#93 - Building institutional grade tokenisation infrastructure

Speaker A: Welcome to the Building and Growing podcast. We're delighted to have Matt Ong from Control Alt with us. Welcome, Matt.

Speaker B: Thank you. Glad to be here.

Speaker A: Yeah, mate, it's fantastic to have you here. And, um, you know, it's a lovely summer's day here in London. Um, perfect time to talk about tokenization. So, um, look, mate, before we do that, do you want to give us an intro to yourself?

Speaker B: Yeah, of course. So, um, yeah, as you mentioned, I'm Matt. I'm founder CEO of Control Alt. Um, we'll come into a little bit about what we are and what we do in a moment. Um, but yeah, I started my career in investment banking, um, and kind of saw some of the problems that we were having in financial markets and saw this new wave of technology that was coming and disrupting this space and um, very specifically the world that I was operating in at those investment banks. And so m. After doing six, seven years of, of investment banking, um, which was brilliant and great place to learn and um, really cut your teeth. Um, yeah, started building my business back in, uh, 2020. Um, left banking to do this full time in 2022 once we've kind of laid all those foundations. And yeah, fast forward to today. We're a business across three regions, um, 40 people and uh, yeah, really exciting time for us.

Speaker A: Amazing. Well, first of all, congratulations on that growth. Uh, I'm pretty sure we met back in 2022 when you were just closing a pre. Seed or a seed.

Speaker B: Yeah, I think really early days. Um, product was different. Yeah. Team was very different. Um, and uh, yeah, funding was obviously very different as well. So. Yeah, very early doors.

Speaker A: Yeah, but look, I mean, you know, like the best thing is to see that growth over a time, which, you know, has been a difficult time for startups. So, uh, you know, but sure, we're going to dive into that success and traction further down the line, um, uh, today. But Matt M. Why don't we start off with maybe a definition of tokenization?

Speaker B: Yeah, great. Great place to start. Right. Because people ask what we do and sometimes when we talk about what we do, it's not immediately clear because people don't know, you know, what does this term tokenization actually mean? Um, so tokenization quite simply is representing some sort of asset through a token on the blockchain. So taking that even one step further back, what is the blockchain? The blockchain is basically just a record. You know, think about, you've got a paper, piece of paper and you've got on there, you write down who owns What? Right. A blockchain is quite simply just a digital record, a way to record, you know, who owns what.

Speaker A: Yes.

Speaker B: And so what tokenization is, is it's recording who's owning what on that blockchain. Um, and so what tokenization can do as a consequence of that is it can make how you invest in assets, how you operate assets, how you manage assets a lot more efficient. You can cut out layers of the structures. And so everyone's very excited about this term tokenization of representing assets as tokens and being able to then trade those tokens and invest in those tokens and get exposure to these asset classes. That's fundamentally all driven by the technology that sits behind it.

Speaker A: Fantastic. That's great. And you know, you mentioned that you'd been in investment banking for seven years. Um, and you know, I suppose for the final two years you were, you were focused on sort of coming um, up with what control alt would be. You know. Can you talk us through the process of why you founded control altogether?

Speaker B: Yeah. So at the banks we were often asked by clients to do, um, to do more, to do a broader set of assets. Um, and also working at the banks as well, we were working on all of these incredible asset classes. But people like myself, we weren't able to invest in those asset classes and so started looking at what was around to help break those barriers down. So not just for me as an investor, but also for some of my customers at ah, an institutional grade. And um, tokenization was an earlier concept back then. It was very much spoken in conceptual terms. It's like this is theoretically possible, but there wasn't the regulatory frameworks really to do this. There wasn't any um, examples of this really happening elsewhere in the market. And so, um, we understood the technology, we did a lot of time with my early team building the foundations. Um, but it was primarily driven by the problem statement that we saw not only in my role at the investment banks, but also on a personal basis. Um, we'll come on to some of the things that we do in a little bit. But one of the big examples of tokenization is with regards to real estate, the idea that, well, what if I could invest in real estate with smaller amounts of money? Um, and so that was something that was very topical to me at the time, wanting to invest in different things, not just public markets. Um, and tokenization was a way to empower that. So that's really what got the idea going. Um, problem statement in personal and professional life. And then we started building from there.

