FinTech Chat (FTC) is a series of educational & informative interviews with world professionals in the FinTech / Crypto / Blockchain communities. We aim to provide content that is digestible in multiple mediums such as video, audio (podcast), and written (blog) form!
FTC Episode 7 – In this episode, Blockchain Wayne interviews Michael So, Head of Tokenization at Atomyze. During the interview, Michael gives us an overview of how the asset tokenization process works, which includes precious metals, real estate, and fine arts, which are currently driving more innovation and adoption to reach out to more retail investors.
Note: This transcript was automatically generated by artificial intelligence (AI) and therefore typos and grammatical errors may be present.
Intro: Interviews on Crypto, Blockchain with your host, Blockchain Wayne on FTC.
BLOCKCHAIN WAYNE: Hey and welcome back for another episode. Today we are joined by Michael So. Now Michael is the head of tokenization at Atomyze. And you’re going to learn very quickly what that is. It’s a unique space within I could guess… you could say blockchain cryptocurrency in that whole space of tokenization of assets. I don’t want to go into too deep, so Michael, first of all, thanks for joining us today for this interview.
MICHAEL SO: Oh thanks for having me, Wayne.
BLOCKCHAIN WAYNE: Awesome man! Always a pleasure. As I mentioned prior to us getting on here, I’m very intrigued to learn about it. I know our listeners here are going to be intrigued to learn more about just this whole process and use case, so before we get into the meat of that, let’s tell me a little bit about your background and what led you to get into this space?
MICHAEL SO: Absolutely, so I guess you know, folks… you know, I started as a trading assistant at a high frequency trading shop. Later on I touch upon almost all asset classes… you know, within the capital markets I have to bank… you know, including fixed income, equity, credit sfx securities and last but not least… you know, some of the commodities and the ethics base. And during 2000, I believe 2017 towards the end of that… you know, during the last peak of the crypto asset prices… you know, I mean I like a lot of people… you know, I was talking about… you know, cryptos you know, how it went up in the humongous way… you know, that nobody, nobody believed…. you know, earlier and at Barclays at that time… you know, I was fortunate enough to sit nearby… you know, what we call a crypto desk so I learned bits and pieces of it… you know. And later on, I joined Gemini the next year, the crypto exchange here in New York and where I really started to… you know, use my skill set… you know, to help construct some of the financial instruments… you know, along with… you know, obviously, you know, getting my feet completely wet… you know, and engage into all the activities…. you know, within the crypto world. And the next year… you know, I joined a firm called trader and markets which tradewind… you know. Actually I built a private permission DLT which we call… you know, which is distributed ledger technology to help a lot of the gold and silver industry to what we call… you know, turn the assets into private permission blockchain which in return… you know, help them to further the use cases… you know, of what they already have. And by gold and the silver industry… you know, we are talking about folk sites such as… you know, the dealers, the refiners, the miners… you know, and even the government mints. So we were very much… you know, integrated… you know, with that vertical. We understand the real world use cases over there. We also understand how… you know, that world being a little bit more conservative and traditional… you know, can use a technology transformation… you know, that allows the use cases… you know, to reach much wider audiences… you know, and much… I guess you know, new classes of… I guess you know, investment instruments as well as… you know, investors, so that’s where I came from. And today I have recently joined… you know, Atomyze based in Greenwich in Connecticut. I am the head of tokenization over here… you know. We pretty much… you know, are doing very similar exercises here except that… you know, we are looking into a much wider scope… you know. Not only are we looking at metals… you know, we are also looking at commodities and further out… you know, we could be looking at… you know, cases such as… you know, real estate, I mean some of the fine arts… you know, more non-fungible…… you know, assets… you know, as we call it… you know, in the crypto industry. So I’m very excited… you know, to be here… you know, here with you to talk to you today… you know, as well as… you know, being at Atomyze… you know, to basically try to further the use cases… you know, of blockchain technology.
BLOCKCHAIN WAYNE: Nice, nice, very nice. And you mentioned non-fungible, that’s a space that I’ve been very passionate about as well. And as you painted that picture, I can kind of see the blending of non-fungibles moving from just collectibles to actual really tokenizing anything to show true ownership, so tell us a little bit about… I mean, you told you touched on Atomyze but how does that process go currently? Do you guys take in clients that want to tokenize their asset holdings or how does that whole process work currently?
