- Scott Thiel, former partner at DLA Piper, discusses the potential of blockchain technology in revolutionizing finance.
- DLA Piper has developed TOCO, a sophisticated tokenization engine, to help clients create compliant tokenized solutions for various assets.
- The inefficiencies in traditional capital markets, such as fragmentation and slow settlement, can be addressed by digitizing assets and leveraging the efficiencies of digital markets.
- TOCO combines legal and asset structuring with tokenization to create digital versions of real-world assets, allowing for greater automation and efficiency.
- The technology can be applied to both fungible and non-fungible tokens, with a focus on enterprise projects and the emergence of NFTs in sectors like retail, hospitality, and leisure.
- The goal is to democratize finance and enable more people to participate as asset owners or issuers, while also facilitating global movement of digital assets.
- DLA Piper works with clients to tokenize assets such as fine art and mortgages, creating new investment opportunities and products.
- The process involves providing regulatory advice, conducting due diligence, creating tokens, incorporating legal documentation into the blockchain, and facilitating asset distribution and servicing.

- Toco offers asset minting, distribution, and ongoing asset servicing for easier management.
- Toco's architecture is a hybrid public-private chain structure, allowing for confidentiality and compliance.
- Toco leverages Hedera Hashgraph's consensus service and can deploy assets on multiple chains.
- The total value of crypto assets is currently around $1-3 trillion, but the World Economic Forum estimates it will reach $24 trillion by 2027.
- Toco is positioned to tokenize high-value complex assets and is present in global financial centers.
- Toco recently received a provisional license in Dubai and is working with regulators there.
- Traditional financial centers may not necessarily become the center of the digital assets world.
- Toco has a booth at the event.

Keynote: Enterprise Meets Web3: Tokenisation of Real World Assets
Speaker: Scott Thiel, Founder, TOKO
Stage: Trust EVM Stage

TOKEN2049 Singapore 2022

#token2049 #toko #tokenization #rwa #enterprise #web3 #blockchain

Until quite recently, I was a partner at global law firm DLA Piper.

4 years ago we envisaged a future in which this amazing technology we know as distributed ledger technology or blockchain technology was going to revolutionise the way we go about representing, buying, selling, trading, collateralising assets.

We were really envisaging what I like to refer to as the future of finance.

As we start moving towards the complexity of digital assets that represent real world interests, there is a lot of complexity from the regulatory perspective.

We heard JP in the last talk making reference to regulatory uncertainty and the need for doing it right.

Why has a global law firm built the world's most sophisticated tokenization engine.

It's so that we can help clients deliver tokenized solutions in a manner that is compliant with regulations on a global basis.

So DLA is global, it's created TOCO, it's still currently the owner of TOCO along with some other service non-non-legal services businesses.

Going back 4 years we looked 5 years forward so we're close to that moment when we're going to see the rise of security token asset-backed tokens and we now have a pipeline of these types of deals.

The rationale for this is the inefficiency in today's capital markets.

By inefficiencies there are several aspects to that.

There are the obvious inefficiencies in terms of the fragmented traditional financial services ecosystem, very paper-based, very intermediary based, lots of layers of fees, lots of layers of different participants that need to work together, everyone's familiar with the slowness of settlement, the fact that stock exchanges open a few hours a day, a few days a year when it suits local clearing banks for example.

If we can compare and contrast that to the types of efficiencies we see in digital markets, let's use cryptocurrencies as the earliest example of that, where we have high velocity trading, 24-7 exchange, low fees, access to lots and lots of real-time information about these assets.

And we're envisaging a future in which that same sort of technology and efficiencies can be now brought to bear on real-world assets.

So what we do with TOCO is we combine legal structuring, asset structuring, tokenisation of a range of real world assets.

So things like real estate, Things like intellectual property rights, funds, financial products, any economic interest or right that you can imagine can actually now be represented in a digital form.

And once it's in that digital form, it can start benefiting from the types of distribution networks, exchange platforms and other efficiencies that we are already seeing in markets like crypto and NFT but now with more complex and higher value assets underpinning them.

So the Toko technology solution allows the creation of virtual assets that represent in a compliant way these various interests.

We can do fungible and non-fungible tokens.

