Welcome to the first episode of STO Unplugged, your new go-to podcast for the latest trends in security tokens and the best new security token offerings.

Each month, I’ll interview leading digital security and cryptocurrency experts to help you understand this exploding market… its place in our financial future… and how to profit. 

I kick things off today with a brief background on myself and my company, Curzio Research. I explain what attracted me to digital securities and cryptos in general… what I didn’t like about the industry… and why I’m all in on security tokens today [00:06].

Then in my guest segment, I’m joined by STOmarket.com founder and Security Token Show host Herwig Konings. Herwig and I discuss the massive opportunity in security tokens today… how Herwig got into the industry in the first place… and the benefits of security tokens vs. other crypto investments. Herwig also gives us some insight on the companies he sees getting into the security token market in 2020 [10:28].

We finish up the show with a look toward the future of the industry. Remember, the security token market is still in its early stages. In order for the industry to achieve widespread adoption, it needs to have easy-to-use exchanges—like online brokerages—and transparency. It also needs advocates… 

Hear what Herwig is doing to help the industry… and what he expects over the next five years [19:33].

Good investing,

Frank X. Curzio
Founder and CEO, Curzio Research


Transcript

STO Unplugged | 1

Introducing STO Unplugged: Your source for the biggest security token trends

Frank Curzio: How’s it going out there? Welcome to the first ever STO Unplugged Podcast, where I interview some of the biggest names in this incredible growth industry. That includes CEOs, executives, analysts, and entrepreneurs. Now, before I go any further, I want to give you a quick intro since many of you may be listening to me for the very first time. I’ve been doing podcasts for 12 years. I’m host of Wall Street Unplugged, one of the most widely listened-to and hightest ranked podcasts in the financial business section. It’s been downloaded more than 8 million times by listeners who live in over 100 different countries. I’m always humbled when I say those stats. Really, really cool.

Frank Curzio: I’ve been interviewing people, some of the top names on Wall Street, a lot of people that maybe you’ve seen on CNBC over the past decade or so. When you say 12 years, 12 years of doing a podcast, I mean, that’s well before anyone knew what a podcast was. Right? I mean, today everyone and their kids have a podcast. Everybody. Everybody in the media, everything is podcast now. So amazing how much this industry developed, but we got to see it firsthand doing this for such a long time.

Frank Curzio: I’m also a founder and CEO of Curzio Research, the independent financial newsletter publishing company. I’ve been in this industry basically my whole life. I have over 25 years experience, but my late dad was a financial publisher for 30 years. I followed in his footsteps. I also worked for Jim Cramer very, very closely and a good friend. That’s who I took the podcast over from back when I worked The Street.

Frank Curzio: So, in mid-2018, I started researching the crypto industry, and I’d been doing it ’16 and ’18, but ’18 I really started digging in. When I started researching a lot of these tokens, I realized that 90% of the industry is basically worthless. This is what I do, I research. I research companies, I break them down, I travel the world to find the best ideas for my subscribers. And when I really dug deep into these things, and these are utility tokens, it was an absolute shit show. They weren’t backed by any assets, you weren’t getting equity stake, even though a lot of people… I would say about 85% of the people who are investing in these things, because they are investments if you plan on making money on it. They don’t even know that they’re not getting equity stake.

Frank Curzio: What does that mean? It means that, if this company, if you buy a utility token and Microsoft comes out and says, “Hey, we’re going to buy you guys at $5 billion” you know what you get? You get shit. You get nothing. Nothing. So all these entrepreneurs… Raising money is basically crowdfunding. A lot of people thought they got equity investment they didn’t. And the utilities can say, “Well, they’re not investments. They have utility functions.” But none of these guys have… I want to say none of them, or pretty close, 90% of them, never develop sites. There’s no functions, no utility function, no utility uses for these tokens. That’s the only value. And yet, there’s tons of these that they have that they just keep dumping on the market, dumping on the market.

Frank Curzio: That’s why you’re seeing how many of these things crash? Even the good names are starting to crash. There’s a good probably top tier of 30, 40, 50 of them, but outside of that, these 2,000 I’ve seen on some of the biggest sites out there that trade, and 75% of them have a market cap of less than $1 million or trade less than $1,000 in volume, don’t update their websites, don’t answer anything back. I mean, you really know nothing with these tokens, which is crazy, because they are investments. A lot of these people were smart. They didn’t launch these utility tokens in the US because they were able to avoid every single regulation. They don’t have to go to SEC, they don’t have to do anything.

Frank Curzio: That basically means, as a token holder of one of these utility tokens, you have no idea what the company you’re invested in is actually doing. Where is the CEO? I have to follow him on Twitter. You can’t even find some of these names when you do a simple Google search of their companies. You don’t know how much cash they have, the money that they raise, what their cash burn is, how many employees they have, what are the financials? Are you generating revenue? They’re probably not generating profits yet. None of this. They don’t disclose anything. So you don’t even know what the hell is going on in this industry.

