For over six years, Artem has been a blockchain & tokenization key opinion leader in the CIS region. Since 2011, he has been an IP&IT lawyer and entrepreneur. In 2016, Artem founded and headed Deloitte CIS Blockchain Lab. As part of that initiative, he led a range of innovative projects involving the implementation of enterprise blockchain solutions, tokenization of real-world assets, tax and legal structuring of STOs, development of cryptocurrency and blockchain legislation.
We are creating a totally new kind of asset - smart security which can be traded in a decentralized way in total compliance with securities markets regulations.
Hi Artem, could you please tell us what your project does?
Tokenomica is a platform for issuing and trading of smart securities. We aim to create a financial ecosystem with open, fully compliant and frictionless global capital flows. Our main goal is to simplify fundraising for both companies and investors. Tokenomica offers companies a solution to launch a fully compliant STO campaign and to get easy access to secondary markets using the new type of financial tools.
We are creating a totally new kind of asset - smart security which can be traded in a decentralized way in total compliance with securities markets regulations. This is achieved with the use of blockchain technology.
In our case, blockchain which allows implementing any kind of restriction required by the regulators in the script of digital assets itself, optimizing the processes both for issuers and investors. Blockchain also opens completely new brokerage systems which completely change the way traditional securities are accounted and administered, reduces the overall costs on every stage and eliminates a set of intermediaries.
We believe that the issuance process should be automated as much as possible. In doing so, we have automated the token issuance system which encompasses the creation of tokens on the blockchain that also includes legal structuring and fully compliant features built right into the code. Automation of these manual processes leads to a significant reduction of costs, cuts a number of intermediaries, and reduces the overhead of time and resources.
For investors, we offer an STO marketplace where all the past and ongoing STO campaigns are available. Advantages that I have mentioned before can potentially benefit investors as well, reduction of setup costs will provide companies with an opportunity to offer better investment terms.
Why have you decided to launch your platform?
During my career, I have been working on both traditional and crypto markets. With time, I’ve seen a growing number of inefficiencies in the structure of the traditional financial market: a plethora of intermediaries that resulted in a massive increase in costs and time spent on the fundraising, along with that, regulations of traditional markets usually limited investors from participating in certain campaigns.
At the same time, I’ve worked with numerous crypto projects since mid-2013 and it was obvious that the solution offered to the market was working. The ICO boom demonstrated that technology can significantly improve the whole financial market. But the obvious problem with the crypto market was the lack of regulation that has resulted in the lack of investors protection mechanisms.
For me, it was obvious that the financial market needed a solution that combines regulation and technological tools. Basically, that’s how we had the first idea about Tokenomica. We have seen that there were already some products that offered the issuance of security tokens or tokenized securities but they just didn’t seem good enough.
After that, my team started working on the ideas on what else we can offer outside the simple issuance tool. That’s when we’ve decided that we need to combine token issuance with access to the secondary market, a marketplace that would allow investors to easily participate in ongoing campaigns, and last but definitely not least back-office automatization. All in on place and working in full compliance with EU regulations.
What services do you provide?
Tokenomica provides an automated solution for the issuance of smart securities. It combines both the legal expertise of our partners from several countries and the technological stack of Waves, meaning that we aim to automate legal processes during the issuance of smart securities.
Smart securities are issued on the blockchain, but fully compliant with security market regulations and equal in rights to the traditional ones.
Right now, Tokenomica allows companies to raise funds in crypto (BTC, Waves) and convert it in other crypto assets in a fully regulated environment. In the near future, we will add an option to raise funds in fiat (Euro) as well as there will a fully transparent and regulated crypto gateway, due to the reason that we don’t focus on the crypto market and blockchain-based companies only.
Could you please tell us a bit more about “smart securities”? Which benefits do they have to traditional ones?
Smart securities is a new asset class which combines the legal essence of traditional securities with cutting-edge technology.
Smart securities is a new asset class which combines the legal essence of traditional securities with cutting-edge technology. Smart security allows companies to reduce the number of intermediaries and overall setup costs. We aim at maximum decentralization. At the moment, we have already excluded central intermediary from the process and overall there are only two intermediaries left between companies and investors. On the current financial market, it is a massive win considering that currently in all forms of fundraising there are at least 7 of them involved.
Another feature of smart securities is a built-in programmable and automated lifecycle management and built-in compliance with the existing securities regulations.
Who is your target audience?
As I’ve mentioned before, we don’t limit ourselves to just one group or one business sector. We believe that any company can use Tokenomica, no matter the size or business sector. But right now we are focused on two main groups that we are already working with: corporations and startups.
