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issuance of in your c20 whatever you incorporate into it is not really a big deal now how do you remain compliant in the lifetime of such a token hi guys this episode of value tokenized is dedicated to banks are yesterday's honest alamo as CEO of manba now the project that is building and Bank fully on blockchain and moreover in December 2018 they held an offering of their tokenized equity successfully raising over 2 million euro and they're very open and willing to share the experience with everybody to follow their example [Music] hire not thank you very much for joining us here for the interview it's valid second ice-t-- it's our pleasure to have you here and monitor on is the first bank to be fully built on blockchain can you tell us about the idea and the technology behind it yeah so basically we want to build the type of libertarian bank where that would be based on three fundamental pillars it's gonna be a Swiss bank based in Geelong it's gonna be four reserve marketplace and circle eyes and I guess the important aspect today is the tokenization aspect because our ambition is really to bring the entire balance sheet of the bank in the form of tokens onto the blockchain right so basically of course we start with the liability side so basically all the people's deposit do you roll the taller the Swiss franc etc will be tokenized in wallet that is controlled by the bank and I guess this is quite important here because we want to have a bank that we use it will be pretty much anyone even your mother right and so they don't need to really understand that there is botching on the back part when they will be able to make a payment out they will always have the options to basically choose rather they wanna pay on the legacy truth so Swift surround ACH in the US and then we will redeem unchain the tokens we will deliver Munira correspondent bank to pay your beneficiary or you could have the options to pay even address rather than an Iban and therefore the token will move on whether that is controlled by the bank so whatever it is controlled by you or your counterparty right but this is only the liability side of the balance sheet now on the asset side this is where it's becoming super interesting because at the end of the day right banking assets and most assets or conference and for with the usage of small contracts what we can do is that we can take this original contract and hash it and incorporate it and Link it with the small contracts automate some of it's part of its functions right so such as the cash flow management and the ownership structure and this brings a whole new set of possibilities if you take the example of a loan the loan is a contractual agreement right that you have visual banking but once you pay them back interest and this is an asset for them it yells they make money but this is also very hard for them to actually have it super liquid because the bank can sell it to another bank of course but you move you as a customer you won't change counterparty you will continue paying back to your bank right and this is where it's becoming interesting because now if you think of it if you pay back to an address rather than an iPad every month the cash flows future is no managed by a small conference so we can be owned by Bank a on day one Bank B on day two but it can also be predictively owned by the crowd because it's represented by tokens and of course you can go one step further and pile up you know smart contracts of smart contracts so that you can recreate mortgage back securities asset backed securities and have products that is fully transparent for anyone to understand by other days in speaking about organization you know a lot about this from practice as well because in February of this year you have successfully raised two million EUR if I'm not mistaken and you did did it and form of selling to kanai's equity and you had investors from 30 different countries and can you tell us a little bit more about this process so first of all it was in December last year it was the worse period of the of crypto of course it wasn't the very deep crypto winter but yet we managed to successfully close the rod so the biggest challenge here was ready to make by new security talker and let me explain so most of the time today what you see is that those security tokens the way they were actually structured is through a private contractual language right so at the end of the day he was an investor you're only protected by the goodwill of the issuer and as well you have to read properly the contract because if they put the little line say that they may change their mind in six months etc at the end of the day you're not that much protected your it's very similar to what you have to what you saw in the ice right so we really wanted to go one step further and give the quality to the token of order to be sure and therefore being protected by this crystal so the first aspect that we had to actually circumvent was the so-called endorsement USA in Switzerland and ideas in most countries when you want to transfer and security or share from multi-age or TD you have to do the so-called endorsement meaning that today it's big it's a pitiful right so it's like you take me sure certificate you go on the back and you sign that the transfer is valid which of course is not very compatible with the blockchain so we manage first to actually have a legal opinion here in Switzerland to get rid of that and I have the blockchain recognized as the shareholder registry now and you have this electronic signature to work as well as the handwritten signature and therefore now the token that I share is incorporated within the token and it's totally the same right so you own the token equals your ownership and because we wanted to have the transfer up in eg completely free you know we didn't want to have some kind of waitlist whatsoever before that we decided to structure it in a way that you can own the share but if you want to get granted all the privileges attached to the fact that you own the sharing such as the social rights protein and economical right dividend so basically you have to register with us right you have to get