DigiShares, the end-to-end white-label platform for tokenized securities, is taking whisky digital thanks to an exciting new partnership with Faer Isles Distillery. This one-of-a-kind collaboration will see Faer Isles become the first distillery in the world to offer shares via an STO and accept payments for those shares in cryptocurrencies.
Christian D. Grahn, Executive Chairman of Faer Isles Distillery, had this to say once this agreement was made official:
“We are very happy about the partnership with DigiShares. We view them as one of the leaders in the space of tokenization of assets. They have a flexible business model, are easy to work with, and provide a tokenization platform with all the functionality we need.”
Faer Isles Distillery will use the STO to further the growth and development of its bespoke craft whisky and gin startup. After securing initial community funding from backers in 22 countries through its Founders’ Club initiative, the proceeds from the STO will serve to take this innovative venture to the next level.
As one of the most northerly whisky distillers in the world, the Faer Isles Distillery on the Faroe Islands in the middle of the North Atlantic is optimally located for whisky maturation. The distillery’s surrounding natural habitat also makes it the ideal spot for gin botanicals such as seaweed, angelica, and juniper.
The STO run in collaboration with DigiShares will see 300,000 B-shares issued, representing 23% of the shares in Faer Isles Distillery PF (Ltd). The purchase price per share is 100- DKK (14€), with the 300,000 shares representing a total value of 30,000,000 DKK (€4,033,700). The STO began in February 2021 and will run until the 31st of July 2021.
CEO of DigiShares, Claus Skaaning, had this to add about the partnership and why the digitalization of whisky makes perfect sense:
“We look forward to working with Faer Isles on the tokenization of shares in their distillery. Whisky is one of the most interesting investment objects globally with an annual yield of more than 20% on average, so it lends itself very well to tokenization. Faer Isles is very forward-looking in choosing this new method of fundraising which can create increased fractionalization and liquidity.”
While a departure from the STOs that are most typically offered by organizations in the real estate and financial industries, this partnership with Faer Isles Distillery shows that tokenization can be a valid and innovative source of funding for forward-thinking companies in any industry. With DigiShares technology guaranteeing that only whitelisted, verified, and approved investors can participate in these offerings, the demand for such tokenization solutions is likely to grow in the future.
About Faer Isles Distillery Faer Isles Distillery is a craft whisky and gin distillery startup on the Faroe Islands. For a craft distillery wanting to produce high-quality malt whisky and super-premium gin, the Faroe Islands in the middle of the North Atlantic is an optimal location. The salty, windy climate on the islands provides the perfect atmosphere for whisky maturation, and the surrounding nature provides the optimal botanicals for gin production. As a new whisky destination, the project has gained a lot of international coverage, e.g., in the largest whisky publication in the world, Whisky Advocate.
Faer Isles Distillery was founded by local whisky enthusiasts. Since then, a group of investors, business developers, and industry specialists have joined and formed the team behind the project today. Test production has been performed for a few years, and the first commercial products will be launched this year.
DigiShares has signed a partnership agreement with 2140 Consulting in order to collaborate on tokenization projects in the Benelux region and potentially also outside.
2140 Consulting is a tokenization and Security Token Offering (STO) advisory company, with the purpose to make security investments accessible to everyone. We are an STO project manager, assisting clients with the feasiblity, preparation, setup and execution of regulated tokenization projects. Together with our client we design the specific STO ecosystem from start to finish, for which we independently assess 3rd parties to work with. Read more here: https://2140consulting. com/.
Finance Meets Real Estate Webinar
DigiShares CEO is hosting a webinar on the Finance Meets Real Estate Webinar series. It will be on Wednesday, April 21, at 12:30 am CET / 7:30 pm ET.
Claus will introduce the concepts of blockchain and tokenization and explain the underlying ideas and value propositions. He will further introduce how these new technologies provide value for real estate developers in order to digitize and automate their processes, reach new types of investors, and create new levels of liquidity. Finally, Claus will speak about real use cases from DigiShares’ own catalog of clients.