Frank Curzio: So I really dug in, and you know, the whole industry is a scam. It’s just people raising money overseas, no regulation, taking the money. You’re seeing the SEC now come out more and more and more with charging people and charging these companies and their CEOs with fraud. You’re seeing it all the time. Every month that goes by, almost every few weeks, and it’s going to get worse. These investors have no idea what’s going on. They’re not updating. Nothing. They don’t even have working websites. And that’s when I discovered security tokens.

Frank Curzio: Now, I have a Wall Street background. Wall Street for most of my life. And learning about cryptos and learning from entrepreneurs, I realize that there’s something really special here. This is an industry that reminds me of Uber. Now, when I say Uber, Uber was the perfect company that made sense. If you tried Uber, you would never jump in another cab again because it’s safer, you get to see the ratings on the people, they get to call you and tell you exactly where they’re picking you up. I lived in New York City for most of my life. Now I have my family in Florida. When there’s people looking for cabs, you have to take out your credit card, they’re hanging on the door waiting for you. Just get out. Not a problem. Call through your phone. Everything that you look at, everything that bothered you about yellow cabs was solved through Uber.

Frank Curzio: And when I look at the security token industry with the massive amount of fees that you have investment banks charging, which are basically middlemen. Right? That’s all they are. They’re middlemen. Hey, you want to raise money? Well, we know all these guys. Give us 6%, 7%. Give us 6% of the equity that’s all it is. You don’t need that anymore with the internet. Directly, consumer to consumer, business to business, and the amount of fees they charge are outrageous. But there’s significant benefits to this industry, and I loved it so much that I based my reputation and my company on it by launching the first ever security token in the financial newsletter industry.

Frank Curzio: You could say almost in the financial newsletter industry, the financial industry by itself. This was the 10th token to be launched in the securitized platform. It’s called Curzio Equity Owners, the symbol is CEO, and this token gives our investors an actual equity stake in our company. So you can participate in our growth. That’s the way this industry should be. They don’t have to worry about the middlemen. You can get into these offerings if you’re an accredited investor. You have that lockup period after a year, and then it’s up to you whether you want to sell a token or not, which is great for investors. If you invest in private placements, your lockup period or the liquidity event is usually 7-10 years. What’s a liquidity event? Well, when these guys can cash out. If you have a private company, it’s not publicly traded and you invested in it, your money’s locked up until that company gets bought out, acquired, or if they do an IPO.

Frank Curzio: The STO industry, this much better for investors. You’re going to be liquid much quicker. Why’s it better for companies like us? Because we don’t have to pay the enormous fees to trade in the exchange. Again, I based my company, my reputation, we’ve launched it, it was successful, and now that it was successful, we’ve seen tons of people, not just on Wall Street, but also in crypto reach out to us. How’d you do it? What’s the legal structure? What’s your cap table? Going through this process, which was extremely difficult. We went through four sets of lawyers to get this done. It’s insane. But just the learning process of working with the right people in this industry, it gave us a lot of experience with some of the top names around are reaching out to us of STOs and even a guy on Wall Street that wanted to launch STOs and do it this way because they’re sick of getting charged huge, huge fees by these investment banks.

Frank Curzio: That’s when I came up with the idea to start STO Unplugged, which is named after, you know, Wall Street Unplugged. STO Unplugged, I’m talking to so many of these amazing entrepreneurs, CEOs, just industry leaders, that I thought it’d be great to start a podcast, have these guys on, have you guys listen, because it’s going to bring a lot of attention to this industry. It’s still in the very early stages, has incredible, incredible growth potential. You’re seeing that, especially over the last six months. A huge shift from ICOs to STOs. No one’s really investing in ICOs anymore.

Frank Curzio: But this industry is growing. It’s going to grow a lot faster. You’re seeing a big build in infrastructure last year in 2019. And now, 2020 companies like Open Finance exchanges, you know tZERO, especially open finance. If you go to open finance, you’re going to see security tokens trading on their site. It’s going to get bigger and bigger. You’re going to see dozens and hundreds come out probably in the next couple quarters, and thousands in three years, and that’s when you’re going to see the liquidity coming, and you’re going to see institutions come in. But now’s the time to invest and to learn about this industry, because it’s in the very early stages, like getting involved early in the internet.

Frank Curzio: Who knew that was going to take over the world? Traveling agencies, every single industry, retail is online. eCommerce, big data analytics, all these crazy trends, which I’m going to cover, by the way. I’m going to the CES this week. It’s going to be really cool. I go every year for the past eight years learning new technologies, following new trends, and things like that. And hopefully, we’ll see a couple of companies talking about security tokens there. But I want to provide a good podcast for you where I bring on some of the top people in the industry, and here we are. The first-ever STO Unplugged podcast.