MICHAEL SO: Absolutely, so our our first what we call tokenizer is a fund called global palladium fund as the name suggested… you know, it has assets… you know, that includes palladium which is one of the precious metals… you know. Within that fund… you know, they also own assets such as… you know, platinum, copper, and, nickel, and I could see how… you know, that can easily spill over to other precious metal classes such as… you know, gold and silver which we’re very much used to. And then further down the road… you know, a lot of the other what we call the PGM minor metals such as… you know, the Rhodium Iridium… you know, a lot of the metals… you know, that can easily be used… you know, within the auto industry. And if you were to look at the… you know, the metals industry itself… you know, if you were to just simply look at the traditional world… you know, it has both obviously the investment aspect as well as the real world use cases… you know, especially for the PGM metals that I just mentioned… you know, within the other world. And today if you were to actually look at the trend… you know, going far out… you know, you can see how… you know, the environmental regulations… you know, require significant usage of these PGM metals… you know, to help further… you know, make the emission stand a little bit higher as well as… you know, as you can see how… you know, the electrical vehicles are coming… you know, a whole different set of elements… you know, in terms of metals… you know, are being used… you know, in the production of batteries and if you were to actually… you know, tie the whole picture… you know, back into what we call the investments landscape as well as the railroad use cases… you know, you can see how… you know, not only do they get used, you can see how price can fluctuate greatly just due to the supply demand dynamic changing… you know, in the very near future within the next five to ten years but last but not least… you know. There’s also a very limited venue of investment vehicles that allows investment into these metals that I just mentioned, gold and silver are very common… you know, I mean we, we can see how… you know, there are ETFs such as GLD that is the Sprott gold trust… you know, which is very well regarded… you know, within the industry but beyond that… you know, I mean the names are not as common so, a lot of times… you know, we would wonder… you know, how would let’s say for example… you know, a high net worth in your family office hedge funds… you know, get into these worlds… you know, with the confidence that… you know, you have full ownership of these metals… you know. Sitting in the back and we thought that tokenization may be one of the best ways… you know, to help them achieve… you know, objective as well as helping a lot of the industrial use case to number one… you know, be able to have the exposure. Number two, be able to use the inventory that they actually already own.
BLOCKCHAIN WAYNE: All right so a big question that’s always come… that one at least comes up to me or when I talk to people about tokenization of assets, how does the custody work? Because there’s always that trust that… you know, wherever the custody that the asset is there to back the token and vice versa?
MICHAEL SO: Absolutely so when we talk about custody I guess… you know, one way that I always explain to folks is that… you know, when you think of custody, it is in other words and full complete english sentences that your custodian will be controlling the asset on behalf of the customer or on behalf of the client in this case. And what I explained to the folks in the traditional world very often is that… you know, I will look at a token rather than being just another instrument like the way we see stocks or bonds or any any securities as we would call it. I actually would explain to them that… you know, the token actually represents ownership title and therefore you can actually almost look at it like a paper receipt except obviously in a digital form. And if you were to think of it that way… you know, applying… you know, the legal construct of what we call a universal commercial code that basically ensures that you already own the assets, you simply… you know, basically storing the asset in this case called a gold, silver or palladium… you know, at a vault, at a warehouse… you know, or in the case of copper… you know. Then it is definitely at a warehouse. So now in terms of the custody… you know, it requires legal control very often… you know, one common way to do that is to achieve by basically assigning a custodian. The custodian in return… you know, would be I guess… you know, empowered with the fact that… you know, they can control metals on behalf of you the clients… you know, and having been assigned that position… you know, custodian… you know, obviously would have the obligations… you know, to ensure that… you know, assets are being accounted for at the same time… you know, it is adhered to I guess… you know, the most… you know, a higher standard that will allow… you know, the financial aspect as well as… you know, the inventory aspect… you know, to all tie it up.
BLOCKCHAIN WAYNE: Very nice, very nice, so that answered the quote one of the questions that I think I had and maybe our listeners would have the other one would be starting to… you know, it’s becoming clear you’ve done a great job explaining tokenization of assets when it comes to like metals and stuff. What would be the reasons that and kind of how would you go about when you mentioned art and property potentially being two other categories? How would that process work as well?