Updated List of Exchanges
DigiShares has posted an overview of global security token exchanges from a regulatory perspective, indicating how these exchanges are licensed in their respective regulations. If you are an issuer considering which exchange to work with, this is a good overview of the most serious and professional exchanges in the world. The list includes Archax, tZERO Group, Inc., Blocktrade, BnkToTheFutu re.com, CoinMetro, Polybird, SMART VALOR, Openfinance, Templum, Inc., Atlant, Nxchange, RealToken, and INX Limited. DigiShares has partnerships in place with several of these to ensure good listing options for your token. Read more here: https://digishares.wodwes.com/exchanges-2021
NEW YORK – March 11, 2021 – tZERO, a leader in blockchain innovation and liquidity for digital assets, announced today that its subsidiary, tZERO ATS, a FINRA member broker-dealer that operates an alternative trading system (ATS), has signed an agreement with DigiShares, a white-label platform for tokenized securities, to connect issuers of digital securities on the DigiShares’ platform to the tZERO ATS. DigiShares’ network consists of many asset managers, investment fund managers, real estate developers, renewables project developers, among others that are based in the U.S., Asia, Russia, Europe, and Africa. Interested issuers will now be able to opt in to provide secondary liquidity for their digital securities, subject to tZERO ATS’s due diligence and applicable regulatory requirements. This partnership is expected to increase tZERO’s access to potential equity crowdfunding, real estate, and other types of issuers of digital securities that are seeking secondary liquidity.
tZERO CEO Saum Noursalehi stated, “DigiShares is a forward-thinking company and understands the enormous potential in tokenizing assets, particularly in the traditionally illiquid real estate space. tZERO ATS is excited to provide DigiShare issuers with an innovative solution to create secondary liquidity.”
Danish-based DigiShares provides white-label solutions for the issuance, corporate management, and trading of digital securities. DigiShares has a number of reputable existing relationships with Polymath, F10, UPRETS, Alcion, and many others.
DigiShares CEO Claus Skaaning said, “DigiShares is focused on bringing efficiency to the token sale and cap table management processes to streamline the tokenization of assets. Our diverse customer base of issuers will now be connected to a market-leading secondary liquidity platform for digital securities, the tZERO ATS. We look forward to collaborating with tZERO, a company that shares our vision of building bridges between traditional finance and blockchain technology.”
tZERO is a technology firm with the goal of democratizing access to private capital markets. tZERO is a subsidiary of Medici Ventures, the blockchain-focused, wholly owned subsidiary of Overstock.com, Inc. (NASDAQ:OSTK).
Investor Notice
Investors should note that trading securities could involve substantial risks, including no guarantee of returns, costs associated with selling and purchasing, no assurance of liquidity, which could impact the price and ability to sell, and possible loss of principal invested. Further, an investment in single security could mean lack of diversification and, consequently, higher risk. Potential investors are urged to consult a professional adviser regarding any economic, tax, legal or other consequences of trading any securities as described herein.
No Offer, Solicitation, Investment Advice or Recommendations
This release is for informational purposes only and does not constitute an offer to sell, a solicitation to buy, or a recommendation for any security, nor does it constitute an offer to provide investment advisory or other services by tZERO or any of its affiliates, subsidiaries, officers, directors or employees. No reference to any specific security constitutes a recommendation to buy, sell, or hold that security or any other security. Nothing in this release shall be considered a solicitation or offer to buy or sell any security, future, option or other financial instrument or to offer or provide any investment advice or service to any person in any jurisdiction. Nothing contained in this release constitutes investment advice or offers any opinion with respect to the suitability of any security, and the views expressed in this release should not be taken as advice to buy, sell or hold any security. In preparing the information contained in this release, we have not taken into account the investment needs, objectives, and financial circumstances of any particular investor. This information has no regard to the specific investment objectives, financial situation, and particular needs of any specific recipient of this information and investments discussed may not be suitable for all investors. Any views expressed in this release by us were prepared based upon the information available to us at the time such views were written. Changed or additional information could cause such views to change. All information is subject to possible corrections. Information may quickly become unreliable for various reasons, including changes in market conditions or economic circumstances.