In the non-fungible token space we've been working on projects for enterprises looking at redemption tokens, loyalty schemes, consumer engagement models.

These are going to be the NFTs in the next wave, I believe.

And we're seeing large scale enterprise, particularly retail, hospitality, food and beverage, leisure.

These types of businesses are now looking for NFTs and Metaverse being a new way of engaging with consumers, bringing new consumers, particularly younger consumers, into their products.

And things like redemption tokens that then connect real world and digital world, because a lot of the businesses that are going to use this technology aren't just digital native, they aren't just metaverse companies, they're traditional companies, very large traditional companies, many of them are goods, services, products, manufacturers, that are now looking to leverage this technology to change their engagement model.

TOCO will take these rights, these different rights and interesting things that we're now creating for clients and creates a digital version of them.

So we're creating smart contracts with the types of autonomous functionality driven by external data feeds to allow these projects to be far more automated, to allow the management of the assets to be far more efficient and to give the investors or the token holders a greater access to rights and real-time settlement and other aspects of what it is that's actually sitting under these tokens.

To all intensive purposes it is the same type of technology as a crypto or traditional NFT, however because these things now are linked to real-world assets They typically have a much more complex regulatory requirement.

And again, we've heard some of the other speakers on this stage talking about the need to therefore ensure that they are compliant.

So, the other piece of what we're doing with Toco is really important.

Digital assets, unlike traditional financial services, are going to be much more global in nature.

They are going to move across boundaries just like your Bitcoin can move across boundaries today.

We're going to see once these instruments are digitised, they are going to want, and people who are consuming them, buying them, trading them, are going to want them to be capable of moving.

If you want to do a secondary listing of an IPO now and you're listed on New York and you'd now like to list in Hong Kong or Singapore or London, that is a huge process requiring enormous amounts of legal fees, lots of regulatory compliance, quite inefficient and a huge heavy lift.

Okay for the very biggest of companies in the world, but what we're going to see with the digitization of these interests is the ability now to start listing on multiple security token exchanges around the world in a far more efficient and lower barrier to entry.

And this is 1 of our primary drives of the project, is to democratise finance, to give more people the ability to participate, both as an asset owner, but also as an issuer of these interests, so that they can then access new investors, and investors can participate in asset classes that are traditionally illiquid or require too much capital to participate in.

So the combination of this, legal structuring, compliance structuring and the world's most sophisticated token engine is then also combined with distribution networks.

So many of our partners, it's fantastic to see here in Singapore at this event, that whether they be the broker-dealers, the custodians, the ATSs, the exchange environments and we've been building ecosystems and route to market.

So a typical deal if you like, client comes and says I own this, a couple of examples today, we have access to several tens of millions of dollars worth of fine art.

We're looking to provide fractional interest in those art.

We're looking to provide people with access to and exposure to the capital growth or revenue that can be generated from this art, either by loaning it out or selling it in the future for capital gain.

Can you help me tokenise and create these assets?

That is exactly the type of question that we're working with clients across the world with a range of asset classes to do.

I had another great conversation in the speaker lounge just before coming on now about how we are changing the world of mortgages.

Mortgages, People who have money tend to give that money to a bank.

The bank then takes that money and loans it out for quite a bit of interest to people who want that money to buy a mortgage.

How about we connect the people with the money with the people who need it, arbitrage that and create new products.

Now, not only does that create efficiency in terms of the various intermediaries in the traditional financial services sector, but perhaps even more interestingly, you don't have to have something that looks like what you can get today, which is a traditional mortgage, which is very much boxed into a set of rules.

There's an LTV, there's possibly a variable or fixed interest rate, and that's it.

You loan and you tend to then have all of the flexibility of choosing 20 or 25 or maybe even 30 years for your loan product.

What we're now beginning to see is the market saying, well hang on, if I can connect investors and homeowners directly, for example, what interest do we have that both of them and products that we can create that are brand new.

And that's where it's getting really exciting is tokenization is allowing people to create new and different products and new and different investment opportunities that we haven't seen before.

So just a quick overview of that process.

Again, client will come to us, we have an asset, it's a piece of real estate, it's some fine art, it's an ex-billion dollar fund where we have all sorts of assets or equities in there.

We, in combination typically with the law firm, will give advice, the regulatory advice.

What is it at law in this country or that country?

