Talking Digital Securities with tZERO CEO Saum Noursalehi
For this week’s spotlight, we connected with tZERO CEO Saum Noursalehi about digital securities and their partnership with ROI Group to tokenize up to $50 million in Dubai real estate.
What is tZERO?
tZERO is a blockchain-based marketplace for trading digital private securities and other digital assets.
We offer institutional-grade solutions for issuers looking to digitize their capital table and investors who are seeking to invest and trade private securities on an SEC-regulated platform, the tZERO alternative trading system (tZERO ATS). tZERO enables mainstream investors to invest in and trade shares of private companies (e.g. real estate, funds, operating companies) as easily and efficiently as they invest and trade shares of any publicly traded company. The value of the ecosystem is becoming increasingly relevant as companies remain private longer, while their investors have limited options for secondary liquidity.
tZERO ATS is an organized and automated marketplace, which transacts hundreds of thousands of shares per month and is growing rapidly. While this volume may be a fraction of what is transacted in the traditional world, it is a major and positive trend in this growing ecosystem. Our platform provides broader access (e.g. retail investors) to illusive private investments and offers issuers the opportunity to provide liquidity optionality to their existing shareholders. In 2020, we increased the dollar value traded in digital securities on the tZERO ATS by 10x over the prior year ($53M vs. $5M in 2019). The assets on the tZERO ATS represent nearly 80% of all digital security value and are responsible for approximately 98% of dollar trading volumes.
In addition, we were approved to operate a retail broker-dealer that offers its customers access to private securities that trade on our ATS, with a vision to offer NMS securities and potentially other assets in the future.
We also operate a digital wallet and exchange services app, the tZERO Crypto app, where investors can buy, sell, and hold four different cryptocurrencies: bitcoin, etherium, ravencoin, and litecoin. We plan to add the top cryptocurrencies this year.
Our vision is to build a one-of-a-kind consumer-facing product to trade all assets. This trading interface will include digital private securities, the most actively traded cryptocurrencies, and publicly traded stocks.
In your view, how has blockchain technology changed how we exchange and trade value?
Trust is the most important component of any transaction involving the transfer of value. Today, institutions and various intermediaries exist to establish that trust; Paypal for sending money, eBay for purchasing goods, clearing firms for transferring securities. Unfortunately, these intermediaries — particularly in the securities world — tend to add costs and complexity. Blockchain, on the other hand, is able to establish trust and quickly and transparently transfer value between two unfamiliar parties, without the need for an intermediary.
Blockchain technology will completely transform how we trade anything of value. It will replace the infrastructure of the traditional financial system as we know it. It will do many of the things people already talk about, including making payments simpler and less expensive, ensuring settlement occurs at the time a trade is made rather than waiting for days, democratizing access to investors, eliminating the need for middlemen, and streamlining manual processes.
I believe we have only scratched the surface in terms of blockchain technology implementation and it will continue to break barriers.
How will the proliferation of digital securities change the global economy moving forward?
Digital securities will enable greater efficiency and access to investment opportunities globally by reducing the friction within private markets and cross-border transactions. Additionally, there will be a greater variation in the types of financial instruments in the market.
tZERO recently announced a collaboration with ROI Group to tokenize up to $50 million in real estate assets in Dubai — how did this partnership come to be?
Headquartered in New York, ROI Group™ has multi-billion dollars in assets under management and views tokenization of real estate as an attractive opportunity to provide investors with liquidity optionality and democratize access to a broader set of investors. ROI determined that tZERO’s end-to-end digital security platform was the appropriate venue to host the secondary trading of its trophy asset. Additionally, Tezos made sense as the blockchain infrastructure for ROI’s asset, as it has already been successfully leveraged for other real estate issuances (e.g. Aspen Resort).
Since the Tezos blockchain has already been successfully leveraged for other real estate issuances (e.g. Aspen Resort), I believe ROI Group decided that Tezos made the most sense for this project.
How does Tezos compare to other blockchain projects as a foundation for these types of issuances?
Tezos is a great protocol for smart contract development and the digitization of private equity and private assets. It has high transaction throughput speeds and low transaction costs that are required to allow liquid trading environments like tZERO to scale quickly.
What three things would you like to see built on Tezos?
1. We would like to see new unique asset classes, such as NFTs and ETFs, issued and supported on the Tezos network.
2. We would like to leverage more off-chain data that correlates to digital assets issued on Tezos through oracle solutions.
3. We would like to see increased on-chain order matching and settlement as the regulatory framework here in the U.S. evolves.