Forward-Looking Statements
This release contains forward-looking statements. In addition, from time to time, tZERO, its subsidiaries, or its representatives may make forward-looking statements orally or in writing. These forward-looking statements are based on expectations and projections about future events, which is derived from currently available information. Such forward-looking statements relate to future events or future performance, including financial performance and projections; growth in revenue and earnings; and business prospects and opportunities. You can identify forward-looking statements by those that are not historical in nature, particularly those that use terminology such as “may,” “should,” “expects,” “anticipates,” “contemplates,” “estimates,” “believes,” “plans,” “projected,” “predicts,” “potential,” or “hopes” or the negative of these or similar terms. In evaluating these forward-looking statements, you should consider various factors, including, without limitation: the ability of tZERO and its subsidiaries to change the direction; tZERO’s ability to keep pace with new technology and changing market needs; and competition. These and other factors may cause actual results to differ materially from any forward-looking statement. Forward-looking statements are only predictions. The forward-looking events discussed in this release and other statements made from time to time by tZERO, its subsidiaries or their respective representatives, may not occur, and actual events and results may differ materially and are subject to risks, uncertainties and assumptions. tZERO, its subsidiaries, and its representatives are not obligated to publicly update or revise any forward-looking statement, whether as a result of uncertainties and assumptions, the forward-looking events discussed in this release and other statements made from time to time by tZERO, its subsidiaries or its representatives might not occur.
About tZERO
tZERO Group, Inc. and its broker-dealer subsidiaries (tZERO) provide an innovative liquidity platform for private companies and assets. We offer institutional-grade solutions for issuers looking to digitize their capital table through blockchain technology, and trade on a regulated alternative trading system. tZERO democratizes access to private assets by providing a simple, automated, and efficient trading venue to broker-dealers, institutions, and investors. For more information on tZERO, please visit the tZero website here.
tZERO is not a registered broker-dealer, funding portal, underwriter, investment bank, investment adviser or investment manager, and is not providing brokerage, investment banking or underwriting services, recommendations or investment advice to any person, and does not provide any brokerage services. tZERO takes no part in the negotiation or execution of secondary market transactions for the purchase or sale of securities and at no time has possession of investor funds or securities in connection with such transactions.
About tZERO ATS
tZERO ATS, LLC is a broker-dealer registered with the SEC and a member of FINRA and SIPC. More information about tZERO ATS may be found at https://brokercheck.finra.org/. Digital securities that trade on tZERO ATS are conventional uncertificated securities. Ownership of such securities is reflected on the traditional books and records of regulated market participants. The term “digital” refers to the blockchain technology elements of a security that are intended to enhance investor experience through added transparency.
About DigiShares
DigiShares provides white-label solutions for the issuance, corporate management, and trading of digital assets. The company works with asset managers, investment fund managers, real estate developers, renewables project developers, and others interested in more efficient ways of raising capital and managing a large group of investors in their fund.
Contacts: tZERO Media Contact Alexandra Sotiropoulos, +1-347-293-1416 asotiropoulos@tzero.com
The following is a list of exchanges where you can trade (buy and sell) security tokens primarily in Europe and North America. If you are an owner of STO, you can find an exchange for listing security tokens.
Note that this list is incomplete and that some of the services may not be fully operational as of yet. All information contained in the list has been obtained exclusively from publicly available sources (e.g. company websites, national authority registers, news articles, etc.).
Apart from the name, type and website of the STO exchange, the list provides information on the status and scope of regulatory approvals in the exchanges’ respective jurisdictions. Included you will also find links to the financial licenses of the respective STO exchange, the specific registered activities (e.g. brokerage services, operation of MTFs, etc.), permitted and/or targeted customers. Some STO exchangeshave affiliate or subsidiary companies that have the appropriate financial licenses, these are also identified where such information is publicly available.
Generally, an STO exchange must obtain appropriate financial licenses in its jurisdiction (e.g. broker-dealer license in the US, investment firm license in the EU) and ensure that the scope of its activities complies with the authorised activities under its financial license.
Definitions
MIFID II – the Markets in Financial Instruments Directive II is a legislative framework instituted by the European Union (EU) to regulate financial markets in the bloc and improve protections for investors. Its aim is to standardize practices across the EU and restore confidence in the industry. With the recent proposed amendments, security token offerings will be falling under the definition of “financial instrument” and, thus, will be subject to regulatory protection afforded under MIFID II.
Multilateral Trading Facility – a multilateral trading facility (MTF) is a MIFID II term for a trading system that facilitates the exchange of financial instruments between multiple parties. Multilateral trading facilities allow eligible contract participants to gather and transfer a variety of securities, especially instruments that may not have an official market. These facilities are often electronic systems controlled by approved market operators or larger investment banks. Traders usually submit orders electronically, where a matching software engine pairs buyers with sellers, learn more here.
OTC Services – over-the-counter marketplaces in which market participants trade stocks, commodities, currencies, or other instruments directly between two parties and without a central exchange or broker.
