Asset tokenization is definitely one of the most noteworthy use cases of blockchain technology since its inception a decade ago. Many blockchain projects are oriented towards this direction lately, as the ability to distribute the ownership of non-fungible assets or to transfer the ownership of illiquid physical commodities by simply using smart contracts, unfolds whole new methods for global trade.
Polybird, is a third-generation, global multi-asset exchange platform that enables financial institutions to raise capital by issuing digital tokens or by listing tokenized assets. Currencies, commodities, bonds, or real estate, will all become available for trading in one platform. In an exclusive interview with [blokt], Harish D. Gupta, CEO, and Co-Founder of Polybird Exchange, shared his views about how Polybird will streamline the life cycle of tokenized assets and address regulatory issues.
The interview went as follows:
Mr. Gupta, what kind of assets do we expect to see on the Polybird platform?
Polybird is a multi-asset platform that would host multiple asset classes such as cryptocurrencies, tokenized equities, tokenized bonds, tokenized commodities, and tokenized currencies.
Polybird and regulatory compliance at a glance?
Polybird is a global multi-asset platform that aims to streamline an end-to-end process from issuance to trading. Given we are a global platform, we will have multiple broker-dealer and capital markets licenses across multiple jurisdictions. Initially, it will be via partnerships with other financial institutions. At later stages, we’ll own these licensing. We would also apply for secondary market licenses such as ATS and stock exchange licenses.
Polybird aims to interconnect investors globally. How are you going to address regulatory discrepancies across different regions? How will you ensure an investor from a country with regulatory restrictions will not have access to certain assets?
We are introducing the concept of “Chinese Walls” in the exchange ecosystem which is a common practice in the financial services industry.
Each jurisdiction has its own set of regulations and regulatory objectives, which may or may not match with other jurisdictions’. Yet it is critical to stay compliant in not only one jurisdiction, but all jurisdictions simultaneously. To achieve this goal, opportunities on the platform are selectively visible, often referred to as “Chinese Walls” in the investment banking industry.
Chinese Walls are self-implemented barriers by an entity with the objective of serving as a barrier for interaction. For instance, if a certain investor is not eligible to participate in a given offering or trading of a certain asset for a certain reason (geographical location, non-accredited investor status, legal lock-up period, etc.), one will not be able to view the opportunity on the platform in the first place.
In the case of physical commodities’ tokenization, which are prone to physical disasters or theft, under which jurisdiction would investors be able to pursue their legal rights?
Given we are a global marketplace platform, we strive to bring together the tokenizers and traders/investors onto our platform. These tokenizers could be from anywhere in the world. Where the investors will be able to pursue their legal rights depends on the jurisdiction of the registered entity of the tokenizer. We will provide the investors with adequate information such that they are able to make a well-informed decision.
Who is eligible to list a tokenized asset on Polybird?
In the initial phase, we plan to source assets from several tokenization platforms such as Polymath, Securitize, FIC Network, Dharma Protocol, which are focused on tokenized stocks and bonds. As we grow, we target a certain set of markets in each asset class for them to list on us. We see an exponential growth in the number of startups tokenizing various assets across geographies, in regions like APAC, EMEA, and the Americas. Our target is to capture as much growth as possible, scale this platform globally, build a brand name, and provide such tokenizers with a go-to listing platform in the world.
How is Polybird going to guarantee liquidity on a listed asset? Are you planning to partner with other exchanges?
We assume that there would be liquidity for certain assets and there wouldn’t be liquidity for others. The assets that are more in demand and easy to price would have more liquidity, whereas the assets that are less in demand and difficult to price would have less liquidity. That is, we expect that for less liquid assets, the buy or sell order of certain assets would sit on the exchange for a while before the order is filled.
How will investors trade a tokenized asset on the Polybird platform?
The trading experience would be very similar to that of trading on cryptocurrency exchanges such as Binance, Gemini, and Bithumb. The distinguishing factor of our platform would be to trade different asset classes on our platform.
We see traditional cryptocurrency exchanges exploring completely decentralized platforms. How important is decentralization of services for Polybird?
In a highly regulated environment such as the securities industry, we do not believe decentralization is ideal. For instance, decentralized exchanges (DEX) offer users to take custodianship of their assets, but institutionally speaking, most buy-side firms are mandated against self-custodianship, so the value proposition of DEX is useless at institutional level, which brings the most volumes in financial markets. Decentralization is not our focus, but it is a rapidly growing ecosystem. If we come across ways that decentralization could help our users, we’d certainly work to introduce it on our platform.
Another major industry player who is not a big fan of decentralization: Billionaire Barry Silbert, CEO/Founder of Digital Currency Group.
We see major financial institutions tokenizing physical assets. Where do you see asset tokenization within the next decade? Will financial institutions massively embrace it?
Multiple financial institutions have been issuing bonds on blockchain. We see that this trend will trickle down into other asset classes and within the next decade, most financial assets will have a digital version of the asset—token.
Is tokenization the most notable use case of blockchain technology?
Tokenization of assets is the second most notable use case of blockchain technology. Blockchain has enabled the creation of truly virtual assets. The first use case has been a currency such as Bitcoin, Ethereum, Ripple, etc. The second most notable use case is tokenization of assets, which is our focus.