Frank Curzio: And today’s guest is Herwig Konings, the founder of Security Token Group, which also owns STOMarket.com. These are two great sites where you can learn a lot about STOs. Two people that I talk to a lot, great, great people, hard workers, believe in the industry. I love these. Love him, love his partner. Kyle is fantastic. Herwig’s also the founder of InvestReady, one of the leaders in the STO industry and verifying the credit investor statuses, which is very important so there’s people invest in security token offerings. It makes it easy for compliance. He’s super smart, a very great guy, and let’s get to my interview with Herwig right now.

Frank Curzio: Herwig Konings, thanks so much for joining us on the Security Token Unplugged.

Herwig Konings: Absolutely pleasure to be here, Frank.

Frank Curzio: Well, let’s start out here. Let’s start out with your background because I want to know, how did you get to this place in your life where you and also your partner, Kyle Sonlin, which we’ll talk about later, are leaders in the security token space. But how did you get to this point, given your entire background, because now you’re one of the leaders in this industry, and I know a lot of people are curious how you got there.

Herwig Konings: You know, I think it’s always funny to find out how people kind of fall into this space or how they get into it. For me, it was actually from two different perspectives. The first was actually from a previous company that I had built, which is called InvestReady. InvestReady is actually a leading investor accreditation platform. So for those of you who don’t know what an accredit investor listing is, it’s someone who has a net worth of $1 million, not including their primary residence, or someone who earns income of $200,000 or $300,000 with their spouse combined for at least two years. This is what’s required in order to invest into private markets.

Herwig Konings: So by developing a software that verified and technology for online platforms to qualify their investors, I got myself very familiar with the regulations, the different exemptions, the different capital markets, ways that you could fundraise for a private business, as well as for a public company. And it was through this that we were starting to get approached in 2016 and 2017 by ICOs in those crazy heydays, by more proper companies that were looking to compliantly verify their investors for their ICO. They were using our service. And now today, we work with platforms and issuance companies that help issuers go through the tokenization process, like Securitize, Vertalo, CrowdEngine. We even work with other players like Prime Trust, Mercedes-Benz, and many of the traditional crowdfunding platforms.

Herwig Konings: I really got a very good understanding from both a compliance as well as sort of how it takes to do a “equity crowdfunding raise,” which is a new form of capital formation. And on top of that, I’m also very involved, I’m a member of the Miami Venture Capital Association. We’re based here in Miami, and there’s a large concentration of family offices and private equity groups and a few VCs and lots of angels, so through that, we have a lot of different organizations and chapters, one of them being Blockchain. So I was also, if you will, on the buy side, helping companies finance with VCs and family offices for their blockchain companies, their ICOs, or their STOs. So that’s how I fell into this space, Frank. It was kind of awesome. The aligning of the stars, if you will.

Frank Curzio: It’s interesting, right? Because the ICO, as we all know, that was a master market, and now it’s kind of depressed. People want equity stakes in these things, and a lot of these companies didn’t turn out to be anything. They don’t even have websites on and things like that, after raising tens of millions of dollars. But we’re seeing a shift, so a shift towards, “Hey, this is a great idea, but pushing it towards security tokens.” Why don’t you explain that. And again, you and I know this, but we’re talking to investors who are just learning about this industry for the first time and getting familiar with it. But when did you see it switching over to security tokens to the point where you were like, “Wow, this is a great idea.”

Frank Curzio: I have to say, for me, when I started citing the benefits of security tokens where it’s you can raise capital by going directly to investors instead of using investment banks, low fee structure, much better structure from investors when they get an equity stake and the token goes free trading one year later. But when I decided to launch our Curzio Equity Owners token, that was about 18 months ago, it felt like I was on an island all by myself, not knowing if this initially would get adopted, and now it has. So I guess, bring it all together here. When did you know you were on to something big, and how’d you know or how did you feel that security tokens would really get to the level that they’re at now?

Herwig Konings: That’s a really great question. Similar to you, I did also experience the ICO wave from an investor perspective, as well. I found myself actually advising a local company here in Miami looking to do Series B financing. They were wondering, what are the different ways that they could raise capital traditional venture, they were interested in the ICO model, and of course coming from my background of InvestReady, I already knew that we had to do this from a compliant fashion. So I was already interested in security tokens. There were leaders like, you know you did your interview with Carlos Domingo from Securitize, who was one of the very first pioneers with SPiCE VC.

Herwig Konings: So at that time, I was already talking to them as well, so that was I would say around the end of 2017 that I got to really experience that process with a client and issue one of the very first SPOs, and it was definitely through that very beginning of 2018 that I saw the writing on the wall and decided to form Security Token Group with Kyle and step aside from InvestReady, knowing that this is absolutely going to be a massive disruption to capital markets as we know it.