DEX – decentralized exchanges allow for direct peer-to-peer transactions to take place online securely and without the need for an intermediary.
Investment Firm License – MIFID II covers all natural and legal persons who perform investment services and activities (e.g. advice, execution of orders, market making, operation of trading facilities, etc.) using financial instruments, as a regular occupation or business, and on professional basis. Where a person meets the criteria and is not otherwise exempt from MIFID II, it will require authorisation as an investment firm with its respective competent national authority.
Broker-dealer retailing corporate equity securities over the counter (OTC)
Mutual fund retailer
Non-exchange member arranging for transactions in listed securities by exchange member
Private placement of securities
Private placement through online methods (excluding publicly traded securities)
Operation of an alternative trading system for unregistered or private securities, including initial coin offerings (ICOs) and other digital securities
DigiShares CEO Claus Skaaning will be giving a speech at the Investor Base Camp of the International Academy of Wealth. The topic will be tokenization and how this can be applied to create better access to investment into real assets for everyone.
The International Academy hosts their Investor Base Camp three times per year. With members in Australia, New Zealand, Japan, UK and the USA. It is a full two day event normally live however online this time round. Guest speakers from around the world share their knowledge with the members. At this event topics such as Defi, property, USA market update with Kelly Korshank from iFlip Invest and many other topics are covered.
If you are interested to attend, please contact us for a special invite.
This document will describe in detail how and why you should tokenize real assets and the DigiShares approach for this.
Contents:
(1) Real asset Tokenization – Why? (2) The DigiShares Platform (3) Real Asset Tokenization Processes
Many real assets have been tokenized until now, including real estate, mining operations, renewables projects, beverage distilleries, sports royalties, infrastructure, expensive objects of art, etc., etc.
1.Real Asset Tokenization – Why?
At the time of writing, the financial industry is seeing a very significant trend in the growth of tokenization projects and tokenization solution and services providers. DigiShares provides a primary issuance platform that supports ongoing corporate management of the real asset, as well as trading via the built-in OTC marketplace.
Other companies provide secondary trading exchanges for security tokens, custody solutions, legal services, etc. Many different pieces of the security token puzzle are now falling into place to form a more efficient, transparent, and secure blockchain-based infrastructure for securities transfer, settlement and trading.
Real assets including real estate is the biggest single asset class where tokenization can provide value – more than $200 trillion in total assets. Real assets share the value proposition of the overall securities market. We view some of the biggest benefits to real asset tokenization to be the ability to reduce ticket sizes by several orders of magnitude (from USD 100,000 to USD 1,000). This is made possible by the extreme automation of issuance and post-issuance processes, and it will dramatically increase the group of investors able to invest in a given fund. Another significant benefit is the new liquidity of real assets by making them tradeable. This will increase the amount of money available to invest in real assets, and on the other hand, will make the asset class more interesting for investors.
Real assets have some properties that lend themselves nicely to STOs – such as being relatively secure investments, requiring significant investment sums, being relatively easily comparable and quantifiable, as well as being notoriously illiquid investments. Real assets will as such benefit from the “standard” blockchain value properties such as: (1) the ability to automate and reduce the cost of issuance, transfer, settlement and trading processes, (2) the ability to automate and reduce the cost of governance processes such as cross-border transfers, cross-investor-type trading, lock-up periods, caps on investor counts, etc., (3) the subsequent increased ability to engage foreign investors and larger numbers of (smaller) investors thereby increasing the pool of investors for any given project, (4) the ability to reduce or remove different types of intermediaries such as CSDs, transfer agencies, broker-dealers, etc. due to the blockchain trust layer thereby increasing efficiency and reducing cost further, (5) the increased ability to attract investors due to the previously mentioned benefits (additional liquidity), and (6) the ability to significantly reduce ticket size of investors by an order of magnitude to cater for retail investors due to the automation of processes.
We will therefore see that good projects can raise capital easier, faster and at a reduced cost, investors will enjoy increased liquidity on their investments, good projects will get a liquidity premium, and investors will globally get access to previously inaccessible types of investments.