Speaker A: Fantastic. That's great. And before, when you were doing the introduction, you mentioned that you're live across three markets now. Now are you able to talk us through, uh, where they are?

Speaker B: Yeah, so, um, we have an office in London. London's our global hq. Uh, we have an office in Ireland. Um, and our newest office is in, uh, Dubai, uh, which we opened last September. Um, so we are licensed in the UK and we're licensed, uh, in the uae and that's where we're most active. Um, but yeah, really exciting to have teams across the world, um, and be expanding our footprint like that as well.

Speaker A: Fantastic. That's great. So look, I mean, you mentioned real estate as a use case, but perhaps we could dive into some of the use cases. Number, um, one, that you've got live, and number two, perhaps that you see coming, uh, in the future.

Speaker B: Yeah, so it really depends on the market. Right. So the markets operate quite differently. Um, and by that I mean the geographical market. So taking the uae, Dubai as an example, um, if you think about what assets come to mind when you think of the uae, it's, you know, Dubai specifically is real estate. You know, real estate is such a big asset, such an attractive asset class.

Speaker A: Yes.

Speaker B: And so it made sense that, um, Dubai wants to be able to offer this asset class to more people. And so it was just immediately obvious that this was an asset class that made sense. But also, you know, tokenization has, as I mentioned before, has long been linked to real estate. And so it was kind of the match made in heaven that, um, you've got this asset class that's super big and you've got the use case there with the technology and bringing that together. So what we do in Dubai is, um, we uh, do what we call a native form of tokenization. And that's where you tokenize, you represent the asset, the property, the real estate itself as a token. And that token can actually be transacted in fractional format. So you don't have layers involved, you don't have, you know, counterparty, you're actually owning a fraction of the, the title deed of the, of the property. Um, so it's an incredible initiative that you know, that have been worked on with, with the Dubai government and with the regulator and with local players as well.

Speaker A: Yes.

Speaker B: Um, so that's a fantastic use case. It's going really well, it's being scaled. Um, you know, loads of other countries are looking at trying to replicate the same thing. So that's probably one of the most prominent and um, public examples of the work that we've been doing in tokenization. But then if you flip that over to UK and Europe, um, what this requires, what real estate tokenization requires is it needs buy in from your central land register to be able to bring those records on chain. And so you know, doing that in the UK and doing that in Europe is harder to get, you know, the land registries to, to do something like this. Um, so that makes a challenge for real estate. But what's really interesting um, in the UK and European markets is there is a gap for being able to provide exposure to different kind of alternative assets. Um, you know real estate is a type of alternative asset. But in the UK and Europe we see more financial alternative assets. So think about private credit, think about private equity funds. Can we try and give people, whether you're an institutional, um, whether you're some sort of sovereign wealth fund, can we help you allocate to these assets in a better way? Can we give you broader exposure to these asset classes and can tokenization be the driver of that? And so that's something that we've seen a lot of uh, in the UK and in Europe. So quite different looking at private credit versus real estate in the uae. Ultimately they all come under the alternative asset umbrella. And that's where our name comes from. We are control, we are giving people control over alternatives. Finding a better way for you to get exposure to these assets. But again each market different, different affinities, different assets.

Speaker A: Indeed. And look, I mean I, I suppose in the past I've certainly come across alternatives, um, and you know, fractional investments, uh, I guess fractional investments through my time at Revolut, um, alternative assets afterwards. Um, and, and there was a lot of sort of the structuring of those alternative assets through say limited companies, whether they were UK limited companies that then issued share certificates to investors within them or you know, overseas based structures. Are you able to talk through how to organization maybe reduces cost or increases the speed, um, uh, relative to, you know, that sort of fractional ownership through limited companies.

