Latest / CRYPTO 101 / Ep. 751 Bringing Equity Markets On Chain with Regulatory Compliance

Transcript

Ep. 751 Bringing Equity Markets On Chain with Regulatory Compliance · CRYPTO 101

0:08
[SPEAKER_01]: All right, everybody, welcome back to the out east summit.
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[SPEAKER_01]: I'm here with the CEO and co-founder of Fairment, Joris Delanyu.
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[SPEAKER_01]: Joris, thank you for joining us.
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[SPEAKER_01]: Thank you.
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[SPEAKER_01]: You've been enjoying the summit?
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[SPEAKER_01]: Absolutely.
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[SPEAKER_00]: Like last year, we are a proud sponsor of the Wondercoup Teller reception.
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[SPEAKER_00]: Yeah.
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[SPEAKER_00]: And I think it's a fantastic event for people to make new connections.
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[SPEAKER_00]: to have great conversation and yeah, sponsoring the first, the first evening before kickoff of the summit today after is always it was good for ice breaking.
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[SPEAKER_01]: For sure, for sure.
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[SPEAKER_01]: Look, we're really excited to have you because you are an expert when it comes to all things tokenization.
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[SPEAKER_01]: Yeah.
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[SPEAKER_01]: tokenization has been in the 15 or so conversations we've had the the word of the year it feels like so you're a hot sector yeah but before we get into what makes tokenization special and all that I want to know a little bit about who you are and what you were doing before you were building fairment and then we'll get into fairment sure so I've been an entrepreneur since
1:17
[SPEAKER_00]: 20 years now in Europe was in France before to come to the US and I've been working in mostly cloud computing for several years before I exceeded my firm of business.
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[SPEAKER_00]: And what was absolutely key in all my experience there was it is extremely hard to do capital formation and extremely hard to easily bring people to the to the cap table.
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[SPEAKER_00]: whether they are an employee or partner and the reality is, if you don't, is that, it's extremely hard to imagine a world where we can IPO faster, right?
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[SPEAKER_00]: Where we can bring liquidity to the early supporters faster.
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[SPEAKER_00]: And this is one of the reason why I think today the market is a bit blocked.
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[SPEAKER_00]: Tokenization is just like a way of facilitating things, okay?
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[SPEAKER_00]: And that's why I keep saying to people tokenization is more and more commodity.
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[SPEAKER_00]: It was obviously super complex, you know, 10 years ago, you were a smart contract dev, you're a part of the very happy few you were able to charge a lot of money with there as a freelancer or as an employee because no one knew about smart contract at that time.
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[SPEAKER_00]: Today at the age of era, we have a lot more people 10 years.
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[SPEAKER_00]: building in this ecosystem makes it more accessible.
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[SPEAKER_00]: So what I did by coming to the States is really like, use what I had as an entrepreneur for years.
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[SPEAKER_00]: identified a problem also as an investor and building something that would make more sense when it comes to issue equity securities.
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[SPEAKER_00]: We are in the equity capital market at Ferment.
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[SPEAKER_00]: And yeah, I think when my co-founder exposed me to blockchain, I was like, whoa.
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[SPEAKER_00]: That reminds me a lot of like the cloud computing in the Bracer.
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[SPEAKER_00]: Yeah.
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[SPEAKER_00]: And this new technology that will drastically change the way we are operating things.
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[SPEAKER_01]: Yeah.
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[SPEAKER_00]: And I think finally, we are seeing the blockchain for what it is.
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[SPEAKER_00]: That's very exciting.
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[SPEAKER_01]: Love it.
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[SPEAKER_01]: And so walk us through fairment.
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[SPEAKER_01]: I kind of want to get a full holistic view of what it is that you're building, who you're building for, and what's your mission?
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[SPEAKER_00]: Yeah, so affirming we are building the on-chain equity capital market stock.
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[SPEAKER_00]: Okay.
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[SPEAKER_00]: We operate as a transfer agent registered to the SEC, but we operate in a way that it's fully on-chain, which means that we literally use the blockchain as the unique service of truth.
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[SPEAKER_00]: But with the guarantee of an reliability of the intermediary that were built like 60 years ago, when the TCC started in the transfer agent became this backbone of the industry.
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[SPEAKER_00]: And so our mission is very simple.
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[SPEAKER_00]: Once you have real share, not only issued on Shane, you can connect that to all the defy, smart contract that were built for 10 years.
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[SPEAKER_00]: to make those assets more liquid, to be used as collateral, to also change the way governance of those assets can work.
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[SPEAKER_01]: Yeah.
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[SPEAKER_00]: And you offer the live-ness that everyone expects in 2026, Yeah.
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[SPEAKER_00]: That everyone experiments in the crypto markets.
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[SPEAKER_00]: but that is not yet fully live for equity securities.
