Thrive for Fintech, “shout out” for innovative firms solving real problems

This week saw the launch of “Thrive for Fintech”, an investment programme focused on Financial Inclusion. Green Shores Capital (my fund) have partnered with Crowdcube for this and it is sponsored by Deloitte. The applicants will be funnelled through a competitive evaluation criteria and six of them will be shortlisted. Via this initiative, we will identify and invest in up to three top Fintech firms.

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This is the programme page, that talks about the criteria in detail

“Successful applicants will also receive a legal support package to cover areas such as company structure, employment and incentives, data and IP, as well as receiving exclusive access to an online platform with a host of free legal resources. All finalists will also be invited along to a legal workshop that is specifically tailored to Fintech businesses.

Lastly, the successful applicants will also receive an accounting support package from Deloitte finance experts, covering areas such as raising investment and financial strategy. Along with a free, bespoke online accounting package and customised analytics dashboard.”

So how did this happen?

All three partners at Green Shores, Deepak Ahuja, Banesh Prabhu and yours truly, have all had decades of Financial services experience. We have had years of global exposure and have seen real world challenges especially in Emerging markets due to lack of Financial Services at the last mile. When we set up Green Shores earlier this year, we identified Financial Inclusion as a core theme for our investment thesis.  

We have made several investments through our previous fund in this space and want to further this cause via Green Shores. This was and is critical as many use cases we see in the UK and in the west are focused on impactful themes, however in order to create impact at scale they need to expand into emerging markets. 2.7 Billion people in the world live outside the conventional financial services system.

This programme also demonstrates that its critical to bring together multiple ecosystem players to create meaningful impact. And we believe, this is a model that can be replicated across different innovation clusters where there is a dire need for capital.

Access to capital is not a goal in itself – it is a means to end poverty and economically empower people – the first step towards achieving healthcare and education, a means to help grow enterprises and create jobs, a means to tackle unemployment, and so much more. 

Arunkumar Krishnakumar is a Venture Capital investor at Green Shores Capital focusing on Inclusion and a podcast host.

Get fresh daily insights from an amazing team of Fintech thought leaders around the world. Ride the Fintech wave by reading us daily in your email

Announcing the Daily Fintech Service: Book an Expert for an Hour

How many times have you read one of our posts and thought “I would like to pick up the phone and talk to the person with that knowledge and network”. Well now you can. You can book one hour for CHF 380 by simply sending an email to our Chief Commercial Officer (Julia Spiegel) requesting an hour’s consultation. We will schedule a time by email (we are in Europe, so we are time zone friendly for most of the world).  We will send you an invoice for your records by email and you pay for the hour by PayPal.

We start with one of the 6 Experts who write regularly on Daily Fintech. Bernard Lunn writes on Saturday from Switzerland about the Blockchain Economy. Bernard, CEO of Daily Fintech, is a serial entrepreneur, senior executive, adviser and strategic deal maker. He started in the engine room of Fintech for enterprise software companies (such as Misys, Temenos and ITRS). Bernard is the author of Mindshare to Marketshare and The Blockchain Economy and has used his media experience (for example as COO of ReadWriteWeb) to guide Daily Fintech since the first post on 29 June 2014. Bernard is a Brit who has lived in America, Singapore, India, London and Amsterdam and has done business in 40 countries. He currently lives in Switzerland.

We will be onboarding all the other people who write for Daily Fintech onto our Book an Expert for an Hour Service Service in the coming weeks:

Ilias Louis Hatzis writes on Monday from Greece about Blockchain, Bitcoin & Crypto. Ilias is an Internet entrepreneur who started his first company, an internet search engine, in the mid 90s during the dot-com era. Later on he founded several Consumer Internet and AdTech startups and went to work for Google and JWT. As well as still being an active entrepreneur, he mentors startups at the MassChallenge, MITEF and other startup accelerators and competitions. Having lived and worked in America, Ilias is currently back in his native Greece and is the Founder/CEO of Mercato Blockchain Corporation AG.

Efi Pylarinou writes on Tuesday from Switzerland about WealthTech and Capital Markets. Efi brings bold Wall Street experience (Salomon Brothers, Bankers Trust, SGCowen) in a broad range of asset classes (fixed income, structured products, hedge funds). She has lived and worked in the US, France, Greece, Canada, and Switzerland in investment companies, a university, an online education provider, and an executive consulting firm. She brings a strong academic background combined with a focus on breakthrough results. Efi is the author of Fixed income books with Frank Fabozzi.

 Jessica Ellerm writes on Wednesday from Australia about Small Business Finance. Jessica is CEO & Co-Founder of Zuper Superannuation, taking a new approach to superannuation savings. Previously she worked for Australia’s flagship Fintech startup and small business banking provider, Tyro. She is also a well-known expert on digital growth hacking and presents financial news and market updates for Australia’s leading online finance news provider, Finance News Network.

Zarc Gin writes on Thursday from China about Insurtech. Zarc is an analyst for Warp Speed Fintech, a Fintech, especially InsurTech-focused Venture Capital based in China.

