FEAS Secretariat talked with newly appointed CEO of Blockstation Mr. Jai Waterman about becoming a new member of FEAS, Blockstation technology, future plans, and many more.
1. Congrats for becoming a FEAS Affiliate Member! What are your expectations and what do you think this membership will give to your company?
FEAS is obviously a leader within the capital market industry in terms of bringing all the members together and providing education and framework for everybody to work in a collaborative manner. What we’re hoping to achieve with FEAS is first of all education in terms of how blockchain can be incorporated into the capital markets lifecycles to empower the exchanges. Of course we hear a lot of times about how the blockchain could disintegrate but with Blockstation we’re really about empowering all of the ecosystem players. We see a really good fit there and once we have everybody educated, then having all those members to be able to collaborate together in terms of creating rules for the region and frameworks in terms of how blockchain is going to be utilized can be very powerful. Once we have that type of collaboration we can get the regulators on site and make sure that we have the right frameworks in place, after that we can have integration. And what I mean by that is how can the different exchanges work together to ensure that issuers and investors have access to the different securities and the different types of assets that they need to have a bigger footprint in terms of expanding across the different countries, across the region.
These are all powerful things that we want to make sure that we can work together with FEAS and your members in order to achieve.
2. We, at FEAS Secretariat, are familiar with Blockstation scope of activities very well, but for our members, let’s introduce them with your technology.
At its core, Blockstation is a technology solution for the entire lifecycle of listing, trading, clearing and settling digital assets: that can be securities and it can also be cryptocurrency, carbon credits. What we do is we provide all the technology processes and procedures, risk management needed for the exchange, for them to onboard their brokers, for them to create the marketplace with open assets. And in order for them to monitor the marketplace, we provide the depository with everything that they need for safe custody of the assets, clearing and settlement where they can have 100% insurance on those assets.
We provide the brokers with the portals and the tools that they need, KYC, AML, portfolio management, suitability management in a very streamlined manner so that they have what they need. Very importantly, we provide the regulators with the platform so that they have oversight of the market, so that they can streamline the process of reviewing the perspectives and providing no objection.
We provide the brokers with a discount brokerage portal so that the investors can go in, participate in the tokenized IPOs, and invest in different securities. And probably the most important is we provide the tool so that the issuers can streamline the things that really prevent most issues from becoming a public company. One is the creation with perspectives. So we have built out a platform that makes it very streamlined for them to create their perspectives and disclosure in a compliant way so that they can save a lot of cost. This is of course very attractive to issuers, and the second thing is the headache for the issuers of the continuous reporting, quarterly reports. We’ve also streamlined that process so that their financials, KPIs and various things that they need to require to report to the exchange can be done in a very streamlined manner. This is what we provide along with the education and training.
3. Many exchanges across the globe are looking for ways to use the blockchain, and you are expertly implementing blockchain solutions across the globe. What are some of the advantages and challenges for a Stock Exchange who wants to utilize the blockchain?
I would say that the reality is that the blockchain is a tool. Let’s just think of it like a chisel, right? You put the chisel in a master artist’s hand and they’re going to create a masterpiece. And if you put a chisel in the wrong hand, you could just imagine all the things that somebody could do wrong with the chisel. So for example, when you hear about hacks on the blockchain and different crypto exchanges, losing all people’s money, this is the point. When you have the wrong implementation of the solution and the wrong players, then this is a challenge. And so the misconceptions associated with this are really about the tools, versus the people and the procedures and the possibilities. And so for example, in our implementation, there is no such thing as hacking, because it completes multiple stories: there’s no possibility for anybody to hack. Private keys are not online.
