CVA Podcast: Claus Skaaning, DigiShares

Transcript

[Music] hello hello this is your host tras ahmed ready to kick off another bite size episode of the crypto valley association podcast a special thank you to seba bank for supporting this initiative as they pursue their mission to redefine finance for the new economy now let's discover together the growing trends of this fast-moving space and try to shed some light on the mysteries it contains today we are joined by klaus scanning chief executive officer of digishares who are on a mission to build bridges between traditional finance and blockchain technology through the issuance of digital shares as tokens on

the blockchain we've heard lots about this topic so let's dive straight in and uncover the complex world of tokenization hey klaus how's it going it's going great and thank you very much for inviting me here on the podcast it's a great pleasure looking forward it's it's our pleasure as well and and how about we start this whole episode of by hearing about how you first got involved within the blockchain space yeah actually i bought one bitcoin back in 2014. i think i paid a few hundred dollars for it but i was still not i didn't tell my wife about it because i thought she'd give me a hard time about it but it turned out to be a pretty good investment then i didn't really look at

the the area for a couple of years until maybe 2017 or 2016 or something like that when i left my previous job in an ai company and basically started looking for new opportunities and i i i met another guy and we discussed sort of different areas that we could focus on and basically just settled on blockchain as a kind of career path for us so we discussed different projects we could do and came up with a project called venture fusion which was basically a kind of startup incubator decentralized startup incubator on the blockchain using tokenized equity in startup companies as a way as

a means of payment for anyone participating in the in the startup project so really a kind of bootstrapping platform where you could pay with tokenized equity in your startup that idea turned out to be not very good and very difficult for us to launch but we did learn along the way that the tokenization was really really early stage at that time and we'd have a real chance of actually becoming a serious player in the space we launched ddcs around four years ago i think and developed from that point forward oh great four years ago and i'm i'm sure klaus that your wife is is probably wishing you bought more bitcoin yeah me too but back in the day but great and maybe

so now we can get further in depth into uh what did you shares really is i mean if the name doesn't give that away already yeah so dds is the provider of an issuance platform for tokenization of real assets with most of what we do really with the focus on real estate real estate being the single largest asset class that is really relevant for tokenization we operate on a wide level business model meaning that we don't go direct to market but we only white label the platform to our clients and partners which are really real estate developers asset managers crowdfunding platform operators of different types and the platform provides functionality basically for crowdfunding or financing part of the

lifecycle it has a lot of functionality for corporate management check-up table management and so forth and it also has bulletin board marketplace where the investors in the process can can trade so that's basically what we do we are a software technology provider and we work together with other partners to provide an end-to-end solution including legal marketing and so on okay one and i'll get into a little bit more more detail with regards to the the issuance platform as as per say but you mentioned something quite interesting that real estate is the only real use case for for this type of tokenization i mean or the only one that really fits what do you think about the others i mean such

as like art or any other type of tokenization yeah so our platform is agnostic and can be used for any kind of of asset really and we have many different types of assets in our pipeline including art mining renewables private equity of different types expensive gemstones and so on a lot lots of different stuff we have a project also working on in whiskey as an investment object so so there's no limitation you could say that imagination is is free to explore the space but i would say from a marketing perspective our company is focused on real estate we target the real estate space we see it as a single largest asset class that is relevant for

tokenization it's a huge market there's more than 500 000 real estate developers globally and it's we're speaking trillions of us dollars it's also very homogeneous market so the value proposition of a real estate developer in the u.s and europe is quite similar so we can target them pretty much with the same type of functionality in the system and the value proposition is just really really strong it's a very illiquid asset as you probably know and it's also an industry that is plagued by old-fashioned paper-based antiquated processes so there's a lot of we can do just with digitization and automation in itself and yeah tokenization just provides a great value proposition for

