A blockchain based wealth management solution

This week’s Crypto Current is with Gregory Van den Bergh, the Co-Founder and Chief Executive Officer of Bankorus; the world’s first private wealth management platform powered by AI and built on the blockchain. 

Greg, thanks so much for joining me today.  To start with can you just explain what Bankorus is?

Sure.  Bankorus is a market place for high net worth individuals to access crypto.  Basically what this means is both security tokens, which is tokenised real estates, venture capital, hedge funds as well as utility tokens.  So, we provide a seamless solution for them to manage their blockchain assets on our platform, so it’s a little bit like Amazon.  On the one hand we have different vendors of security tokens and normal tokens and on the other hand we have several clients for whom we give a curated way of accessing the market place.  We take care of the custody, we take care of any types of compliance, borrowing and lending.  It’s really a one stop shop for them to access crypto.

And where did the inspiration for the business come from?

We are a four year old business.  We started as the first robo-advisor of China and inspiration for the first robo-advisor of China came with basically me being an MBA student in China at the Cheung Kong Graduate School of Business and there I had a room mate who told me this amazing story of how he bought several investment products in China that went almost to zero and he lost a lot of money for his kids’ college fund.  Talking with him he asked me what he liked to invest in and I then basically told him look, what I do with my portfolio is I do several ETFs, exchange traded funds, that I then rebalance and I then made a similar product for him.  He liked it, his parents liked it, his family liked it, his friends liked it and before I knew it we knew we had a business.  That’s sort of the first robo-advisor of China came out of that called MiCai.  We’re currently the market leader in China for software for private wealth management specifically for family offices and high net worth individuals.  We currently have over 200,000 family offices that use a piece of our software for their financial wealth management and we have been using blockchain for a while primarily on the audit trail for our transactions, KYC, etcetera. 

For us the step was taken a year ago to basically rather than just put the data about the asset on the chain we can actually digitalise the assets and put that one on the chain and that’s how the whole security token idea started. 

You mentioned you were one of the – well, not one of the first, the first, robo-advisor in China.  How many more are there in the market now and did you face much backlash from the Chinese government when it comes to regulation?

There are hundreds of robo-advisors now in China, or hundreds of companies that claim to be offering robo-advisory services.  We were the first and we still are the market leader in providing of the B2B technology for robo-advisory to people.  For us we basically in terms of talking with the regulator we talk a lot with the regulator.  The regulator of course is very much in favour of protecting investors and robo-advisory investing index funds, etcetera, provides regular investors with a very easy way to invest in a low volatility portfolio.  So, we have a good relationship with the regulation.

I believe your platform runs on the NEM blockchain, why did you choose NEM?

We actually use different chains, one of which is NEM.  We have to use different chains because most security tokens are built on different chains, many are built on the Ethereum blockchain which we use as well.  We are an ERC 20 token as well as different types of chains that can hold smart assets, NEM being one of them.  NEM has some advantages in terms of the operability, in terms of the smart contracts.  Building smart contracts on NEM is relatively easy but again we support several other chains as well.  Lon Wong, the President of NEM, he is an investor in us as well so we have a relationship with them but we use other chains as well.  We are a big believer also in atomic swaps, so these enable that a smart contract can move from one particular chain to another and specifically in the security token space where everything should be fully decentralised, it should not matter what chain your security token is built on everybody should be able to access it.  So, atomic swaps are going to be quite important in that space and we fully support companies that work on atomic swaps.

Now, Greg, I believe your platform, Bankorus, allows people to convert real world assets, so real estate for example, into cryptocurrency assets.  Can you just explain to me more about how that all works?

Absolutely.  We have one module called bTokenize.  Most of the time we work with third parties that already have in their local jurisdiction a track rate of success of tokenizing assets, real world assets.  The way how this normally works is imagine I have a particular asset, let’s say I have a house in San Francisco and I would like to create the San Francisco house token.  The way I go about it is I take the house and I put it into a trust, a trust is a vehicle, a legal vehicle, a legal entity that’s been around for hundreds of years that’s been used to transfer wealth and I put the house in the trust and then the trust becomes de facto the owner of the house and then the beneficial owner of the trusts are basically all the wallet addresses that own the tokens of the house.  So, I can say in the trust there are 100,000 or a million token holders or tokens and then each token holder has a piece of the house.  So, that is technically or legally how tokenization works.