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[SPEAKER_00]: This is what we will affirm in our mission is to make equity move on chain.
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[SPEAKER_01]: And is that equity that's public equity or private equity or both?
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[SPEAKER_00]: That's boss.
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[SPEAKER_00]: Mostly because the technology is completely coming to blur the line between the two words.
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[SPEAKER_01]: Okay.
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[SPEAKER_00]: If you are able to do capital formation, if you're able to transact,
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[SPEAKER_00]: whether the company's private or public, the only difference is will be on the compliance, will be on the criteria, like you need more disclosure if you are public.
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[SPEAKER_00]: But at the same time, you have an unlimited numbers of people that can be sitting on the cap table, right?
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[SPEAKER_00]: But if you are private, you have a disclosure, but you need to monitor the numbers of seats on your cap table.
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[SPEAKER_00]: So that's a kind of example, but the reality is,
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[SPEAKER_00]: If you are able to offer to an issue or an access to a distribution where you can get capital, where all their shareholders can get some liquidity or can get the opportunity to turn the shares into collateral, people won't care if the company is private or public.
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[SPEAKER_00]: This is where the tokenization
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[SPEAKER_00]: is very interesting, because it helps blurring the lot, and 60 years ago, we decided as an industry to make the public market super robust, super reliable and trustable, but nothing was done on the private side.
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[SPEAKER_00]: Until we started to have a lot of big companies,
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[SPEAKER_01]: state private.
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[SPEAKER_01]: Yeah.
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[SPEAKER_00]: And you're like, okay, guys, you will see a run on an Excel on theories.
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[SPEAKER_00]: Yeah.
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[SPEAKER_00]: Can call it Cartel.
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[SPEAKER_00]: You can call it a low firm.
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[SPEAKER_00]: Yeah.
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[SPEAKER_00]: You're sure that's for a public.
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[SPEAKER_01]: Yeah.
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[SPEAKER_00]: But the private side is still very antiquated way.
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[SPEAKER_00]: Okay.
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[SPEAKER_00]: And we are bringing precisely the transfer agency.
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[SPEAKER_00]: to hold the issuers that decide to use it.
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[SPEAKER_00]: Yeah.
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[SPEAKER_00]: So that's your captive.
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[SPEAKER_00]: It can be IP already, not because you are IP-eling, but because you are an issuant.
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[SPEAKER_01]: Yeah.
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[SPEAKER_01]: I'm curious like for those people who are listening who they might not be running the start up, they might not be part of a private company, but they're trying to invest in the private opportunities.
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[SPEAKER_01]: There was a big story recently.
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[SPEAKER_01]: with everybody and their brother was thinking they were owning anthropic shares.
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[SPEAKER_01]: And then all of a sudden anthropic came and said, those are zeroed out.
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[SPEAKER_01]: There's a bunch of companies that want to name them that were doing these SPVs.
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[SPEAKER_01]: And so I want to understand first what went wrong with that model.
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[SPEAKER_01]: Yeah.
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[SPEAKER_01]: And secondly, how does your model enable the everyday person to get access to early stage private companies?
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[SPEAKER_00]: what has been built, because the problem of having companies with a lot of traction, but that remained private, was an issue.
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[SPEAKER_00]: Okay, okay.
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[SPEAKER_00]: Two, there is a huge demand around the world to get a fraction of the financial upside of US entities.
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[SPEAKER_00]: Yes, private or public, right?
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[SPEAKER_00]: All we saw is just an answer to these two problems, a big demand, and the companies that stayed private and longer, that being said, what's very important is what are you purchasing?
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[SPEAKER_00]: And I'd like to connect that to you all the token and I see you across.
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[SPEAKER_01]: Yeah.
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[SPEAKER_01]: Or I could talk about the question is, what are you buying?
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[SPEAKER_00]: And do you know what you are buying, right?
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[SPEAKER_00]: So unfortunately, the term token was used extensively to qualify a cryptocurrency.
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[SPEAKER_00]: The cryptocurrency behind you back it with trust.
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[SPEAKER_00]: So here we trust a team.
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[SPEAKER_00]: You trust a project, you trust a tech.
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[SPEAKER_00]: Or you trust nothing.
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[SPEAKER_00]: And in that case, it fails.
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[SPEAKER_00]: But when you start to talk about a company, you immediately think as equity.
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[SPEAKER_00]: So you think that you're an equity older.
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[SPEAKER_00]: This is where intermediaries that started issuing token version of the financial upside of an equity, parking a SPV layer 1, 2, 3.
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[SPEAKER_00]: If it's very clear and you explained that to the person that is perchasing, that's fine.
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[SPEAKER_00]: The problem was they didn't say it and if you think cloaked it in the very, very, very fine print and or if you are trying to do secondaries without the authorization of the board, which was the case for intropiq, yeah, then you take the risk of what's called the right of first refusal where the board case say no, I don't transfer that asset.