Frank Curzio: So you are CEO of Security Token Advisors, right? So that’s the consulting arm. Explain that, because when we launched our token, which was the security token when we closed out Curzio Equity Owners in July, we used Securitize, the sent out the press release, and it went to thousands of the leading institutions in this industry and kind of put us on the map, which is really cool. And now today, again coming from the wall Street background that I have, several dozen companies have reached out asking, “Hey, we saw you do this. We love it. How do we do it?” I’m sure you’ve seen the same thing. How are you putting this together where, what’s involved in the consulting if someone is interested in launching their own security token offering?

Herwig Konings: Absolutely. There’s a lot of different ways you can go about this process, and a lot of people like to take advantage of experts or individuals that have gone through this process, and that’s where we come in to kind of help handhold the client and go through sort of the four major components of what we used to do with the security token. But before I kind of describe that, I think the best analogy to give as an example is when you go to sell your house. We’re not talking, in this case, about a tokenized house, just a traditional house sale process.

Herwig Konings: You may enlist a broker or an agent to help you find your buyers, manage the transaction and the sale, but where we as a consultant company is more like a general contractor to make sure that the house is in shape, that you have all your permits and your licenses and your filings, that perhaps you need to market research to see what a good price would be to put on your house. We really come in and makes sure that what you’re bringing to market is proper and will sell, if you will, by itself.

Herwig Konings: That’s where what we do as consultants, we help our clients understand the fundraising process and what it’s like to do an equity crowd fundraiser security token, in a sense, how they might want to come to market, in terms of their structure, how the technology fundamentally really transforms the way they are now going to manage their issuers, as well as a lot of their own governance for their company. We’re talking about how they may involve voting rights for their investors, perhaps here now programmatically or digitally sending dividends across the block chain to wallet owners. You now have to manage liquidity and the functionality of it, which is, there’s a investor relations component to it that I know you’re experiencing with your very own token, Frank. So I know a lot of your listeners are familiar with this, but it really is a whole process.

Herwig Konings: There’s dozens and dozens of different applications, dozens of different partners and technology providers and blockchain solutions. So we help our clients with an education perspective, as well as really going through this process to make sure they’re doing it right and evaluating all their options.

Frank Curzio: Now, talk about some of the companies that have been coming to you to explore this, because tokenization is basically the selling off of a piece of an asset, most of the time it’s a liquid. So if you have a monster commercial real estate portfolio that’s worth $1 billion, you’re not liquid. You’re not as liquid. You could sell off 20% of that and tokenize it, and then create a token around that which determines the value, kind of similar to an IPO. Right? They’re selling off a portion of their stock and that’s going to determine the value and it trades like a stock. It’s equity. But what kind of demand are you seeing, especially over the last not just 12 months, but really over the last six months? What kind of companies are approaching you? Are you seeing the demand that makes you very, very excited for the future? Because I’m starting to see on my end where this is not mainstream yet, but you’re seeing more and more people talk about this and even mention it in a financial media, now.

Herwig Konings: I’m extremely excited for next year, because a lot of this year has been the infrastructure being deployed into the space. If you will, 2017, as I sort of cited as sort of the origin, the concept here of the security token. 2018 raised capital, something around half a billion dollars from different investors. And this year, 2019, was the year that they all deployed that capital and put it to work and started getting different clients and different use cases out there. So 2020 to me is sort of that banner year, the legitimization year that it sort of becomes mainstream and a real viable option for issuers to consider.

Herwig Konings: We’re seeing both from personally to our consulting side the usual bunch from small cap companies to, as you mentioned, real estate portfolios and different individuals that are looking to create that liquidity, but we’re also seeing all kinds of other use cases. You know, energy deals, the bond markets and debt markets are extremely exciting use cases because of a lot of the efficiencies that the digital management of these securities brings to the value proposition. So at the end of the day, I think we’re going to see pretty much the tokenization of all assets. I guess, as personal clients, we’ve seen both lenders and marketplace lenders approach us. We’ve seen securitization providers and individuals that already work with individual institutions in a family office to try to create liquidity. And then from a global perspective we also see institutions like HSBC saying that they’re going to track private placements or work with the Singapore Exchange and Tenna SEC to do the Asian bond market. We’ve seen Deutsche Bank tokenized bonds, and Morningstar announced looking into the debt market.

Herwig Konings: The only other comment that I think that can shed some light to our listeners is that I can draw some parallels from the equity crowd funding industry, which to me, security tokens are an evolution to that. And the security token industry also was very successful with real estate because it’s a sound offer with a secured asset to it, and it’s more digestible for an investor than say a risky startup.