Now, in other jurisdictions there are other vehicles such as a trust or a company or corporation or an entity or something similar to it but that’s more or less the way that tokenization of real world assets works. 

Are you mainly aiming this business towards Chinese locals or are you also aiming it at expats that live in China?

For us it is global, so we have an office now in San Francisco, we have people in London, in Singapore, so for us it is really using expertise that we have and of course we have an edge in the sort of Greater China markets but the platform is open for everybody. 

I just want to sort of zero in on the Chinese market, China obviously has very strict controls about how much money can be pulled out of the country at any one period of time.  Are there protections in there that the government has forced upon you?  Say I have a million dollars’ worth of property, I convert that to a crypto currency asset, say Bitcoin, what’s stopping me from then sending that Bitcoin offshore and moving it out of the country?  What protections are there?  Have the Chinese put any on you to make sure that that doesn’t happen?

So, when we do the tokenization it’s not that we actually are the ones that convert the property into Bitcoin.  So, what we would do is we would take the property and convert it into the property token and so that property token will be restricted by the local loss in jurisdictions.  So, we are not in the business of converting that property token ourselves into fiat and then moving it in different jurisdictions.  Every jurisdiction we operate in, including China, we abide in the strictest way to the laws of the country.  So, China for example as you know has a very strict capital control so we do not touch it.  However, a lot of the high net worth their money is technically overseas so those funds we can use, if the source of the funds is from the right jurisdiction we can use it and they can access the platform.  For every person that is on the platform, we do rights, anti-money laundering, KYC, etcetera, and only when they pass that they can actually use the platform as well.

I’m just trying to understand what the advantage is of converting property into these tokens, what is the advantage of doing so?

There are a few advantages.  A main advantage for the investor is that as an investor you are able to first of all access a much more diverse portfolio of investment.  So, currently if you, let’s say, have $100,000 and you would like to invest globally in different asset classes, real estate, gold, precious metals, farmland, venture capital, private equity – well, with $100,000 you cannot do that much or even with $10,000.  With tokens you can basically say I put $5 in a house in San Francisco, I put $5 in a house in New York, $5 in a house in Singapore, $5 in a chateau in France, $5 in a piece of wine, venture capital, etcetera, and I’m ultimately diversifying in the same way that now when you are a very high net worth individual you can invest in a very diversified way and you can really access that type of diversification.  So, that’s point one, is diversification for the investor. 

The second point is liquidity.  So, tokenisation unleashes a lot of liquidity and a lot of wealth in the system.  Currently a lot of investments like real estate, like farmland, like venture capital, like private equity, if I say you have to sell it tomorrow then it’s very difficult to do and you probably have to give a very large discount to the people that are willing to buy it.  That is not good, that’s something we’ve seen during the crisis of 2008, many people are forced to sell their house or default on their house without being able to get some liquidity.  When you tokenise your house you can actually sell off a small part of your house, get liquidity but still have all the benefits of living in your house.  If you’re an asset owner this gives you a lot more possibility.  For example you can sell parts of the asset.  So, imagine you have a piece of property, it’s worth $100 million, if you would tokenise it you would make the asset liquid.  Then technically the value of the house would go from $100 million to $120 or $130 million because the liquidity premium in economics is 20% to 30% of the actual value so the difference between two assets that are exactly the same but one is liquid, one is not, is 20% to 30%.  So, this is really beneficial for many of the property holders.