Speaker B: Yeah, that's, that's what we consider to be like the first generation of giving people exposure, exposure to these asset classes. And there's definitely still a place for that to exist. Right. Um, but tokenization is the next generation of that. So in some instances it allows you to remove the deed for that entirely. Right. So if you look at the real estate example, again tokenize it at source rather than tokenize an SPV or a wrapper around it. But there are some asset classes that don't have a Central record of ownership. Right. And so you do need a legal wrapper like an SPV around it for you to be able, able to give people exposure to it. Um, but tokenization can also help there, as you've kind of just alluded to. Right. So in traditional structuring, if you think about, you create an spv, you create a UK limited company for example, and you want to have a thousand investors invest, um, in that SPV that then owns another asset. A thousand investors is quite a lot of investors to then go and manage. You think about doing that at scale as well. You think about having, you know, hundreds of SPVs each with thousands of investors in it becomes a bit of an operational nightmare to try and manage all of that. And so that's where the blockchain element becomes really powerful. Because what happens if you start recording that ownership on chain and you've then got a token? What about if you want to sell your share in that SPV and you transfer your token to me and that automatically then updates the records of ownership rather than going to then make filings and make manual paper updates. So tokenization can help in both cases, not only where there is a central register and bringing that register on chain, but where there's not and you need a wrapper around it, there is also a much more efficient way to do that through blockchain technology.

Speaker A: Yes, indeed. And so look, you've spoken, um, uh, a bit about both institutions and kind of individuals, um, investing, um, in you know, alternative assets, um, through tokenization based infrastructure. Are you in control, more focused on individuals or on institutions?

Speaker B: Yeah, good question. We are, we're a B2B business so we focus on institutions. Even where there is a retail component, we wouldn't, we don't face the retail customers directly ourselves. We go through, um, a partner distributor. Right, yeah. Um, and that's because our skill set isn't in distributing to end retail investors. You know, it's a very costly exercise to go out and do that. We're focused in providing the infrastructure and the tools for institutions to invest themselves or for them to provide access to their customers, um, on the other side. So yeah, we are, we're a B2B business.

Speaker A: Fantastic. And you know, one of the key benefits that you mentioned before was the fact that all records that say on the ledger are tracked, um, and are traceable. And um, you know, if we mentioned the word crypto, crypto and tokenization at different things. But, um, you know, in the case of say crypto theft, people have been able to track that theft all the way along the ledger. So are you able to talk a little bit about, I guess, the safety and the traceability of tokenization based transactions?

Speaker B: Yeah, you know, people often associate. Well they did certainly initially they associated tokenization with crypto and then it was associated with all the hacks and, and security concerns around it. And so, you know, when we talk to big institutions, you know, that's one of their biggest concerns because they're not necessarily informed about actually how does this work.

Speaker A: Yes.

Speaker B: So there's two things that one, the transparency. Right. So as you mentioned, you're able to track every transaction that happens on chain. So there's a full audit of, of what's happening. Yeah, um, so that's very helpful. But taking one step back, how do you prevent that happening in the first place? Because you know, I could be an institution. That's great. I can see my stolen token moving through the network, but I didn't want that, that token to be stolen in the first place. And again that's where the technology helps because into these tokens you're able to build in certain features. You know, you can have KYC flags for example, or freezing capabilities or clawback capabilities. And what that means is if you've got a token that's held in your wallet, that token can't move to someone else until it's been an approved transaction, what we call a permissioned transaction. And so what it does is it actually puts better controls in place in how you operate to say you can't actually transfer that until the other person has gone through, for example, a KYC and AML check which will allow that flag to then be lifted and then that transfer can then happen. So if anything it should be seen as a, uh, as a tool that can improve security and compliance rather than something that people should be afraid of. Again, I think people associate it with the defi world which is where you don't know potentially who the counterparties are. We operate in a more centralized, um, environment on chain where you need to know those counterparties are, you know, we deal with regulated financial products so we need to do that. And so that's actually very helpful the technology in that case because we can put those, those barriers in place.