Arunkumar Krishnakumar writes on Friday from UK about consumer banking.Arun has the experience and global mindset to cover innovation wherever it comes from globally and is equally comfortable in the world of big agile companies as well as scrappy upstarts. His big company experience includes Barclays and PWC. In his current role at Angels Unleashed, StartUp Bootcamp and Funding XChange, Arun works in the world of the scrappy upstart.

For those not familiar with CHF (the famously stable Swiss Franc) it is about par with the US$ today.

Many people requested an easy engagement model for our advisory service. Now you can start working with us by simply paying CHF 380 for an hour with one of our Experts. One day all consulting firms will make it this easy.

Request one hour of Bernard’s time for CHF380 by sending an email to Julia Spiegel (our Chief Commercial Officer)

7 mega waves in the Blockchain Economy and the dams holding them back

RCC DAMS LONGTAN Dam Completion.jpg

This post is aimed at “buidlers”, to those in the Blockchain community who use a Bear Market to build solutions and to those who invest in those solution builders.

You can take these mega waves to the bank. More specifically you can take them to investors. These are trends that that are inevitable and we show why. This post also shows the dams that are holding back these waves today. Entrepreneurs look at these dams as their problems to solve by creating the sluice gates that let the water flow in a useful, controlled and profitable way. We also show the picks and shovels that are being used to build these sluice gates.

In each of these waves there are ventures who are building solutions. The sluice gates are under construction. This list is based on observations in the real world, not theory. Which ventures will win will depend on their execution capability, but we are confident that each wave will produce at least one big winner.

Wave 1:  Decentralized Exchanges

  • What:  A Centralised Exchange is an artefact of Legacy Finance and the Centralised Internet. If we went in that direction we would end with a duopoly like NYSE/NASDAQ. There are already hundreds of Decentralized Exchanges.The logic of decentralisation is that every wallet can exchange with another wallet or to put it another way that P2P Exchange is feasible. Although some Legacy Finance markets (such as Public Equities) work through Centralised Exchanges, many Finance markets today operate through decentralized OTC (Over The Counter) traders, so this is easy enough for Institutional Investors to buy into.
  • Why: Centralised Exchanges are a honeypot for thieves (even if the Exchange operator is honest). The only way to protect money when money is data is radical decentralization so that a thief only ever gets one person’s money (and if that is fairly hard to do, they won’t bother).
  • Dam = liquidity. If exchanges are decentralised how do we get best price when we want to buy or sell? How do we get the price transparency of a Centralised Exchange in a Decentralized world?
  • Picks & shovels: liquidity is fundamentally a broadcast messaging data problem and there are computer science solutions to this. There is likely to be a mix of offchain matching and onchain settlement. Hubs will  perform a critical aggregation function and not every wallet is equal – some buy and sell in huge quantities.  Data aggregation based on P2P broadcast messaging is a solved problem in computer science and does not require a scientific breakthrough.

Wave 2:  Decentralized Investing/Trading

  • What: The Legacy Fund Management fee model of AUM (Assets Under Management) plus Carry (aka profit share on exit) will move to a model of signals, decentralised exchanges, networks & syndicates. The big change is that the Legacy Fund Management fee model is based on first gathering assets from LPs then investing.  The Blockchain Economy Fund Management fee model reverses this. You start investing whatever you can afford, then you publish signals of your trades and people pay to follow those signals. The passive investor’s capital is kept under their control, there is no equivalent of AUM.
  • Why: Blockchain changes the rules of the game and the game has not been going on long enough for Legacy Fund Managers to show their track record. We need new compensation models for a new generation of Blockchain native active investors/traders.
  • Dam: How do you a) identify the new and emerging investors/traders b) how do you compensate them properly? How does a a new generation of Blockchain native active investors build trust with passive investors (fka LPs).
  • Picks & shovels: The Decentralized Investing/Trading world is being built using four tools – signals, decentralised exchanges, networks & syndicates. Signals are what an active Investor/Trader provides for a fee to passive Followers. Decentralised exchanges are critical so that we know what a signal provider actually bought and sold (avoiding the scammy promoters who say buy when they are selling etc). Networks are how Followers find Signal Providers. Syndicates are  how enough capital is raised quickly through these networks by aggregating Followers just in time; lets not forget that the purpose of Capital Markets is to fund innovation and new productive capacity.

Wave 3: Stablecoins and other hard asset Tokens

  • What: You can buy/sell them like any Token, on Exchanges, but their value is tied to hard assets in the Legacy Finance world (such as Fiat currencies, gold, diamonds, real estate etc).
  • Why: If you are trader/speculator, volatility is your friend. If you are using Tokenomics to fund a venture, volatility is also your friend; you sell Tokens into a rising market in order to fund the business. In most other situations (such as payments and investing), volatility is your enemy and stability is your friend.
  • Dam: Stablecoins and other hard asset Tokens exist at the intersection of Legacy Finance and the Blockchain Economy. It is not simply a matter of clever code. Interfacing to that Legacy Finance world is not easy.
  • Picks & shovels: a new generation of Stablecoins are entering the market to meet these needs. These exist at the intersection of  Legacy Finance and the Blockchain Economy and the winning formula seems to be “audit heavy/tech lite” (in the words Balaji Srinavasan, the ex Andreessen Horowitz Partner and now Coinbase CTO which he says around 37.40 to 42.3 during  this panel on YouTube with Vitalik Buterin).

