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29 September 2018

VNX Exchange, future of the stock market

VNX Exchange to become the first token trading platform to digitize assets

PHOTO: GETTY IMAGES

Thierry  Labro, of The Luxembourg Wort shares his insights about digital assets trading platform, VNX. After San Francisco and Singapore and before the Bloomberg Conference on October 11 at the Chamber of Commerce, the Luxembourg start-up VNX went to Moscow to present its platform that is to shake up old capitalism. Its leaders have made Luxembourg their main selling point.

Luxembourg is not Silicon Valley! But it is ranked the second largest European financial center behind London and the first European country with a regulated crypto currency exchange market (BitFlyer).

With 450 billion euros assets under management, it is the first wealth management center in Europe! With 4,200 billion euros under management, it is the second center in the world for investment funds behind the United States. It seemed normal to start there!

VNX CEO Alexander Tkachenko set the bar very high. Regulation and transparency are at the heart of the speech that he announced in front of 200 financial professionals, where only 60 were expected. VNX, the marketplace of the former TDK executive, is nothing more than an attempt to revolutionize capitalism.

 

The seventh and last floor of the Moscow Exchange overlooks the Kremlin PHOTO: THIERRY LABRO
Tokenize Assets

“We have a system that has not fundamentally changed since the 1970s,” said Skype’s former operations director, Michael Jackson,” Tkachenko reminded an attentive audience.

The partner of the Luxembourg company Mangrove Capital even went much further with the publication of a study of 204 ICO (these modern fundraisers based on cryptocurrencies), according to which even taking those that fail to meet funds (46%), the return on investment exceeds 1,300%. “Basically, there are a lot of people who want their coins to be quoted,” says Jackson at the Business Insider website. “The stock exchanges are where the cash is – that’s where the money is – so that’s where the power is at the moment.”

How to restore liquidity to venture capitalists? This is the basis of the Luxembourg project presented in the Russian capital: by promoting the “tokenization” of assets.

The buzzword comes from bitcoin, and technology, the blockchain, thanks to which were born more than 4,000 other crypto currencies (only 1,969 are still alive for a capitalization that fall from 795 to less than 200 million euros this year).

CEO of VNX Venture Exchange, Alexander Tkachenko PHOTO: SERGEY SMOROVOZ

Tokenization is nothing more than the digitization of stocks and other bonds, still largely materialized by pieces of paper. With technology, these “bits of paper” will become a code made of numbers and letters. The challenge is to guarantee to those who own them that these series of figures have the same value at the end. But not only.

The platform would then monetize these “assets” instead of “sleeping” for ten to twelve years and that venture capitalists are constantly obliged to return for cash from investors to bet on start-ups, innovative companies or SMEs.

The day before, in the trendy restaurant in the center of Moscow, where Ladas’exhaust pipes release black fumes is now the cliché, announced by journalists with not enough inspiration, the startup team presented the details of the project, supported by the Luxembourg House of FinTech.

First 20 million announced

Around the table, after an intense morning work session with the main Russian banks, everyone drinks water, the chairman of the board, Vladimir Khanumyan, former chief operating officer of CTC Media the largest private group of media in Russia, which he had successfully introduced to Nasdaq and which is the co-owner of Sony Pictures Television Russia; Dominique Valschaerts, the former Managing Director of the Brussels Stock Exchange and former member of the Executive Committee of the Luxembourg Stock Exchange, and thus, CEO AlexandrerTkachenko former, TDK executive in Luxembourg, passionate about innovation to the point of being among the first to bet on digital assets.

“It will be a new class of assets,” says Tkachenko, himself surprised at the enthusiasm that accompanied him during the Moscow conference. “Venture capital is $ 1,000 billion. Even if we start with 20 to 50 million, that would be good.”

The figure is not casually used by Alexey Prokofiev, the one who organizes this Russian stage in the tour of the world of “Luxembourgers”, heads a risk-adjusted investment fund, Add Venture, and participates in the working group on digital financial assets at the OECD.

“By the end of the year, we will put twenty million assets on this platform,” said Alexey Prokofiev, the director of Add Capital and Add Venture PHOTO: SERGEY SMOROVOZ

“By the end of the year, we will put twenty million assets on this platform,” he told the Moscow Exchange, in front of a number of personalities from the financial world, to include the executive director of Sberbank CIB, Sergey Polikanov,the technical director of the MoscowExchange Anton Govor, the director of the LiteCoin Foundation, Zing Yang, the president of NEM, Kristof Van of Reck or the director of BitFlyer Europe (Luxembourg), Rikiya Masuda.

Tokenization of assets is just one aspect of this platform that will offer a range of services, from standardized forms to gauge the current and future value of a company to advice and support, expertise. “The real added value of our project – we are not the only ones working on this idea – is to first prepare a complete ecosystem,” says Valschaerts.

VNX has filed with the Commission for Supervision of the Financial Sector (CSSF), the Luxembourg regulator, all the necessary documents to know whether or not it can have a license and what type of license.

“The law must follow the technology,” Elvinger Hoss, lawyer Luc Frieden suggested at the conference. Recalling his experience with PayPal, the former finance minister detailed the three arguments for smart regulation. “First of all stability, the law is there to ensure that the system is not shaken; second, that technology is not abused by illegal activities, be it money laundering or the financing of terrorism; and that consumers are protected. Maybe we will need an adaptation of the law, maybe we have to let the technology evolve and see it at the national level, at the European level and with our international partners, whether it’s OECD, the United States or Russia. “

Alongside Lite Foundation director Zing Yang and Dominique Valschaerts (VNX), Luc Frieden advocated smart regulation. PHOTO: SERGEY SMOROVOZ

By the end of the year, Two of The Big Four and the SNT

Two of the Big Four (EY and Deloitte) are already involved in the adventure. “But we also want to include all major law firms,” ​​said Khanumyan, “as well as experts. Take Spotify: some experts did not know what Spotify was when the streaming music site had already managed to become the world leader. And 30% of today’s success comes from new technologies.”

Finally, VNX took advantage of its trip to Russia to announce an upcoming agreement with the University of Luxembourg and SnT about security. “The nature of the information that this platform will collect requires that this complex beast can never be hacked,” said SEDAN group director at SnT Radu State. “46% of ICOs – these new generation fundraisers from encrypted currencies – fail, mainly because they contain irregularities and because the technology is vulnerable, most coders of these programs do copy and paste, including buggies and faults. “

Luxembourg’s ambassador to Russia, Jean-Claude Knebeler (here 5th from right). Luxembourg delegates invited to the Moscow Exchange event. PHOTO: THIERRY LABRO

The four-year contract will allow post-doctoral students to work on a concrete case and other partnerships are being developed, on the same topics, with American or Chinese projects.

In addition to security, will this liquidity guaranteed by VNX to the capitalists please them? Will it involve too much transparency on their secret recipes, thevery ones that justify their own bills? And investors will they always want to take risks by engaging in such long periods of time against a more dynamic monetization? Ten to twelve years in a world of technological breakthrough, these are very long bets.

To all this, VNX will still have to answer by practice. The proof of concept exists. Most likely in December.

Click here to read the full article by Thierry Labro on Luxembourg Wort.