For some years now crowd-funding platforms have offered access to invest and trade “digitized” various real assets (primarily real estate). Why is tokenization better? For two main reasons. The “old” crowd-funding platforms are siloed and not interoperable globally. The global tokenization industry will use the same standards such that tokenization platforms on different continents will be inter-operable. This means that real assets issued by DigiShares will be tradeable on exchanges in the US, Europe and Asia. It also means that tokens issued by DigiShares can be kept in safe custody by most security token custodians globally. Finally, it means that no investors or issuers will be locked into a single vendor’s ecosystem but will be able to transfer their tokens for trading or custody to any other vendor globally (only limited by regulatory restrictions). The other reason is that blockchain technology is a much more modern, secure and efficient method for implementing securities transfer, settlement and trading compared to proprietary digitization of securities.
DigiShares provides a white-label platformfor digitizing securities (shares, bonds, etc.), issuing these in order to raise funds for a project, longer-term management of a group of tokenized investors, and an OTC marketplace for trading of these. The DigiShares platform is “white-label” meaning that it is exclusively sold to partners who offer the platform under their own brand-name.
The DigiShares platform can be used in connection with fund-raising but it can also be used in connection with the tokenization of existing real estate funds, in order to create more liquidity among existing investors and make it easier to on-board new investors.
The DigiShares platform provides a lot of functionality, however, the most important to mention is that it supports three main processes: (1) the issuance process where tokenized securities are issued in order to fund-raise for the project, (2) the longer term management of a group of investors who are holding tokens to document their ownership of securities within the project, and (3) the trading of tokens via the built-in OTC marketplace.
For the issuance process we support a customized on-boarding process where KYC and AML options can be adjusted to the specific jurisdiction of issuer and investors.
The investor has his own dashboard where he can view his token holdings, communicate with the issuer, vote on relevant issues such as how to renovate a building, purchase more tokens, etc. The issuer has a dashboard where he can verify investor provided KYC documentation and approve investors to participate in the STO. Once the investor is approved, he can buy tokens with various payment options. The solution has an e-signature module such that the contract workflow can be automated and digitized as much as possible. The KYC verification process can be handled internally or outsourced to a third party.
For the management of token holders over the longer term, many functions are provided to ensure communication with investors, to conduct token holder (shareholder) meetings, to conduct votes, pay out dividends (possibly with stablecoins), maintain the share cap table (shareholder register), etc. In addition, the solution supports various corporate actions giving the administrator (normally a top executive of the issuer) the right to forcefully transfer tokens from one investor to another, or back to the company – and to reissue tokens in case an investor lost access to them.
The platform also provides an internal OTC-like (Over The Counter) trading exchange. This means that existing investors within a project can trade tokens with each other. They can issue buy and sell orders and can match these on their own in a manual manner. It is also possible for new investors to be white-listed and invited into the exchange such that they can buy tokens from the old investors. This function provides increased liquidity within a single project and will provide an extra value for investors.
The platform is “multi-STO” meaning that it can handle multiple STOs in parallel, at the same time. Each STO can have its own URL for investor on-boarding and will have its own graphical content, presentation and content. This makes it possible for the real estate developer to have several ongoing real estate projects being active simultaneously in the platform.
The platform is increasingly integrated with payment providers, custodians and third-party KYC / AML providers.
The DigiShares platform is highly suitable for real asset tokenization as it allows the issuer to manage and automate many of the processes related to fund-raising and ongoing fund management. The platform works with different security token protocols and we prefer to work with those that are open and do not enforce any kind of vendor lock-in.
While DigiShares is “bullish” on real asset tokenization, we do realize and acknowledge that not all investors understand and accept blockchain and indeed are prepared to hold a security token in a crypto wallet. For these investors we cater in two ways, one is by working with custodians who can hold the tokens for these investors (at a cost), the second is by enabling the platform to also support non-tokenized investors, that is, investors that do not receive tokens to represent their ownership but rather are registered within the platform as normal/traditional investors.
The DigiShares platform is constantly being updated in order to reflect changing and evolving market needs and the agile approach of DigiShares help our clients to stay up to date and relevant.
3.Real Asset Tokenization Processes
So how does one go about tokenizing a property? Either to raise funds for a new development project, or to sell an existing property?
When a client engages DigiShares in this process, we also involve our legal partner in order to help with legal matters in relation to the issuance. As such, two processes start and run in parallel, the legal and the technical processes. (It is also possible to work with the client’s internal legal department or legal partner if they are sufficiently knowledgeable in STO regulations).
For any project one of the initial steps will be to create a project plan / roadmap for both the legal and technical work.