Another misconception that sometimes the regulators have is in terms of the anonymous aspect, they understand or think that blockchain is completely anonymous. So the regulators are not going to be able to know who’s doing a transaction. And so this is very concerning to them. But again, the reality is the blockchain is a very powerful tracking mechanism. And then you have the flip side, where they hear that the blockchain is transparent. And so there’s concern like, is everybody going to see my transactions? But it’s not exactly like that. It’s transparent where it needs to be transparent, and it’s very secure and anonymous where it needs to be so that just like in the exchange, we want to have, or at any broker dealer, we have different roles and they have access to different information. So they have the least required information to do their role in their job, right? This is the same thing that we incorporate and how we roll out the blockchain. The challenges really come down to really educating everybody in terms of how to utilize these tools. And then when we talk about the advantages, advantages are significant. Utilizing the blockchain in the right way, pretty easy to get people settled, which alleviates a lot of pressure from the broker dealers. We can have a real time market cap. So for example, in a traditional exchange, when we look at the market caps,it could be three months old because the last time the amount of shares or whatever that were reported did not include some share based payments that they made to employees or some strategic partners, so these things are not necessarily reflected. But with the blockchain, as those securities are issued, it will show up right away on the blockchain, it will show up right away on the stock market. So this can be very powerful.
And of course, you’ve got transparency, for example, we’ve all heard of horrible stories with insider traders sometimes doing something that they should not do. With the blockchain, there’s an option, for example, tags, insiders address, so if an insider is doing something, it should be transparent. This is, for example, an advantage or use of how we can protect investors by utilizing the blockchain.
4. Let’s talk a bit about the recent news, according to which Nigeria’s NASD will deploy the Digital Securities Market by Leveraging Blockstation platform, what are the next steps in this regard?
The next steps for the NASD in Nigeria is really about market sensitization. And so again, it comes down to the education piece. And we’re going to be holding some events in November, late November. The dates are not set yet, but what we’ll be doing is having in person sessions where everybody gets to be hands on the platform, learn how to navigate the platform, make sure that they learn about the blockchain and take some of them through the certification program so that they can actually walk out of there with the certificate. And this is all in preparation to go live, so always prior to going live, we have these processes where there’s market sensitization, so all the stakeholders understand their roles.
We also do simulators where we deploy the actual live system. And everyday, everybody will log in and do their actual role in terms of whether they’re traded or do some trading, custodian or depository, they’re going to do some settlements. Everybody does what they do on a day to day basis, so they get the muscle memory, and once they have the muscle memory and you turn on the switch to go live, everybody knows their job very well. So it’s our way of making sure everybody’s comfortable and everybody’s ready to go live.
The other thing we’ll be doing is we’ll be doing sessions with issuers to where they can come in and learn how to create their prospectus in a very streamlined manner utilizing our platform and get them prepared for getting on to the exchange. So it’s a really exciting time and I’m looking forward to it.
5. What’s the type of relationship you have with the Exchanges you work with? From my understanding you’re not just a technology vendor but more of a partner.
Our model really is we want the exchange to be successful and their success means our success. So we don’t want to just have a vendor relationship where we’re signing you the technology, we implemented it, our hands are off. And now when you need to change, we’re going to try to figure out how to squeeze every dollar out of you for that little change. We want the market to grow. We want capital formation to be easy for companies so that they can do great things and impact the world. When we come in to work with an exchange, we’re helping them again with the education piece and the training. We’re working with them in terms of adjusting or creating a new rule book, which includes the digital assets so that they can have appropriate rules based on how new technology works. We work with them to do presentations with the regulators, provide suggestions in terms of what that new legislation may look like, and make sure that everything makes sense in terms of how things actually work, not so that there’s random legislation that’s not applicable to help them realize.
Once they go live, then we also work together with them in order to help to feed the market, feed issues to the market. Because we have the end to end tools for the issuers, through our sister organization, we’re able to give all the issuers the tools that they need for managing their financials, the KPIs, their disclosures, everything that they need so that they can be prepared to be a public company on these exchanges. Because without that piece, then you have a lot of issuers who just are not ready, or would not be interested. It’s really about making sure that we form a partnership. We work together, sometimes we share costs together, and essentially our objectives are fully aligned. And that’s the kind of partnership that I like.