Wave 4: Safe & Easy custody/storage

  • What: As easy as putting money in a bank, but as safe and unconfiscatable as your own private keys in your own vault.


  • Why: Safe must mean decentralised to avoid the centralised honeypot problem and to avoid the danger of confiscation. That is job number one. To cross the chasm from early adopters with their hardware wallets, brain wallets and other nerd friendly stuff, it must be easy to use for the mainstream.


  • Dam:  Insured banks don’t store crypto assets today, so the problem has to be solved technologically so that a trustless/uninsured ecosystem of custodians emerge.


  • Picks & shovels: we need digital version of the old bank vaults, hardened against both physical and cyber attack and an easy way for them to interface into the world of investing/trading.

Wave 5: Whitelisted Wallets = your ID

  • What: A self sovereign Digital ID wallet that stores all our assets including our personal data and our reputation assets. Part of our reputation defines what type of assets we can buy and sell.
  • Why: if every wallet can trade with every other wallet through Decentralized Exchanges, it is critical that some form of Whitelisting emerges where  we trust that the wallet we are transacting with is doing things legally and is owned by a person “of good standing”. Even if you are of the libertarian school and believe that the solution must be free markets not regulators, you want some quick and easy way to spot the good guys from the bad guys.
  • Dam: self sovereign Digital ID wallets exist today but are only used by a small number of very early adopters
  • Picks & shovels: Self sovereign Digital ID technology already exists, there is no scientific breakthrough needed.

Wave 6: Security Tokens particularly Early Stage Equity Tokens

  • What: Legacy Finance has Debt + Equity. The core building blocks of The Blockchain Economy are Utility Tokens + Equity. We already have Utility Tokens (albeit often controversially, with many that are scummy and illegal). What is coming are Security Tokens that enable Early Stage Equity to be traded like Tokens.
  • Why: Just ask a) any entrepreneur fed up with the current process of early stage fund raising or b) any early stage investor who wants liquidity and price discovery.
  • Dam: Security Tokens are regulated by Securities Law and this is complex and changes slowly.
  • Picks & shovels: Tokenisation is the easy part and Security Tokens will be able to use all the tools and techniques of the Blockchain Economy. The tricky bit, as with Stablecoins, is the interface with the Legacy Finance world which currently controls Securities.

Wave 7: Credit Card dominance era is coming to an end

Note: this maybe the most controversial mega wave. I am saying that the Peak Credit Card dominance era is coming, not that Credit Cards will soon cease to exist. It is like saying we may start using a lot less oil, but we will still be using some oil for a long time (ie oil will be less dominant but will remain part of the economy).

  • What:  Credit Cards are replaced by Blockchain based payment networks (on chain and offchain).
  • Why: Credit Card payments are expensive for both buyer and seller (which is why Credit Card Networks are so profitable)
  • Dam: integrating credit at the point of sale is hard and the reason why Credit Card Networks are still so dominant today). But it is a solvable problem.
  • Picks & shovels: the dam may first break in niches that are a) cross border (where fees are highest b) for digital products (where there is no return dispute resolution issue) c) where the buyer does not need credit.

There are two ways the water gets past the dam. One way is the regulated way – via the sluice gates in the dam. The other way is the unregulated way – there are no sluice gates and the water goes over the dam, eventually breaking the dam. Regulators and lawyers and technologists, conscious of the threat of a dam breaking are working overtime to build those sluice gates.

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Bernard Lunn is a Fintech deal-maker, investor, entrepreneur and advisor. He is the author of The Blockchain Economy and CEO of Daily Fintech.

Check out our advisory services (how we pay for this free original research).

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“Build It and They Will Come” – Security Tokens at the Gate


This post, the 4th in a series of 4, is written by Sheldon Freedman, a fintech and funds lawyer at Hassans in Gibraltar. Click here for last week’s post in this series.

2019 is widely anticipated by blockchain bulls to be the year of the security token. In Instalment 1 of this 4-part series, we described how security tokens are created through strong cryptography, able to digitally represent ownership in an asset, such as shares in a company or fund, real estate, rights to cash flow or financial instruments.  In Instalment 2, we looked at how security tokens are generated on Ethereum-based platforms employing blockchain technologies.  In Installment 3, we observed how new regulatory frameworks for these new securities called “security tokens” do not yet exist – that the issuance and exchange of security tokens is being conducted under existing, traditional securities laws of registration and exemption, while complying with comprehensive, overlapping, global anti-money laundering/sanctions regimes. Today’s concluding segment previews what lies ahead in the coming months for security tokens.

Exchanges, Trading and Liquidity. 

