DSENT, an Inacta company, is a Switzerland based leading provider of solutions for corporate capital raising via Digital Assets. As one of Switzerland’s first-movers in tokenization DSENT creates new capital market infrastructure, provides business consulting, and has already completed several STOs (Security Token Offerings). Issuers worldwide can benefit from a one-stop-shop with top-notch technical capabilities. The quality of our services is based on an industry-leading ecosystem of financial institutions, leading blockchains and stakeholders, with a presence in the Crypto Valley of Switzerland, Liechtenstein and the UAE.
Banking-grade standards are made available to issuers of Digital Assets on a holistic platform. This platform consists of KYCgate, an AML & KYC compliant online client onboarding tool used by multiple Swiss Banks as single onboarding or extension of existing systems, and inCAT, which provides automated creation and lifecycle management of reliable Security Tokens. These two modules reinforce Tokengate, a financial market-compliant token issuance platform covering the entire capital raising value chain. Lastly CAD (Crypto Asset Directory) provides wealth managers with reliable investment information on Digital Assets.
Thought leader
Felix Simon is the Head Business Development at DSENT, with 11 years of experience in investment structuring and regional distribution. Passionate about creating possibilities through new investment structuring, Felix believes that this will bring further value to both issuers and investors alike. Currently, he is responsible for financial industry partnerships and the onboarding of wealth managers, issuers and distribution partners.
Prior to joining DSENT, Felix led the business development team of a Liechtenstein based cryptocurrency exchange and held a role as an asset manager. His professional career started at Credit Suisse, where he initially advised M&A and capital raising transactions, subsequently becoming Head of Sales Middle East and Southern Europe for derivative investment structures.
Felix is an alumnus of the University of Oxford and holds a Masters in Finance, Banking and International Management from the University of Mannheim.
Q&A with Felix Simon
How is DLT and Blockchain reshaping wealth and asset management? Where is the industry today and how do you foresee things changing in the future?
One of the most prominent use cases of Blockchain technology in the financial industry is corporate capital raising. Herein the solutions have evolved immensely over the past two years to meet the security and quality requirements of professional financial market participants. Services evolved from an unregulated and untrustworthy market to Swiss Security Token Offerings which meet CISA regulatory requirements. This has led to an increasing number of traditional financial institutions becoming active in the space at a faster pace and trust being created in the quality therein. On a macro level, Digital Assets as a new way of capital raising for Small and Medium-sized Enterprise impacts over half the GDP creating companies in Switzerland and most developed countries. Therefore, even a small improvement on this front can have a significant impact and a new revenue stream for wealth managers. Additionally, we can turn non-bankable assets into bankable ones with the new possibilities and thereby include them in client portfolios. Access to new assets leads to more diversification.
To get such offerings to work in full compliance, fintech companies, including DSENT, have created new ways of client onboarding, payment management or shareholder registration, as well as management of dividends or similar payouts and corporate actions. New ways to onboard and manage the clientele brings better user experience, higher legal security, speed and thereby cost-reduction. Swiss banks are already using these solutions and we see a trend, which started in order to legitimize startup capital raisings, today being adopted for conventional fundraising and by traditional investors beyond the digital asset space.
As with every emerging technology, we see continuous quality improvements and an increasing number of institutional quality offering eligible for wealth managers. At the same time, others are still in development and it is therefore important to understand which technology offerings are not mature enough yet. The secondary market of tokenized assets for example, is lacking liquidity. But for many assets, it is already a significant improvement to have a low liquidity listing or private market with OTC trading. The important piece in the development is to structure a Digital Asset in a way that it will be able to trade in secondary market, just as it’s traditional “bigger brother”, for once the secondary market of security tokens is better-established.
Why should wealth managers get up-to-speed on Blockchain & DLT technology now and in what ways can it benefit their business today?
Digital Assets are a valuable extension to modern asset management and with banks, stock exchanges and large corporations offering tokenization, it is worth to consider this as an additional revenue stream.
