Stablecoin Interview with TrustToken
For this week’s podcast, we have the pleasure of interviewing Tory Reiss, VP of Corporate development at TrustToken. TrustToken is an asset-tokenization platform which recently raised $20 million in a strategic token sale with the support of major VCs, such as Andreessen Horowitz and BlockTower capital. Their first product is a stable coin, TrueUSD, which already is among the top 100 coins by market cap.
This interview is <20 minutes long, feel free to click play and listen to it now, subscribe to our podcast here to listen later, watch it on YouTube, or simply go ahead and read the edit below. Please enjoy and let us know what you think!
SR: So, our first question in the Stable.Report podcast is always: what got you interested in cryptocurrencies?
TR: I first got into cryptocurrencies back in 2012 through a friend of mine. I didn’t really get very interested until 2013 when I was thinking about buying a bitcoin ATM — I didn’t end up going through with it, but the fascination was definitely there and it only grew overtime, since I was interested in FinTech. With regards to stablecoins, my interest is in the concept of tying real world assets to distributed ledgers, and that’s where I see most value could be created.
SR: Why did you choose a centralized, fiat-backed stable coin?
TR: Our theory is that we first need to bring the most trusted and well understood assets to the blockchain, such as currencies, and overtime move from the simple to the complex.
SR: Why did you choose a centralized, fiat-collateralized model?
TR: We think there is enormous value in having traditional fiat currencies on the blockchain. We are building financial products and we will be dealing with real estate, fixed income bonds and traditional equities….so we will need the ability for those securities to issue dividends in fiat. There is also a need for people to transact with each other in USD, and there are countless applications that require fiat-equivalents on chain. Since we are focused on real world assets, it made sense to start with that stablecoin.
We do think that crypto-collateralized stablecoins are also a great idea and work very closely with MakerDao — they plan to use TrueUSD and many of our asset tokens in their multi-collateral basket.
SR: That’s great! I love to hear about collaboration in the space, we really need that. Let’s speak about the TrustToken Platform… could you explain what the SmartTrust platform is?
TR: Essentially, the TrustToken platform breaks into many layers. One of them is a legal layer, pioneered by our legal counsel Michael Bland in collaboration with our outside cancel, and the idea is to take a legal vehicle (e.g. Trust) and use it with a Smart Contract to distribute fractional ownership of assets. We tokenize the Trust and whatever assets are held in that trust are beneficially owned by the token holders, creating a SmartTrust.
SR: So it’s a very important layer when it comes to the tokenization of assets.
TR: That’s right, because you need to have a legal right or title of ownership to assets, you can’t just say “I own this, trust me”, it needs to be legally enforceable.
SR: Very cool. Could you explain the other layers: TrustMarket, TrustProtocol and TrustVault?
TR: It would take a very long interview to explain in-depth, we have a 70+ page whitepaper, and I recommend anyone interested to read it.
On a high-level, the TrustToken platform is about solving the issues to create a distributed system of trust, similar to underwriting an IPO, or eBay’s reputation system. We can break it down into a few buckets:
Technical protocols to communicate between the blockchain and real-world custodians holding and managing assets.
Legal protocols that tie legal ownership between token holders and the actual assets.
Economic incentives to ensure that investors purchasing tokens are buying the actual representation of assets in the real world.
SR: Are you running on Ethereum?
TR: Yes, all tokens issued are ERC-20 compliant.
SR: Why choose Ethereum over Ripple?
TR: We see the developer ecosystem that has sprung up around Ethereum as by far the most robust. We are not married to any one blockchain but we will go where the market share is. Right now, the mind-share and consumer market-share is with Ethereum, as well as all the exchange support. But we are blockchain agnostic and we’ll likely be cross-chain so our asset-backed tokens can exist in multiple blockchains.
SR: Being from Venezuela, I find the potential of stablecoins in developing nations really interesting. Is that one of your target markets, or are you more focused in institutional investors, traders and other targets closer to home?
TR: Initially we are focused on institutional traders, hedge funds and enterprise applications, because that’s where the bulk of the volume is now and we can more easily meet their needs.
SR: Where do most of your clients come from, are they mainly buying in with crypto or are they on-ramping via fiat?
TR: Every single TUSD in existence today was originally purchased with USD. The majority of people dealing with us directly tend to be institutional players and, once is traded more broadly in exchanges, people from around the world buy in smaller amounts. Distribution is taking a life of its own and we now have customers around the world buying TUSD in virtually every single currency — from Bitcoin to Pesos,we are working with an exchange called BitInka to trade in most of South America.
SR:What are the main exchanges you are listed on and how has the process been?
TR: We’ve honestly been really humbled by the reception. We’ve done very little work to promote and market our product and are just starting to think about that now. Most of the growth has been organic based on market demand. I think the market has been largely disillusioned with Tether and has been hungry for a more trustworthy solution, so we see it as our job to do everything we can to earn consumer’s trust. So far the market has been voting with their wallets. We were fortunate to earn trust and that has led to a virtuous cycle, we are now deep in conversations with various exchanges, most of it inbound.
SR: That’s a great story. How do you generate revenue presently, and what are the plans for the future as you tokenize different assets?
TR: Right now we are just covering costs to break even, we are not collecting fees on TUSD and are operating as a service to the ecosystem. Once we begin issuing securities, our model will look something like a distributed investment bank — there will be a fee to take assets to the public market, in exchange for access to our platform’s underwriting, distribution, sales and marketing.
SR: Does TrustToken have priorities on which assets or securities to tokenize first, and what’s the timeline on that?
TR: We are getting all of our “regulatory ducks” in a row and want to make sure to have all the proper licensing in the US and abroad first. Our plan is to begin issuing security tokens in 2019 and we’ve seen a lot of inbound interest from asset owners around the world, from real estate to pharmaceuticals, and our team is working really hard to vet all of these and decide which options to prioritize when the time is right.
SR: How do current KYC/AML requirements delay your onboarding and affect the bottom line?
TR: We made a very conscious decision to hold ourselves to the highest standards when it comes to KYC/AML regulation. We definitely made a trade-off in the sense that we collect an enormous amount of information when onboarding new users and it can take 2–3 days to verify all their information and perform the necessary background checks. We are willing to trade-off short-term growth for the right long-term decision, which is to remain a compliant business and doing the right thing. Not every project has taken that approach, but we think it will end up being a long-term advantage.
SR: Tory, is there something that we did not cover in this brief interview that you would like to tell our listeners and readers?
TR: There is one question that I like to think about: what does the future look like with asset tokenization, what does it unlock?
For me the most exciting aspects are:
1) Access: We take for granted our access to dollars or investment vehicles but investors around the world are restricted due to geographic or arbitrary reasons, and the tokenization of these assets will vastly increase their availability and access.
2)Use cases around the un-bundling and re-bundling of assets: For example, region-specific bundles of real estate, with investors having the ability to long or short cities or countries through distributed derivatives platforms (e.g dy/dx) and make more informed investments. It’s not only real estate, the ease, liquidity and specifity that tokenization provides will allow broader access to various investments across all asset classes.
If you want to learn more about TrustToken, visit their website or follow them on twitter at @trusttoken