The Pomp Podcast - Juan Hernandez, Founder & CEO of Open Finance Network: Crypto's Biggest Impending Issues

Episode Date: April 18, 2019

Juan Hernandez is the founder and CEO of Open Finance Network. In this conversation, Juan and Anthony Pompliano discuss the current state of digital securities, the quality of assets being tokenized today, and the challenges facing the industry moving forward. ----- If you enjoyed this conversation, share it with your colleagues & friends, rate, review, and subscribe. This podcast is presented by BlockWorks Group. For exclusive content and events that provide insights into the crypto and blockchain space, visit them at: https://www.blockworksgroup.io

What's up, everyone? This is Anthony Pompliano. Most of you know me as Pomp. You're listening to Off The Chain, simply the best podcast in crypto. Let's kick this thing off. Juan Hernandez is the founder and CEO of Open Finance Network. In this conversation, we discuss the current state of digital securities, the quality of assets being tokenized today, and the challenges facing the industry moving forward. I really enjoyed this conversation, and i hope you do as well anthony pompliano is a partner at morgan creek digital all opinions expressed by pomp or his guests on this podcast are solely their opinions and do not reflect the opinions of morgan creek digital or morgan creek capital management you should not treat any

opinion expressed by pomp as a specific inducement to make a particular investment or follow a particular strategy but only as an expression of his opinion this podcast is for informational purposes only. Bang, bang. What's going on, guys? Got Juan here. A nice early morning on a Friday rainy in New York City. Thank you very much for coming. Yeah, absolutely. Thanks for having me. How are things going? Good, good. You know, a lot of what we're seeing on the marketplace is just It's just this level of growing excitement for digitized securities, the ability to take these existing alternative assets or new alternative assets, be able to tokenize them, expose them to a broader universe of participants and investors, both in the U.S. and worldwide. And so a lot of that momentum is just slowly building up and picking up steam across the board. Cool. Before we get into kind of a state of the digital security ecosystem, maybe let's go through your background.

because you obviously weren't in crypto early on and kind of backed into this in a very unique way. So just kind of where did you start your career and then we can get into how you actually discovered all this. Yeah, so quick background on me. So I have a computer science degree from Northwestern University, did software consulting for a while, went back to business school to get my MBA at Kellogg,

and then just started doing entrepreneurship, just started doing startups in 2010. And so had a couple of small startups, one small exit, and then in 2014 started what is now OpenFinance, which at the time we were focused on, this is before crypto. So it was pre-crypto, alternative assets, building out a trading platform for these alternative assets. And the crux of it was at the time crowdfunding was really getting started, really going. And for us, we looked at that industry and said, OK, where is the next challenge for this sector? What's the next hurdle they have to overcome in order for the industry to really grow?

And for us, that was the issue of liquidity. So what happens after you buy one of these crowdfunded securities, people expect to be able to move around in them like they do with a Google or a Microsoft stock. And that just wasn't possible at the time. So we built a trading platform. We acquired a broker dealer, built a trading platform for trading of alternative assets. And we're doing that successfully, expanded into publicly registered non-listed REITs as well, which is an instrument in between private REITs and then the more traditional publicly registered, publicly listed REITs that you see on NASDAQ or NYSE. And then from there in 2016, much like every other financial exchange, we started looking at blockchain for clearing and settlement solutions for efficiencies on the clearing and settlement side.

started playing with that late 2016 and then 2017 hit right to the the big ico craze if you will and from that big boom and craze what we what we saw emerge was this new form of asset sorry capital raising mechanism in in these tokenized offerings but we knew that they were securities and we knew that once the sort of the all of the uh the dust settled if you will that they would be classified as securities. And so we began positioning ourselves to be able to take advantage of that coming wave of security tokens or digitized securities or tokenized securities, whatever you want to call them. And so we worked on that throughout 2017. And then in 2018, we did launch our digital trading platform and have been going ever since. And so we work with

tokenized securities like blockchain capital and several others that are out there today. Awesome. So here's what I want to do. I want to go through kind of the current state of digital securities, right? What do you call them? Tokenized securities, digital securities, smart securities. I mean, there's all these different names for them. But what we're essentially talking about is a digital form or a digitally native security that is programmable, etc., right? yeah it's the format right now i mean and so that you know a couple things to talk about there like i was let's circle back on like terminology and the lexicon of uh of these types of instruments because i think that's one of the things that is um it's a hindrance right now in the industry because a lot of people just use these different terminologies and there's some nuances they might mean different things but but yeah i mean to your point these are just securities at least today these are securities within in a new and improved format so so you know we went from paper certificates

to electronic certificates, and now we're going to these digital certificates, digital securities. And so as part of this, I think in my opinion, right, we need issuance platforms, we need protocols, we need exchanges, we need accounting, we need legal, right? We need regulatory clarity, right? All this stuff. Let's just start with issuance platforms, right? So describe to me what you think the issuance platforms, what's their importance to the