Markets can only operate effectively with liquidity. The creation, i.e. issuance, of a security token is a preliminary step, giving birth to the token. But for securities markets and security tokens to live meaningful lives, there must be robust secondary trading via exchanges which is fully-automated, reliable, inexpensive, scalable, rapid in trade and settlement, compliant, always-on, global. Just as company stock issuance boomed with the development of centralized stock exchanges, so too the security token industry would flourish as decentralized security token exchanges develop. “Build it and they will come” is the mantra that is usually mocking engineers who build nifty technology and assume without any basis in market reality that everyone will want to buy it because it is nifty.  However, if people want to trade security tokens, this mantra is in fact true for security tokens exchanges: demand will follow supply.  Building security tokens exchanges and secondary markets requires enormously complex business, legal and technical collaborations married to massive amounts of capital, but in the coming months we will see beginnings of this integration of blockchain markets into traditional finance.

In Europe, most notably Switzerland’s stock exchange owned and managed by SIX Group is building a fully-integrated trading, settlement and custody infrastructure for digital assets, known as a ‘digital asset ecosystem’ – SIX Digital Exchange.  SIX (acronym for Swiss Infrastructure and Exchange) operates the infrastructure of Switzerland’s financial center.  In USA, the Boston Stock Exchange and subsidiary BOX Digital Markets have announced a partnership with token platform tZero to launch the world’s first regulated security tokens exchange Q2-19. 

tZero is championed by super crypto-bull, Patrick Byrne, CEO of parent company,  Byrne is committed to integrating blockchain capital markets into the US National Market System (NMS). Byrne is, in effect, staking Overstock’s future on tZero, which is burning at least $2 million per month. “I don’t care whether tZero is losing $2 million a month, “Byrne was quoted yesterday in the Wall Street Journal. “We think we’ve got cold fusion on the blockchain side.” 

This is the creed of blockchain True Believers, which is powering the development of security token infrastructure.  Like other blockchain-related infrastructure companies, Overstock raised capital from the sale of its own security tokens:  $134 million to be exact.  Mr. Byrne is not alone, as investors and blockchain pioneers charge ahead. The Wall Street Journal reports in its article that, according to Overstock, Hong Kong-based GSR Capital has agreed to invest up to $270 million in tZero equity that would value tZero at $1.5 billion. GSR would not confirm this claim to the Wall Street Journal. 

Security Tokens Issuing Platforms.   

Security tokens issuing platforms are daily becoming faster, cheaper, smarter. Decentralized applications (DApps) with back-end code are being developed in every part of the globe where there is a developer-grade internet connection. Several outstanding, mostly USA-based, Ethereum platforms issue tokens, and manage the investor process and the tokens through the lifetime of the asset, such as Securitize, Harbor, Securency, Swarm and Polymath (Canada). tZero expects to be handling token transactions by Q2-19, beyond issuing and managing, as well as offering an alternative trading system moving into other investment sectors such as debt, real, estate and other tokenizable asset classes.

European platform, Token Market, based in Gibraltar, [disclosure – client of the writers]has this week become live as the first security tokens issuing platform offering to public retail (as distinct from private) investor markets. Token Markets was selected by the UK regulator to assist in carrying out security tokens offerings to test, measure and develop issuance of digitized equity in UK.  Lithuanian platform, DESICO plans in 2019 to launch a securities exchange that will provide immediate listing and liquidity for security tokens, operating in conjunction with the Bank of Lithuania.

Impressive platforms with breakthrough architecture/technology may move beyond Ethereum technology.  EOS is believed by many in the longer term to eclipse Ethereum with higher scalability and lower cost.  Distributed platform Cardano claims to be more scalable and more decentralized than Ethereum, as it scales through side-chains/horizontally. Cardano, administered by the Cardano Foundation in Switzerland, was created in Hong Kong, and is led by Charles Hoskinson, co-founder of Ethereum.

Regulation, Compliance.

Financial services represents about 15% of the world economy; inevitably, significant portions will be digitized and integrated.  Though counter-intuitive to some, in financial services industries intensive regulation and strict enforcement are key to establishing confidence, orderly operation and mass adoption. The stringent regulation and enforcement governing financial markets in the USA have helped make the USA financial markets the envy of the world, the model to emulate.  Securities industry regulators are the critical partners in any development of the security tokens industry.  All stakeholders, aware of this, – cheer regulators on to action, or condemn their inaction.

In coming months, there will be significant step-up in activity by issuers and investors under existing global securities regulation, smart contract-auditing procedures and disclosure practices, and evolving regulation of the blockchain-related ecosystem.  Enormous investments of time and acquisition of domain expertise are required for regulators to understand sophisticated systems, methods of capital formation and investor interfaces, and the complex financial services implications that flow from their deployment and development.  The SEC, for example, by its FinHub  is committing considerable resources to engaging ecosystem players.  In addition to being a resource for the industry providing information about the SEC’s views and actions in the FinTech space, FinHub is a forum for SEC staff to engage the public

UK has shown aggressive innovation in crowdfunding by providing exemption for equity offerings up to EUR8 million, stimulating the crowdfunding industry. It came as no surprise when UK regulators (Financial Conduct Authority) recently launched a dedicated regulatory sandbox which includes exchanges for security tokens.  Successful applicants benefit from lower regulatory thresholds and receive direct guidance from the regulator, while the FCA gains confidence and understanding working with new financial technology and processes.