MICHAEL SO: Absolutely so in terms of art… you know, I have done a little bit of work… you know, looking into this as a class a while ago. The way I see it is this, right, so let’s say you have a piece of very nice Monet… you know, sitting… you know, let’s say at a gallery… you know, somewhere in Soho… you know. For a lot of folks… you know, the piece of art… you know, number one is out of reach not only because in terms of the price point… you know, but also in terms of the complexity of storing this piece of very nice fine arts… you know, and it takes professional care and experiences… you know, to deal with it. One way is that… you know, I have seen how there are some shops in Soho who would number one professionally take care of it. They in return… you know, would also sell… you know, the piece of art either outright or in the form of a trust share. And when we talk about trust… you know, what it means is that… you know, the owner of the of the piece of art made simply as a what we call a trust door will put the piece of art into a trust such that… you know, the asset is being protected by the trust and owned by the trust. Having done that, they would then assign someone called the trustee who has the legal authority to basically… you know, move the assets, protect the assets, make sure the asset… you know, is stay as intact as it would… you know, in the form of art. And furthermore… you know, if the trust… you know, get what we call so into different shares of ownerships in the…. in terms of the trust shares, then I mean an average investor… you know, can then go buy trust shares very much like… you know, the trust funds that you see from the Grayscale from let’s say, I mean many others… you know, classes of assets… you know, that being put in the trust and in return… you know, obviously the trust shareholders would get to own a piece of it. I enjoy the upside and or all the downside… you know, but that… but that allows… you know, the ownership to spread out in a way such that… you know, that can be digestible for a lot of the average investors.
BLOCKCHAIN WAYNE: Very nice! Now one of the cases, so this is probably similar when you think about it, so in those cases, it could be shared or it could be a non-fungible that represents ownership of the whole piece, is that correct?
MICHAEL SO: Yes yes, so yeah a lot of times… you know, what we… all we see is that… you know, once a piece of assets… you know, I mean call it meadows, call that and arts… you know, have been put into a trust… you know. The legal construct… you know, changes a little bit such that… you know, you have someone who is acting as a custodian. I mean going back to the question that we touched upon earlier in the form of trustee and having that really allows… you know, the wider market to have, number one, the comfort that… you know, there’s someone looking after this piece of assets, number two, you can make sure that… you know, whoever is issuing or should say tokenizing… you know, this piece of assets… you know. And for that reason… you know, I mean it is a very much a preferred way for a lot of the asset classes… you know, to be tokenized and we have seen a lot of use cases out there… you know, that uses either a… what we call a traditional asset protection trust. And in many different cases… you know, there’s also the special purpose trust… you know, that for example… you know, the NYDFS… you know, have permission.
BLOCKCHAIN WAYNE: Oh cool, what about real estate? How does… how do you see that coming into play as far as tokenization?
MICHAEL SO: Yeah I mean… I see a very similar construct… you know, with the exception that… you know, because gonna stay a lot more non-fungible, so I mean I just say so to speak… you know, meaning they’re all unique due to the fact… you know, I have heard from industry a lot of times that… you know, let’s say for example… you know, what we call commercial estates… you know, I mean let’s say you call it a 50 apartment… you know, a residential complex… you know, can be put into let’s say for example trust and then further tokenize… you know. And therefore… you know, the pieces can be tracked… you know, I mean individually but at the same time what it means is that… you know, the cost that goes into it… you know, meaning the tokenization process in itself… you know, can sometimes be high just because the final value of the entire asset… you know, may not be high enough to justify… you know, this cause of tokenizing. And what we’re seeing is that… you know, in the most traditional world… you know, commercial real estate… you know, which I was a little bit involved in… you know, in my past life as well… you know, we can see how… you know, the securitization of that… you know, can cost quite a bit. And I can see how… you know, the tokenization… you know, can bring down the cost at the same time… you know, help really help… you know, the settlement of the instrument in terms of speed… you know, to greatly enhance to the point of… you know, sometimes being instantaneous just because tokens… you know, as we all know… you know, has that smart feature built in and a lot of things can simply move faster than the way… you know, it is today.
BLOCKCHAIN WAYNE: Nice nice. Now maybe you’re familiar with this, I’ve heard this, I guess it was a year or two ago, there was one of the first cases I’ve heard of real estate being tokenized. I think it was a building in New York for like 30 or 50 million that was tokenized. Do you see that as a way that’s a way for people that normally wouldn’t be able to invest in commercial real estate to be able to get in if it’s tokenized in a way that they can buy tokens that represent a small share of ownership in the building?