Herwig Konings: So similar to equity crowd funding, in the beginning days a lot of people anticipated that it would disrupt venture capital, and now startups will be able to sort of raise from the crowd, but ultimately at the end of the day, the focus was real estate, energy assets, even debt products, things that traditionally didn’t have easy access to capital. And now we’re able to do so through an online fashion. So I expect the same exact thing, and we’re seeing the same exact thing for security tokens where real estate is a really, really popular choice, but again, we’re going to see a lot of niche, as well as other use cases for really all types of financial instruments, simply due to the fact that tokenization brings many different efficiencies to it.

Frank Curzio: Now, one of the biggest things for me, Herwig, is how do you get this into mainstream where you can write about it, you can talk about it, you could say how great it is, but until people see it themselves so people can almost touch it and say, “Okay, I get it. I see this trading.” To me, that’s a huge milestone, and it’s something that you guys created with Security Token Market. So if people went to securitytokenmarket.com they’ll be able to see some of the security tokens that are actually trading with volume where you’ve created this portion of your site. I haven’t seen that anyplace else, but at least now people could look at it and actually see these tokens trading which adds credibility to the industry. It’s here. This is happening now. This is just a few. You have a few on there, but there’s hundreds and hundreds and hundreds that are going to launch throughout 2020, and thousands going forward in the years ahead. But talk about Security Token Market, because you guys seem like you’re well ahead of the curve, and it’s one of the few places that I know of, if any, where you could actually see where some of things are trading, kind of like a coinmarketcap.com kind of thing for ICOs.

Herwig Konings: Yeah. I’m glad you brought that up. I hope you get the chance to interview my partner, Kyle, who runs that project. Specifically, you hit the nail on the head. When he started that, because we saw that there was a gap in the marketplace, specifically an information gap where there was a lack of data and really information around both STOs that were raising in a primary market sense, as well as ones that were getting listed on exchanges like tZERO and OpenFinance. And this lack of insight or information for investors we believe was a huge and is a huge friction that prevents investors from participating in these markets. You don’t really go through the process and work of becoming registered with an exchange going through the compliance procedures and setting up an account without knowing already ahead of time that you probably want to go and buy something there. And how do you know what to buy if no information around that exists?

Herwig Konings: So that’s why we launched that. In fact, that information is relatively new, and we hope to continue to add more and more exchanges and products so that investors and really the market can get insight on these tokens and their prices and how they’re trading from our site there.

Frank Curzio: Now, let’s talk about the exchange front. It’s going to be maybe difficult to answer questions, because we don’t want to put anybody down, but we really want to let everyone know who the big players are there, how this is going to get adopted. When it looks at the exchanges, for me in order for this to get adopted, it has to be similar to an online exchange where you get just a regular eTrade, Ameritrade, Schwab, Fidelity type thing where you can just go in, put your tokens into it. They’re going to be taking custody now, but it’s got to be similar to that, because the more easy it is, the more it’s going to get fully adopted by Main Street.

Frank Curzio: Now, when I look at the exchanges, and I’m talking about US Exchange. I’m not talking about the ICO exchanges, Kraken and Binance. Binance, I believe, is launching their own security token exchange in the US. I think they filed for that. But now you have tZERO, which for me, I’m a big fan of tZERO. I went to go visit them. I love those guys, but there’s a lot going on there. I’m just surprised that they didn’t develop a lot faster. But then we have this company, OpenFinance, which seems like it just raised money, all of a sudden now you have leading tokens trading on this. I don’t want to call it an exchange, but OpenFinance.

Frank Curzio: Where do you see the exchanges? Where do you see this? Because all this has to come together. I thought it would be tZERO would be one of the leaders, but maybe it could be Coinbase, because I know Coinbase also has all the accreditation, KYC, AML, they have all their clients now on that platform, so regulated. But what do you see on the exchange front? Who could be the leaders, or is there more exchanges coming out that you heard of, because that’s going to be a very big deal, even for tokens like us to get trading on these exchanges.

Herwig Konings: Yeah, absolutely. That’s a great question. Coinbase, just as you alluded to, they absolutely are getting ready. In fact, they already provide custody services for the BCAP token, which is live and trading and is available on OpenFinance. So I have, without a doubt, an expectation that Coinbase will probably get into security tokens in 2020. They also acquired a broker dealer so that they can have the regulatory authority to do it, as well. Coinbase, just like Gemini, as well as many of the other, Poloniex or Circle, I mean, the parent company, they all have intentions of entering into the space. Even the traditional stock exchanges like ICE and NASDAQ have both commented on the fact that they are interested in it.