industry? And let's just kind of talk through like, where are we with issuance platforms today? Yeah, I think issuance platforms for us serve one huge primary role right now. And it's not actual just issuance, it's actually education to us. They're the ones that are going out there, reaching out to the issuers, doing the advocacy of why you should tokenize, why you should move to this digitized or tokenized format. And so, you know, they get a lot of inbound right now. I think there's a lot of interest from new issuers who want to take advantage of this capital raising technique. But I think a lot of what we see the better ones do is reach out to more traditional issuers and try to really espouse the benefits

of why you want to do this tokenized format. And so for us, that's a big, you know, they're obviously bringing in a lot of the flow, a lot of the influx of new assets that are able to then trade on the secondary market like ours. Got it. And as we move through this, uh i think that there are various levels of um kind of maturity with each aspect if you had to give a grade right so a b c you can do plus or minuses uh like we're in school yeah issuance platforms today as a whole ecosystem alone a plus b minus where where are we in terms of uh of just like how sophisticated they are yeah i think as a whole i'd give them a gentleman c A gentleman C. Okay. All right. And what do you think the biggest challenges are right now that like, what do we have to do to get from a C to an A minus?

So I say that only because, you know, to be fair, also, you know, we're in a tough market right now. I mean, across the board, the crypto markets have gone soft, crypto winter, you know, extended or whatever you want to call it. And so their job is very challenging right now because you have perhaps a lot of exciting new exotic offerings that are trying to raise money in this market. And they're not really able to do so just because the market itself is very soft. And also because these are very exotic offerings that might not be appealing to a broader audience. And then for the more traditional assets, more traditional issuers that might want to participate, they see the softness in the overall crypto markets. And they say, well, is now really the right time, right? And perhaps last year, just with all the frothy and the frenziness, I think you would get a lot more traditional issuers to dip their toe in the water because they just want to, you know, be a part of that movement.

But now since it's cooled off a bit to a certain extent, that's made their jobs a lot more difficult. And so, I say a gentleman's C only because just as a whole, I think there are a lot of macro-level issues that are playing against successful capital raises in today's market. And what do you think the timeline is for some of that to improve? Do you think it's really just market dependent in terms of if we can get some price stabilization and maybe even some recovery, a lot of that gets alleviated? Or do you think this is something where, hey, we probably have a two year timeline and we just need time for people to build technology? It's I don't know that it's a technology hurdle right now. I think it's more it's a institutional level adoption hurdle. Right. You you mean you work a lot with your institutional partners and you have a sense of where the appetite is.

And people are starting to dip their toes in the water with across a variety of instruments. Right. And so you've got pension funds. We're starting to allocate capital to two firms such as yours. You've got you see the fidelities of the world, the Goldman Sachs of the world start to slowly creep in a little bit, starting with Bitcoin or something. And so once you have enough of those larger scale participants starting to throw their weight in, then I think that's going to bring that more mid-level tier institutional players who see now that there is a validation to a certain extent. this isn't this scary exotic crypto world anymore. It's more of just this new form of capital raise and this new form of asset management. And then you'll start to see a lot of them say, OK, is there an opportunity for me to, let's say, they're doing a new billion dollar raise for whatever instrument they're working on. Perhaps there's an opportunity to carve out a little

sidecar, 100 mil, something, and try one of these tokenized paths and see how that works out. And It's low risk to them in a sense of it's just a sidecar to their main vehicle. So that, I think, probably by year's end. I don't think it's a two-year thing. I think we're having a lot of conversations with some of the institutional level folks who want to see a bit more validation in the market before they decide to, okay, let's try a little pilot, if you will. Got it. What do you think about the protocols? So where are we with protocols?

What's kind of the state of the union? Too many protocols. Too many. Okay. Right. And so it was just speaking at an event yesterday at the Harvard Club here, and we talked specifically about this, right? There's every single issuance platform out there has their own little protocol layer. And for us, as we interface with all of these partners, and so we've had a chance to review a lot of the protocols. And quite frankly, a lot of them do

very similar things. And so to us, that's not a differentiator for an issuance platform. You have to provide an additional level of service and products on top of that protocol. If all you have is a protocol layer, you're not really offering much to your clients. And so the protocols, they're all starting to really sort of synthesize into, I think soon we'll just be able to, as an industry, almost take a vote and just decide, OK, we're going to pick this open source format and everyone's just going to adopt it because that's going to be better for everyone. So even today, these are open source standards.

And so you can see how certain protocols are very similar to other protocols, just with slightly different tweaks here. Will there be consolidation, you think, where literally they kind of all just say, all right, this one, you know, option A is the most effective, efficient and best to move forward with. And let's all just use that. Yeah. And the thing is, you have to you've got folks that are putting their names on protocols, which is just no one's going to adopt the competitor's protocol if it has their name on it. So so we advocate a lot for just kind of trying to push forward just a brandless, if you will, protocol that everyone can agree to. Is there one that you have in mind as like, this should be the one? We're looking at a couple of the EIPs out there.