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[SPEAKER_00]: So this is where we need to, at one point, have people that are paying attention to what is effectively transmitted?
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[SPEAKER_00]: What is the underlying asset?
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[SPEAKER_00]: Is an asset that is liquid or liquid?
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[SPEAKER_00]: If it's in liquid, what are the right of transferring that assets?
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[SPEAKER_01]: Yeah.
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[SPEAKER_00]: If you are able to do that properly by just letting people who know about this, dealing with that, I mean, you don't take any risk.
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[SPEAKER_01]: Yeah.
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[SPEAKER_00]: I think intro peak was just sending a message like stop stop fucking with our cat table.
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[SPEAKER_00]: Yeah, because the the the main issue for them, they're going to be public soon.
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[SPEAKER_00]: So they wanted to protect everything and well, it's also because by low, you can not have more than extra older a sub-curved company without triggering what's called a trail disease threshold and you cannot like basically 500 known
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[SPEAKER_00]: on your cap table.
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[SPEAKER_00]: Okay.
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[SPEAKER_00]: But if someone is starting to sell and fractionalize the shares, like the company might end up with people that they don't want or too many people that yeah, that was the first problem.
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[SPEAKER_00]: The selling one is if they don't control any more their valuation, those companies are evenly relying on options to onboard talent.
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[SPEAKER_01]: Yeah.
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[SPEAKER_00]: So if you start to say to your employees, hey, I'm going to give you options to exercise at 10% of the current market value the last round.
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[SPEAKER_00]: But actually, you have people that are selling at 20.
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[SPEAKER_00]: You are literally fucking the all valuation of the business.
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[SPEAKER_01]: Yeah.
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[SPEAKER_00]: So those are the reason why the board are very protective, interesting.
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[SPEAKER_00]: But we can come to with a solution to all.
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[SPEAKER_00]: The moment that we understand that problem, that for example, is tribe solved by raising a massive room a few years ago to exit all their shareholders right where employees that are their option plan that we're coming to a term.
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[SPEAKER_01]: Yep.
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[SPEAKER_00]: Gusto did it last year as well.
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[SPEAKER_00]: This is a real problem to fix.
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[SPEAKER_00]: How do we bring liquidity?
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[SPEAKER_00]: Well, let's E.S.
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[SPEAKER_00]: capital formation.
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[SPEAKER_00]: Let's make sure that the board have an easy way of setting things up for them to control and in that case, everything will be smooth.
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[SPEAKER_00]: And then, let's make it easy to IPO.
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[SPEAKER_00]: Like, today, one of the biggest risks is disclosures.
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[SPEAKER_00]: It is compliance is the full intimidation that makes an IPO extremely expensive.
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[SPEAKER_01]: Yeah.
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[SPEAKER_00]: You do a virtual in Wall Street.
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[SPEAKER_00]: And you will get investment banks.
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[SPEAKER_00]: Yeah.
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[SPEAKER_00]: And you will give, like, 20%.
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[SPEAKER_00]: If you do a SPAC, you will give 30%.
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[SPEAKER_00]: That's pretty expensive.
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[SPEAKER_00]: Yeah, you see.
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[SPEAKER_00]: So we need to ease that.
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[SPEAKER_00]: one of the best tools to make all these ways smoother.
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[SPEAKER_01]: When do you think, because right now, like, you know, a lot of the themes of the conversation we've been having are, you know, you know, tokenization is this and crypto right it's a really, really big concept, but maybe it's a little further out of the money people are folk tech investors are focused on AI right now they're focused on things that are right here right now when is it that tokenization and crypto is going to come back going to be the bell of the ball again will command these high valuations do you think it's.
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[SPEAKER_01]: Five years down the line.
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[SPEAKER_01]: Do you think it's closer than that?
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[SPEAKER_01]: Where we are?
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[SPEAKER_00]: So where we are right now is already unbelievable.
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[SPEAKER_00]: Okay, if you think like remember the NFT craze the mean coin Yeah, on our cheap economy all the tizzys of pollack with base Yep, that's one point.
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[SPEAKER_00]: It was almost impossible to exist doing securities.
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[SPEAKER_00]: Yeah The shift is massive already.
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[SPEAKER_00]: Yeah
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[SPEAKER_00]: Um, but it's still probably a five to ten years move.
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[SPEAKER_00]: Yeah.
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[SPEAKER_00]: Um, it would, it would take time, but, you know, when you are a big bank, when all your, um, assets and industry run on AWS and cloud, yeah, Google Microsoft, I mean, moving from there to a blockchain,
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[SPEAKER_00]: is a very big movie.
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[SPEAKER_00]: Yeah.
