Digital Securities Insider Talks | Episode 1: A Cautious Approach to Discussion Helps Secure Investments

Recently, the podcast "Security Token Insiders," co-created by Security Token Market and RedBlock Capital, has officially launched. The program focuses on discussions and exchanges in the digital securities field, with Chain Catcher serving as the Chinese blockchain media support for this series.

The first episode is hosted by Kyle Sonlin, CEO of Security Token Market, and the guest is Frank Curzio, founder of the research institution Curzio Research.

Below is the transcript of the first episode:

Kyle Sonlin (Host): Hello everyone, welcome to the exquisite program "Security Token Insiders" created by Security Token Market and our partner RedBlock Capital. As the opening piece of this series, we are honored to invite a giant in the digital securities field, Frank Curzio, as our first guest. I can't wait to start the conversation with Frank.

Frank Curzio (Guest): Thank you for the invitation. I can't accept the title of "giant"; we just entered the industry early. To be honest, when we first started, we didn't think too much; we just set our goals and direction because we all believed that public trading is a particularly interesting field.

Kyle: Thank you for your kind words; I am eager to start the discussion. I am Kyle Sonlin, currently the CEO of Security Token Market. STM has always insisted on enhancing the exposure of the digital securities field by producing a large amount of high-quality original content. Next, I would like Frank to introduce himself and describe his work, and also share with everyone why we are so passionate about this interview program.

Frank: Curzio's work is to produce newsletters in the financial field. In just the past year, we generated $2.8 million in sales. Those strong competitors have sales figures generally between $200 million and $300 million. So how do we compete with them? As a startup team, we are short on funds and marketing budgets, but when I researched the digital securities market, I was pleasantly surprised to find that this field allows us to raise funds at a very low cost, and we don't need to seek help from investment banks. On a personal opportunity note, my father started in financial media 25 years ago, so we already have a relatively loyal audience. In the stock field, we also created a blog called "Wall Street Unplugged," which has accumulated over 10 million downloads.

On a personal experience level, I take pride in my 14 years of interviewing experience. So, I am glad to see more and more people like you entering the podcasting field. I believe this is the simplest yet effective medium for promotion. Because compared to the capital on the Nasdaq, the influence of niche capital markets is still relatively limited, and their recognition is often unsatisfactory.

Starting anything is difficult; after overcoming media issues, we successfully raised $4 million from people familiar with our work direction in just a few weeks. Currently, this funding is sufficient for us to expand our company's capabilities.

Ultimately, I believe digital securities are greatly beneficial for clients and all participants. The entire industry has begun to thrive, and I believe it will eventually grow into a massive industry worth trillions of dollars. However, those who want to make underlying investments also need to have corresponding strength. Currently, if you want to conduct an IPO or consider an acquisition, valuations have already reached billions of dollars.

Therefore, becoming an underlying participant is no longer realistic, and the entire industry has undergone tremendous changes. For investors, if they invest in a private company, the average liquidity cycle is about 7 to 10 years until an IPO or takeover. During this period, the invested capital will be locked in Reg D products. We have been doing this for a year, and we can say we have already carved out our own niche.

Authorities have raised this limit, and now people are starting to raise funds for Reg A digital securities. Investors can trade instantly without locking up funds.

This compels us to be responsible for our own business. If the business operates smoothly, investors will hold our tokens just like holding stocks. As believers in the industry, this is also the reason we created our own token representing the CEO—Curzio. The company itself does not hold tokens but has common shares. Therefore, growing the business will benefit every participant. Token holders can also receive our quarterly profit dividends.

So far, we have paid four profit distributions to token holders, equivalent to an annualized return of 1.7%, which we are very proud of. We still hope our tokens can be benchmarked against stocks rather than percentages or utility shares.

Although this industry has taken longer than expected to build infrastructure and has just begun to expand, I am still pleased and hopeful, believing that future developments will be quite interesting.

Kyle: During our close collaboration, I have witnessed the progress you have made. Perhaps it would be more meaningful to look back at the entire process from the beginning. I would like to know what attitude investors had towards issuing digital securities when you initiated the fundraising process? How did you help them understand the industry and its benefits so that they wouldn't fear innovation?