Haven't necessarily seen one that's all-encompassing yet. But internally, we have this thing called S3, a smart security standard, which is not another protocol. It's almost a standard of standards. And so if you want to interface with our platform, because there is a technical integration needed for the different protocols, if you want to interface with our platform, you have to adhere to this S3 standard of standards, which is really just a common interface. You can do whatever you want underneath the covers. Obviously, we have to do a security audit, a smart contract, and we have to do a review and ensure that it's properly following all the rules. But for us, we feel that that S3 layer

allows us to ensure that the securitized protocol and the harbor protocol and the token self protocol are all sort of doing what they need to be doing and then if you want to add a couple of additional features here and there that's fine because i think that's kind of the bare minimum right you got to meet the you got to meet the s3 as the bare minimum and then anything that you want to do bells whistles whatever on top exactly so so there you know we've had a lot of informal discussions with the different um issuance platforms and and there's interest in in standardizing and just kind of coming to terms with with if we can all agree on one protocol then that should benefit everyone but you start getting into you know people put

their names on protocols and no one wants to adopt a competitor's protocol so i that that's something that's just going to take time um ultimately too i mean a lot of the you know by our last count there's over 80 issuance platforms out there that we've cataloged only a handful of them are active and so i think the active protocols the protocols are in production today that are being used on out in the wild already ultimately i think those will also be the ones that are going to really influence a lot of what the the the final protocol will look like simply because they're out in the wild they're being vetted they're being battle tested right now and that's going to be i think a big uh attractive selling point across the board for sure and then i guess the other piece of this

is uh there's exchanges right uh one of which you guys i think you guys were the first to be up running and trading and and i and i should say clarification good not in exchange okay it's a sec reserve term we're an ats an ats okay alternative trading system describe what the difference is yeah so so so there are three tiers if you will in the broker dealer you know think of these like pokemon i think if you will you've got your base broker dealer that that can transact in private securities like these alternative assets digital securities then you can upgrade your broker-dealer to what's called an ATS, an alternative trading system, which is that next level. What the ATS allows you to do then as well is now other broker-dealers could

pipe into you. So, think of it a little bit as a spoken hub type model where the ATS, other broker-dealers are able to pipe into it via APIs or fixed feeds to receive real-time quotes, put in automated orders, etc. And so, then the third level, sort of the final level on top of that is the exchange. So, full-blown SEC-registered exchange. At that level, there are a lot of similarities between an exchange and an ATS, but just to oversimplify it as a whole, an exchange is subject to much, much higher standards and reporting requirements and varying levels of different regulatory hurdles that they need to overcome. So, for us, there is a future where we will move to that model when it makes sense. Right now, as an ATS,

we are able to do a lot of the things that an exchange can do, but just it's a bit more a better fit for what we're trying to do within the industry. Got it. And I should say as a disclaimer, obviously, we're investors in open finance. And so a fan of what you're doing, maybe describe kind of, okay, where are we with ats's exchange are there actually exchanges that are doing this is it all ats's right now it's all ats's right now yeah there's no i mean so again like an ats and exchange are very similar in certain regards just it is a much bigger undertaking to to be a full-blown exchange and quite frankly just the industry is not there yet right so for us we're an ats and so we have

the ability to allow other broker dealers to plug into us to to effectively you know be e-trades to our NASDAQ, if you will, right, where they can onboard their own clients and then through their trading interface, they can, you know, send in automated orders, you know, receive real-time price feeds, et cetera. There aren't really any broker dealers doing that right now. So to be a full-blown exchange, it doesn't make sense, right? I think you need a, right now as ATSs, you know, there's only a handful of broker dealers that are out there that are actively working with these digital securities and so so on the ats side there's a handful of us out there um uh so so there's open finance there's uh t0 is also active they're they're only trading their own token uh

shares post is someone who's also done um they've done one live trade uh um and and there's some others out there but but they to our knowledge they have not done a live trade yet um and are in various stages of readiness got it okay and then um in terms of the uh let's go back to the protocols for a second. What grade are you going to give protocols? Incomplete. Incomplete. Okay. All right. Not that we haven't even taken the test yet. Okay. We are just, um, you know, again, I mean, some of these instruments just went live and we haven't, you know, one of the challenges we were talking about one of our partners the other day was that they, there's a certain tokenized fund that we work with that is actively trading. Now that fund wants to do sort of a

second tranche. And so now the smart contract layer needs to be able to handle, OK, you've got investors' shares from the first tranche, and they've been trading. There's different holding periods on the Reg D, Reg S side of when it can start trading, both in and out of the US. And now you're adding the second tranche layer that now, in theory, not in theory, in actual practice, shares from this second tranche, although they are the same underlying share class, they need to act a little bit differently because now these have a different timeline around them. So it sort of restarts the clock for these particular shares. And so how do we manage that? I mean, how do you manage that sort of aspect? In the traditional world, what

you would do is you would simply just not release the second tranche of shares to the shareholders until the holding periods had passed. So you would kind of bypass any of that interim period, But by just withholding them and obviously that's not what we want to do collectively across the board. We want to be able to empower the investors, you know, allow them to hold their tokens or store them in cold storage as they prefer. So that's something that we're just that's still being worked on. So that's why I say incomplete. Right. I mean, there's still a lot of factors that are being worked on as more and more edge cases start showing up and need to be handled properly. What grade would you give the ATSs and exchanges?