Do they need to be professional investors?

We help the clients build the tokenomics.

We help them then take all of that traditional legal documentation that is essential to real world investment and we bake that into the token.

We hash legal documents, we put them on the blockchain, we put information about the underlying asset on the blockchain so it provides information to investors and a level of transparency that we don't currently see in traditional financial services.

That's great for primary market issuance.

It's going to be even more important for secondary market liquidity because 1 of the barriers to liquidity in so much of traditional markets today is, what is this thing I'm buying?

Let's go and ask the law firm to spend a couple of hundred thousand dollars building a data room so I can then have a look at it and decide whether to invest.

We're going to put all of that data room into living and breathing on-chain information packs so people can make decisions far more efficiently and quickly.

We then mint the assets, we then as I referenced with our partner networks around the world we can do distribution of those and then we can provide ongoing asset servicing whether it's things like on-chain voting, automatic capital distributions and other cap table management and other features and functions that are going to make the asset then far easier to manage.

I want to talk about the Toco architecture for a moment because this is really critical and it's a fundamental difference in terms of what Toco offers that other tokenisation platforms do not.

It is a hybrid public chain, private chain structure.

If you want enterprise and if you want institutional and professional investor participation in real world assets, they are not going to accept that all information is visible through a block explorer to everybody in the world.

And I know that might sound at odds with the objectives of fully decentralized crypto ambitions and blockchain ambitions, but if you want the world to move en masse to the use of DLT solutions, it's a critical thing that you can hybridize and you have some information that's public and some information that's in a private chain layer.

So TOCO uses a hyperledger fabric environment in the private chain to keep the information that only should be accessible by permissioned, white listed, AML KYC, professional investor proven people to get access to it.

And that's important both for the investors in terms of their own confidentiality, but also in terms of the issuer to make sure they don't do things like selling a PI product only to a retail investor, which would be illegal in many jurisdictions.

So it's a critical part of making sure we, this is an example of how we've baked legal compliance into tokenization.

We then leverage the Hedera consensus service, our good partners, technology partners, Hedera Hashgraph, the world's best consensus service for any distributed ledger technology.

We work with Hedera and every 1 of our tokens leverages the HCS service.

So in terms of transaction approval, subsequent trading of transactions, it's running through the world's best ABFT level for those who are into the mathematics of consensus, we leverage that trust layer.

And then we can deploy assets on multi-chain.

Different projects, there are so many blockchains out there, different projects have different priorities, different needs, different wants in terms of where they would like their assets.

So we've already integrated Ethereum layer 1, we've integrated a layer 2 in Polygon, the Hedera token service, which is our preferred standard for complex high value assets, as well as the Algorand ASA standard.

So we can mint multi-chain using a twin smart contract model and this is something that we're able to continue to evolve.

So we have some conversations going with some other protocols who are saying we have asset owners wanting to mint on our platform, can you help us please?

And I think this slide neatly sums it up.

There is so much excitement about crypto and NFTs and DeFi.

And I am also share with that excitement.

It's been fascinating to watch the rise of this brand new technology and the associated asset class.

I didn't check this morning but it's somewhere in the region of 1000000000000 dollars is the current value of the crypto markets and at its peak it jumped over 3000000000000 dollars before we had a little a little crypto winter that we're currently going through.

But we are talking 1 to 3 trillion dollars is the total value of crypto assets.

Now the World Economic Forum, Davos, they've estimated that by 2027, which is actually not that far away, we're going to see at least 24 trillion dollars worth of assets on a blockchain.

And that itself is just the tip of the iceberg.

If you start looking at real-world asset classes, real estate is already $310 trillion.

Global debt, so debt instruments, the types of things I referenced earlier, mortgages, which are just a simple example of a debt, $220 trillion.

Global equities is running at just over $100 trillion.

And there are many other asset classes that we don't even necessarily think of as an asset class because they aren't currently serviced by the financial services market.

So I think what we're seeing here is the potential for you know 5 to 700000000000000 dollars worth of assets that are going to be moving on chain over the course of the next decade or so.

Now let's just compare that to the 1 trillion dollars worth of crypto today.

That technology applied to the tokenization of everything is where Toko's positioned itself to do high value complex tokenization.