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[SPEAKER_00]: And you're facing an industry that spend the last 60 years elevating a risk.
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[SPEAKER_00]: Making sure that everything is rock solid.
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[SPEAKER_00]: And you tell them, oh, you know what?
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[SPEAKER_00]: Fuck all all that.
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[SPEAKER_00]: Just trust us, the small dev that do sparkle track, DJing style.
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[SPEAKER_00]: Well, they have been observing everything for months for years.
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[SPEAKER_00]: when they are ready to press the button, that's because they made sure that there will be no risk integrating this new piece of technology.
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[SPEAKER_01]: Yeah.
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[SPEAKER_00]: I think we are still in the process of that.
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[SPEAKER_00]: It's probably probably a couple of years, but look at the DCC and what they announced this week.
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[SPEAKER_00]: That was huge.
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[SPEAKER_00]: Yeah, and they are just like moving from a very
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[SPEAKER_00]: to immediately tokens.
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[SPEAKER_00]: Yeah.
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[SPEAKER_00]: Fantastic.
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[SPEAKER_01]: Do you foresee like your acquisition strategy evolving?
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[SPEAKER_01]: Are you guys going directly to private companies and say, hey, let's take a look at your cap table how we could help you.
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[SPEAKER_01]: What's kind of the strategy to grow your customer base?
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[SPEAKER_00]: So the right now, what we observe that is very obvious is the need from both side, private and public.
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[SPEAKER_00]: issuers that are bigger are coming to us saying we want a better form of transfer agency.
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[SPEAKER_00]: We want to make sure that whatever we originate, whatever we issue, is done in a way that allows us to be connected to outsourceers to all the pool of liquidity, but not the national exchange, that this is not what we offer them, right, for all the distribution that we're
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[SPEAKER_00]: Are you telling us pretty early to change?
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[SPEAKER_00]: No, yeah, I'm talking of any district, whether it's DeFi, centralized, whole legacy systems.
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[SPEAKER_00]: Right now, the main thing for them is, can we rely on an interoperable way of dealing with securities?
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[SPEAKER_00]: Yeah, in equity world.
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[SPEAKER_00]: Sure, and so again, we are very factory some of the equity capital markets.
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[SPEAKER_00]: But the moment that you feed them with the exact same asset as they we get from Karta, except it's on chain.
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[SPEAKER_00]: And because of that, they can plug to all the traditional exchanges, all the traditional actors, and the new distribution.
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[SPEAKER_01]: Right.
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[SPEAKER_00]: Yeah, you're already solving one of the biggest pain of the issues.
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[SPEAKER_00]: But this is where we are right now.
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[SPEAKER_00]: This is why we see least publicly listed entities coming to us saying, hey, we just want to better use our experience for our self.
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[SPEAKER_00]: Clearly, the industry is not offering that.
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[SPEAKER_00]: And it's very funny.
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[SPEAKER_00]: I had an analogy.
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[SPEAKER_00]: I refer to me this week from a CFO of the NASDAQ listed code.
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[SPEAKER_00]: It was telling me, look,
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[SPEAKER_00]: All the system that was built 60 years ago with the TCC and rocket dealers and all is like the Washington bridge.
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[SPEAKER_00]: The tokenization platform then come on top of that there are basically the new deck that they build on the Washington bridge over it, but it's still the same rate.
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[SPEAKER_00]: Yeah, you guys are building an ipadoo on the side.
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[SPEAKER_00]: doesn't mean that you will kill the Washington.
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[SPEAKER_00]: It just means that now you have another power.
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[SPEAKER_01]: Yeah.
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[SPEAKER_00]: And what you can expect from that is probably cheaper faster easier to deal with.
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[SPEAKER_00]: And it might answer to a new class of issuer.
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[SPEAKER_00]: There are more like internet web 2, web 3, savvy.
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[SPEAKER_00]: And all these guys that are using Amazon Prime
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[SPEAKER_00]: Yeah, they would like to deal with their transfer agency the same way.
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[SPEAKER_01]: Yeah, I absolutely agree.
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[SPEAKER_01]: And I'm excited for the future that you're building and where can people find out more about fairment?
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[SPEAKER_01]: Obviously, your website, but do you blog on LinkedIn or you post on x?
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[SPEAKER_01]: What handles can be arrived to?
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[SPEAKER_00]: So, Fermi.com, obviously, but you can reach out on LinkedIn and X, absolutely, that's the two-nights work where we are, and yeah, we try to post Artico when it makes sense.
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[SPEAKER_01]: who share things when we really believe in it's yeah perfect well i'm excited everybody that's joris delano uh... CEO and co-founder of fairment checking out fairment dot com uh... enjoy the rest of your summit thanks for uh... sponsor and all that's great stuff uh... we had a lot of fun so we'll see you around awesome thanks for having us take care