Well, I would give us an A+. We're killing it across the board. That's like if the teacher took the test, right? Yeah. And I had the answer guide next to me. Yeah, yeah, yeah. All off. I think across the board, as a whole, I would put us at a B-.

B-. Okay. Across the board. But I think the one thing we talk about a lot with some of the other ATSs out there is how do we pull our liquidity together? Because there's not any one of us that has just like a massive pool of liquidity just yet. And so in order for us to really catalyze growth in the industry, we feel that there's a need to really pull these pockets together in a way that now we can increase the distribution and the eyeballs in the audience that see these type of tokenized offerings. that to me is really the only way that that collaborative um you know collab um collaborative what do they call it collaboration or something what is it uh and that collaboration when it's

like collaboration with your competition oh okay oh yeah frenemies but but so so that that's that's my sentiment that that in early days we need to do that we need to pull liquidity together in order to to make it work and so so there i still think we're a b-minus just because with that we there's been a lot of talks of that but we haven't actually pulled together and put that yeah um individually for us i'll give us an a i think there's room for improvement a minus a minus um no i i i think we're we're i think we're doing a lot of things right i think we could do a lot of other things better what's the number one thing that you're like you wake up in the middle of the night you're just like man we suck at doing this we got to get better at x

I think, honestly, we are hampered to a certain extent by how the regulations and how we can talk about what we're doing. I think that's one thing we need to work on. And it's not a we need to do better marketing. I think it's more just because I think our marketing is killing it. I think it's more we need to understand how to better communicate the value proposition of what we're doing to our audience. and also not even just to our audience of folks who are already active in crypto, because I think that's easy enough, right? You can push our content to crypto channels,

but the real growth is going to come from mainstream adoption. So we need to really detail out what is the value proposition for a mainstream investor? Why would someone who, or even a traditional alternative asset investor, right? Why would somebody who's accustomed to buying these assets on paper, if you will, I mean, certainly for us in the room, it's easy to say, oh, of course you want to digitize, you know, your investment holdings. But we say that because we're very techno savvy and we kind of like are very excited and caught up in this little bubble, if you will. But how do you get a mainstream traditional investor excited about the opportunities here? How do you communicate to them that this is a better instrument for you? And not even just the instrument itself, this is a better format for you.

that's what I think we need to do better. And quite frankly, across the board, I think as a whole, the industry needs to do better on that to try to really increase the pie because otherwise we're all just fighting for that same little pie slices. Yeah. Makes sense. Service providers. So we'll just lump in accounting, legal, auditing, kind of everything together, which is probably unfair to a number of people, but we only have so much time to talk. But walk through kind of where do you see in that service provider bucket the most important aspect or two? And then we can get into what you think the grade is. Yeah.

I mean, I've got to go with lawyers as the most important factor. I thought you were going to say that. Yeah. I mean, it's so funny because I just had this conversation yesterday, too, that there are folks out there who are saying they're blockchain lawyers. And you're like, what does that mean? What does that actually? there's no new law for blockchain per se and so for for us it's the securities lawyers that are kind of savvy enough to recognize sort of this new technological format and how it applies to

existing securities laws that those are the folks that that we that that to us are critical to kind of educate more and more of those securities lawyers to this new format so that they can take it forward to their clients and and or when their clients approach them and say you know we've been hearing a lot about digitized assets. Is this something for us? Could this be appropriate for us? The lawyer can actually then give them a educated response instead of a, I don't know, I'll go ask our new 22 year old, you know, intern or whatever, who is more tech savvy than I am, right? We need to have that education sort of at the frontline because the securities lawyers are at the frontline of all of these new offerings coming out and sort of, you know, even before

they start doing an offering, the first thing you do is go talk to your securities lawyer. The first thing you should do is go talk to your securities lawyer. So I think that's the most important layer of service providers. Accountants, I think, is also pretty critical in a sense of, especially as you start dealing with the Reg D, Reg S combinations that are very popular today. There's a lot of implications around selling outside of the U.S. and in terms of tax withholdings and whatnot that aren't necessarily being accounted for properly today. And I think it'll flush out over time. But, you know, people have kind of just been sweeping it under the rug right now because they're like, oh, that's an end of year thing. We'll deal with that when we get there.