Herwig Konings: ICE, which owns the Euronext invested in Tokeny, which is an issuance platform out of Europe. You see that Bakkt, which is a major exchange for crypto, which is also owned by ICE, is expected to get into this. We actually have a list on our blog, the medium blog for Security Token Group, of over 50 different exchanges that haven’t masked the fact that they are providing security token services or blockchain-based digital securities in the near future. And that near future, I really expect the first half of 2020 to see a few dozen exchanges globally enter into the marketplace, as well as a lot of new entrants here in the US. You know, you saw the partnership with tZERO and the Boston Security Token Exchange is another big one to come out. Harbor acquired a broker dealer to also offer a full-on marketplace and issuance solution. And we fully expect tZERO and Openfinance to list a whole bunch more, and even some, as you pointed out, Binance and some of these alternative crypto exchanges are also looking at security tokens and how can they properly get regulated and support them.

Herwig Konings: Uniswap is working with RealT, which is an issuance platform that has tokenized a couple residential properties in Detroit, and they are now trading and have liquidity through Uniswap through working with the issuance platform to make sure that everyone is compliant and white listed in order to properly buy them, both using Reg S to access international investors and Reg D to maintain the credit investors here in the US. So we’re seeing a lot of activity, it’s just now it’s a matter of listing more and more products and getting that into the hands of investors.

Herwig Konings: Really, to get things mainstream, I think it’s as you pointed out, we just need more and more options for investors to easily sign up and buy a product. At the end of the day, there has to be demand for what is being sold, and I think the more and more exchanges we have, the more and more technology providers there are, the more and more we’re going to see great companies and great financial products come to market tokenized. And that will slowly, slowly bring the technology mainstream. I don’t think this is an overnight situation. The same thing did not happen for equity crowd funding, and historically FinTech tends to move slower than most other industries when it comes to an adoption curve.

Herwig Konings: So I think, really from my perspective, and from what I’ve witnessed, I’m extremely excited for how fast tokenization is being adopted. I think there’s something like $10 billion in pipeline of tokenized opportunities announced this year alone. And that number will probably only 10X or more next year and the years to come.

Frank Curzio: Yeah, it’s interesting because they’re security token offerings, so they’re regulated just like securities, but they’re only open to accredited investors. So a lot of this that we see behind the scenes because we’re in the industry is taking place now, but the average person who wants to trade these things, you’ve got to be locked up for a year. And after that year, then they go free trading, which you’re seeing now where a year ago the tokens that launched which they probably raised money 18 months ago, now you’re seeing them come online. Why you know and I know that 2020 is going to be a banner year. You’re going to see a lot more of these. It’s going to be a lot more mainstream. But again, it’s still very early, still first inning, here.

Frank Curzio: Where do you see this market, because I think we both agree 2020 is going to be a really big year for this so it’s going to get more adopted. But where do you see this market say in 2025? It’s almost as more and more of these things come out, more people request, and then you’re going to see even more money coming into the system. Again, you have to wait a year before these things get fully traded. It’s like the capital-raising stage right now for a lot of these companies. And then their token goes free trading. But where do you see this say three to five years from now?

Herwig Konings: Just because of the way I see this market growing, I really think that by 2025, especially, we’re going to have a very robust, efficient, and competitive industry. What I mean by that is, by then doing a security token offering and a tokenization is going to be a completely viable option and comparative to doing a traditional financing. And when that happens, it becomes serious, because that means all the major exchanges, investment banks, investor marketplaces, and technology providers are now working in a competitive fashion to provide the best value proposition that they can. In this case, whatever it may be, we’re talking about efficient investor marketplaces so that you can actually debut an offering and raise capital globally. We’re talking about the technology providers all having sort of a sound standard and solutions that allow us to effectively save money on a lot of these processes and governance controls. And of course, we’re talking about exchanges that have robust investor pools that actually allow you to create liquidity for these products.

Herwig Konings: And again, the way things are going, by 2025 I have no doubt that it’s going to be very serious, and at that point it’s going to become a question of will major players like the NASDAQ and the New York Stock Exchange and many others also start to offer tokenized solutions as well?

Frank Curzio: Do you ever think, and this is kind of a tough question, that you are in the right area of this market? Because for me, I’m always looking, “Okay, I know I have the publishing company. We have a security token around it.” I didn’t expect how big of an impact we would have on the industry as a whole, where that’s another growth avenue for us, which is security token market, where we could really educate people and do lots of things. I feel like this is the early stages of the internet here, where I haven’t seen a trend as big as that… This is amazing. Again, we have cloud and stuff like that, and I get it and AI.

Frank Curzio: But did you ever look at this market and say because during the internet it’s like, “How do we make money?” You have online travel agencies, when it really started taking off and everybody had WiFI, then you have Amazon figured out and said, “Instead of books, let’s just sell everything.” And you have Netflix that figured out and said, again, Amazon was built on selling books and look where they are. Then you have Netflix was built on sending DVDs to you through the mail and killing Blockbuster and now the leading stream ware provider.