I think a third benefit which is a benefit for everybody, especially our generation, is that the biggest problem of our generation worldwide in Singapore, in China, in America, in Australia, is getting on the property ladder.  So, currently compared to our parents we have to work much longer to get the down payment to get a house to get on the property ladder and then we start to pay off our mortgage throughout our lifetimes.  That was not the case with our parents’ generation.  With tokenization, however, the whole way real estate works will shift because as soon as I get my first pay cheque I will be able to buy a particular token of a house with an option to gradually acquire more and more of the house throughout my lifetime.

I just want to jump ship now to a different topic.  I believe your platform is launching its own token soon.  For those that would  like to purchase it what are they actually investing in?

Great question.  Our token, BKT, Bankorus Token, has several crypto economic features.  The first of all the token is the main network token which means of the people that are already using our platform they can buy and sell the technology with the token, we pay third party people that focus on AML, KYC, etcetera, with the token as well as any type of party that uses the token.  Also, if you transact on the platform you can transact with the main currency similar to an exchange however if you use our token you will get a discount in terms of transaction fees to the trades that initially will be around 50%.  Secondly similar to a private bank we will have different types of membership of the platform.  So, we will have a silver membership, a gold membership and a platinum membership and depending on how many tokens you stake within the system you put it on smart contract, you will get particular access to tokens.  So, for example if you have a very rare asset, let’s say it is a Picasso that is tokenized on our platform and that will be sold to people then this particular asset will be first available to the platinum holders to buy outright.  Or let’s say a house, we would offer a house in let’s say New Zealand up for sale and then the platinum owners or gold owners they can bid for it, and they can bid for 100% of the tokens so then the entire asset is theirs.  So, there are a lot of benefits to that.

Then thirdly we need people within the network to stake and to ensure that the network runs smoothly and so for those people that stake their tokens on the network we will take 20% of the net fees of the platform and they will be able to claim as part of their staking efforts part of these tokens.  So, that is how it will work.  So, every quarter we will go and take part of the net profits, go to the exchanges, buy our token back and then stakers will be rewarded for their staking with our own token.

I just want to drill in to who your product is marketing towards and who can actually use it.  Now, it’s clearly a product for high net worth individuals, is there a minimum amount of investment that they need to have to be able to use the platform?

No, the platform has no minimum amounts however because of regulatory reasons some tokens, specifically those that focus on VC or private equity tokens, they will have some minimums in there depending on jurisdiction they’re in or depending on the token vendor as it were.  But, for us to use the platform and to use more tokens there is no minimum so it is really open to everybody however we as a company have to make the strategic decision to focus on a particular class of people first.  So, it’s a little bit similar to Tesla.  Tesla’s mission is to have electricity run the main energy rather than fuel and so for us the mission is we believe in a world where everybody will be able to have the same sophisticated investment as very wealthy people have at the moment and we believe in a world where in a few years’ time you will be able to hold all your wealth in the form of tokens.  So, we have to start somewhere and the first people that came to us were these high net worth that would like to create liquidity in their platform as well as a lot of crypto high net worth that are looking to diversify their assets.

Greg, do you have any closing thoughts on the cryptocurrency space for the year?

I believe this is a paradigm shift.  As you see I think 2018 will really be the year that we will see a lot of great assets being tokenised and being put in the hands of many investors.  There’s a team working on the Plaza Hotel tokenization that we’re involved with and you will see this more in Singapore, in Hong Kong, in Australia, New Zealand, America, Latin America and this would really, I think in sort of wealth management, be a paradigm shift even bigger the way that internet changed media.  Blockchain will change the way wealth management is being done in a fully decentralised way.  So, it’s really a big paradigm shift and the way that regulatory wise everything is moving a lot will be focussing on security tokens, security assets.  That’s exactly where we as the bigger player in Asia are focussed on, on this security token side. 

Greg, thanks so much for taking the time to speak with me today, I really appreciate it.

It’s my pleasure.  If people would like to know more the best way is to join our telegram group chat which is t.me/bankorus, that’s really the best way.

That was Gregory Van Den Bergh, the co-founder and Chief Executive Officer of Bankorus.

The Constant Investor is a media partner of the upcoming World Blockchain Forum taking place in Dubai on the 16th and 17th of April, 2018.