And I think it's something that's going to potentially bite a lot of the issuers in a way that that could hamper growth because it's going to leave a bad taste in their mouth. And they're not going to be interested perhaps in doing a second offering in a tokenized format. Got it. OK. And then what do you think about the assets themselves? Right. The assets seem to be, we just went through kind of the ecosystem, if you will, right? So everything from the issuance platforms, the protocols, the exchanges, and the service

providers, they're all, in my opinion, going to live or die with the quality and the demand for the assets, right? What are you seeing in terms of the types of assets and maybe even which ones are being successful and then which ones are just falling flat on their face and failing? Yeah. So, I mean, we're seeing stuff across the board, like venture capital funds, hedge funds, real estate, private companies, revenue sharing models of like new product lines. It's it's right now everyone's struggling across the board to raise capital. But but the what we believe to be a winning formula, which is going to sound obvious when I say it is sort of a marquee name putting out a high quality product. And so we think real estate is just well-suited for this type of, you know, real estate in general is just well-suited for fractional ownership.

I think it's an asset that people generally understand across the board. Everyone knows that real estate is a critical component of a well-balanced portfolio, a well-diversified portfolio. And so if you can, you know, have a marquee name that's offering some sort of a downtown New York office building, for example, like that, that I believe is a product that will do very well because people will understand that. they'll understand the hard asset that that is under the offering and and they'll have a place for it in our portfolio um the more exotic stuff that we're seeing a lot of new sort of brand new companies per se that are very unproven this is almost like their series a that they're trying to raise i think those are going to have a really hard time right now because you've already got this exotic format of tokens and then you've got this exotic underlying asset as well that just

It's it's it's a hard sell. You have to you have to cross two hurdles. So but, you know, blockchain capital, they did a tokenized offering of one of their venture capital funds that did very well. You know, they're a name in the industry where people recognize them and they kind of recognize the management team behind them. They know that they have a successful track record. And so if they were to do another fund offering, I believe it would do well as well. We're starting to see some real estate offerings. Harbor is working on a private REIT right now that seems to have good reception in the market. And so real estate, I think, is going to be that big driver because I think it's just something people really understand. And so then you remove that exotic asset offering element of it.

And now you just have to get people across the hurdle of this is just the same real estate you've invested in before. Now it's just an improved digital format. what's the number one asset if you could pick any asset in the world you were like if we tokenize x there would be like that would be your dream i i gotta go with real estate no but like like what piece of real estate yeah like the actual asset itself which one would you pick i i there's like a big marquee name let's say for example uh um in chicago let's say you know if if they were to tokenize the sears tower something like that like refinance the sears tower something to that extent, that I think, I mean, people would recognize that worldwide.

I mean, that's a landmark building. It would have that broad name recognition. And then quite frankly, so long as you underline offering, the economics are sound. I think that's an easy sell. But that to me, I say an easy sell just because that appeals to a wider audience of participants and what's in the market today. You know, the folks that are in the market today, some of them perhaps invested in ICOs back in the day or they've done Bitcoin and Ethereum, so they're kind of used to that

exotic element of it. But again, to my earlier point, for us to really grow the market, we need to have more mainstream adoption. And so a marquee name, something that people immediately recognize, give them that sense of stability, confidence, and trust. I think something like that will be a watershed moment in the industry. Got it. And then what about regulators, right? Obviously, you've spent a bunch of time both just kind of in getting your own regulatory licensing, et cetera. And then also I'm sure a lot of regulators have wanted to just understand what's going on. What have you found maybe they're most curious about or learning about? And then also what's their reception to this whole digital security space? Yeah, it's been a lot of education

in a good way, in a good way. I think there is a lot of, there's been a lot of back and forth conversations that we've had around properly conveying how these digital securities interact how they're different than what's been done before and also how they're very much the same as what's been done before. And so for us, we had the benefit of having an operational business already that was doing exactly what we're doing today, just non-blockchain. And so we were able to really, you know, we had our policies and procedures from how we do this on paper, if you will. And we were able to walk the regulators through that and then almost show them a red line version of, and here's how we're doing it on the digital side now. And so a lot of that just

kind of being able to relay back and forth at like, okay, here's how we did it in the traditional space. And this is how we've all kind of understood that it's okay to be done. And here, you'll note here that instead of using some sort of transfer agent or fund administrator or something like that, we're using someone, a service provider that is the books and records keeper on chain, if you will. So one of these issuance platforms, I mean, it serves as a digital registrar to a lot of these issuers so similar to a transfer agent or a fund administrator and so kind of being able to show sort of the the old way and the new way side by side i think was really beneficial and kind of was a was helpful in educating kind of how these digital securities are different and

more importantly why they're better right i think for us a big thing that we talk about is is it's because you can code a lot of the rules and regulations of the smart contract layer you can actually ensure that they're being enforced across the board in a way that was never able to be done before. So you explain that to the regulators and now they can actually, without having to sift through mountains of paperwork, they can actually see that these offerings are adhering to the rules and the regulations and the process and enforcing investor protection at a much higher level than was possible before. That to us is sort of like a huge boon to the regulators, because at the end of the day, they're out for the protection

of the, you know, mainstreet investor, if you will, the mom and pops out there who want access to these types of offerings for their portfolio, you know, just have to ensure that they're protected. And so the technology allows the regulation to be enforced in a much better fashion. We've talked a lot about the kind of equity ownership, right? Whether it's in companies in funds or in real estate, what are you seeing in the debt markets, right? Debt's a huge asset class in the traditional markets, but what are you seeing in this digital security space for debt? There's been a handful of debt instruments that we've seen come across our desks.