It has been critical of course to create the infrastructure that meets wealth manager’s requirements with regards to security, classification, booking and reporting. This is where our partnership with InCore Bank, a well established transaction bank in Switzerland plays a vital role. The cooperation allows financial institutions to combine traditional with digital assets and tailor the service to their needs, whilst profiting from the quality service of a Swiss financial institution and keeping assets booked with their principal bank. We invite wealth managers to take part in the discussion and let us explore which part might make sense now or in the near future.
Some entrepreneurial clients are considering fundraising by tokenization, whereby the wealth manager can offer this new service through an outsourced mandate. This allows for project sizes from CHF 5m, which so far was too low for private placements. This is not range bound and we see lighthouse projects raising over CHF 100m. As these new possibilities are not that well known within the industry, we provide specific workshops, conduct project analyses and organize public events and conferences. This way we support the decisions on what fits when and how it compares to traditional possibilities.
How do you foresee the role of Blockchain & DLT in the next wave of transformation in wealth management?
Amongst other transformations, the combination of information technology, financial engineering and market regulation has led to easier and more cost-effective capital raisings by use of blockchain technology. Now actors must focus on the legitimacy of their offering and enable exemplary projects in order to build up investor trust. This is currently gaining speed and we are working on a variety of tokenization types. One live example is the growth financing for a LATAM agricultural company which has been operational for 20 years, holds 3,200 acres of land and a large herd of cattle. Even for a well-established and cashflow positive company, it is very difficult to raise funds. This changed with the creation of a token which is a Swiss financial instrument and having the trusted setup, well-known to investors worldwide. They get access to a business with low correlation to international financial markets and backed by solid asset holdings.
This is one example where an international setup is used to serve investors who are interested in such a niche investment, while giving the company access to the suitable investor base. Besides this, non-bankable assets, such as Real Estate, agricultural, forestry and collectables assets are being made bankable, which opens new possibilities for portfolio structuring and management thereof. Inclusion of these assets means an increase in Assets under Management (AUM). New segments are becoming part of the wealth management offering creating sustainable new revenue streams.
For the long term, this will not only enlarge the offering available to the clientele and thereby increase value creation for wealth management clients but also further increase industry transparency and provide cheaper hedging possibilities. The theme seems to be a hunt for more price efficient offerings, but in reality, it should rather be described as the creation of a wider choice of products to optimize portfolio risk and return. Furthermore, such investments provide a different and positive user experience and we see the personal association with a certain part of the portfolio to become more and more important to the clientele.
What solution(s) does your company offer that wealth and asset management firms should consider?
The three pillars of services DSENT provides are (1) banking access to cryptocurrencies, (2) tokenization and (3) business applications such as digital client onboarding.
Specifically, for wealth managers, we see it as vital to have the Digital Asset class manageable in a very easy way, enable booking, reporting, risk management and similar for the user and always have the secure storage with a Swiss Bank. In this way, we ensure that the AUM does not decrease due to outflows into Digital Assets but remain bankable and within the portfolio and oversight of the wealth manager.
Tokenization is envisaged to take up a significant part in capital markets and DSENT has created Tokengate as a one-stop-shop for wealth managers to offer asset tokenization. Switzerland already has the legal framework to issue Swiss security tokens from equity, fixed income, fund linked products to real estate and commodities, all the way to passion investments such as collectables. The cross-border financial service regulation of Switzerland allows wealthy individuals from other geographies to profit from this as well. They get access to new market entrants, from new geographies, industries and development stages. Until now, this was possible mostly through venture capital or similar funds. Today, however, with the Crypto Asset Directory, wealth managers can screen companies as easy as on a Bloomberg terminal and have access to companies fitting a specific interest of their clientele.
For capital raisings to fully abide by all KYC and AML requirements on involved investors globally, we have created KYCgate for client onboarding in minutes. This tool allows all AML requirements to be reviewed by the compliance officers on one central platform, thereby minimizing required time and creating a new, smooth customer experience by also accessing it from their mobile devices. This has created a completely new customer experience and after the positive feedback from the using Banks, we are now enlarging the user group to wealth managers as well.