Speaker A: Yeah, fantastic. And I guess another thing that is, you know, we've spoken about say the uk, um, and Europe as markets, uae. It's an interesting one, they're very innovative, um, you know, 85% expats, uh, you know, in the UK, sorry, in the UAE, um, I want to, I guess Move the lens slightly to you know, more sort of emerging markets, um, where you know, there might not necessarily be a land registry. Um, uh, there, um, but things like crypto and stablecoins in particular have had really high rates of adoption. What role do you see tokenization playing in emerging markets?

Speaker B: Yeah, really interesting question, um, because when you think about how this technology can disrupt um, what we do, if you're already starting from a, um, uh, from, from a more basic base, then you've got even more improvement than to get from that technology. Right?

Speaker A: Indeed.

Speaker B: Um, the challenge that you often have with um, uh, with developing markets is that you need some sort of infrastructure to be able to plug into. So Dubai was a fantastic example because, um, they also had some infrastructure there for us to be able to connect into and do this quite quickly. You know, if you think about real estate and if you think about some countries that have paper records, you're still going to need to get those paper records into some sort of digital format. So there is a step that you still need to take. Whereas if you already have those in digital, the step to then make it into um, you know, onto a blockchain is, is a lot easier. So um, I think it, it's going to be massive in the developing countries, um, and I think it can do wonders. But the reality is that to implement it in a lot of these developing markets is actually quite challenging just because, you know, they're starting from one step behind. So absolutely it's going to happen and I think it's going to have material benefits. And I think, you know, once they get it digital, they can move to the next stage quite quickly. But there is still a bit of a gap there.

Speaker A: Um, yeah. Fantastic. And um, look, I guess why don't we have a bit of a chat now about trends. Um, you know, you've mentioned that you deal with regulators a lot. Have you been seeing any regulatory changes?

Speaker B: Yeah, we're seeing regulatory changes across the globe really, and it's really great to see. Um, because when we first started this business it wasn't that way. Um, tokenization was kind of like a hush topic. You can't really talk about it. The fact that you're using blockchain was kind of like, yeah, we just use this behind the scenes. Um, and it was quite difficult to convince regulators that this is, this is the same, this is the same as what we're doing today. It's like an infrastructure piece that sits behind it. That rhetoric has changed completely. You know, in the UK for example, we've now got the digital security sandbox. So you've got the bank of England and the FCA coming together with an environment to be able to test digital securities and tokenization. It's fantastic. Um, and you're seeing similar initiatives, um, you know, across Europe, um, across Asia. And you're seeing, you know, the uae, for example, launching vara, a dedicated, um, regulator for, for virtual assets.

Speaker A: Yes.

Speaker B: Um, but it doesn't stop there as well. You look across the pond, you look at the US and their change of, of tone when it comes to, um, stablecoins tokenization. You see, you know, Robinhood's coming out looking at tokenizing stocks, um, Kraken tokenizing stocks. Um, you know, that change has happened on the back of regulatory changes and regulatory clarity that's happening across the world.

Speaker A: Yes. Yeah. Fantastic. And stablecoins are another, um, real hot topic at the moment. We've had the genius act in the US Recently. Any sort of views on what's going on in that space?

Speaker B: Yeah, I mean, uh, as someone that operates in the tokenization space, stablecoins, or the ability to make payments on chain, is what unlocks an incredible benefit of tokenization. So think about if you now own a share, that's a token, and I can make that payment on chain as well. So I pay you in a stable coin, um, or some other digital currency. It means that I can immediately settle that transaction. It's both happening on the same digital rails, so I don't have to think about my T +1, T +2 settlement. It's settling instantly.

Speaker A: Yeah.

Speaker B: Um, when you think about payments, you know, dividend payments that can then happen automatically, you know, on the same rails again. So, you know, there's a lot of excitement around stablecoins in my world because of what it unlocks. You know, today most of that payment leg sits off chain, so it sits in traditional cash. And, you know, if you need to then make, you know, large cash payments, you're then at the mercy of, you know, the traditional rails to settle that cash.