It's haven't seen too much at a – for us, debt is really just because of some of the long-term aspects So they really need to have an entity behind it that is high level and trustworthy. It can't be sort of a new operation per se. So we haven't seen any institutional level type players step forward with debt offerings. I mean, similar to the early crowdfunding days. We like to call this stuff crowdfunding 2.0, if you will. But early crowdfunding days, like debt-based instruments took off significantly because You had these entities that were taking traditional real estate product, for example, and offering debt instruments off of that.

And so I haven't seen too much of that yet, but we think it's going to be a big, big growth area in the market. Got it. Is there any area that people aren't talking about that you're like, look, this is either a huge opportunity or you're actually seeing quite a lot of assets and activity and just people haven't caught on to it yet? But, yeah, I think just traditional, like, limited partnerships that are out there, just like these traditional vehicles where people are in these for, you know, 10 or so years, we think that's an area that no one's really looking at just yet. And we think there's a lot of pent-up liquidity sort of demand there where you've got these participants who have been in these instruments for a very long time. And these are solid, well-performing instruments. and to give those participants the option of liquidity, we think it's going to be an area that will be a good conduit towards more institutional product.

We haven't really seen anyone focus on that just yet. And so that's an area that we think could be focused on. Got it. Before I wrap up, I always do rapid fire questions. What is the most important company in crypto other than your own? um i will go with i'll go with backed actually backed yeah b-a-k-k-t k-k-t yeah i i think they're going to on the regulatory side they're going to push the envelope much further than than companies like ours can do simply because they have much larger financial backing and so

So they're able to kind of really push the needle forward on the regulatory side that I think will benefit all other participants in the market. So they'll be the ones out there advocating and lobbying in Washington to really push for a refresh of some of these securities laws and the regulation in place. And I say refresh. It's not a redo. It's not a rewrite. It's just refreshing them to account for this new distributed format. Got it. That makes sense. What do you think is your most controversial thought in crypto? What do you believe that a high majority of other people would disagree with? So a lot of people are struggling with the fact that these security tokens, I think, they're not bear assets anymore. I think people have that mentality of, you know, you've got your Bitcoin, you've got your Ethereum, you can hold it in your wallet and no one can take that away from you. And the way a lot of these security tokens are being coded is they actually are for regulatory and legal reasons.

There are ways to kind of claw them back if you need to. And so I think that that's something that a lot of people aren't, they feel it kind of goes against the spirit of blockchain because it almost kind of brings back that centralized aspect of it. But to me, I think that's something that needs to be done sort of in this first phase. And then as we move to the second phase and we can kind of revisit that aspect of sort of, you know, autonomous ownership, if you will. But that's something that, you know, we we hear a lot about, you know, people saying, oh, it's just inherently contradictory to the spirit of distributed ledger technology.

Well, I mean, part of it, too, right, is, you know, think of cell phones, for example. It would have been great to go from landlines to smartphones. But in between, actually, people came around a suitcase that had a phone in it. Right. And then they went to like the big bricks and then they went to like a flip phone. And then eventually we got the smartphones. And so there's some there's some evolution that has to happen. And I look back at this time and be like, man, can you believe our phones are like this big? Can you believe digital securities were this clunky at first and until they got evolved into that next phase?

When I was a kid, I've actually never told a story before. When I was a kid, I was probably, I don't know, eight, nine years old. And I remember I got in a car and I actually can't remember. Was it a car that like my dad had rented or was it like a friend's car or something? But I remember the first time I saw like a landline looking phone in the car. Oh, right. Like, like you could like pick up the phone and had the cord and like, you could talk in the car on the phone, whatever. And I remember just being like, Whoa. Right. And now we walk around with

computers in our pocket. It's crazy. Yeah. Yeah. I used to have one of those like T-Mobile sidekick type. Yeah. And the slide out keyboard. I was like, this is amazing. Yeah. Those are the best phones ever. Yeah. Um, all right. What, uh, what one regulation would you change or improve if you could? I'll go obscure here. I'll go section 12G. Okay. What is that? You're the first person ever named the regulation by official name. All right. What is that? It's on page 38. This is line number 40. So section 12G is sort of a, it does a variety of things, but it puts a cap on the number of shareholders that certain private companies can have. It used to be 500. You could have no more than 500 shareholders and they bumped it up to 2,000 for private companies. But to us, if you

