Last April, the first securities issued on blockchain was part of a test on the London Stock Exchange (LSE) – one of the largest exchanges in the world.
20/30, a Fintech that has been part of the Financial Conduct Authority’s (FCA) Fintech Sandbox, issued around £3 million in tokenized equity, settling on the LSE’s Turquoise platform, described as a test environment. The test was an important step towards the future of digital assets which are regulated securities.
20/30 is an interesting company with a diverse group of portfolio of subsidiaries. The company’s constituent parts include:
- TokenFactory – a security token issuance platform
- ID Works – KYC which is easy to port
- Asset Management – an advisory and fund services that will introduce a curated investment approach to a highly technical sector
- Pillar – a crypto and wallet which is “developing a decentralised solution for data management.”
While there remain a lot of questions regarding the utilization of blockchain in the thousands of crypto projects around the world it is pretty clear that the digitization of securities is happening. It is just going to take some time. 20/30 has positioned itself at the leading edge of this phenomenon in the UK – a jurisdiction well known for its Fintech innovation cred.
By working with both the LSE and the FCA, 20/30 immediately established itself as a viable project in the regulated digital asset sector. Financial services are all about trust and compliance and 20/30 is leading with its move to adhere to existing rules.
Several weeks back, Crowdfund Insider had the chance to catch up with 20/30 co-founder and CEO Tomer Sofinzon in between flights as he visits various countries around the world looking to extend their service into other markets.
Asking Sofinzon about the success of their first security token offering (STO), he said it was a phenomenal success. Three tranches of 20/30 equity were issued at different times.
Sofinzon said he is already planning their next security token issuance – once they receive their security license which is expected to arrive in the coming weeks. 20/30 apparently has many companies in the queue which are interested in using their tokenization platform.
Sofinzon is agnostic about the type of tokenized assets, be it debt, equity, real estate or something else, what he is most concerned about is the underlying quality of the asset – a common comment from other aspiring tokenization platforms.
While the FCA is in the midst of a consultation regarding digital assets, Sofinzon says this does not really impact them. A security is a security. There is no need to change the regulatory regime for the issuance of securities. It is the existing infrastructure and processes that need to be updated to become digitized.
“Because we are at the beginning of a cycle it ends up being quite expensive as well,” explained Sofinzon. There is a learning curve to the process but they are working to smooth everything out to remove any friction.
Sofinzon wants to solve the challenge of liquidity. Pointing to their test on the LSE, he believes this partnership will be vital in providing the liquidity digital asset issuers desire. He stated that the 20/30 security token to trade on one of the markets of the LSE within a year.
20/30 expects to be a client of the LSE going forward. They plan to bring more and more companies to the exchange – something that should please the LSE which wants to trade more securities. Sofinzon envisions a future where they bring new asset classes to the LSE thus expanding their reach and creating value for the exchange.
“We should be growing their markets. This should be music to their ears,” said Sofinzon.
20/30 is working to solve both the tech and regulatory hurdles to make the tokenization process seamless.
“There is obviously some work to do but I am very optimistic,” added Sofinzon.
20/30’s participation in the FCA Sandbox was extremely important – vital to their progress. They brought their service to life without changing the rules but by involving the oversight of the regulators.
Sofinzon lauded the FCA and how open they are in the process. He complimented the professional and positive experience of being part of the FCA Sandbox.
“We are really trying to do the right thing for the financial industry. There will be tremendous benefits to the industry,” Sofinzon explained. “We have only had a really great relationship with the FCA. Absolutely tough. But worth every second of it. We are going to continue to collaborate with them.”
Sofinzon could not say enough good things about the UK financial regulator and their openness to innovation and change. Tough and demanding, but extremely open to Fintech evolution.
The tokenization of property is a sector of investment Sofinzon is very excited about pursuing. He said they are currently filtering out a lot of possibilities for tokenization. He is currently looking for a high-quality issuer to engage via their platform.
“It there is no quality, this industry will never take off,” Sofinzon said.
20/30 has formed a “match made in heaven” with a partnership with Nivaura described as a digital back office for a modern investment bank. 20/30 is the front office in the process and client facing.
Nivaura offers a “modular platform” to enable process automation for the issuance and administration of securities. Nivaura claims to have offered “the world’s first fully automated debt issuance that was denominated in a cryptocurrency and settled on the public blockchain.”
As part of their global ambitions, 20/30 is working on launching a broker-dealer in the US – just as they are working on getting licenses in many other jurisdictions including Asia (Hong Kong – Singapore), Australia, perhaps Canada and more.
He does not think there are other players in the STO market that can bring to the table what they have created. Sofinzon shared that they have spoken to other large exchanges without mentioning specific names.
While he is very optimistic about the tokenization industry, Sofinzon is concerned about the US falling behind. He sees a regulatory environment that is not moving forward when it comes to regulated digital assets. From a regulatory perspective, he sees a market in the US which is not taking off. This is a theme that CI has heard from domestic platforms.
But when it comes to Europe and Asia, Sofinzon is very excited with the progress.
In the end, 20/30 is working towards a 100% compliant security token issuance platform that is simple to use and integrates into existing stock exchanges – regardless of jurisdiction.
Digitization with liquidity.
“I do not believe anyone in the blockchain community will be able to compete with the liquidity we are going to be able to provide,” Sofinzon stated confidently.