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In an interview with Miko Matsumura on his podcast—MikoBits, Qredo’s Chief Product Officer Biran Spector discussed the problem of custody institutional investors face. The two dove deep into both the technology that underpins secure custody and the concrete products that it can provide.
Miko Matsumura, the host of the MikoBits YouTube channel, is a general partner with Gumi Ventures, a U.S.-based $30 million venture capital fund focused on early-stage blockchain startups.
Brian Spector is the chief product and strategy officer at Qredo. Spector co-founded security infrastructure company Apache Milagro and computer and network security company MIRACL (formerly CertiVox). His previous experience includes working at RSA, nChipher, and McAfee.
This is part 2 of the blog series covering What Layer 2 Networks can do for Institutional Digital Asset Management. Read Part 1 here.
Long before electronic trading platforms existed, armies of back-office clerks would shuffle paper stock certificates around offices as investors bought and sold. This not only curtailed trading volume, but led to million-dollar mistakes from simple administrative errors.
Eventually, through dematerialization, shares transformed from paper certificates held in vaults to digital shares. This took the paperwork out of the picture and boosted efficiency. But—more often than not—electronic stocks were held under the name of the brokerage in what is known as street name securities registration.
Under this form of indirect ownership, asset owners lose direct property rights and must rely on the stockbroker to pass on benefits like asset yields and business updates. More dangerously, many financial firms now also use client assets as collateral in what is known as rehypothecation. This practi...
Tokenization is already bringing blockchain to institutions, with financial giants like Nasdaq developing decentralized infrastructure for trading stocks and shares.But in the opposite way, security tokens could also eventually act as a bridge bringing institutions to the heart of blockchain: Cryptocurrency.
Though most security token startups are currently working with permissioned blockchains, the drawbacks of these networks—and the never-ending need for more liquidity and higher security—are likely to lead financial institutions to eventually seek out permissionless blockchains like Bitcoin and Ethereum.
The tokenization of equities is appealing for several reasons:
Secure ownership is preserved immutably on the blockchain ledger
Automated compliance can be achieved with smart contracts
Illiquid markets are opened up by letting investors divvy up stakes in hard-to-trade assets like collectible art, or individually buy up a few square meters each of a Tokyo apartment.
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