MICHAEL SO: Yeah I can. I can see that, definitely see that… you know. And I would say… you know, it’s not a one-size-fit-all solution and apparently right now I believe… you know, this kind of investments are refined to the accredited investor which is a significant class of investor… you know, but at the same time… you know, it requires some know-how and the understanding of trust structures… you know, for just an average investor to get comfortable with. But I can see how… you know, as this instrument becomes more and more common… you know, just like… you know, on the metal space… you know, as tokens… you know, become more and more common… you know, both the… you know, investor in the real estate side… you know, and also the industrial uses… you know, on the metal side… you know, can appreciate the fact that… you know, tokens represent ownership represents title and more importantly like I said before… you know, it allows them to further the use cases in a way such that they can easily transfer ownership in a matter of seconds… you know, I mean given that… you know, if you can combine that with a currency token or sometimes… you know, just simply… you know, having banks… you know, that allows this kind of instantaneous settlement to happen. And… and when you think about it… you know, I mean let’s say I’m going a little bit off tangent here… you know. I mean I’ve seen how… you know, I mean in the year 2020, the two biggest inventions were what one I would say that made popular… you know, in 2020 the non-custodial aspect, which is the divide way of trading as well as… you know. What I have recently heard about in the past three four months… you know, the flash loans of the ERC-20 token being able to combine multiple transactions at the same time… you know, so I mean I think it’s only the beginning of the new way for tokens to open up possibilities for the wider financial world in terms of… you know, the use cases, the way they trade to almost break away from the way we do things today, but not exactly detached from the reality.
BLOCKCHAIN WAYNE: Yeah and those bridges are important because for people to adopt a new way, they have to see some kind of relevance to that, so those are all great points when it comes… comes to that now. I guess my next question for I’m sure your team has probably had… you know, you mentioned starting out with medals and then moving into some non traditional type assets of token tokenization, what’s some of the… I don’t want to say, I guess the way to put it… what are some of… what most people would say are some of the… I guess outlandish or craziest things that your team has suggested tokenizing?
MICHAEL SO: Oh oh, so we actually have internally… we have discussed a little bit… you know. What we have found is… is this… you know, and that’s just purely an internal idea… you know, without being vetted… you know. We thought that… you know, looking very deeply into the whole auto industry space… you know, obviously we got very close to the PGM groups… you know, like we said before, the palladium group metals… you know, which is tied completely almost to the auto industry usage. We thought that… you know, firms that are I mean obviously… you know, trying to stick to a higher what we call the… the ESG world… you know, meaning the… you know, the ethical way of producing… you know, making things sourced responsibly, if they can combine the usage of the… for example the metals, the material along with the environment, environmental credit… you know, which is very popular in the European space… you know. And imagine you pair them together… you know, and trade them in a smart contract way such that… you know, you receive I mean in almost in a DeFi where… you know, receive some sort of credit for it or maybe some sort of recognition for it, call it the liquidity. I mean at the LP tokens everywhere if you will right in the Uniswap world and that in itself… you know, usually is recognized… you know, right now in the wider commercial world as just simply being a good citizen. But I believe… you know, that can be quantified as well… you know, so if you were to combine… you know, I mean the carbon credit world along with… you know, the… I mean I guess… you know, the… a little bit more of the dirty side of the equation which is inevitable from producing any industrial products… you know, we thought that can really change the way… you know, not only… you know, things are being traded financially… you know, are carried out but also some… sometimes… you know, even the social policy equation of the matters… you know, to… to get implemented so I mean that I thought was extremely impressive… you know, coming from my team… you know. I mean that I may have to shout out to Jan… you know, you know, from Atomyze.
BLOCKCHAIN WAYNE: Nice nice, yeah… you know, I threw that question in there I know it’s not something that you, your team has probably vetted, but I always love to hear those brainstorming sessions because that’s where some of the craziest ideas sometimes end up being the most revolutionary, so always like the probe into that whole… that whole aspect of everything.
MICHAEL SO: 100% agree, yeah.
BLOCKCHAIN WAYNE: So what… what’s next for Atomyze over the next six to 12 months? What is the focus at Atomyze right now?
MICHAEL SO: Yeah, so as I mentioned before… you know, we are looking to help tokenize… you know, the first set of metals… you know, which is palladium, copper, nickel… you know, and platinum. We thought that… you know, the wider world can really use a new way to invest into these instruments… you know, but at the same time… you know, it allows… you know, both the investor has exposure to it to allow… you know, the quality producers or the industrial users… you know, to have a way to either secure access to these materials… you know, for production purposes or to simply… you know, allow them to hatch just because… you know, they have materials on hand. But I mean… I guess… you know, just like… you know, many other technologies out there… you know, at the end of the day, we are making things more efficient to allow more possibilities… you know, of things to be used. And I guess… you know, most importantly… you know, I think the composability… you know, as we call it now… you know, in the crypto world… you know, is that… you know, we may be the first one to put the tokens out there… you know. But I think we would allow a lot of creative people… you know, to put the token into better use cases that we probably have never even thought about… you know. So we’re pretty excited about that.