Speaker A: Yes.

Speaker B: Um, so we're super excited about, you know, what's happening in stablecoins, um, and central bank digital currencies because it unlocks a massive benefit of. Your asset now sits on chain, but your payment leg also sits on chain, and it's on the same rails and it unlocks the, you know, the things that everyone has been talking about. The kind of holy grail of tokenization.

Speaker A: Indeed, indeed. And, you know, we did mention crypto before. Um, uh, I suppose, you know, crypto has gone through Its sort of booms, its busts, its different cycles. How does that impact tokenization or the rhetoric around it?

Speaker B: Yeah, I mean we distance ourselves a lot of the time from cryptocurrency, um, uh, often because of the negative connotations that it sometimes has with institutional customers, with our customers.

Speaker A: Right.

Speaker B: Um, you know, cryptocurrencies have a value in this, in this, in this ecosystem, um, in our ecosystem for sure. Um, but we typically distance ourselves away from it. However, you know, a lot of capital that is going into, you know, investing in the infrastructure for blockchain technology is driven by the cryptocurrency markets. Right. So when the cryptocurrency markets are doing very well, you see a lot of investment happening into the space, into the, the picks and shovels, the infrastructure into, um, you know, the interest just massively spikes. And so, um, that's beneficial for us. So even though we are not tied to the crypto markets, we're kind of indirectly associated with, with those movements. Now what's been quite interesting is that sometimes the crypto markets move and then our space kind of follows. But what's been quite interesting is that a lot of the changes in the crypto markets at the moment has been driven by regulatory changes and that's put interest back into the crypto market. And so, um, maybe that's a sign that ah, the crypto markets are going to be slightly less cyclical and more driven by adoption, um, in the market of the blockchain technologies itself. Potentially. Um, but um, yeah, certainly for us it's been, it's been super beneficial for, you know, over the last, you know, 12 months or so, the trend upwards in the crypto markets for sure.

Speaker A: Fantastic. Yeah. Look Matt, this has been a really great introduction into control alt and tokenization and you know, the work that you're doing in order to help, I guess, institutions, um, uh, use your infrastructure to um, uh, build access for alternative, um, uh, assets. Um, is there anything else that you want to add about control alt before we move to takeaways?

Speaker B: I think it's a really exciting time for us, um, uh, because of the things that we've just mentioned and we've got massive tailwinds in this space. Um, it's super exciting to see some of the initiatives that are being worked on by governments, by institutions, by people coming together in this space and it's great to see tokenization in the news, um, and the coverage that it's getting. So no, it's just a really exciting time for us, um, and uh, we're very much looking forward to being in this moment expanding, growing our presence, entering into new markets, um, building relationships with um, some of the new institutions, some of the new governments, rolling our products out, um, uh, into new UK systems. So um, just an all round exciting time for us for sure.

Speaker A: That's fantastic. Amazing. And look Matt, any key takeaways you'd like to share with the audience today?

Speaker B: Um, I think people should think about how tokenization can actually impact what, what they're doing. And people don't realize as well how much tokenization is happening in the background. You know, um, rewards cards for example, they are managing you know the, the reward systems on chain.

Speaker A: Yes.

Speaker B: You would never realize that there are some really big reward sch are now managing that on chain. And so I think um, people should expect to see this infrastructure coming into their day to day lives. It's already happening. People might not realize it and people should be really excited about that. Um, we've moved on from just pilots and um, initial use cases. We're now really gunning for what's unlocking the true benefits of this technology. And so um, yeah, I encourage people to keep an eye out for this um. Yeah. And hope they embrace this uh, wave of technology that's coming.

Speaker A: That's fantastic. Matt, thank you so much again and congratulations on uh, the success Control Alt has had and we look forward to keep watching you grow.

Speaker B: Thank you. Appreciate it.