to announce to the company who you are it's not a formal can see it's just a pure declarative names because we have to write you English shareholder registry which is a necessity respond to project and you had investors from over 30 countries and can you tell them more about their regulation that you relied on to make a public offering so what we did was Swiss so we are Swiss company our shares are issued in Switzerland of course but we wanted to address as many countries as possible so to do so we had to of course comply with some of the securities law so we should prospectus we made a proper prospectus for the Swiss Swiss prospectus but we didn't want at the time to file it for the EU for example because it would have taken too much time to file it out across the entire so we decided to remain below the threshold so in EU for example you have two so-called 150 investors per state member per country in Europe that you can address without being qualified as a public offering alright so this is the threshold so we had to put a kind of mechanism on the website that counts the amount of people coming onto the website and it requesting documents prospectors to short purchase agreement and all these things so we had something that was counting per country depending on the IP for which were logging an information-gathering and therefore would limit the number of investors and even the number of people that could have access to the documentation 250 per country and France in Italy Germany etc etc and that's pretty much how well it's actually today we have opened the path right so pretty much anyone can just copy paste work with it so everything is like bubbling ranks all our documentation so public if they all the process of course if they respect the same process that we did they can actually do a control C control V and we do it for them of course there are some things that is understood and if they want to have some advices they can contact us we'll be more than willing to help to organize such things I mean today we have an offering we help actually already different companies to do that we have of course the tech aspect and we have created the so-called bridge protocol in order to help people to issue securities on chain in a compliant way but that's certainly the technical part and then of course we can help anyone - of course collect money in the form of chat because this is the biggest pain point for blockchain companies today first of all to open a bank account yes but secondly when you have open the bank account to convince the banker to accept thousands of wires from the entire world is also something that is point all right so we've managed to have all these relations he arranged so if so if someone wants to do that they can contact us and Google more more than willing me to help them to actually either use our own accounts to do that we were financially to make every so we can do it on the Alf or we can even help them to open bank accounts here engineer are depending on the quality of each and every project we are happy to make interactions don't understand it right that you either can already do it now or you will be able to accept money both in flight and in cryptocurrency and his future like according to banking license or you're still in the progress of obtaining this lights so we are so of course our ambition is to become a fully licensed bank now this is the roadmap but in the meantime we are already a financial intermediary right so what it means it means that in Switzerland we are allowed to accept deposits but up to a maximum of 60 days that means that we can help people to collect fiat currencies in cryptos but true to say one can do it was their own wallets but for the Fiat we can help them doing it on our own accounts but the of course the sale has to last maximum of 60 days so that we can collect thousands of wires in one side and deliver the money on the other side at its maximum 60 days later yeah so this is already something we can do we have a banking partner here that trusts us for the KYC and AML point so we do all the documentation for the triads we prepared a full compliance file that would be then delivered to the client so that his bank is will be confident with the fact that he can receive this money and that the reasonable problem behind it please tell us more about the bridge protocol because there we see a lot of simulation protocols well suppose that some call extender it's emerging on the market can you share what are the peculiarities of breach protocol what makes it suitable for securities the main idea behind it was the observation that today most of the people they really focus on the issuance right and on the technical side issuance of in E or C 20 whatever you incorporate into it is not be detected now how do you remain compliant in the lifetime of such a talker this was actually solved by many protocol many projects in the form of a whitelist right so they say people have to first pass the cable C and then they are in to whitelist so that they can transact unit and send and receive those dollars now we believe that this is not very elegant because it creates a lot of frictions and we wanted to have something more refined that is in line with the goals so for example what we developed is a rule engine a user which is free on the other side the combination of the two is almost endless so let me give you a few example if you want it recognized let's say you were Swiss franc or even dollar most of the time you have to comply with rules because it's not because it's so token that it can own one of those it's not because it's token that it can be used on the darknet UND end of the day as an issuer you are actually the custodian of the real money and trusting it within your own bank account and therefore you're responsible for that so you have to apply some kind of restrictions of transfer the eg and rather than having only a pure wait list which is quite cumbersome we decided to have something that is more refined in the sense that we can send let say 50 euros per transaction without passing any kyc up to a maximum of five hundreds per of 12 months and that's without any twist then you have to pass the first level of kyc