read sort of the spirit and the intent of what the rule is, it's to, again, investor protection, that once a company gets to a certain number of shareholders, in theory, they cannot properly manage slash communicate with their shareholder base well enough in a way that the shareholders will be protected. So at that point, you have to go public. And then there's a very onerous process for that or a very burdensome process. And so for us, with this new technology, you can streamline and properly communicating managed relationships with more than 2,000 shareholders if you needed to. And so we think that's one that if you look at what the spirit

and the intent of Section 12G is, we think that that's one that is ripe for refreshing, especially as more and more companies seek to remain private longer. Do you think that the lines between public and private are going to kind of completely blur? Like there won't be a private company and a public company in the future. it'll just be there are companies and there's liquidity options associated with what the company wants? You look at some of these tokenized offerings out there today and they're pseudo

public in the sense of blockchain capital puts out a nav every week. They update their nav every week and people have this visibility now into the companies, into these tokenized offerings in a way that they never did before. I mean, with traditional private securities, maybe you get an update from the gp or the issuer once quarter once a year depending on how how how active they are and so you look at some of these new offerings and and the data that's available to you now just a transparent nature of distributed ledger technology allows for the investor to have greater insight into what's happening with the company and how it's performing and so you're they're already pseudo public i think so it just kind of then depends on what tier are you at right

Are you just getting started and so your reporting requirements are really low so you're down here all the way up to your NASDAQ level and obviously you have very stringent reporting and other requirements you have to adhere to. And so depending on the needs of your company and where you're at in the full sort of capital raising life cycle, you select a level that's right for you. I think that it just gives the issuers, the entrepreneurs, the companies a lot more flexibility and options in terms of how they raise capital, how they how they can access these varying capital markets. Makes sense. What's the most important book you've ever read? That's a tough one. I'll be honest, I've not read a book in a while. um i'll actually i have it's a it's a the uh uh uh what it's called uh the content little baby is the most recent book i've read now i have a nine month old at home and so so the only the

only actual reading i've been doing lately is around like um uh baby books um you know what's the one thing that that having a child has like been the biggest surprise what did you not expect i don't know if it's a surprise i think to me it just prioritized things differently um in a sense of you know um you know in my spare time i would you know do things that were more you know um uh perhaps more of my personal interest or hobbies and stuff and so since you learn to kind of prioritize different things now because obviously uh riley my daughter you know i now instead of you know doing things that might have been like a personal hobby i'd rather just spend time hanging out with riley at home and just um

playing around with her she's starting to crawl and she started to pull herself up and kind of shuffle around now it's like that to me is so much more exciting than than than you know finding time to read books per se i just haven't been able to do that so i don't know that it's been a surprise i think i think you know i think as a first-time parent like we and we knew what we knew and we didn't know what we didn't know but um but yeah i i think it's it's you know it's been something that's just been really uh challenging rewarding and just like a lot of fun i think yeah that's awesome yeah the uh the baby on the move imagery in my head of like a baby crawling around the floor while you're uh trying to read is probably not uh not something that gives parents a calm

all right so two uh non-crypto questions uh how long do you dunk oreos in milk i like to let them get really soft oh my god that's that's a psychopath move no i'll take a mug uh like a like a wide mug and just put a bunch of oreos in there and come back like five to ten minutes later and they're all mushy and it's just like it's like cereal yeah and it's like cereal that's a little weird oh my god that is that's the worst answer we've ever had i was like some people like go real crazy like oh i dunk it for 15 seconds you leave it for minutes i just let them yeah and you just eat them really mushy yeah all right it's like it's like oreo it's not even cereal at that point i guess it's yeah oh man we got a lot to talk about

um all right and then what about uh aliens believer non-believer real not real i i think i'm a believer in the sense of it's it's a very big universe and i think it's a little self-centered to think that we're the only life out there um beyond that i don't know what it looks like right i mean i i don't think it's going to be you know no no i i i think i mean in what sense like you know are you would you rather go to the depths of the ocean which we know nothing about really or would you rather go to space which we think we actually know a lot about i go to space space yeah yeah to me that's that's i you know i look at i look at like what Elon, uh, is doing. And like, I think, like, I think, I think my daughter's going to live on

Mars one day. Like, I think that's crazy. That's going to be like the up and coming neighborhood, right? You could live in like, you know, instead of people moving to like, um, you know, some of the key cities out there, you know, like today, like New York, Chicago, Los Angeles, people sort of in that region gravitate towards those hubs. I think people are just like, I'm going to leave Chicago and go to Mars. Well, I think, you know, for, for, for the same reason that people come to these hubs for like opportunities right i think there's going to be a lot of opportunities in these different outposts you know when it comes in 20 years from now um and i think people will flock to it simply for the opportunities to be part of that first wave and to be able to