Frank: Taking our company as an example, these investors have been following us for a long time. When they want to invest in a company, and I explain it to them in the way I just described, but you must lower your expectations for the investment because when discussing blockchain technology and equity proof, or work results, it is easy to lose these investors if not careful.

Michael Lewis is one of the greatest writers in the world, but I didn't lower investment expectations because of him; I want to talk about his writing style. He writes in an accessible language and uses easy-to-read statistics to reach a broader audience. He could even "convince" my mom to watch the movie "Moneyball," which is a film about baseball and statistics, two of the most boring things in the world.

But look at how many books he sold; it is undoubtedly a great work. We need to lower the barriers and make this information easier to understand, right? This is how you scale things. At this stage, I need my partners to understand that this industry is still in its early days, and I believe they will understand because they have been following me for a long time. But for me, my job is not just to write financial newsletters and sit behind a desk.

For the past 12 years, I have participated in electronic technology exhibitions every year, consuming there, and I also love to travel the world. I attend conferences around the world, which gives me the opportunity to touch on many different industry trends, covering almost everything, including cloud computing, artificial intelligence… Although entering these fields and technological trends, such as 3D printing or 5G, is still developing, just being involved in these things and partnering with people in these industries to gain credibility in the industry is very important. Every business should have credibility, which is why these people follow you, and I am very honest about the size of the risks.

However, this process requires great caution, just like Uber. Uber is very careful on various levels, making it hard to dislike them, and it is positive for customers. They can know how to be safer, which is cheaper, or how to make it easier. Now with Uber, you just need a phone to hail a ride, which is much better than taking a taxi, so the audience has a reason to use Uber. When a digital industry like Uber emerges, it meets almost every condition to "disrupt" traditional financial banking and investment banking; it's just a matter of time. Now you see Goldman Sachs and JPMorgan just starting to collaborate with Galaxy Digital because this is a market worth $2 trillion. Look at our development from three years ago to now; we are publicly traded on the MERJ exchange, which is exciting, and this is just the beginning.

Kyle: Let's talk about the MERJ exchange. The benefits of digital securities are not only in automated management, high efficiency, and capital markets but also in providing small businesses with fundraising opportunities, as well as the secondary liquidity aspect, which everyone is very excited about and is attractive to investors.

What has your experience been with MERJ? What has the process been like for your investors? Did they find the process quite simple? Do you think others can also leverage this advantage?

Frank: Look at Netflix; when they entered the market, people didn't understand what this business model was, but people would use streaming. What was their concept, and how did they compete with cable companies? I think now everyone understands that these streaming services are not just competing with cable companies.

Every cable company is competing with online media, and in this process, they will encounter problems, which are just surface-level issues and all these questions from industry newcomers, but this is what we do. We understand our business, and you are learning about us one by one from my foundational business.

I have an obligation to disclose the company's profits and ensure the company's healthy development. Although we have established some partnerships so far, the infrastructure is still under construction, so it is extremely important to make good use of different partnerships, especially in a brand new field where practitioners must learn to cooperate with each other. Although there may have been some friction in the past, everything is now being integrated, and you will see the rapid development of this industry. The MERJ exchange has incredible benefits for us, and we are conducting token transfers. Shareholders will transfer those tokens to the MERJ exchange to create more liquidity in the future.

This is why Goldman Sachs and JPMorgan are rushing into the digital industry; these institutions were mocking Bitcoin three years ago, but now they are all in. Why? Because this massive $200 billion market is highly liquid and has no development restrictions.

So how do we increase liquidity? How do we get more digital securities on the site? MERJ is a great case because it is almost the only platform of its kind operating online right now. Look at tZERO; it's a great company, but we expect more, and we want to see more tokens. When people keep pouring in and continuously using the platform, it becomes thought-provoking.

Why do people keep using Coinbase? Why do they keep using Binance? Because these platforms have 30, 40, 60, or 100 tokens being traded simultaneously. Typically, users must have more than three tokens and continuously expand the product pool to effectively attract sticky customers. In this process, MERJ is almost the only single-token trading platform currently operating online.

However, it is important to remind everyone that MERJ is not an alternative trading platform; this is very different. To let this industry take off, transparency of information is essential, which is why we will almost be the only token because our financial situation must go through a careful auditing process, and only then can we reassure customers.

