They are our clients, our friends, good contacts or just people we met in the crypto-community. They have new vision, they are running great projects, they are developing new services or they just want to share their story. Havas Blockchain
is interviewing key people of the blockchain ecosystem.
We are today with Lucas Ereth, Managing Partner of GENTWO Digital.
1. Why has GENTWO Digital been launched in 2018?
GENTWO Digital is the bridge between the traditional financial market and the new emerging crypto market. Large and institutional investors were facing great difficulties to access the market for digital assets. The fact that this bridge has been missing for such a long time is one of the reasons why the crypto market is as fragile and volatile as we see it today. Most of the money that is in cryptocurrencies today came from private individuals. The potential for new institutional inflows is therefore huge.
It’s truly paradoxical. It was always about giving private individuals access to a market that is dominated by institutional investors. For the first time in history, it is the other way around. The reason is the existing infrastructure and other aspects of the functional framework. It was just not compatible with this new asset class and its new business landscape. Therefore, they couldn’t really participate in the rise of digital assets just, yet. I see the current situation like this: the crypto market got funded with “seed capital“ by private individuals from around the world who believed in the technology. But, the big funds from institutional investors to really underpin and legitimately fuel the development of the blockchain technology and the crypto community behind it, are still missing. Funding is available, but “trapped” in the traditional financial system. And, this is exactly where we come in.
2.What is GENTWO Digital and how does it work exactly?
We create securities for all asset classes. GENTWO Digital turns all digital assets into real securities that are bankable and exchangeable in the approved global banking system. Securities are issued through a tailor-made and segregated issuance vehicle that is individual and off-balance sheet for each client. We disrupt securitization and make all asset classes investible trough the traditional banking channel. This way, we make crypto assets assessable for professional/qualified investors from around the world. Or in other words: GENTWO Digital transforms digital assets into a format that has been used in finance for decades. It is the format of an International Securities Identification Number or short: ISIN. The ISIN is the de facto standard for securities trading internationally. Every bank, large scale/ institutional investor knows exactly how to deal with it. So finally, these big market participants have received their long-awaited, infrastructure-compatible ticket, which allows them to travel directly to the new investment world.
3. How is it implemented in practical terms?
So far, a new crypto venture has procured its funds via so-called Initial Coin Offerings (ICO). In addition to an ICO, which is limited to users that can handle the complexity of investing out of a crypto wallet, it can now also issue its own investment certificate with a Swiss ISIN code. This traditional security is now made available to banks, family offices, pension funds and high net-worth individuals that want to invest big amounts of money. Institutional investors, thus, become financiers of crypto ventures and strong members of the project supporters’ community. Certificates are investment instruments that are very familiar to traditional market participants. The greatest added value for institutional investors is that they can invest in new assets with their proven and compatible form of investment. This is a wonderful example of how the old and a new fundraising methods complement each other.
4. Why securitization and not tokenization?
The established banking system still has its advantages. Certificates are like tokens in the sense that they can be used to securitize anything. The only difference is that certificates feature normal investor protections and they can be easily purchased through security brokers from any bank account in the world.
The fact that securitization as a financial instrument was a privilege and was almost exclusive to banks to issue, resulted in very high fees and lack of freedom in making use of securitization as a fundraising instrument. But finally, we can offer securitization of any asset in an affordable, simple to use, tailor-made and modular set-up that suits everyone’s investment needs. We use the old method to migrate the new market into a long-standing one. The old standard of transacting in securities becomes the new standard once again. GENTWO Digital just makes the old simple to use when investing in crypto assets. We securitize digital assets at a cost and safety where tokenization fails today.
5.How big is the market potential?
The potential is huge. Looking at the figures today, the crypto market has a converted market capitalization of 133 billion US dollars. Compared to that, the total financial market is about 500 times larger! The gold market alone with its roughly 8 trillion dollars makes the 133 billion dollars look tiny. Now, you see how small and immature the market for digital assets still is. I would like to make another rather unconventional comparison with Jeff Bezos. Amazon’s CEO has an estimated private net worth that is currently bigger than the total crypto market capitalization. GENTWO Digital has opened the door to a potentially huge, cryptographic market that is likely to become more mature and stable.
6. A few words about the blockchain ecosystem in Zug (Switzerland) and Liechtenstein? How is it put together?
The Swiss blockchain ecosystem in Zug (Switzerland) and Liechtenstein, also known as Crypto Valley, is home to over 750 blockchain startups, service providers and other organizations, advancing the growing industry and its technology through their daily efforts. CV Maps, is a constantly updated database of these contributors to the ecosystem (cvmaps.com
Let’s look at some of the numbers: a recent analysis published by PwC and CVVC as per December 31, 2018, shows that the 750 blockchain companies in Crypto Valley employ together more than 3,300 people. The total funding volume of only the top 50 companies amounted to three billion US dollars, their total valuation roughly 20 billion US dollars, including four Unicorns. (https://cvvc.com/index.php/CVTOP50-Q418
7.Tell us more about the Crypto Valley.
For me, having worked in Silicon Valley and California’s tech hubs for several years, I got to say I’m impressed by its development. It is also the way it has evolved and still continues to evolve. A favorable tax system has certainly helped to lay out the fundament for the functioning of the ecosystem. What’s more, unlike Delaware in the USA, for example, Crypto Valley has managed to combine both. On the one hand, it is a magnet for new and emerging companies in the blockchain industry due to the attractive tax environment. On the other hand, it also seems to guarantee a sustainably functioning and inspiring ecosystem. This further includes the ongoing attraction of talent in a variety of ways and it provides a wonderful quality of life in the heart of Europe next to beautiful lakes and mountains.
An example that illustrates this nicely is that in the meantime, not only Europeans pilgrim to Silicon Valley, but Americans visit Crypto Valley as well. We, at GENTWO Digital, are very excited about being part of the Crypto Valley and contributing to its ecosystem by offering our services. I am looking forward to seeing other big players joining the game and help the rise of this new exciting technology.