BLOCKCHAIN WAYNE: Yeah yeah it’s definitely an exciting space because as new things are developed we don’t even know what’s possible until we see something new… new technology we developed, new use cases come to light. It’s just amazing to see that build. You mentioned the DeFi space earlier, that’s something that I think is yeah it’s been a very crazy year for it. But it’s got huge potential and it sounds like what your team’s doing at Atomyze in the tokenization aspect, it’s going to bring… you know, I think that’s going to… it could bring a lot more… a lot more people to the table in terms of… you know, tokenization cryptocurrency blockchain, kind of bridging that gap, but also as you mentioned, I mean I could just see my wheels are turning as you talking just basically making the whole supply chain more more efficient, faster, more efficient which allows… that allows… that allows innovation… You know, a lot of times, when you create efficiencies, it allows more time for innovation.
MICHAEL SO: Absolutely and my previous firm… you know, Tradewind… you know, we actually worked pretty closely with Stably… you know, to perform extremely similar exercises… you know. And we understand… you know, both I mean especially from our lands… you know, we understand the traditional industrial use cases… you know, so we understand that they… a lot of times… you know, they could be very big corporates… you know. They have certain standards to adhere to… you know, so we would actually, I mean stick to the KYC/AML regime… you know. I mean making sure that… you know, things are… I mean fully vetted… you know, making sure they stick to what we call the chain of integrity… you know. Within the metals well we stick to the LBMA… you know, at standards but at the same time you’re not forgetting the fact that… you know, I mean there’s some new use cases out there… you know. So for that reason… you know, I mean Stably has helped us… you know, a lot in terms of… you know, bridging that gap… you know, between let’s say both… you know, here in the US… you know, to the wider world and also… you know, from the more traditional finance and industry side… you know, to the crypto world. And we also work with other trust companies… you know, I mean in my previous, previous life… you know, and over here Atomyze we’re looking to dive into let’s say for example some of the licensing that is needed to make these use cases more accessible to our users.
BLOCKCHAIN WAYNE: Awesome! All right, Michael, so as we wrap up here, I’m sure our listeners and myself included want to know more about… you know, how can we follow Atomyze? How can we connect with them? So where can we connect and find more about what… What is your company doing?
MICHAEL SO: Oh absolutely! You can simply just go to atomyze.com… you know, Atomyze, a-t-o-m-y-z-e. We actually have two arms… you know, one in Switzerland, the other one in the US. And you can simply find us… you know, on the website and or, you can also follow us… follow us on Linkedin. We have a full team of over 15 professionals already, already… you know. Even though we… I mean, sorry not too long ago… you know, but we’re growing very quickly… you know, both in terms of our user base as well as our… I guess, head count… you know, at the office.
BLOCKCHAIN WAYNE: Nice well, it’s been a pleasure having you on today, Michael, really learning about just a token… tokenization of assets and what Atomyze is doing definitely appreciate what your company and what you’re doing in the space you’ve… you’ve been around for a little while, so driving innovation, driving adoption, that’s really what… you know, what it’s about. So again pleasure, I appreciate having you on and we’ll definitely in the comments, I’m sure whenever this thing is posted, we’ll have the… the links to where you can click and and straight to follow Atomyze and learn more about them. I’m not mistaken, wasn’t there I saw in that article recently, was it on Coindesk or Cointelegraph, one of the two about Atomyze?
MICHAEL SO: Yes, so the reason why I joined Atomyze… you know, was because our CEO Jeanine Hightower, she and I used to work at Gemini together… you know. She was named one of one of the most powerful women in the financial space… you know, also within the blockchain fintech space… you know,, very prominently on Coindesk… you know, along with other articles… you know. So yeah, just check out us, check us out… you know, if you were to just search Atomyze, Jeanine, you’ll be able to find us.
BLOCKCHAIN WAYNE: Nice, all right. Thanks again, Michael. Thanks everyone for watching and we will see you in the next episode. Take care everybody.
MICHAEL SO: Thanks for the time. Bye!
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About Blockchain Wayne (Host)
Wayne has been managing, teaching, and coaching high performing teams for over 20 years. He has a passion for helping and teaching people and a passion for cryptocurrency and blockchain projects. He has created various coaching programs and partnerships with select education platforms and cryptocurrency program tools.
You can learn more on his website: https://www.blockchainwayne.com/