Benefits
Even the most traditional wealthy individuals are demanding more services within asset management or are willing takers if a new possibility is presented. This ranges from risk diversification or new theme-based investments to opportunities supporting passions such as their charity or investments in Art and other collectables. At the same time, regulatory oversight requirements tightened, and the demanded services can be time-consuming, with little initial payoff. This is why the service of DSENT was designed from the beginning with the ease of manageability in mind. You have an all-encompassing but lean setup, which is fully tailored to the specific needs of wealth managers and specific projects.
Herewith the wealth manager can offer tailored tokenization, whilst profiting from smooth execution and outsourced parts of the workflow. Funds remain bankable and previously non-bankable assets become bankable, signifying an increase in AUM. As an example, we can look at a client holding a vineyard, where the asset signifies an important part within the portfolio but is accounted for as an immovable asset. By tokenizing a part of this asset, the client unlocks partially from this asset. With such tailored structuring, the asset owner does not give up ownership, but simply grants rights to the revenues. Token holders would receive operating revenue participation or dividend payment within the specified lifetime of the token. Here, the sellside profits from global investors accessing the Digital Asset, with the trust in Swiss securities. And in order to increase the binding of the token holders with their investment, a delivery of the vinery’s wine may be part of the economic interest. This association with the held asset means a huge additional personal value, which is hard to appraise financially, but a strong interest trigger for the token investment itself. Other examples could be commercial real estate, forestry or agricultural asset and tokenization makes them manageable in the secondary market and the owner can rebalance the amount in the portfolio as needed, i.e. flexibility is created.
As these assets require oversight, wealth managers build out their revenue stream.
As to the buy-side, it has been difficult to do proper due diligence and the following selection of Digital Assets in the past. We solve this in two ways. Firstly, research can be done on Crypto Asset Directory, which provides an objective comparison within Digital Assets and points out which ones are regulated securities or lacking this qualifying criterion. As a founding member of the Swiss public-private partnership Swiss Blockchain Federation and posting the Head for its Security Token working group, we have established guidelines for tokenized equity and related tokens and see following such guidelines of essence for ensuring legitimate offerings. Secondly, the cooperation with our partner InCore Bank allows Digital Assets to follow the banking standard and thereby be equivalent to traditional offerings. As part of this cooperation, we are developing inCAT, a tool for automated creation of and lifecycle management for Security Tokens. Correspondingly, Digital Assets are being made available to the clientele of banks globally, and the investments remain booked with the wealth managers bank. This is one of the advantages of working with an established transaction bank with long-term experience in banking, in-depth knowledge of applicable regulations, processes and serving financial institutions.
Deployment & Development
As an infrastructure builder for a new capital market, easy implementation and use is extremely important to us. This is why we created a one-stop-shop. With Tokengate, wealth managers have one tool where they see client onboarding, payments, distribution and lifecycle management on dashboards. We can integrate it with their systems.
As to product development specifically, we are increasing the types of securities that are offered in tokenized format. This is also in line with the build-out for the Security Token Services from InCore Bank. Every project evolves the capabilities and improvements are incorporated on a constant basis.
Secondary market is another topic where we contribute to the development. OTC trading is possible, but liquidity needs to increase and international cooperation being created with financial institutions.
Throughout this process, the cooperation with wealth managers specifically is of high importance to us, because they encompass economic and social interests beyond single investments. Here is where opportunities arise outside of the typical box-thinking and we evolve financial products and services to a new level. Wealth managers, advisors and financial institutions are provided with our insight and experience form multiple successful Digital Asset tokenizations. This brings value to envisaged projects and thereby decreases development time, risk and cost on their side significantly. Over time this translated in a higher probability of placement success and Investment appetite due to the quality and timeliness of Digital Assets. It is great to see more and more advisors and wealth managers join on the one side and traditional exchanges and banks on the other, in a joint effort to increase the new capital market possibilities
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