “stick” to the platform. This business model innovation was implemented and tested on several platform businesses. Some of them proved very useful and highly functional, such as Binance’s BNB token. The great utility of the BNB and the growth of the platform resulted in an increase in value of the token by 5’820% since its launch in September 2017.
The core business model, i.e. the marketplace for tokenized investments, is similar for SMART VALOR and Binance, while the focus is different in terms of product: SMART VALOR platform is focusing on security tokens and alternative investments. Therefore, while implementing the VALOR token design, we replicated part of the functionality of Binance token, such as its payment function and usage as a bridge currency for trading. Additionally VALOR will be used for for staking by asset issuers and investors and as a prime unit of account in reward programs. As an early acknowledgement of the VALOR tokens robust framework, a jury of investors nominated VALOR for “Best B2B (business-to-business) Token Design” at the Token Design Competition 2018 hosted by JRR Crypto Capital in Shanghai.
A contrarian’s courage
The perception of ICO’s within the crypto investor community has turned to negative toward the end of 2018. While some claim “ICOs being dead”, it is relevant to put such views into perspective keeping in mind two major factors. First is the disappointment of investors who expected fast extraordinary returns. AS the quality if startups crowdfunding through token issuance improves, this factor will become less relevant. Second is connected to US regulation as SEC has clamped down on unregistered token offerings and is currently investigating around 500 ICOs. To this end, SMART VALOR has taken the most conservative approach and has applied with the SEC for an exemption from registration requirements according to Regulation D (Exemption 506c). With this exemption, SMART VALOR can offer 99 accredited investors from US the opportunity to participate in this offering.
In its home jurisdiction, Switzerland, SMART VALOR submitted its White Paper and token model to Swiss financial regulator (FINMA) and received a positive response (no-action-letter) supporting the utility and payment token categorization of the VALOR.
It needs to be noticed that the unique advantage of non-security tokens is that it is possible to distribute them globally (i.e. in the majority of the countries) to non-accredited investors in a compliant and legal way. Therefore, in the cases where the major purpose of token is to attract and hold a global audience of users, the utility token provides the most sensible way. Regarding the reward program, users in many countries cannot be rewarded or paid in securities. These are some of the reasons why we committed ourselves to the issuance of the utility-payment-token.
The rising tide and small-steps approach
The public sale of VALOR on the SMART VALOR platform will start on 27th December and run through June 2019, followed by listing and start of trading. During this time, the current and potential users of the platform can purchase VALOR during the last 7 days of each month. VALOR will be offered for sale at a monthly decreasing bonus schedule, ending at 1 CHF (Swiss Franc) parity.
With this approach we are following the small-step approach which is becoming new normal in the Venture Capital industry. Here the funds are granted based on the milestones achieved. SMART VALOR has decided to voluntarily follow this approach. It has committed itself to achieving operational targets over a 7-month period, ending with the final full launch of the platform and listing of VALOR.
The extended length of the initial sale also makes sense due to the current cryptocurrency bear market. The sentiment around the crowdfunding via token offering will brighten up as the quality of companies improves and the cryptocurrency market cycle reaches a turning point in its cycle. Finally, a rising tide lifts all boats, which is the principle that holds true not only for traditional equity markets but also for cryptocurrency markets.
Originally published at smartvalor.com on December 26, 2018.