If anyone was asked to describe the future outlook of the banking and finance industry, one cannot dismiss terms like blockchain and tokenization. And in progressive and innovative markets like the UAE’s, these terms have already been heavily used and implemented.
In order to have a better understanding of the importance of tokenization and where it's headed, we had the pleasure of interviewing Mr. Jean Paul Tarud Kuborn, partner and co-founder of one of the sector’s earliest adopters and evangelists firms, Deca4 Advisory.
- What is the status of tokenization in the current market situation?
Several events in the past 2 years have created profound changes in the world economy and shifted the mindset on the use of blockchain in finance and economics. This, of course, directly impacts the concept of tokenization. We have seen multinationals, financial institutions and governments adopt different forms of tokens, for whatever reasons these may be: a war, financial independence of smaller nations, the hurdles caused by the pandemic restrictions, accessibility, cost and, most importantly in my opinion, the democratization of investments and finance. There is a social sentiment around the world with regards equal opportunity that was exacerbated during the peak of the pandemic restrictions, especially when it comes to money and finances. The use of Blockchain technologies and tokenization solves many of these issues and the movement is from the bottom up, just like most revolutions. We can clearly see that the Blockchain revolution has and will have a similar impact as the “Internet revolution” 25 years ago.
- Is tokenization the way forward?
The crypto markets are on the headlines of the mainstream financial media. Countries have modified their laws to adapt to this new wave in the economy, Central Banks and Governments address different aspects of tokenization publicly and some countries have adopted cryptocurrencies as legal tender. It is safe to say we have long passed the point of no return and businesses that do not adapt to this will disappear, just like many very large companies disappeared when they were not able to adapt to the radical changes the Internet brought to the world.
- Why does Deca4 believe that tokenizing assets is revolutionary?
The capital markets, in a traditional sense, were not designed to be democratic. Any form of financial dealing is highly regulated, and the entry barriers were created long ago to keep a tight grip among few gatekeepers. Banks, Financial Brokers, Asset Managers, all the regulated functions of the financial world are a select club and the entry tickets for investment or participation were much too high for the common individuals to enter. This old structure received a slap in the face that came out of nowhere, when the first uses of Blockchain technologies came about to do fundraising for companies from small individual investors who didn’t need a bank or a broker to invest, and collect their returns directly. And unlike crowdfunding, these investments provide tangible returns and are not limited to a small group of people. This was met with strong resistance at first, from the traditional finance sector, just as it occurred with the internet a quarter century ago. Once the regulations come into balance with this new phenomenon, we will see a drastic shift in the way the average person will invest their savings. This is the revolution in itself, the democratization of investments.
Tokenizing assets, in financial terms, allows small investors to access certain types of investments and asset classes that were inaccessible to them before. For example, the concept of fractional ownership of real estate or other financial assets is something that was only dreamt of before, but there was no practical system to implement this. Blockchain technology allows this to occur in a very efficient way. Suddenly, small investors from all over the world with only a few hundred dollars to spare can own a piece of a prime property in New York or Monaco, and enjoy the same returns as the large investors. This is truly democratic and provides equal opportunity.
- What are the pillars for this token revolution?
The main pillar is of course the technology that makes this possible: Blockchain. It was built around the first token, Bitcoin, but has since been developed and improved by a large community, into becoming a multiverse of adjacent and cooperative technologies. In essence another layer of the internet but with strong financial applications. The second pillar is the community. The concept of decentralization is precisely the fact that people interact with each other as a global community and not through a centralized gatekeeper. A bit like what we saw with file sharing 20 years ago, the decentralization of money and payments is a key aspect of the token revolution.
- How do you tokenize a company?
In essence a company is represented by its shares, also called Equity. The Equity can be converted into tokens (in this case referred to as Security Tokens) which are of course regulated by the financial authorities. Security Tokens can be listed in multiple regulated exchanges allowing companies to reach out to more investors, and allowing investors to exit at any time with better access to liquidity, for instance. The process is somewhat similar to an IPO but the outcome is faster and more efficient. This is just one use case of tokenization, there are many others.
- What is the impact of tokenization in investments around the world?
The Tokenization of assets for investment purposes is impacting and will continue to impact the financial sector. It is the most significant shift that the financial world has seen in several decades. In about 10 years, we strongly believe that STOs will replace IPOs, tokenization and Blockchain technologies will become the main method of distribution of financial instruments, certificates and listed assets. Intermediaries will become obsolete and banks who have not converted to becoming secure custodians of digital assets will also disappear. This is a drastic change similar to what occurred 25 years ago when the internet came about. The businesses that cannot adapt will be defunct.
- How does Deca4 play an important role in this market?
We have been involved in tokenization and STOs since 2018, one of the very first companies in the World to have worked on STOs from the inception. For the past 5 years, we have dedicated ourselves to providing the pathway and strategies to private companies and Nation States on how to benefit from the various aspects of Tokenization, be it Security Tokens, NFTs or Utility Tokens for an ecosystem.
- What is Deca4’s main role?
Deca4 begins the client journey by providing Assessments and Audits on the viability of a tokenization project. We look deeply at all possible options and use cases of Tokenization, from a finance perspective. If the project is viable, a detailed project plan and budget is established for the next phases. This includes Technical Redaction (from Prospectus to Whitepapers), Use Case Development, Implementation Strategy, Technology Development, Blockchain Ecosystem Launch, Marketing Strategy and Implementation all the way to dealing with Licensed Brokers and Distributors in the case of STOs.
- Tell us a bit more about Deca4 and the partnerships it has.
Deca4 Blockchain Advisory was founded in Dubai, UAE in early 2018 by Mohammed Mahfoudh and Jean Paul Tarud Kuborn. In the past five years it has established itself as one of the main Blockchain Advisory firms on a Global stage with offices and clients in 5 continents. Deca4 works with most of the major technology and platform players in this nascent industry, such as Securitize, Polymath, Hedera Hashgraph, HBAR Foundation, Polygon, DAO Maker, Cardano, DigiShares, Chainyard and many more.
About Jean-Paul Tarud-Kuborn:
Jean-Paul Tarud-Kuborn is a partner and co-founder of Deca4. He is also the former Ambassador of Chile to the United Arab Emirates, a function he held for almost 10 years and during which he received the Zayed Order of Independence from Sheikh Khalifa bin Zayed Al Nahyan, President of the UAE, for his contribution to the Nation. Jean-Paul comes originally from the finance world and was involved in the launch of several IPOs during the Dot Com era in the Silicon Valley in the late 90s.
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