for that space all right definitely we'll get into some of the advantages a little bit later down the line and i definitely see why you're focusing a little bit on on the digitalization of uh of real estate i mean i i prefer uh much better real-life uh whiskey than than virtual one in any way so uh but how about we talk about the reasons why you decided to create a white labeled uh issuance platform like where do you see the the unique uh selling point of having it as a white label where do your your customers see the advantages yeah it's a good question it has to do with our business model i think that from our perspective a white label business model is just much more scalable longer-term profitable for

us we get to deliver a platform to any asset manager or real estate developer and and we can also deliver the platform to crowdfunding platform operators in in different countries so the the space the market for us is just just much much larger i would say rather than going direct to market and maybe creating our own real estate crowdfunding platform for instance so that's that's one advantage another advantage i would say is the ability for us to you could say avoid being regulated or having certain licenses in place it's not necessary for us we just we basically just provide the software of course we have to be concerned with the clients and making

sure that they get an end-to-end solution so we do need to be aware of the licenses that are needed but generally of course if you tokenize your own assets assets that you own and control you don't need to have any licenses in place so our business model you could say is is more regulatory light compared to going direct to the market and maybe we can take a step back now and uh tokenization is is a buzzword within this space maybe you can give us a little bit more information about the main advantages of tokenization and potentially any disadvantages that tokenization might bring yeah it's a good question actually and we we work a lot on you could say understanding and

formulating the value proposition and making it easy to understand and both for ourselves and also for our clients of course and our partners so there are sort of advantages and benefits in different levels and some advantages are really realized now and some will be later as the ecosystem matures so right now we can directly go in and digitize and automate a lot of processes for the real estate developers relating to investment or purchase into certain projects payment of dividends trading and so on these processes can be digitized and automated to a great degree compared to what is possible now and we think the just the corresponding reduction of administrative cost is

maybe three for five percent on an annual basis so that in itself is quite significant then you have the automation in itself which allows real estate developers to have just as easily 1000 investors into each project as they have 10 or 20 today so they get much more much higher degree of ability to reach smaller investors reduce the ticket size and fractionalize and in turn democratize and allow smaller investors to invest into the projects and sort of expand the scope of potential investment funds out there that they can tap into so it should become easier for them at the end of the day to to fund their products

then we have i would say the liquidity itself real estate is extremely illiquid so just the ability to provide a trading facility on the platform that the real estate developer controls himself and that allows the investors to trade in a peer-to-peer fashion is something completely new for them they didn't have it before it was extremely time consuming and expensive for them to facilitate a trade so that in itself is a completely new opportunity that i think is hugely interesting for for many of our clients this is what we can do now we can do even more in the future i would say so we are starting to tap into the d5 ecosystem and longer term we can potentially

allow the real estate developers to click a few buttons and then use the real estate backed tokens as collateral for diva lending so instead of going to the bank they can they can just uh yeah tap into the hugely competitive default landing space and get access to us dollar denominated loans so the future looks right okay well bright very very interesting and maybe on another kind of side side of the coin if we're looking at the future with regards to tokenization um and and especially like liquidity and then on to volatility do you believe that if the real estate markets become more liquid there will be more volatility as

potentially more real retail investors will be investing into the real estate space and that what we've seen previously as being a rather stable if you kind of take out some of the the outliers the standard deviation or rather stable market do you believe it can bring uh volatility to the the real estate market and then thus kind of bring a lot of negative aspects to 221 stable market yeah i think it can actually and it might be a negative point at least short term so i think short term there is a risk that you can see real estate assets traded at a price that is far removed from the appraisal value but i think longer term when we start to see more investors and traders

and potentially defy traders coming into the ecosystem and trading i think that we will see we will not see it so much but of course it's it's it's a real risk you could say and putting your asset out for public trading of course makes it more difficult for you to control the price but it the pros and cons so you you might also see the price becoming higher there is an illiquidity punishment or penalty you could say in the real estate space now which is 10 20 30 percent so you you might see just the value of your real estate property go up correspondingly when you make it liquid yeah uh that's a very very interesting point right the the ability to