The legal process:
1) Deciding on jurisdiction for the projects. Tokenization projects fall under standard securities regulation and are as such indirectly supported in many countries. However, many countries do not support the full digitization of securities such as shares and bonds due to requirements for notarized transfers, paper-based ownership certificates, etc. Other countries are unclear on regulations so far. DigiShares and our legal partners keep track of regulatory developments and can at any time recommend best options, optimizing cost and regulatory complexity, while at the same time catering to investors in one of the three main regions (USA, Europe and Asia). We will be able to provide a recommendation for countries that support tokenized securities – or in case these are not supported, simplified types of securities such as profit-sharing rights or debentures that may more easily be tokenized.
2) Once a jurisdiction has been selected, the legal unit (the SPV = Special Purpose Vehicle) should be created and a bank account obtained.
3) Designing the fund-raise itself, based on amount to be raised and type of investors that are targeted. Together with our legal partners we can give recommendations on this. In the US, if the amount is above 1 M USD (as is almost always the case), it is relatively straightforward to conduct an STO under the reg D exemption where only accredited investors can be targeted. In Europe, there are more choices. If less than 5-8 M euro is raised, it is possible to make a public offering towards retail investors in many European countries. If the amount is above 5-8 M euro, it is normally necessary to get a prospectus approved which is a more costly and time-consuming process. For more insight, please click here. 4) Design the security to be tokenized. For real estate this is typically a share in the company owning and administrating the property, but it can also be a tokenized loan, profit-sharing right, dividend-distribution right, etc.
5) Designing the KYC (Know Your Customer) process for on-boarding investors. Together with the legal advisor, it is necessary to determine what information must be provided by investors in order to document their ID and address, for retail and accredited investors, and for consumer and business entities. Verifying the ultimate beneficial owner for a company may be quite complicated and time-consuming, so it is best to require of the investor to provide all relevant information when registering.
6) Reviewing and determining what kind of reports and updates have to be made to public transfer agencies, CSDs, etc. These can be generated as custom reports from the platform.
7) Depending on the type of raise, different types of legal documents need to be produced, such as either a private placement memorandum, a public offering memorandum, a regulation D filing form, a US or EU prospectus, etc.
The technical process:
1) Customizing the KYC process based on the input from the legal process.
2) Customizing the contract workflow deciding which contracts need to be used for the signing up of investors and subsequent token purchase, such as subscription forms, purchase receipts, shareholder agreements, etc. The goal is to automate the contract workflow as much as possible.
3) Customizing the content and information available to attractively present the property, including photos, financials, etc.
4) Customizing payment options including credit card payment, bank transfer and crypto payment. Again, the goal is full automation but this may require banking integration which can be time-consuming and expensive.
5) Customizing custody options – either with integrated custody partners or just by setting up agreements to custody investor tokens, paid and managed by either the issuer or the investors on their own.
6) Installing and customizing server software and training the issuer administrators in using the software platform.
7) Testing that everything is ready for the STO launch.
8) Pushing the “start” button and launching the STO.
9) A normal STO will typically last for 2-3 months.
In addition to the above workflows, there are also workflows relating to marketing and investor relations that DigiShares can also support. DigiShares is connected to both marketing agencies and investor relations services providers world-wide that are experienced in assisting with fund-raising for real asset projects.
We are happy to announce that Bjørn Holta, experienced finance and asset management professional with many years of experience joins our team in order to strengthen our approach and access to asset managers and institutional organizations interested in tokenization.
Bjørn Holta has experience from two decades in alternative investment management and investment banking roles in New York, Tokyo and Oslo. After leading hedge fund sales at Salmon Smith Barney out of New York and Tokyo, he drove research due-diligence at Evolution Capital, MCP Asset Management and Alchemy Fund in different parts of the corporate capital structure within multiple investment strategies.
As Bjørn explains it in his own words:
As VP of business development, I am looking forward to helping drive adoption of security tokenization as an integral part of the DigiShares team. All kudos to the team that has managed to develop a product that promotes productivity, efficiency and profitability for the end customer rather than the semantics side of blockchain. I hope to do my best to support what has been built, by adding some financial flair and drive customer engagement.