To make it clear, by “corporations”, I mean big companies that attract funds through debt funding. Using smart securities, they can simplify the fundraising process which is achieved through the significant reduction in setup costs and time. Along with, they massively broaden the range of investors, attracting investors that couldn’t have taken part in their campaign before due to regulation and by attracting crypto investors. We are already working on bonds tokenization project for one of the major issuer of bonds in Europe.
If we talk about startups, our solution provides benefits compared to traditional fundraising methods. First of all, as we mentioned before, Tokenomica provides a significant reduction in setup costs and time. In the future, we will build a secondary trading solution for all assets issued on Tokenomica. Along with that, on our platform, we are building back-office automatization tools that are aimed to eliminate the excessive paperwork.
And what about companies that don’t want to launch a public campaign and focus on a private one?
We allow companies to launch private fundraising campaigns as well. There is no difference to us whatsoever.
At the moment there are quite many companies in the industry. What are your competitive advantages?
It is true that there are other companies in the industry, some offer security token issuance, some offer their services to conduct an STO but currently there is no other product like Tokenomica. We are developing a solution that will combine issuance, marketplace, secondary trading. Along with that, we don’t limit issuers and investors with just one investment method and provide a fully-regulated bridge to the crypto market in the form of our Digital Assets Exchange — the first decentralized regulated crypto exchange on the market that we’ve launched earlier. These features combined form an ultimate ecosystem for fundraising that will benefit both investors and companies.
Another significant difference lies in the technological solution that we offer. There are two main differences, the first one is decentralization. We offer a decentralized solution that allows companies and investors to hold and control their assets. Other platforms provide fully centralized solutions which raises security and trust issues. In most cases, assets and collected funds are fully stored by a platform.
The second significant difference is the technological basis that we use for Tokenomica. Most of the platforms are built on Ethereum and it has proven itself greatly. However, the high cost of transactions (gas) and the complexity of creating fully customizable smart contracts requiring a significant level of experience for the developers is a massive downside.
We use Waves blockchain that covers every aspect needed for our platform: compliance embedded in a technology — Smart Account and Smart Asset technology created by Waves was specifically designed to implement compliance-related restrictions into digital assets in a fully customizable way.
Easy adoption — Waves provides a wide range of tools for developers, including Waves Smart Contract Console (IDE) and a language specifically created to design Smart Assets (RIDE). No Gas and low transaction fees — transaction fees are maintained at the lowest level compared with other platforms which provide similar functionality.
A lot of experts predict a big growth in the security tokens industry. But much time has passed, and the volume of investment in the industry is still small. What do you think about the prospects and which problems do you see on the market?
Of course, lack of liquidity is the main problem of STO market right now but this problem is very complex and it originates from other significant issues.
I believe that currently there is no clear understanding of what STO is. What is currently called an “STO” by most people on the market is just an “ICO” that doesn’t pass the Howey Test. Our understanding of what STO is and what it should be way beyond from that, so there is no standard, no definition, and no classification of what STO is. Somewhere close to this problem is the regulatory uncertainty, partially caused by the incomprehension on the market of what STO is and what it should be, so regulators are extremely careful with the basic or further development of STO regulation.
Because of the reasons I just mentioned there is no trust in STO from investors, no certainty that they should go for it. STO is usually described as a sweet spot that should attract both traditional and crypto investors but right now it attracts neither. For institutional investors, regulation plays a gigantic role, so they won’t give their money until there is legal clarity of what STO really is. Most of the crypto investors are interested in high profits in a short period of time, they are not interested in the long-term development of the project which they won’t get from an STO.
And of course, there is a quality problem. There is almost none quality STOs being launched in the industry at the moment. Most of the projects that have launched and conducted an STO up to date were based on the same principles as ICO or had an ICO before.
And all of these problems result in the lack of liquidity. But i believe that with proper regulation and positive STO cases, investors will come to the market. It’s important to understand that STO is a fundraising method, not some magic bullet that will bring money to both companies and investors with one simple move.
Right now, STO is connected to the crypto market only. Do you plan to attract traditional business?
As I said before, we are already working with one of the biggest issuers of debt bonds in Europe and there are a couple of startups that are planning to launch their fundraising campaign on Tokenomica as well. Not related to crypto in any way as well. I hope that their campaigns will help us demonstrate that STO is not about crypto, it’s about using new technologies in fundraising.
What are the company's plans for the near future?
We have already created the issuance system that our users were testing for the last month and a half before the launch of the full version on Waves testnet. During this testing period, there were more than 60 campaigns launched on the testnet and more than 6500 transactions made. We plan to issue the full version of the platform this August, it will include automated smart securities issuance, our Marketplace, and regulated decentralized crypto exchange. This fall, we will integrate Fiat and back-office automatization tools for companies. In early 2020, secondary trading of smart securities will be available.
Generally, our plans are to become a significant player on the EU financial market in the next couple of years and change the way people see fundraising.