when you reach the 5k threshold it's a formal kyc with the video and voting and everything to respect those rules and then we need also to be able to trigger suppose on the blockchain when transfers which is the AML threshold right the anti money laundering that requires us as an institution to document the economic context of such a transaction the origin of the funding cetera in order to remain compliant so it's really linking the unchain world and the of chip board so that is what is a a fiat but now if you think about security all type of securities that they have to respect different groups in Europe we have something called me fit for example so you have to at the onboarding level you have to make sure that the client understands what he is buying into if the product is subject to me feel so you have will have risk takers will have some risk-averse type of person and depending on the classification they will able to own and see those torrents or not some doggins will represent an asset that is only for accredited investors and you need to have flags also in order to restrict on the fly the transferability of such program depending on the quality of which in every individual and this is what the bridge protocol is about is a way to basically serve compliance there on top of into public atrium so that anyone can actually transact but you have a restriction of transrapid of course you need to support compliance Oracle's in order to do so we are one of course on our own network but it's open for anyone to become that's poquito de Pury of it is that it's an open source protocol anyone can review the code and anyone can participate and become a regulated member here the idea is that when you issue your token value through security you will be able to say I want to actually bind this contract to this Oracle this Oracle and this compliance Oracle because I trust them to be compliant with my regional regulations and therefore individual every time people we want to transact we have to pass the Courvoisier with those Oracle's one of those or the trigonal wisdom cetera et cetera so that's really are we how we structure it and so and by the way by the end of May we will release a simple page a really super simple page for anyone to issue their own security token so they will put the name of their company and the amount of shares the time for the for the sales or presale publication etc some timing etc they will plug that reservoir or their ledger onto the computer they will click on generate validate on the treasurer and it will be free for anyone to issue their own security so no more line being sixty cage you have like some kind of there's 20 years in to represent securities so basically I think that the future of innovation is and self patience yeah it's all about decentralization and it's all about empowering people to do it on their own yet remaining compliant I first want to ask you about the story behind the bank's name because when I actually knew what it represented I think that it quite suits the idea of the civilization and it really sounds interesting in this regard maybe you can tell us more about this one yeah sure the name actually is derived from a small mountain that is in between Lausanne in the vein Switzerland's it's quite famous for the libertarians in general because it has seen the birth of so whole team thank at that time it was called the Society for thinkers and basically it was after the Second World War some economist and philosopher of their time called him the destructor of their time they really wanted to promote Liberty in every aspect of people's life right so Liberty of speech about your price but also economic Liberty and having to actually spread the word that if you want to have prosperity you need to have Liberty right and you need to have a state and has little impac in the life of its citizens especially economically otherwise it would lead to anything of course this was funded by highly acutely ponies based on Friedman and all those guys that we all know and of course this is the value that we want to convey so that's for in multifamily you plan to do a kind of marketplace for different in tax that we'll be able to integrate in the entire protest and how will this work on blockchain can you explain this yeah so basically as I told you the beginning so the bank is based on pretty full wizard marketplace and signals so because we intend to have a free reserved type of Bank it means that we will refuse to ourselves the privilege to do on balance sheet credit right and this is how commercial banks usually make money 90% of the revenue instrument for that so if you want to make money that's how we will make money actually it's accurate through the market will be commission based rather than being credit based and because our mission is really to say that the bank shouldn't be the sole counterparty for each and every product and services you might buy I mean today if you bank that UBS the only product you can buy or the UBS proper price if you are bank that whatever been b-body bar well you can request a loan but it will only offer you to learn from being bit about right so what we want to become is video Nagre later on through the marketplace it's always open but we aggregate all the products and services from the markets onto a single marketplace for you to choose and consume when it's your best so you just fill up your criterias and whatever comes on top is always the best so of course we started with the payment system so that we can have a proper currency exchange in terms of here as well on top of Krypton so that people can actually much focus it needs and that's always the best deal but also if you look at it for the lumen for example which I believe is a great example you at the end of the day you do not care if you'll almost provided by Bank of America UPS or even anything right so what really matters to you is then all your criteria so much and you get the best deal out of it and that's really the principle of everything we do every verticals that we create every marketplaces believe in this and it's always open right so and the end of the day even if you're still unhappy with what you've been proposed you can create