What is value? And how blockchain makes sharing it smarter

Circle’s Marieke Flament on the meaning of value in a liquid world – and the role diversity plays in sharing it out


Circle, the blockchain unicorn breaking boundaries in the finance sector, is on a mission to enable people anywhere to create and share value.
How? With the tokenisation of everything.

Some qualifiers first. What are tokens? A utility token, such as bitcoin, is different from, say, a security token. Utility tokens represent the potential for future value (since digital marketplaces are still being built). By contrast, security tokens have real-world assets backing them up, such as equity in real estate. As a result, they have a tangible value – dollars, euros, pounds – separate from a cryptocurrency’s (crypto) worth. In other words, trading in security tokens is less of an abstract bet-hedging strategy than trading in utility tokens.

As fintech continues to accelerate at pace, tokens are emerging as an asset class of their own. They hold the potential to bring crypto to a deep bucket of investors: gaining real-world value from the digital assets in which they invest holds a heady allure.

“Imagine an Indian farmer wanting security for his land,” says Marieke Flament, Managing Director of Europe at Circle. “He will be able to sell a portion of it directly to consumers with digital wallets using dollars or euros, without any intermediary. On the one hand, the smart contract means the farmer will gain. On the other, it creates a new investment opportunity for consumers who want to participate.”
Now, extrapolate this scenario for billions of people across the globe. “We are right on the cusp of tokenisation anytime, anywhere being possible,” says Flament, a London Business School MBA graduate.

Blockchain is bringing value to everyone, including vulnerable people. For instance, Building Blocks, a programme started in 2017 to help the World Food Programme (WFP) distribute cash-for-food aid, has helped more than 500,000 Syrian refugees in Jordan. The refugee camp runs on blockchain. People shop at supermarkets without physical money. To pay, they look into a camera and an iris scanner connects to their WFP accounts. Previously, the humanitarian organisation had given aid directly to refugees but the payments cost millions of dollars in bank transaction fees: blockchain cut those fees by 98%.

For definitions of blockchain, smart contracts and crypto assets and securities, skip to the end.

We believe blockchain smart contracts will allow people anywhere to digitalise any asset. That’s tokenisation

The tokenisation of everything

Over five years, Circle has created an app-based peer-to-peer payment network using blockchain, which means more liquidity and no commissions. It is one of the leading players in the over-the-counter market for bitcoin trading, and has an app for buying crypto, Circle Invest.

“We believe blockchain smart contracts will allow people anywhere to digitalise any asset. That’s tokenisation,” says Flament.

Take a beautiful painting you can’t afford. “What if you could have fractional ownership of a piece of art? Tokens will make that possible.”

Blockchain, by its structural design, reduces transaction costs through an undisputable record of ownership. Security tokens allow for the release of illiquid assets into liquid marketplaces. With no middle person and using a smart contract for legality, tokens lower the cost of global transfers.

“In the near future, we may live in a world where people from all corners of the globe trade everything from fractional ownership of a piece of art to a down payment on a flat.”

So the future will upend our classic definition of value? “Yes.”

Farmers, founders, investors, you name it – one of the big benefits of tokens is that they provide access to money from both sides of the table. Investors who perhaps lack connections will have a bite of the pie. Entrepreneurs who want to retain control of their ventures will have a dynamic way to find capital.

“We’re tapping into ways to move money,” explains Flament. “Share it, trade it, invest it across borders, between currencies and among friends.”

What’s blocking blockchain?

As with any rapidly-evolving innovation, there are potential blockers.
The first challenge is regulation. “There is little clarity on the vast and diverse range of crypto tokens that are emerging,” notes Circle’s CEO Jeremy Allaire.

Watch Allaire share his take on the tokenisation of everything

Worldwide, regulators have intensified their scrutiny of online fundraisers known as “initial coin offerings” (ICOs) and crypto exchanges. In July 2017, the US Securities and Exchange Commission (SEC) cautioned that some coins issued in ICOs could be viewed as securities. Trading them would have to comply with federal securities laws.

Circle is helping craft relevant global regulatory frameworks. From the SEC in the US to the UK’s Financial Conduct Authority as well as policymakers in Japan, China and Korea, the fintech unicorn is collaborating to shape best practice. “Our aim is to be open and consistent,” says Flament. “We want to educate but also ensure that consumers (and societies) are protected.”

Blockchain technologies have no borders, which presents a nuanced challenge. Financial inclusion is, it appears, in direct tension with economic programmes such as Donald Trump’s America-first philosophy, and Brexit. “Having fragmented societies is the opposite of what we’re trying to do,” clarifies Flament. Leaders at the G20 summit in July 2017 recognised the fact. Building an inclusive global digital economy that’s secure and accountable to the world’s citizens requires decisive steps and cross-border economic cooperation, it reported.

The second challenge is going mainstream. “If you want to buy crypto right now, good luck,” quips Flament. “It’s too complicated. At Circle, we’re trying to make things simple, easy and transparent. Who even needs to know that something is using blockchain technology at all?”

Flament’s point is this. When we send emails, do we care how it lands in someone’s inbox? Do we need to know the code behind it? Right now, technical know-how is the ball and chain to adopting this technology at scale.

How diversity values help

Today, Circle trades more than US$2 billion (£1.4 billion) in crypto each month. The engine behind the fast-growing firm is a senior leadership team that puts diversity high on the ledger sheet. “If I’m building a team, I want that team to be diverse,” notes Flament, who has been a driving force behind three hiring programmes.

The first was launched to attract and recognise women in finance. Circle UK became the original fintech to sign the Women in Finance Charter in July 2016. The charter is a HM-Treasury-led initiative that invites firms to sign their agreement on working together and building a fairer industry.

“According to Hewlett Packard research, women will only apply for a job if they are 100% qualified, whereas men will apply even if they are only 60% qualified. Fintech is a mix of the predominantly male finance and technology sectors, meaning we get fewer applications from women. To equalise the hiring process, we’re working to combat bias through rigorous reviews, and by educating our teams on the power of diversity.”

Second is a programme known as VETS (Veterans Employment Transition Support programme), launched by Barclays in 2015. It is designed to offer two-way value: supporting ex-service people in the workforce while simultaneously making the most of their unique skills. Just 22% of veterans feel their current employer fully recognises their experience, according to research. Yet military skills – leadership, adaptability, discipline – are much-needed capabilities in a pacey work environment such as fintech. “Veterans have so many amazing skills, like a risk and security mindset. We want them in our workforce,” says Flament.

Third is a collaboration with Colorintech, a non-profit founded in 2015 by technologists and engineers who, frustrated by a lack of diversity, decided to make Europe “the most inclusive tech hub in the world.”

“Diversity is at our core,” says Flament. “If the people who build our products are not representative of the people for whom we build them, our products will have a biased view.”

Circle’s values have business value, she explains. “Our values and creating value are interlinked. Inclusion at work helps us contribute to building a globally inclusive economy.”

Tokenisation: the glossary

Blockchain. A tech-powered way for untrusted parties to reach agreement on a common digital history. Digital assets and transactions can, in theory, be easily duplicated. Blockchain solves this problem without using a trusted intermediary.

Smart contracts. An agreement that is automatically computed once certain pre-programmed conditions are satisfied, alleviating the need for traditional, often troublesome, written contracts.

Crypto assets. New, purely digital assets that are issued and mediated as (or by) public blockchains. They have free-floating price value while being liquid on a growing number of digital asset exchanges.

Crypto securities. New forms of tokenised securities using crypto computing systems as secure record keeping. They often merge utility and financial value and are a departure from paper-based securities, such as a stock certificate.

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