capitalize on a lot of those opportunities that are popping up of you know from a professional perspective or from from a just um like a scientific or or just um exploratory perspective but yeah i i think i'd much rather go to space and then deep underwater yeah the ocean kind of scares me a little bit it's a little yeah yeah like what's down there yeah like you might find you might find like a sunken ship with uh treasure or you might find a sea monster that we don't know yeah but but see that's less it's not like we're gonna find atlantis right like like if there was a possibility that atlantis was down there like that would be exciting to me because then you could to me that the civilization that might have evolved from there could be the the aspect of

adventure and discovery to you is more exciting of like mars space the unknown than like down the ocean it's just we're not gonna find anything yeah yeah i feel like you're right i mean there's certain pockets down there that we don't know much about but we're not going to uncover something it's like oh hey there's a whole nother world down here so yeah all right that's fair uh what one question do you have for me to end it does everyone call you pomp like does anyone ever call you just like hey anthony aside from your mom does your mom call you anthony or does your mom my mom actually doesn't even call me anthony uh so growing up um i think i was in like kindergarten or something and i couldn't write my name like dumbass me literally couldn't figure out how to

write a n t h o n y and uh and so my mom uh was like oh just write your initials so my name is anthony john pompliano and uh so she's like just write aj and i was like whew went from you know a bunch of letters to just two this is this is fantastic and like if you think of anthony or uh aj a and the j are actually just like straight lines you just have to connect them like it's like pretty easy letters to write uh and so i started writing it and literally through high school uh pretty much all of my friends called me aj and uh and uh my my mother my father everyone all my brothers aj uh and anthony only came out when i was in trouble and uh and so when i got to college um a little bit in high school people had called me pop uh but really in college people

started calling me that um and the reason why it was hard through high school was i have four younger brothers and so usually there was two of us whether we were playing sports we were doing like we were all together at some point uh and we rarely did things alone so if you yelled out pomp yeah you'd get like two or three people to turn around and that doesn't really work for names um and so uh when i went to college uh for a couple years i was uh there by myself without any of my brothers and um and so pomp started to take hold and i literally couldn't lose the nickname at this point if i tried like people get mad at me at conferences um or an event or something if i introduce myself as anthony yeah and then somebody else will say like hey pop and

the first person be like dude what the hell like nobody knows you as ant like you have to introduce yourself as pop because that's how everybody knows you and so uh it's weird like yeah it's like the first time i wrote you an email i was like do you say anthony or pop i was like do i you know you start with the name comma and then you write your messages like do i write pomp or I think I may have said, I think I may have used Anthony just cause I was like, I didn't really know you back then. I was like, is that presumption? So just like, just jump in on the nickname to start calling him Pomp.

And so I realized everyone calls you Pomp. Literally to the point where my mother even laughs about it now. Right. Like, she's just like, well, how the heck did this happen? And, uh, and I think my brothers are the funniest, right? They're just like, you know, how did we go from Anthony Pompliano, which is like one of the most Italian, you know, long names you can have, uh, to just four letters. right and so uh so we get a good laugh out of it but uh names are weird because in crypto

specifically like if you think of um even twitter like how many like i literally see at conferences people will put their first name on like a name badge and then they'll put like at and then whatever their twitter handle is or people will come up to me and they'll introduce themselves and they're like hey um and whatever the twitter handles like you didn't even tell me your name you literally told me your twitter handle and it's like that becomes such an idea 2020 yeah Well, it just becomes this like identifier because if you're on Twitter a lot, like that's what you engage with. You actually don't engage with the person as a name. You engage with their Twitter handle.

Your Twitter handle is not Pomp. It is not. It's like A Pomp or something. I tried to get it one time. Big issues. There's a guy, I think he. You can call him Jack and just have him. No, listen, I think there's this guy, if I remember correctly, he's like a DJ in Texas or something.

I actually think he blocked me at this point. Oh, is he really? Well, because everyone kept like, you know, accidentally tags them. They just play at Pomp and they tag them. And so I messaged him one time. I was like, hey, man, like, would you give it up? And he was just like, basically kick rocks, right? Like he was like, no way.

Is he even using it? So he is. He's like a radio DJ. Oh. So like, and I think his name is like DJ Pomp or something. And I was like, oh, man, you're stealing my thunder. Like my DJ career. He's a great April Fool's joke somewhere in there.

You guys switched Twitter handles for a day? Yeah, yeah. Yeah. No, if we switch, I'm not giving it back. So I'll warn him right now. Don't give me that Twitter handle. You're not getting it back. All right, man. Listen, thank you so much for doing this. This is awesome. I think people really appreciate hearing kind of a state of digital securities and we'll have to do it again in a few months. Yeah, absolutely. Hey everyone, Pop here. If you liked this episode of Off The Chain and want to help us take crypto to the top of the Apple, Spotify, and other podcast charts, please do us a favor and rate,

review, and subscribe. To review, simply go to the Off The Chain homepage, scroll down until you see the five blank stars taking 15 seconds to fill those stars in and leave a quick review goes a long way in helping us take the entire crypto ecosystem to the top of the charts i appreciate you listening and see you next time on off the chain