Quick overview, Toko is in all the global financial centers, New York, London, Dubai, Singapore, Hong Kong, where we have teams.

Quickly mention on Dubai, it's our most recent setup, we're currently working and supporting the virtual assets regulator there on an advisory cap capacity and on Monday night we also announced that Toco has received its provisional licence from Vara, so we are going to be a regulated entity in that market.

We're seeing 1 thing I would say about this map, if we look at the traditional financial centres of the world, I would caution that they may not be the same financial centres that become the centre of the digital virtual assets world.

They may be, but it's definitely not a given.

This is what we're seeing in markets like the Middle East that are positioning themselves to be at the forefront of this new revolution.

We do have a booth just in the back at the right here, M17, thank you for your attention, it's great to be here.


Speaker 0: Hi, good afternoon. Fantastic to be here in Singapore. My name's Scott Thiel. Until quite recently, I was a partner at global law firm DLA Piper. 4 years ago we envisaged a future in which this amazing technology we know as distributed ledger technology or blockchain technology was going to revolutionise the way we go about representing, buying, selling, trading, collateralising assets.

We were really envisaging what I like to refer to as the future of finance. I was a lawyer in a law firm. As we start moving towards the complexity of digital assets that represent real world interests, there is a lot of complexity from the regulatory perspective. We heard JP in the last talk making reference to regulatory uncertainty and the need for doing it right. Why has a global law firm built the world's most sophisticated tokenization engine.

It's so that we can help clients deliver tokenized solutions in a manner that is compliant with regulations on a global basis. So DLA is global, it's created TOCO, it's still currently the owner of TOCO along with some other service non-non-legal services businesses. So what is it? Going back 4 years we looked 5 years forward so we're close to that moment when we're going to see the rise of security token asset-backed tokens and we now have a pipeline of these types of deals. The rationale for this is the inefficiency in today's capital markets.

By inefficiencies there are several aspects to that. There are the obvious inefficiencies in terms of the fragmented traditional financial services ecosystem, very paper-based, very intermediary based, lots of layers of fees, lots of layers of different participants that need to work together, everyone's familiar with the slowness of settlement, the fact that stock exchanges open a few hours a day, a few days a year when it suits local clearing banks for example. If we can compare and contrast that to the types of efficiencies we see in digital markets, let's use cryptocurrencies as the earliest example of that, where we have high velocity trading, 24-7 exchange, low fees, access to lots and lots of real-time information about these assets. And we're envisaging a future in which that same sort of technology and efficiencies can be now brought to bear on real-world assets. So what we do with TOCO is we combine legal structuring, asset structuring, tokenisation of a range of real world assets.

There are some on the screen here. So things like real estate, Things like intellectual property rights, funds, financial products, any economic interest or right that you can imagine can actually now be represented in a digital form. And once it's in that digital form, it can start benefiting from the types of distribution networks, exchange platforms and other efficiencies that we are already seeing in markets like crypto and NFT but now with more complex and higher value assets underpinning them. So the Toko technology solution allows the creation of virtual assets that represent in a compliant way these various interests. We can do fungible and non-fungible tokens.

In the non-fungible token space we've been working on projects for enterprises looking at redemption tokens, loyalty schemes, consumer engagement models. These are going to be the NFTs in the next wave, I believe. And we're seeing large scale enterprise, particularly retail, hospitality, food and beverage, leisure. These types of businesses are now looking for NFTs and Metaverse being a new way of engaging with consumers, bringing new consumers, particularly younger consumers, into their products. And things like redemption tokens that then connect real world and digital world, because a lot of the businesses that are going to use this technology aren't just digital native, they aren't just metaverse companies, they're traditional companies, very large traditional companies, many of them are goods, services, products, manufacturers, that are now looking to leverage this technology to change their engagement model.

TOCO will take these rights, these different rights and interesting things that we're now creating for clients and creates a digital version of them. So we're creating smart contracts with the types of autonomous functionality driven by external data feeds to allow these projects to be far more automated, to allow the management of the assets to be far more efficient and to give the investors or the token holders a greater access to rights and real-time settlement and other aspects of what it is that's actually sitting under these tokens. To all intensive purposes it is the same type of technology as a crypto or traditional NFT, however because these things now are linked to real-world assets They typically have a much more complex regulatory requirement. And again, we've heard some of the other speakers on this stage talking about the need to therefore ensure that they are compliant. So, the other piece of what we're doing with Toco is really important.