Frank Curzio: Do you ever sit back and think, “Okay, what’s going to be the massive growth potential, the part that I want to get in?” It seems like you and I are both educating and consulting, but there just seems like there’s so many more avenues. I’m just curious if you see other ways, or something that’s really going to take off. Because for me, even from the investment banking portion of this, I think there’s a huge opportunity there, but I’ve never been involved in a market where it seems like there’s such open space for you to do whatever you want. And if you’re a believer in this industry, you’re probably going to benefit if you pick the right choices.

Herwig Konings: You’re completely right. It’s a free-range opportunity out there. I think over the next couple years, it’s still opportunity for entrepreneurs and even fund managers and asset managers to leverage the technology or develop technology in a new way that the market ultimately adopts, just the same way that Google and Facebook and many other “second movers” were able to kind of create the dominant use case or become the dominant market player. So I think there’s a ton of opportunity as we get to kind of a healthy infrastructure in the next five years. And for us, it’s been very easy. We’ve been focused on a universal mission to advance the technology and help investors, issuers and everyone in the space understand and how to apply it. So for our consulting company, it’s been great just simply because we’re on the cutting edge always with our clients working on the latest technologies and use cases.

Herwig Konings: As I said, because that killer use case or that killer way to do things hasn’t yet been invented, we’re always looking to help make that happen. From the security token market perspective, we know very clearly that we are here to bring transparency and information to the market, and we plan to do that via both APIs, because we see it as a programmic market, as well as from the media side, as you said, kind of the coin market cap of things. And then I think there’s a lot of other opportunities in the space, like I said, from a fund manager perspective. Whether it’s tokenizing your fund, or even employing strategies using tokenized products, I think we’re going to see a ton of innovation there.

Herwig Konings: When it comes to being a first-time fund manager or improving your fund and standing out, it’s a very competitive environment, and so I really think new strategies and technologies like this are going to radically disrupt that side of the industry. So overall, I think you’re right. Sorry, Frank, to interrupt you, but I think at the end of the day its tough to say now what’s going to be the best way to position ourselves. But at the end of the day, we all follow our passion and keep doing what we love to do. You know?

Frank Curzio: Yeah, and listen, that’s a really tough question. For me, as someone who’s covered so many trends from it by 25 years, I like doing Consumer Electronics Show every year, which is coming up in January. Identifying those trends and being able to invest in them. This is a trend that’s amazing, and it’s just funny where… I’ve never been in a position where is it investment banking? Is it consulting? Is it exchanges? Is it being an information provider, kind of like Yahoo Finance type thing? But there’s just so many avenues of growth here, which I think they’re all going to grow. But yeah, I just wanted to get your thoughts on that.

Frank Curzio: So let’s end with this. You and Kyle Sonlin, who’s your partner, have a podcast. I love people who launch podcasts, and because we’re all on the same page here, I’ve been doing this Wall Street Unplugged podcast for 12 years and now I have this podcast I’m doing for security tokens, Security Token Unplugged. But talk a little bit about your podcast, because it’s cool and you guys talk about the latest trends. I don’t know if it’s weekly, but I’ve listened to it a few times. I’m curious to know more, and hopefully you guys stick with it, because I see so many people start podcasts and don’t finish off. But it seems like you guys really like it. I could tell when you guys interact with each other.

Herwig Konings: Absolutely. I’m glad you brought that up. We’re a fellow podcaster. Kyle and I do host a security token show on a weekly basis, and we do exactly that. We cover the news, all of the latest technologies that have come to market, the new players, things that are happening in the market, both from the trading perspective, as well as new STOs and events and things like that. And then we always have a main topic that we like to cover to provide a little bit more of an educational segment and cover sort of what’s relevant and what’s happening in the news every week. There’s always so much going on that our listeners find that it’s a very great way to kind of stay in touch and really sort of be on the inside of what’s going on with this space.

Herwig Konings: I’m glad you’re a fan, and definitely everything we do we take to heart, so we have no intention of stopping. Hopefully, you’ll check it out if you get a chance.

Frank Curzio: Yeah, yeah. You can tell you guys are passionate about it and you guys are all in on this, and it’s really cool to see. Listen, Herwig, I want to thank you so much for coming on. Great conversation here. Again, we’re trying to bring this more to the mainstream, let people understand this. There’s so much going on behind the scenes, but I appreciate that almost everything you said you had an explanation for, you dialed it down because sometimes technology and terms get crazy for people who are not in this industry.

Frank Curzio: I really appreciate it. I know they got a lot of great information and if somebody wants to find out more information about you and your company, how could they do that?

Herwig Konings: Well, you can always go to securitytokenadvisors.com to learn more about our consulting arm, and you can go to STOmarket.com to learn more about security token market prices, information volumes and new offerings.