tokenize an asset to create an asset token or security token and then to see that well that price is is higher than what maybe the asset would be worth on the market due to the fact that well it has these kind of components of actual liquidity etc so maybe kind of tokenizing your asset could increase the value as well which would be another value proposition to to want to actually uh tokenize in the first place yeah exactly incredible only the future will tell and i'm looking forward to to um discussing more more about that and maybe we can into the the topic that you that you just alluded to before in the kind of defy side or even just the decentralized element and it's a little bit of a

tricky tricky question for you guys but i we often talk about centralized tokenization what are your thoughts about its decentralized form i mean you see protocols and and various uh efforts such as like ravencoin that that are doing some sort of decentralized tokenization is there a world whereby tokenization could be completely decentralized or to be there still needs to be this centralized validator that's a great question there are two sides to the story i think right now we are sort of customer driven and customer motivated in our development and our clients the real estate developers they they care about all the parts of the value proposition such as automation

reduction of administrative costs liquidity and so on but i think that of course overall there is a drive towards decentralization and i think that we will also see the industry moving in that direction at least to some degree we do have regulatory requirements such as the ability to maintain a centralized view of a sharecap table for instance that is is hard to decentralize completely you can have the checkup table on the blockchain but still you need some kind of central place to to view it right you can also decentralize the id of users and the white listing process to some degree but the the decentralized id frameworks available today don't really fully support

the ability to do kyc on users and to have you could say a verified trusted kyc on users accreditation and so on and also there's no widespread standardized framework for that but the industry will come up with it i'm sure and in a few years we'll be using it and we'll be able to decentralize more but right now is really not i would say an important objective to us and to our clients but i think i think it will develop over time okay it's very interesting point right in terms of blockchain technology being just one of the suite of the new tools coming out and that you will need other technologies to support blockchain if we

want to truly kind of move into into the next into a next wave a very very very interesting point that you raised um there and and maybe another that you actually pointed to with regards to the kind of regulatory hurdles and red tape i mean being in this space since 2016 and having the the vision and the view of okay we can tokenize anything anywhere and that being so so beautiful and then quickly coming to realization well it's not it's not as easy as that i mean maybe you could tell us a little bit more about why you believe regulation has really been holding back tokenization from flourishing if that really is the case and and yeah maybe some comments on the regulatory side

yeah it's a great question actually i i don't think that regulation has been holding back tokenization so much in many countries the regulators i think have looked at it the right way and have viewed tokenization as basically just another way to digitize securities and actually in a lot of countries including denmark where we're based the regulation already supports digitization of securities you can have cr certificates that are digital you can have a check-up table that is digital and so on the regulation is actually pretty close to already supporting tokenization in many countries but of course then we we still need to work with the regulator in order to understand exactly what happens when you have you could say

a self-sovereign security stored in your wallet right that you can transfer peer-to-peer and so on and you might want to use it as credible for a loan and so on this different scenarios you still need to sort of review with the regulator in order to understand how you can be fully compliant so i think i think the regulators have actually done a pretty pretty good job but of course it takes time to go through the sandbox process in many different countries and clarify these aspects we are involved in three or four sandbox processes in different countries now together with our partners and it takes time but i think the regulators are very open to this and supportive and they want to see it happen they see the benefits as well and they also see that

i think the the global uh industry is is going in this direction there's no avoiding it okay interesting and you know uh because we don't have so many uh danish individuals or even companies on the show maybe you can tell us a little bit more about how denmark has been facing the whole maybe even like blockchain technology as a whole but but specifically as well tokenization how the jurisdiction is is playing out with regards to others such as ours in the crypto valley in switzerland or be it uh in other places around the world yeah i guess you have nicholas nikolaisen as one of your members he's a danish guy right bitcoin swiss