Digital assets, unlike traditional financial services, are going to be much more global in nature. They are going to move across boundaries just like your Bitcoin can move across boundaries today. We're going to see once these instruments are digitised, they are going to want, and people who are consuming them, buying them, trading them, are going to want them to be capable of moving. If you want to do a secondary listing of an IPO now and you're listed on New York and you'd now like to list in Hong Kong or Singapore or London, that is a huge process requiring enormous amounts of legal fees, lots of regulatory compliance, quite inefficient and a huge heavy lift. Okay for the very biggest of companies in the world, but what we're going to see with the digitization of these interests is the ability now to start listing on multiple security token exchanges around the world in a far more efficient and lower barrier to entry.

And this is 1 of our primary drives of the project, is to democratise finance, to give more people the ability to participate, both as an asset owner, but also as an issuer of these interests, so that they can then access new investors, and investors can participate in asset classes that are traditionally illiquid or require too much capital to participate in. So the combination of this, legal structuring, compliance structuring and the world's most sophisticated token engine is then also combined with distribution networks. So many of our partners, it's fantastic to see here in Singapore at this event, that whether they be the broker-dealers, the custodians, the ATSs, the exchange environments and we've been building ecosystems and route to market. So a typical deal if you like, client comes and says I own this, a couple of examples today, we have access to several tens of millions of dollars worth of fine art. We're looking to provide fractional interest in those art.

We're looking to provide people with access to and exposure to the capital growth or revenue that can be generated from this art, either by loaning it out or selling it in the future for capital gain. Can you help me tokenise and create these assets? That is exactly the type of question that we're working with clients across the world with a range of asset classes to do. I had another great conversation in the speaker lounge just before coming on now about how we are changing the world of mortgages. Mortgages, People who have money tend to give that money to a bank.

The bank gives you no interest for it. The bank then takes that money and loans it out for quite a bit of interest to people who want that money to buy a mortgage. How about we eliminate the bank? How about we connect the people with the money with the people who need it, arbitrage that and create new products. Now, not only does that create efficiency in terms of the various intermediaries in the traditional financial services sector, but perhaps even more interestingly, you don't have to have something that looks like what you can get today, which is a traditional mortgage, which is very much boxed into a set of rules.

There's an LTV, there's possibly a variable or fixed interest rate, and that's it. That's what you can do. You loan and you tend to then have all of the flexibility of choosing 20 or 25 or maybe even 30 years for your loan product. What we're now beginning to see is the market saying, well hang on, if I can connect investors and homeowners directly, for example, what interest do we have that both of them and products that we can create that are brand new. And that's where it's getting really exciting is tokenization is allowing people to create new and different products and new and different investment opportunities that we haven't seen before.

So just a quick overview of that process. What do we do? Again, client will come to us, we have an asset, it's a piece of real estate, it's some fine art, it's an ex-billion dollar fund where we have all sorts of assets or equities in there. We, in combination typically with the law firm, will give advice, the regulatory advice. What is this thing at law?

What is it at law in this country or that country? Who can you sell it to? Do they need to be professional investors? All of that. We do the associated due diligence.

Then we create the tokens. We help the clients build the tokenomics. We help them create the structures. We help them then take all of that traditional legal documentation that is essential to real world investment and we bake that into the token. We hash legal documents, we put them on the blockchain, we put information about the underlying asset on the blockchain so it provides information to investors and a level of transparency that we don't currently see in traditional financial services.

That's great for primary market issuance. It's going to be even more important for secondary market liquidity because 1 of the barriers to liquidity in so much of traditional markets today is, what is this thing I'm buying? Let's go and ask the law firm to spend a couple of hundred thousand dollars building a data room so I can then have a look at it and decide whether to invest. We're going to put all of that data room into living and breathing on-chain information packs so people can make decisions far more efficiently and quickly. We then mint the assets, we then as I referenced with our partner networks around the world we can do distribution of those and then we can provide ongoing asset servicing whether it's things like on-chain voting, automatic capital distributions and other cap table management and other features and functions that are going to make the asset then far easier to manage.