Frank Curzio: All right, Herwig. Well thanks so much for coming on. I know you’re a busy man these days, and I know you’re going to be even more busy going forward being in this industry. So thanks so much for coming on.

Herwig Konings: Thank you, Frank. Always a pleasure. Hopefully we can be on the show again sometime.

Frank Curzio: Okay, guys. I mentioned earlier, I’ve been doing podcasts for a very long time. Wall Street Unplugged, I also do another one called Frankly Speaking, where that’s Fridays available to my subscribers at Curzio Research. It’s a Q&A, they ask questions and send me through email, and I answer them. So it’s really cool. I’ve been doing this for a long time. But for Wall Street Unplugged, I say the same thing after my interviews. I say, “This podcast is about you, not about me.” I’m doing this for free. I don’t get paid. There’s no advertisements on here, nothing. So if we get huge demand, it’s going to get bigger. Right now, I plan on doing this once a month and interviewing a great guest once a month. It might even be more than that.

Frank Curzio: But I always say it’s about you, not about me. So let me know what you thought about this interview and I’ll love hearing your comments, because that’s how you create a great business. You have to be able to accept criticism, new ideas, new guests out there. So it’s not just about me. It’s about you. And that’s very, very important to understand because I’m going to know what you want by you emailing me at frank@curzioresearch.com. Frank, you should hear this guest. This guy was great, I saw him at a conference. There’s going to be some of you that have been in this industry even longer than I’ve been. You’re going to know certain areas of this industry better than I am. The goal here is to create a massive network for all of us where we can invest in the right things, get the right information, and make money for ourselves and make money for our families. That’s our goal.

Frank Curzio: Okay, it all happens. It starts with you guys, but it has to be a network. It can’t just be, “Hey, this guy’s pretty cool and I listen to him.” No, I want to hear from you. Let me know what you’re seeing in this industry. There’s so many outlets out there. There’s so much noise out there, which we want to avoid. We want to cut through all the bullshit, right? And get right to it. That’s only going to happen if I have your help, I’m getting emailed, again about you not about me. So email me frank@curzioresearch.com. That’s frank@curzioresearch.com. Going forward, you’re going to find this podcast on iTunes. Also can be found on our Curzio Research site. More specifically, our token tracker site. We publish basically all the new developments that you see in the SCO industry, we publish that every single week and we send these stories directly to your email.

Frank Curzio: So to sign up for that, which is absolutely free, just go to www.thetokentracker.com com. There’s a little box there, put your email in there. We’re not going to bombard you with all kinds of crazy stuff. It’s going to just send you a nice email with a list of the top stories that we’ve seen in the SCO industry every single week, and that list is growing bigger and bigger and bigger, because we really weed out all the BS and try to send you just the best stories. So I mentioned earlier, I plan on having at least one of these every single month, but depending on the traffic we’re seeing, depending on what I’m hearing from you. If you really love this podcast, I would do it more.

Frank Curzio: I’m talking to so many people in this industry, I could tape so many different interviews. You’re going to see some of the leading people in the SCO industry on this podcast. We do have the reputation. Again, I’ve been doing my business 25 years, we have 20 employees, generate revenue at Curzio Research, generate profits, and the result is, we’re launching a security token behind an existing company and it’s generating revenue. It puts us I wouldn’t say in an elite class. It puts us in a class all by ourselves, because I don’t know an SCO that’s doing that. I don’t know any of them.

Frank Curzio: They tell me, “We’re going to raise money and this is what we’re going to do.” No, we’re doing it already. This money is to grow our business when we raise money. This isn’t to establish the business. This isn’t to go and hire a bunch of employees. This isn’t to build anything. Everything’s built. Infrastructure’s built. Now you’re participating in the growth through our CEO token. And with this industry, it’s going to continue to grow, get bigger and bigger and bigger. And when that happens, and it’s happening now, it’s going to happen for the next 5, 10, 20, 50 years. That’s why I’m doing this. That’s why I base my reputation and my company on this. You’re going to want to be involved, because it’d be some great, great opportunities that you can invest in the very early stages. Not in the Facebooks when they come out with multi-billion dollar valuations and the Dropboxes and the Unicorns. None of that. It’s getting involved at the super early stages, because that not only creates millionaires, it creates billionaires if you’re able to get into these things like how Peter Teel invested in Facebook in the super early stages.

Frank Curzio: That’s what this industry is bringing for you for security tokens. So, covered a to today. Great interview. Thank Herwig for coming on the show. Thanks so much for listening and getting question comments. My email frank@curzioresearch.com. That’s it for me, and I’ll see you guys in 30 days. Take care.

Announcer: Frank Curzio is the CEO and founder of Curzio Research. All opinions expressed by podcast participants are solely their own opinions and does not reflect the opinion of Curzio Research or it’s affiliates. To read more about our private policy and disclaimers, visit www.curzioresearch.com.

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