Gibraltar, a first-mover in legislation for digital assets, is the world’s first jurisdiction to license distributed ledger technology for blockchain and fintech businesses. Next month, Gibraltar is publishing shovel-ready legislation for security tokens compliant with all EU directives, the fruit of unified efforts of Gibraltar regulators and local industry experts.


  Security tokens are theoretical game-changers for financial and ownership models, allowing any asset or fund to offer equity, debt, full or partial ownership or revenue share. Bulls and bears abound. For investors security tokens are secure, virtually incorruptible, and accessible to trade by anyone with an internet connection. In the longer term of three to five years, comprehensive fintech banks will have to emerge to conduct the securities token industry to act as traditional investment banks performing funding, underwriting, compliance, retail distribution, analysis, legal and advisory functions to manage processes, because the development of the security tokens industry going forward is about 20% technology, and about 80% regulatory/business. If security tokens will continue to provide access to compliance features for issuers, signs of liquidity for investors and a framework for oversight to regulators, then 2019 could belong to the security token.

Omri Bouton co-wrote this.  We are both at Hassans.

Recommended reading for further research: 

  • StartupEngine Summit – Tokenizing the World, with excellent panels from StartEngine conference October 19, 2018 Los Angeles

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Bernard Lunn is a Fintech deal-maker, investor, entrepreneur and advisor. He is the author of The Blockchain Economy and CEO of Daily Fintech.

Check out our advisory services (how we pay for this free original research).

Get fresh daily insights from an amazing team of Fintech thought leaders around the world. Ride the Fintech wave by reading us daily in your email.

Insurtech Front Page Weekly CXO Briefing – Agitation


The Theme last week was InsurTech action from China

The Theme this week is agitation. The  insurance industry is rattled. This week we bring you three stories that show customers, InsurTech ventures and  incumbents all agitated; but all for different reasons.

For more about the Front Page Weekly CXO Briefing, please click here.

For this week we bring you three stories illustrating the theme of Agitation.

 Story 1: Some life insurers unsure they can get results from digital

Extract, read more on Digital Insurance:

“Life insurers are still lagging other industries and even lines of insurance when it comes to leveraging data in the enterprise, including on the sales side, according to a report from RGAX.

Nearly a third said it is too expensive to introduce or expand digital marketing efforts, mostly because their companies aren’t equipped to recover the cost, RGAX found.”

The survey was conducted among small-to-mid size life insurers who hope to create a breakthrough with the help of digitalization. The cruel reality is that there is a high capital barrier for them to go through first.

Story 2: Customers Vote: State Farm or Lemonade?

Extract, read more on Insurance Thought Leadership:

“A recent social media dust-up between renters and homeowners insurance technology upstart Lemonade Insurance and old-line insurance industry stalwart State Farm motivated us to look at what their respective customers are saying about their experiences with the companies.

A little context: State Farm recently aired a television commercial poking fun at technology-focused entrants to the marketplace. Specifically, the commercial made fun of the use of bots (artificial intelligence) used to process claims.”

State Farm probably just wanted to stress the importance of real-person agent. But it got interpreted in another way. It could mark a significant moment of agitation between incumbents and startups.

Story 3: Marsh rolls out social unrest insurance coverage

Extract, read more on Life Insurance International:

“Marsh has introduced a standalone social unrest insurance plan that offers financial protection to businesses in event of losses.

The product, which is underwritten by Chaucer, provides coverage of up to $20m for denial of entry/leaving a property caused due to terrorism, protests, civil unrest and strikes.”

When it comes to agitations among regular people, it’s good to see we can seek insurance for help.

When the whole industry is on a fast track, some may be afraid of being left behind, some may worry that their efforts are made in vain. Thus agitation appears. It could be a good thing for customers if agitation induces more innovation, and more discounts.

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Zarc Gin is an analyst for Warp Speed Fintech, a Fintech, especially InsurTech-focused Venture Capital based in China.

Get fresh daily insights from an amazing team of Fintech thought leaders around the world. Ride the Fintech wave by reading us daily in your email.


Introducing a 4 part series on Security Tokens by Sheldon Freedman from Hassans.


Editors note. This post is written by Sheldon Freedman, a fintech and funds lawyer at Hassans in Gibraltar.  Security Tokens is a big, complex subject that requires legal, technical and commercial  knowledge. We found that rare combination in Sheldon Freedman, member of the Bars of New York, Ontario (Canada) and Israel, former FINRA-registered representative, and asked him to write a 4 part series, because Daily Fintech’s job is to explain complex subjects in an engaging way. This is the first post. Tune in (subscribe by email) to get the the rest of the series over the next 3 weeks.

A blockchain token is a unique digital token created on a blockchain as part of a decentralized software protocol.  Some tokens function as digital currencies, like Bitcoin.