One industry view I subscribe to is that security tokenization will require both its fair share of quantity and quality of projects to thrive properly. Regardless of what part of the capital structure (equity, debt, preferred) the security tokens represent, it is the basics – good quality projects, whether defined by sound fundamentals, unique characteristics or underserved segments that will drive adoption at large. Large fund net-inflows from new sources begets more flows and helps closure of the illiquidity premium for real assets like real estate. This should follow the path of corporate debt markets where institutional participation in liquidity pools has helped close this illiquidity premium and help our customers.
At its core, the simplest value proposition that is closer to universal truths than metrics is the certainty of ownership that on-chain data can provide. Unfortunately for our asset manager customers, it is a bit more complex. DigiShares’ current and future clients need proper units of account in terms of what DigiShares product offering offers in the context – productivity, efficiency and profitability. With this regard, my own path comes from the standpoint of a not-so-innocent bystander in traditional finance – raising capital and running money for financial institutions.
My own experiences have made me increasingly cognisant of how hard it is to actually deliver this profitability in the form of stable outsized-returns or “alpha” for client fiduciaries. It is not easy. At one point I spent several years of salary paying for administration and back-office fees while trying to scale the fund. Both time and cost could have been saved substantially through tokenization.
In my new role, it boils down to helping our customers, many whom are in the nascent adoption stage and running a business where productivity and efficiency is equally as important as profitability. It is work in progress, but I hope to bring the combination of these value propositions to the forefront, seek out both good projects and sufficient scale.
The Summit has traditionally been visited by 100-200 delegates. First time it was physical but the last one was virtual, as will this one be. We are aiming for 250-500 delegates this time around.
The goal with the Summit is to educate and motivate the traditional financial industry to adopt blockchain and tokenization technology, so delegates will be non-blockchain non-crypto people from the traditional industry. The Summit spans two days and the schedule has been adjusted to cover both EU and US delegates and speakers.
We will market the Summit massively through our channels as well as the channels of our partners and sponsors. The goal is to make it one of the top global events focused on tokenization targeted towards the traditional industry. There will be tracks focused on legal, market status, future visions, real estate tokenization, etc.
DigiSharesrecently signed up a new client, Faer Isles Distillery, Faroe Islands. We are working hard towards launch of their white-label platform for tokenization of whisky within the next weeks.
Faer Isles Distillery is a craft whisky and gin distillery startup on the Faroe Islands. For a craft distillery wanting to produce high-quality malt whisky and super-premium gin, the Faroe Islands in the middle of the North Atlantic are an optimal location. The salty, windy climate on the islands provides the perfect atmosphere for whisky maturation, and the surrounding nature provides the optimal botanicals for gin production. As a new whisky destination, the project has gained a lot of international coverage, e.g., in the largest whisky publication in the world, Whisky Advocate, read the full article here.
Faer Isles Distillery received some initial funding and community support by offering membership in their Founders’ Club. 1100 whisky and gin enthusiasts from 22 countries registered. Within the next month, Faer Isles will start their crowdfunding campaign, which will be issued as an STO offering digital shares as tokens. This will make them the first whisky distillery in the world to use the STO format and allow crypto currency payment for shares.
Faer Isles Distillery was founded by local whisky enthusiasts. Since then, a group of investors, business developers, and industry specialists have joined and formed the team behind the project today. Test production has been performed for a few years, and the first commercial products will be launched this year.
We are proud to announce the third installment of the conference, previously named Fintech Disruption Summit, and still available.
The Summit has traditionally been visited by 100-200 delegates. First time it was physical but the last one was virtual, as will this one be. We are aiming for 250-500 delegates this time around.
The goal with the Summit is to educate and motivate the traditional financial industry to adopt blockchain and tokenization technology, so delegates will be non-blockchain non-crypto people from the traditional industry. The Summit spans two days and the schedule has been adjusted to cover both EU and US delegates and speakers.
We will market the Summit massively through our channels as well as the channels of our partners and sponsors. The goal is to make it one of the top global events focused on tokenization targeted towards the traditional industry. There will be tracks focused on legal, market status, future visions, real estate tokenization, etc.
(Please note that the first couple of minutes are in Danish, but the webinar switches over to English language after a few minutes. There are also initially some sound problems but these are rectified later in the webinar.)
New Real Estate Client: BAHGS Fund, USA
DigiShares recently signed up a new client, BAHGS Fund, USA. We are working hard towards launch of their white-label platform for tokenization of real estate within the next weeks.