um then you have make a dial which was founded in denmark as well by warner custerson you have chain alice's which is also a danish founded company so i think denmark is actually quite strong in the crypto space yes more than i knew we have some some some good companies all developed into unicorns at this stage and hopefully we'll have more in years to come the community in denmark is is relatively small and i think some of some of our important uh guys moved to uh to crypto valley uh which is great so so yeah yeah let's uh keep developing that relationship yeah wonderful and i'm sorry for taking all your talent away great and so um we we talk a lot about

the the future right and industry experts i mean they really do expect that much of the financial infrastructure will move on to blockchain in the coming years even the next decade all right in your eyes what what does that process look like yeah that's a that's a great question if i could completely respond to that which surely win the competition here so we have we have of course we have smaller companies startups like like us who are trying to build to some degree a parallel financial infrastructure and trying to do things outside the banks to some degree just in order to move things forward and to reduce friction and

administrative costs and so on but we are also collaborating with the banks we want to collaborate with the banks and we want to help them to sort of jump into this ecosystem as well and take their role and then on the other side we have the banks and the sort of incumbents working to to try to keep up and to try to understand what is happening here and making their pilot projects and their experiments trying to yeah to understand how they can respond and keep keep keep up but i think that overall we see a massive trend towards everything moving over to the blockchain blockchain and tokenization is is really not a thing in itself it is an infrastructure it's the value add and

it's it's it's just a better way to facilitate any kind of ecosystem where you need to transfer digital assets of different types right i think that's well documented and proven so far so i think there's no doubt in my mind that this trend will continue in in a massive way and i think we're just seeing the beginning now i also think we'll see a massive sort of integration between the tokenization ecosystem and the d5 ecosystem that we're just starting to see right now i think there'll be huge innovation and a lot of new sort of financial services developed over time i like that it's so that everything that is is done in this space is uh

is sort of so atomic and so interoperable and the decentralization helps with that and the decentralization is is critical in order to make sure that everything is atomic and interoperable so that's another reason why we should decentralize more i think i think that's what i can say it's it's hard to say anything more specific i think yeah i know it i think he provided great great clarity on on the question and maybe a last one for for the road here to what extent do you believe that the cryptocurrency markets as per say that are that are vastly volatile now are correlated to to the blockchain ones right and kind of security tokens having an underlying asset um

do you see that the same volatility playing out do you believe that the crypto markets and the emotions that are there are going to be mirrored within the security token side how do you believe that that relationship is going to develop in in the future and the years to come that's a great question i think they are fundamentally different asset classes right so i think they will not be correlated to a great degree i think i think d5 investors and crypto investors will become longer term very interested in real asset-backed tokens as a way to diversify and protect their holdings at the end of the day i think even the the most hardcore crypto investor is sometimes concerned that his uh that

the value of his assets could drop to zero right so i think there will be always some interest in diversifying at least maybe five ten percent of your portfolio into something that is backed by a real asset and cannot on enter under any circumstance drop to zero value so i think we'll see a large interest in that so a lot of d5 a lot of the diva ecosystem will be i think extremely interested in being able to get access to real real asset-backed tokens we also see the other way around so the real the real estate world i think would be extremely interested in in getting access to the d5 ecosystem for default lending for decentralized trading and so on and for

all these sort of new sort of financial atomic functionalities that are being developed that's maybe not a direct response to a question but at least it has relates to it yes no no it definitely was and it's very hard to to be completely precise as well because of all the movements and all the the potential of this this market uh holds but but thank you thank you so much uh class four for joining us today and i'd just like to ask if you have any in final words uh for our lessons uh today no it was a it was a pleasure to be on the on the podcast i look forward to yeah being a good member of the swiss crypto valley and developing our relationship

wonderful well thank you thank you for for joining us and if you enjoyed this conversation feel free to check out more on our website cryptovalley.swiss where we host plenty of events educational material and even provide information on how you can join our growing community thanks again klaus for joining us thank you stay tuned stay safe and until next time from the crypto valley in switzerland [Music]