A utility token is digital coupon or ticket redeemable by the holder for a good or service.  A utility token, or user token or app coin as it is sometimes called, can entitle the holder upon redemption to a cup of coffee, an advanced medical device or admission to the World Cup championship game.  A utility token functions in a closed system according to the token economics designed for the system.  For more on utility tokens, please see this chapter in The Blockchain Economy.

Though utility token prices may fluctuate in value as demand for the redeemable goods or services fluctuates, utility tokens do not provide holders with, or relate to, ownership or assets relating to the entity issuing the tokens other than the redeemable goods or services. Security tokens, also known as securitized tokens or tokenized securities, are a digital investment asset with security aspects that do relate to ownership or other assets. For more on security tokens, please see this chapter in The Blockchain Economy.

Security tokens are blockchain-based value tokens that provide holders with value relating to investment assets, which may include rights in the issuing entity such as rights to voting, equity ownership, debt, derivatives, real estate, dividends, profit sharing, buy-back options, cash flow – anything related to assets or performance of the issuing entity, or any real-word asset. The spectacular promise of blockchain and related decentralizing technologies to support the reliable recording, trading and mass adoption of security tokens will undoubtedly lead to the digitization of securities becoming adopted on a massive global scale that will revolutionize finance – limited only by the imagination and daring of financial engineers.  Security tokens will have the advantages over conventional securities markets of:

  • functioning 24/7 at low transaction cost
  • high liquidity
  • rapid settlement
  • great market depth
  • automated compliance
  • transparency
  • asset interoperability (different types of assets in same wallet)
  • continuous expansion of design space for security contracts and unlimited varieties of features. 

Security tokens are programmable by sophisticated architectures deploying rapidly-developing mechanics, employing dramatic efficiencies to process large capital pools.

The versatility and seemingly limitless varieties of deployment of security tokens suddenly presents the world’s regulators with a new digital security asset that they are only beginning to understand.  Securities regulators, in their perceived role to protect the investing public (and economies in general), establish regimes of disclosure, registration and reporting to regulate the viable issuance and exchange of securities.  Understanding how security tokens markets and smart contracts function – and the complex ramifications elicited thereby- is obviously requisite to regulating them. Some notable small, nimble jurisdictions in Europe, Asia and the Caribbean have been vigorously investing since 2015 in studying and establishing early regulatory blockchain finance-related frameworks to capture early leading industry activity, while the major national jurisdiction are in the committee stages in the process of deciding what to do about the coming golden age of security token innovation, which will be no less revolutionary than the invention of the railroad. 

The United States Securities & Exchange Commission has taken the view that security tokens are securities fully subject securities regulation. Thus, the issuance and exchange of security tokens in the United States is subject to registration or must come under an exemption from registration (typically, exemptions pertaining to investors deemed sufficiently sophisticated to analyze the risks and merits of an investment, or of sufficient means capable of sustaining losses).  Other major jurisdictions are taking note of the United States position, some following, others embarking on their own regulatory reforms to address regulating of security tokens.  Since blockchain infrastructure is trans-jurisdictional and anonymous, there is an added dimension of the need for global cooperation, and for the involvement of agencies that regulate much more than securities:  banking, taxation, anti-money laundering, anti-terrorist and other crime financing, tariffs and trade finance. There is not an industry that will be left unaffected by the advent of security tokens.  From mining to pharmaceuticals to retailing to aerospace – security tokens will play a role.  The ability of small investors to participate globally will democratize investor bases. Tokenized funds and other collective investment schemes will emerge to attract passive investors.

Over the next three articles we will examine how the global security token “rails” are being laid to provide for the imminent securities token global express train. Dozens of fabulous companies are building rails of scalable, standardized, interoperable token solutions ushering in a Golden Age of securities innovation.  We will survey the many platforms available and being built for the launching and trading of security tokens.  We will also analyze the regulatory approaches major jurisdictions are taking to the challenges of regulating security tokens, taking notice of existing laws and trends. 

The schedule of the other 3 posts in this series is as follows:

  • 3rd November: Platforms for launching Security Tokens.
  • 10th November: Jurisdictional and Legal issues related to Security Tokens.
  • 17th November: The current state of the art in Security Tokens and where the puck is headed.

Tune in to receive the rest of the series by subscribing to Daily Fintech by email.

Bernard Lunn is a Fintech deal-maker, investor and advisor. He is the author of The Blockchain Economy and CEO of Daily Fintech.

Get fresh daily insights from an amazing team of Fintech thought leaders around the world. Ride the Fintech wave by reading us daily in your email.

Brazil’s Moeda – The cooperative network for Women Entrepreneurs on Cryptos

Its a bit counter-intuitive when we tag a country (Brazil) to a crypto start-up. While the operational capability for Moeda is currently based in Brazil, the entire world can invest into their projects using the MDA token.


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Moeda was launched in 2017 at a UN hackathon with a view to address the UN’s Sustainable Development Goals. Their vision is to facilitate capital for social entrepreneurs who have had challenges financing their business via the traditional banking system. With their platform, where they bring the community of social entrepreneurs to the world stage, investors across the world can invest in projects, while having complete transparency on the project details.

