TokenSoft: How to build institutional grade Technology
We are pleased to welcome Sean Nasiri for our weekly Interview on Security Tokens. Sean is the Head of Business Development and East Coast Operations at TokenSoft a seasoned entrepreneur and startup advisor.
He jump started his career as an early pioneer in the equity crowdfunding space and founded GenYrator, the first mission-driven equity crowdfunding platform, helped StartEngine to launch the first Regulation A+ equity crowdfunding platform, and joined TokenSoft in 2018, now working on the vision of digital securities to become true.
Enjoy the Interview.
What is TokenSoft’s vision?
TokenSoft is delivering the promise of digital assets to institutions and funds. We provide the leading technology platform for companies seeking to issue, manage, and custody digital securities on the blockchain. Our suite of products helps companies enforce security, banking, and tax laws. We envision a future where a marketplace for digital securities is 24/7 and global. We look forward to continuing to support the evolution of the securities industry by providing the technical infrastructure and support for those getting into this space.
What is the role of TokenSoft within the Security Token Ecosystem? What makes you special?
We are the leading end-to-end primary issuance and management platform solution for globally compliant digital asset securities.
TokenSoft is a primary issuance platform first and foremost, our founders and team members hail from technology and security industries and combine 20 years of experience in blockchain to provide a complete suite of products that manage the lifecycle of a digital asset. This includes industry leading solutions such as the first self-custody solution made for digital assets, Knox Wallet, integration with Coinbase custody, open-sourced flexible ERC-1404 compliant token standard, post-issuance management platform, and ownership interest in a broker-dealer, which we leverage to provide various liquidity options and manage exchange relationships.
Our primary differentiator from other issuance platforms is our dedication to build bespoke institutional grade technology that is tailored to meet the unique needs of every client. Whereas most of the industry is creating low-touch, repeatable, DIY style issuance portals with boilerplate legal terms and smart contract functions, TokenSoft works hand-in-hand with our clients’ executive and legal teams to create a custom platform that fits their stringent requirements.
In your experience, what is the biggest misconception people have about Security Tokens?
The biggest misconception around Security Tokens most people have, I believe, stems from the base word “token”, which can be misunderstood or quickly associated with crypto and ICOs. I think it’s worth continued emphasis on definitions and the associated regulations to move the industry forward in a consistent way. We’ve written a fair amount on the distinctions, for example: Digital Assets, Digital Securities: What’s the Difference Anyways.
In short, we view digital securities, often referred to as security tokens, working within existing security laws and leveraging the blockchain and smart contract technology to make them smarter, more easily traceable, trackable, manageable, transparent, transferable, and liquid. For the first time, securities can be programmable and automate investor-friendly events such as dividends, buybacks, vesting, and other disbursements. They can also be programmed to adhere to local and global automated compliance standards, which also enables them to be transferred anywhere around the world, with 24/7 settlement.
What are the biggest challenges for the Security Token Ecosystem to democratize access to capital markets for companies and (retail) investors alike?
The infrastructure is still nascent and being built. For the ecosystem to become more mainstream and accessible, two things are necessary: 24/7 access and a common global compliance fabric. Additionally, digital assets, in most jurisdictions, are only available to accredited investors at the moment, and many issuers are still waiting for clearer guidance from legislators before allowing public offerings to occur.
When will we see Security Tokens hitting a market cap of $1 trillion? Why?
Not to speculate on market size or pricing, but the Security Token industry requires mainstream institutional participation in order to grow. For that to happen, the industry needs to build out greater institutional grade products that reflect the infrastructure that they are used to seeing, with similar protections, which is happening currently.
What are the 3 most promising projects doing a STO in 2019?
It’s difficult to cite specific projects; however, we see various bright spots, including real estate and private equity. We’re starting to see more alternative investment opportunities, specifically around debt, in addition to larger companies and more mature projects entering the space, along with continued interest from venture capital funds.
What is the one thing you believe in regards to Security Tokens most other experts within the industry would disagree with?
In some circles, it’s still controversial to say that the market is still maturing because we don’t have all of the necessary infrastructure for custody and exchange. I also believe that regulatory guidelines need to become clearer and more consistent across jurisdictions so that institutions and investors have improved clearance participating in regulated activities.
There are many within the digital asset space who believe that governments need to change or create new laws to accommodate digital assets; however, here at TokenSoft we embrace existing regulations and build technology that scales for stricter legislation.
What is the most exciting happening you are waiting to see in the Security Token Ecosystem in 2019?
What has me most excited about the STO ecosystem in 2019 is global exchanges and ATS starting to come to fruition, though, it will still take time before the market can mature and be accessible to more investors. The second is the entrance of a true marquee, larger name issuer entering the space and catalyzing the industry. I believe we’ll see that this year and it will be a milestone event for the industry.
Can you describe a benefit Security Tokens are generating by walking us through a process before and after Tokenization/Blockchain came along? Help us to understand the increase of efficiency and cost-saving opportunities Security Tokens can provide?
The primary benefit of security tokens is their ability to be accessible and compliant globally and available near real-time 24/7. For example, they support the trend with Asian investors wanting access to US investment opportunities and US companies wanting access to Asian capital. All of this is made possible with digital securities.
Another thing a lot of people brush over is how much easier digitizing shares makes it not only for cap table management during post issuance in the short-term, but in the long term for additional fundraising rounds and acquisition, because all the shareholders are easily traced and in one central location.
From a cost-saving perspective, PricewaterhouseCoopers stated that an average IPO runs about $4.7ml, while an STO can cost as little as 1/10–1/100 of that in some cases.
The issuance process is broken up into 5 parts:
- Legal structure, which outlines compliance standards and smart token requirements
- Investor onboarding
- Security fiat/crypto transference and custody
- Smart contract minting and distribution
- Post issuance investor management
What was the biggest learning or a-ha moment you had in the last year?
As it relates to the digital asset industry, I realized in the last year that digital securities are the future of finance. They are the next evolution in financial securities and represent how things will be done moving forward. I’m excited to play a part in that through TokenSoft, which sits at the cutting edge of helping companies leverage this development.
Thank you for the Interview!
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