I want to talk about the Toco architecture for a moment because this is really critical and it's a fundamental difference in terms of what Toco offers that other tokenisation platforms do not. It is a hybrid structure. It is a hybrid public chain, private chain structure. This is really important. If you want enterprise and if you want institutional and professional investor participation in real world assets, they are not going to accept that all information is visible through a block explorer to everybody in the world.

And I know that might sound at odds with the objectives of fully decentralized crypto ambitions and blockchain ambitions, but if you want the world to move en masse to the use of DLT solutions, it's a critical thing that you can hybridize and you have some information that's public and some information that's in a private chain layer. So TOCO uses a hyperledger fabric environment in the private chain to keep the information that only should be accessible by permissioned, white listed, AML KYC, professional investor proven people to get access to it. And that's important both for the investors in terms of their own confidentiality, but also in terms of the issuer to make sure they don't do things like selling a PI product only to a retail investor, which would be illegal in many jurisdictions. So it's a critical part of making sure we, this is an example of how we've baked legal compliance into tokenization. We then leverage the Hedera consensus service, our good partners, technology partners, Hedera Hashgraph, the world's best consensus service for any distributed ledger technology.

We work with Hedera and every 1 of our tokens leverages the HCS service. So in terms of transaction approval, subsequent trading of transactions, it's running through the world's best ABFT level for those who are into the mathematics of consensus, we leverage that trust layer. And then we can deploy assets on multi-chain. Again, a decision we made some time ago. Different projects, there are so many blockchains out there, different projects have different priorities, different needs, different wants in terms of where they would like their assets.

So we've already integrated Ethereum layer 1, we've integrated a layer 2 in Polygon, the Hedera token service, which is our preferred standard for complex high value assets, as well as the Algorand ASA standard. So we can mint multi-chain using a twin smart contract model and this is something that we're able to continue to evolve. So we have some conversations going with some other protocols who are saying we have asset owners wanting to mint on our platform, can you help us please? So why is this all so important? And I think this slide neatly sums it up.

There is so much excitement about crypto and NFTs and DeFi. And I am also share with that excitement. It's been fascinating to watch the rise of this brand new technology and the associated asset class. I didn't check this morning but it's somewhere in the region of 1000000000000 dollars is the current value of the crypto markets and at its peak it jumped over 3000000000000 dollars before we had a little a little crypto winter that we're currently going through. But we are talking 1 to 3 trillion dollars is the total value of crypto assets.

Now the World Economic Forum, Davos, they've estimated that by 2027, which is actually not that far away, we're going to see at least 24 trillion dollars worth of assets on a blockchain. They will be asset-backed tokens. And that itself is just the tip of the iceberg. If you start looking at real-world asset classes, real estate is already $310 trillion. Global debt, so debt instruments, the types of things I referenced earlier, mortgages, which are just a simple example of a debt, $220 trillion.

Global equities is running at just over $100 trillion. And there are many other asset classes that we don't even necessarily think of as an asset class because they aren't currently serviced by the financial services market. So I think what we're seeing here is the potential for you know 5 to 700000000000000 dollars worth of assets that are going to be moving on chain over the course of the next decade or so. Now let's just compare that to the 1 trillion dollars worth of crypto today. That technology applied to the tokenization of everything is where Toko's positioned itself to do high value complex tokenization.

Quick overview, Toko is in all the global financial centers, New York, London, Dubai, Singapore, Hong Kong, where we have teams. Quickly mention on Dubai, it's our most recent setup, we're currently working and supporting the virtual assets regulator there on an advisory cap capacity and on Monday night we also announced that Toco has received its provisional licence from Vara, so we are going to be a regulated entity in that market. Hugely exciting. We're seeing 1 thing I would say about this map, if we look at the traditional financial centres of the world, I would caution that they may not be the same financial centres that become the centre of the digital virtual assets world. They may be, but it's definitely not a given.

This is what we're seeing in markets like the Middle East that are positioning themselves to be at the forefront of this new revolution. I am conscious of time, my time is up. We do have a booth just in the back at the right here, M17, thank you for your attention, it's great to be here.

See all TOKEN2049 transcripts on Youtube

Enterprise Meets Web3: Tokenisation of Real World Assets - TOKEN2049 Singapore 2022