This year Moeda have onboarded 18 projects involving family farming cooperatives in Brazil. They are also developing the Moeda Seeds App that will help global investments to arrive. In Q2 this year Moeda moved its transactions to IBM’s Hyperledger fabric composer.

In the past 18 months, Moeda have made significant progress not just in Brazil, but across other neighbouring countries.

  • They opened up operations in Uruguay and became the first blockchain firm in a free trade zone.
  • Moeda’s CEO Taynah Reis, joined Brazil’s Parliamentary Special Committee on the legislation of virtual currency.
  • Moeda presented their proposition at the UN General Assembly on Sustainable Development Goals Impact Zones.
  • In Jan 2018, Moeda started funding its first set of projects for rural Brazil
  • Taynah has also spent time with UN leaders, Nobel Prize winner Muhammad Yunus, and several top world organisations including the World Economic Forum, where they showcased and validated their business model
  • More recently Moeda implemented a fiat pegged token (MDABRL) to be used in its ecosystem.

One of the projects that Moeda have taken on board their seed programme is that of Divinia. For more than 10 years, Divina from Cooperval produced and sold frozen fruit pulp, vegetables and baked goods to schools in Formosa, Goias. The group now wants to boost production and increase their income.

For the financing of the expansion, Moeda developed a Seed Project focused on the Baru, a traditional chestnut from the region. Through this project the cooperative in partnership with a local beer company will produce 1500 bottles of Baru nut beer. Moeda have helped them establish the partnership, in marketing the product and with the entire business plan to ensure investors make returns. This project, thats planned to go on for 4 months, will give investors a 10% return within that period.

Moeda are also working with a group of women that focused on 21 local projects from more than 8 states in the region developing 25 value chains pertaining to extractivism, agricultural extractivism and traditional family farming, including the Babassu palm production chain.

These are some inspiring coming out of the blockchain world, and for people asking for real world implementations of the technology, all I would say is, look at the emerging markets – its all happening there.

Arunkumar Krishnakumar is a VC investor focusing on Inclusion, a writer and a podcast host.

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AI algorithms – takeaways from Fintech+

The Fintech+ conference with its AI thread was unique. The morning sessions included presentations from Nvidia and Google, and use cases and learnings from Zurich Insurance. Leading into the sustainability & Fintech panel that I moderated just before lunch.

Marc Stampfli, Swiss country manager at Nvidia took us on a journey of AI Fall, Winter and into Spring. He explained neural network concepts borrowed from biology and the initial difficulties of neural network computations outperforming statistical approaches. The 1st tipping point came with increased data availability through the internet, and only then we had evidence that neural networks could outperform statistical models.

After that point, we ran into the next problem which was the lack of computing power to process all this data and multi-layer neural networks. And this is where GPU – a kind of parallel computer –  was created and first used in vector mathematics. This is the technology of Nvidia’s processor.

For me, this historical thread is another example of a solution designed for theoretical mathematics that finds a real-world application that takes us to the next level of the 4th industrial revolution. I associate it to the zero-knowledge proof in cryptography, now used in some blockchain protocols, that allows to verify & validate data without having to trade-off privacy[1].

We are living in a world in which, more or less unconsciously, we increasingly “Trust in Math”. After the GPU adoption in business, we moved to new hardware that is not only faster but also smaller in size. We basically reinventing how data rooms looked.  And this the world from Nvidia’s angle. They have facilitated the growth and new value creation, all powered by #AI tools.  The use cases in Finance are immense. Fintech solutions for:

  • Operations: automating claims processing and underwriting in insurance
  • Customer service & engagement: alerting customer for fraud, chatbots, recommendations
  • Investing/Trading: automating research, trading signals, trading recommendations
  • Risk & Security: fraud detection, credit scoring, authentication, surveillance
  • Regulatory & Compliance: AML, KYC, automating compliance monitoring and auditing.

Evidently, the biggest but fundamental problem that incumbents face in adopting any of these potential use cases, is that they first need to find ways to integrate their data and then to upgrade their data rooms to be able to handle the required computing power.

Having said that, Zurich insurance, one of the large Swiss insurers, shared with us their AI projects and research which started as early as 2015. Gero Gunkel spoke about their very successful AI applications in automating the review of medical records with the aim to arrive at a valuation. A process that entails reviewing reports ranging from 10-40 pages and that may take on average 1hour. They used AI algorithms that reduced this to 5 seconds! That is nearly real time for a business process that is Not low hanging fruit.

Zurich Insurance has also been using AI to automate the time-consuming process of collecting publicly available information towards opening accounts for large corporates. This automated web search can not only offer efficiencies but also become a new service provided to the underwriters of these types of insurances.

“Don’t look for the Swiss army knife”, said Gero Gunkel as AI may seem so promising that one can think it can take care of everything.

