Angel Investor Gil Penchina: “Securities Tokens Are Coming”
Angel investor Gil Penchina recently spoke at length about securities tokens at the StartEngine ICO 2.0 Spring Summit in Santa Monica, California.
“The SEC is saying every ICO is a security,” said Mr. Penchina, who has provided capital to projects like Civic, Ripple and Brave. “To some degree, the SEC is in a fight with the CFTC and other regulatory agencies over who is in charge. So, some of these statements are a bit inflammatory.” He still understands the push to regulate the industry, however, and even applauds it.
“Regulator’s jobs are to protect all of us from things going wrong, and there have been some things going wrong in token sales and ICOS,” the investor said. He notes that crypto projects haven’t always acted in an upright manner.
“If you think about what regulators spend their time on, they spend it on things worth regulating,” said the co-founder of Pryze, a decentralized sweepstakes company. “Five years ago, crypto wasn’t worth regulating. This sector has enough people and money in it now that it is worth regulating. Any time a sector takes off, the regulations are going to come…The question is, how much, how fast and how painful?”
Mr. Penchina notes how far the industry has come since the early days when trading was done via a handshake or an email, followed by exchanges like Mt. Gox, and finally onto more evolved platforms like Coinbase, and Binance.
“[We’re] starting to see securities tokens with Bitcoin Capital’s BCAP, to brokers like Cointopia and Polymath, and enablers of security marketplaces [in] folks like tZERO and others,” said Mr. Penchina.
Still, the early PayPal investor says he tries to remind people that crypto is not actually that large when compared to mainstream markets. He mentions how Alibaba raised 21 billion by selling securities, for instance.
“The equity market is a lot bigger than crypto, and the debt market is even bigger,” he says. “Meanwhile you have the New York Stock Exchange, which is open Monday-Friday 9:30am-4pm. I’m sitting here at 2:00am Saturday morning, slightly buzzed, trading my crypto, and thinking, ‘I can’t trade my Cisco now.’ To make it worse, it’s not just that it’s closed every night, it’s actually closed for entire days on weekends and holidays. Who does that?”
So what do we need today in terms of security tokens? Mr. Penchina contends token infrastructure. “The Polymaths, the Cointopias, TZEROs and Harbors…”
The industry will also then need traders; an area upon which Mr. Penchina himself has focused. “Right now we are talking about how there are going to be securities tokens, but no one is talking about how do we buy and sell these things.”
He highlighted Dividx, an as-yet unannounced decentralized securities exchange for accredited investors. He also highlighted Swatt Exchange, which is trying to build an institutional grade exchange in what would be a first of its kind. He explained why large organizations need such an exchange.
“Institutions don’t want to go through KYC, because they are companies. They don’t want to put a photo of themselves with a driver’s license and a date. That is not their idea of a good time.” There are other sensible reasons institutions need a place to trade.
“They also want custodial services, they want to be able to place large orders. And right now if you want a large order you can go to Cumberland or something like that and talk to a guy over Skype. But that reminds me of Bitcoin in 2010.”
He believes companies like Swatt Exchange and others will start to build an institutional exchange that will allow a large volume of trading.
“We need institutional exchanges because we need to get large pools of money in [to the space] to get it to be a liquid market,” said Mr. Penchina. “That requires family offices, companies, and all of those [other entities].”
Mr. Penchina said: “I’m not sitting here saying every utility token is going to be a security token just like I don’t think baseball cards and beanie babies are securities just because they are traded and they go up and down in value. But, I do think securities tokens are coming, mostly because we all want them to.”
He concludes: “It’s access to a much bigger market, and the idea that I can trade T-bills 24/7 around the globe is better than calling Merril to buy a T-bill. I think it’s coming and we should try to embrace it as a good thing.”
Check out Gil’s article: How crypto goes from less than $1 trillion to $100 trillion with Polymath
About Polymath
Polymath Network (Polymath) is a decentralized platform that makes it easy to create security tokens. The Polymath ST-20 standard embeds regulatory requirements into the tokens themselves, restricting trading to verified participants only. The platform simplifies the complex technical challenges of creating a security token and aims to bring the multi-trillion dollar financial securities market to the blockchain.