Economic Empowerment, Economic Growth and Generational Wealth meet Blockchain Tokenization
Founded in April 2020, BAHGS Fund is a blockchain-based marketplace that leverages tokenization technology to fractionalize ownership of affordable residential real estate, making investments more affordable. Sponsors and private investors now have early liquidity options through the issuance and tradability of asset-backed digital securities. Drawing on the team’s deep expertise in real estate, finance, and technology, BAHGS Fund is providing leading-edge capital market solutions for the $54T global industry.
BAHGS Fund will soon announce their first phase of residential and mixed-use properties to be listed on the DigiShares platform.
This will be the first public offering of security token offerings (STOs) backed by Affordable Residential Real Estate at this scale. Historically, Qualified Opportunity Zones are underserved communities across America’s rural and urban areas. The TCJA has incentivized capital gains investments in Qualified Opportunity Zones with a social impact. How do you know if your investment has a social impact? How profitable will your investment become? By Investing through the BAHGS Fund’s platform, small investors can invest alongside major institutional companies with similar investment goals. By using blockchain, the crowdfunding impact will allow non capital gains investors to reduce the initial investment cost, allowing them to diversify their capital into multiple projects instead of one, without the historical requirement of holding them for 3-10 years before exiting.
DigiShares is making good progress. Over the past month we have added several new white-label partners who are initiating tokenization activities in their own country. Recent clients work with equity crowdfunding, real estate, and other types of assets. They are based in the US, Europe, and Africa. Several of these will be announced in future newsletters.
At the moment we are seeing very significant interest in our white-label tokenization platform. Our recent partnership with Polymath has spurred further interest and within the next few weeks we expect to announce a partnership with another industry leader. One of the great benefits of the security token industry is that everyone collaborates on developing the value proposition, putting together the pieces of the ecosystem, and improving the joint marketing into the traditional financial industry.
For those that do not know, DigiShares provides a white-label tokenization platform for issuance, corporate management, and internal trading. We differentiate by having an attractive white-label partnership model, as well as sophisticated functionality for share cap table management, investor portal, OTC trading, and investor corporate management. We work with legal partners to provide a turn-key offering and can normally set up a new white-label platform within 1 month.
Protocols
Still more than 90% of all tokenization occurs on the Ethereum blockchain, despite poor performance and high gas fees. To avoid high fees, tokenization providers are forced to adopt inferior designs such as the omnibus approach to wallet management where all tokens of all investors in a single project are stored in the same wallet. This eliminates many internal transactions for transfers and trades and cuts the gas fee for these transactions down to zero. Only in the case where the investor removes his/her tokens to an external wallet, will there then be actual gas fees. The token industry is slowly converging to protocol standards that are open, flexible and inexpensive to use. As a Polymath partner, we are rooting for ERC-1400 and will also support Polymath’s forthcoming non-Ethereum based protocol Polymesh.
New Territories
One of the reasons for the sudden explosion in the tokenization space is most likely the increased regulatory openness to tokenization. More and more regulators are interested in supporting tokenization and are increasingly clarifying how securities and associated transactions can be digitized and completed without touchpoints to banks, CSDs, notaries, the tax department, etc.
DigiShares is constantly monitoring the development of global regulation and currently supports tokenization in these countries:
USA: primarily out of Wyoming and Delaware
Singapore
Switzerland
Liechtenstein
Estonia
The UK
Germany
More countries are being added to the list every month. We are involved in dialog with regulators in several countries in order to fast forward the regulatory process. If you are interested in our help for this, please reach out.
In those countries where tokenization is not yet fully legally clarified, there are other options for how to proceed. One is to use the DigiShares solution without tokenization and just use it to manage uncertificated shares – essentially the share cap table then determines the ownership of the shares and it will be managed by the company admin via the DigiShares platform. So, investors will initially not get tokens and will have to wait for legalization before these can be issued. The other solution is to work with another instrument such as debentures or bonds. These are less demanding on the regulatory side and possible in many more jurisdictions. However, the investor interest may not be as high as for pure equity.
« The security token market cap grew by over 500% in 2020, and the best is still yet to come. I believe this number will continue to grow significantly, reaching over two billion dollars by the end of the year. As larger institutional firms continue to enter into the security token industry, I think we’ll see funds enter this space in a big way in 2021. I predict that over $100M will be raised by security token offerings this year. Worldwide exposure to real estate, private equities, and the hundreds of other security token use cases including art, luxury cars, and sports teams is now possible» The Security Token Industry in 2021