your own deal and let the other members we can let the Cross subscribing to it right and root organization as you said through these small contracts we can automate the cash flow structure and people actually that would buy into those incentives with this assets actually will own something that is more liquid than it is today on any credential platform I mean today for example lending flaps it works quite well people are happy right so they have a battery hills that they have at the bank otherwise they also happen to invest in project or people they truly believe him but at the end of the day they are locked in their investment opportunity matures and this is how tokens can solve that because right after issuance you have a secondary market organized and also it's totally free also to trade in from Texas cetera so you have something that is more liquid so if you want to take let's say two three months of yields you have invested into it and then you need your money back because you have another investment to do you can always cash out on the secondary market and this is really the principle of everything we ask this will be a last question for today but going back to you the banking lines instead you're in processor Janey how does the process go and what are the obstacles you're seeing anyway being a very innovative project obviously please tell us more about that yeah I mean at the end of the day you know a banking license it's about the it's about people all right so they wonder the regulator is absolutely focused on who are the people who are the key people today happy understanding the knowledge via beyond the career as well that's the main thing right I mean and then of course especially in Switzerland the regulator will not grant banking license to any company if they believe that they will not reach profitability within three years this is super important for them because it it would be a huge repetition risk to give a banking license to the company that would basically go bankrupt after three years health that would be like quite bad in terms of reputation so we had to actually explain that right so we had to actually prove that we can make money in another way by running a commercial bank they don't have to actually to on balance sheet it's to make money we can actually make money as well we can be profitable by running those marketplaces so that was really the first part now of course the second aspect is that you have to retrofit everything you do everything you do into the existing compliant boxes the regulatory boxes right so you shouldn't go to the regulator and say here is what I do please qualify me no you have to actually put yourself in their shoes and look at exactly what are the regulatory boxes and make sure that everything is able to retrofit back into it so that's why we started to build this bridge protocol is in order to actually code with the rule engine all the transferability restrictions that today banks apply in the off chain world and we had to actually replicate that on to the on chain so that's the first that's why we had also - and something that of course is not super appealing for this the the Bitcoin bugs etcetera because I am in love with become this other thing but we have when you talk about the fiat currencies for it's fun when you talk about securities you have to retrofit rules so that's why we had to have as well the golden key that is the we call the judge key so that's a judge if he has the Monday he can come and he can lift the Swiss banking secrecy to seize assets on chain and that's because at the end of the day we as a bank we only act as a custodian Bank right so we entrust the real assets and what his own chain is only a representation of what is interested within the back so that that is super important to actually to prove to the regulator that everything works as it used to work in the off in the of chain world so you have to actually prove that because new rules are going to be made especially for you because you're a new innovative project right so that's that's the main aspect that's also why in terms of Krypton in Switzerland at least it's not that easy to offer Bitcoin and etter to the crowd to the mass it's very moral actually simply because you have to respect the compliance food you have to actually document the origin of the fund as a life right you have to actually convert this all to the legend and when it comes to Bitcoin and editor you can think of chain analysis you can think of things like that but we all know that is you know at the end of the day you deposit your column in exchange we threw it is not the same coin anymore so it's hard actually to document it in a systematic way of course you can take three weeks to make a proper assessment discuss with the client and try to prove a story is right and this not lying to you but this would be quite cost inefficient and and for a banking institution that's quite hard to actually bring that so it makes sense if the client comes with millions yeah the form of private banking etc but if he comes with only 50k the cost of an boring social customer versus how much money you can make on such a customer is quite disproportionate so that's also why we're trying to work now on the proper way to actually systematically have this compliance done and that would be acceptable for the Swiss regulator but we believe this is something that will come in phase two we hope we can bring it into phase one but we don't want to actually you know postpone the banking license because of that so on the first stage we really want to be a bank on blockchain not a crypto bag and then a second stage we will add a crypto but maybe we will make it happen before that yeah good luck with that and thank you very much for for being with us that's very taking nice and sharing what you do it is extremely interesting and we'll be following closely thank you very much thank you for having me it was a nice very great pleasure to meet you this was valued tokenized thank you for watching if you have any questions to your today's guests feel free to leave them in comments below or contact us via mail directly and of course don't forget to Like and subscribe to us on YouTube and Twitter