Dr. Christian Spindler,  IoT Lead and Data Scientist at PwC Digital Services, raised the important question on how to develop Trust in AI. This is a tricky topic as it beckons for answers around the limits of technology. For now, it is recommended to develop AI algorithms that can also provide explanations for their “Answers”.

I would say that “In Math we Trust” to develop algorithms that Answer “What & Why”.

“Improving lives through AI” is Nvidia’s motto for their Corporate Social Responsibility. See their initiatives here.

[1] Zero-knowledge proof allows a someone to re-assure a validator that they have knowledge of a certain “secret” (data) without having to reveal the secret itself. Zcash is an example of such a blockchain protocol.

Efi Pylarinou is a Fintech thought-leader, consultant and investor. 

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The blockchain landscape of Ant Financial

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The 2018 Yunqi Conference is being hosted by Alibaba during 19th to 22nd in September. The conference is one of the biggest digital meetup in China’s Internet community. And Ant Financial is also hosting its ATEC (Ant Technology Exploration Conference) in the same venue.

In the ATEC, both the CEO and VP of Ant Financial have explained their visions into Blockchain application.

Jing Xiandong, CEO and chairman of Ant Financial has announced a Blockchain Partnership Plan in the Yunqi Conference on September 20th. According to the plan, Ant Financial will open its Blockchain-as-a-Service platform in an attempt to create more values for the underlying financial systems and to lower trade costs.

The first batch of partners includes PwC, Tsinghua Smart Cloud, Accenture, Standard Chartered Bank etc. And their cooperation will be implemented in various verticals including auditing, consultancy, banking, tax etc.

Jiang Guofei, vice president of Ant Financial also shared his perspective on blockchain in the ATEC speech. He explained that the blockchain team inside Ant Financial was established in 2016 and has been working very hard since the inception. They have built a blockchain platform for financial industry and also been speeding up the application in every industry.

Jiang also stressed the values Ant Financial blockchain is holding – create values for the actual world. He thought that the blockchain market is in a chaotic state during the past 12 months, but they have been committed to addressing actual problems in our world. Creating value for users is the only goal they are pursuing through blockchain.

Jiang believes blockchain technology can promote the credible transfer of data on the chain, making the society more efficient and lives easier. For example, in a consortium, the companies of one single industry chain can jointly provide integrated services customers. Blockchain as an infrastructure can connect service providers with end users.

As a matter of fact, Ant Financial has already implemented various blockchain applications in different industries. Here is a list of these applications.

Ant Financial

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Zarc Gin is an analyst for Warp Speed Fintech, a Fintech, especially InsurTech-focused Venture Capital based in China.

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Clash of Asian Giants – Singapore’s Blockchain Sandbox advantage

Since the Fintech boom started across the world, two Asian giants Singapore and Hongkong have always fought hard for the lead in the region. Singapore had better access to the ASEAN community to help Fintechs expand seamlessly, while Hong Kong has been historically seen as the gateway to China.


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However, in my opinion, what gave Singapore a clear edge is the proactive and collaborative regulatory regime. The Monetary Authority of Singapore (MAS) along with the Financial Conduct Authority (FCA) have perhaps been the two most forward thinking regulators, who have helped Fintech boom in their markets.

The regulatory regime and its effectiveness (or the lack of it) on the innovation ecosystem has been a real case study with Blockchain. This is a detailed break down of what regulatory stance countries took on Blockchain. MAS have been quite collaborative when it came to both Blockchain and Cryptos.

ICO By Country

China have shocked the world (as they do every other day), with their focus on AI and Blockchain. According to a study by Reuters, they have the highest number of Blockchain patents in the world in 2017 (225 of 406). In AI they are only second to the US with 23% of Global patents granted in 2017 in the field. However, China have taken a binary stand with Cryptos.

In contrast, MAS had published a set of guidelines for token offerings in 2017.

This may not be the most popular stance today: I believe, every country that has banned Cryptos and ICOs have pushed themselves behind in both technology innovation, and in the evolution of new capital markets, at least by half a decade.

China, perhaps may be an exception to that, as the innovation in Blockchain coming out of the country is mind boggling. But in general, it shows ignorance in the potential of the technology or even laziness to work with this ecosystem. The MAS on the other hand, haven’t banned cryptos. They have worked closely with the innovators to understand the potential and help them get it right.

While Blockchain is meant to be trustless, its hard for counterparties in a value network to trust each other primarily because of the technology involved. Its like asking someone to allow a self driving car to do the job on a busy motorway on day 1 (with eyes closed).

To jump through the trust barrier, MAS are setting up a secure platform to sell tokenised securities. MAS, SGX (Singapore Exchange), Deloitte and Nasdaq are working on this Delivery Versus Payments (DvP) platform to add trust to this ecosystem. This is a continuation of Project Ubin – whose first phase tested Digital currency (for SGD) and the second phase focused on RTGS.

With the five phased approach to Project Ubin, we may soon see a state issued digital currency. That would not only put Singapore ahead of its Asian peers, it may be a Global first.

Arunkumar Krishnakumar is a VC investor focusing on Inclusion, a writer and a speaker.

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