These prudence help us gain institutional investment. Once we obtain the upcoming liquidity, more people will get digital tokens, and we hope to become a leading role in the industry. Everyone must be curious about the reasons for our success? First, you must believe in your numbers; we are generating millions of dollars in profits from our growing business, we have a high reputation in this field, and we collaborate with many amazing people, which brings more accolades to our qualifications, further leading to more subscriptions and more revenue. Everything is going smoothly now, and it's very interesting.

Kyle: One cool thing about MERJ token trading is that it is available to retail investors. People do not need to be accredited investors, but this is one of the concepts in the digital securities industry, and there may currently be some misunderstandings that only accredited investors can invest. How does this concept sound?

Frank: This is a big deal for me. This is key because that is my promise to investors. A year later, anyone can enter the trading market. We created a Reg D product with a very large investment space, but only accepts investments from accredited investors.

Everyone expresses a desire to invest, and I also promised that it would be launched a year later, and then it took a few more months. Currently, our open finance is not the platform we want. Despite the pandemic, we are still hopeful for future development.

The pandemic slowed this process down. Now, the entire industry is growing at an incredible speed. We have seen a large number of alternative trading platforms launched, but the fact is that retail investors can use our tokens. They can simply open an account during the merger and hold our tokens.

People may achieve such retail investment on tZERO, but MERJ is one of the leaders in this field. This is really cool for us because now investors can trade freely. You know, suppose I am a complete idiot, and Kyle and I slow down our ups and downs in business, or even sell it. You wouldn't work there for seven years because it is just a private company that has only been established for three years. This work and technology have changed and are no longer relevant to us, just like in AOL or dynamic research. For example, the smartphone market has a considerable elimination rate because Apple crushed them. Get everything ready and go to the MERJ exchange because it will be a great experience, but back to your question, for retail investors, or for me, it is a big deal; I hope they can trade and show them this and the last missing liquidity, but this liquidity will come as more digital securities enter the platform. Now the situation is becoming very interesting.

Kyle: Based on your experience in the public market, you must have enough experience to determine what is truly missing to drive the industry, is it really just the lack of the number of tradable assets? Are there other potential deficiencies?

Frank: This is a big deal concerning the development of an industry. I previously mentioned Michael Lewis; whether it is ordinary tokens or utility tokens, they will not give you equity, right? The only value of that token is its utility, and I can't even guarantee that people have enough awareness of what they are buying. Suppose you know Microsoft comes in and buys; even if you have $70 billion in tokens, in the end, you will have nothing.

Why? Because you have no equity. This is the difference between it and digital securities. It is backed by assets, but look at how many companies there are; it can make things easier. Then ICOs came out, and they are using digital securities to ensure these tokens have utility.

Moreover, when we visit websites, users familiar with block fi or blockchain.com will know that account setup is very simple, taking only 10 minutes. In the digital securities industry, these identity registration checks take longer, and developers must make this process smoother. This has improved significantly compared to two years ago or even a year ago, and the easier we make the services we provide to subscribers, just like Coinbase, which is great, regardless of whether you like this platform, it is crucial for those who do not understand the crypto industry but account for 99% of the entire market; that is remarkable growth. If we can make the process as simple as possible, we can attract hundreds of millions of people to the platform.

But I feel that this process has been continuously happening in the industry. It is too technical; many developers assume from the beginning that everyone knows what wallets or digital securities are. We must educate investors and tell them this is a new technology, just like when the cloud first appeared. I remember cloud technology emerged between 2011 and 2012, and John Chambers from Cisco talked about how many devices were ready to connect to the cloud. People were curious about the cloud; they would search online and want to understand what the cloud is. Of course, now everyone knows what the cloud is. From the cloud's case, you must make it easier for people to understand; it must be a user-friendly experience. Look at Uber, look at cloud technology companies, whether it is Microsoft, Amazon, or Google; it has a positive effect on customers.

If this can provide a great user experience for customers and the tokens are set up correctly, then this industry will have limitless potential and is indeed gradually breaking away from the traditional reliance on investment banks. I have many friends in the investment banking industry, and I have worked on Wall Street for 25 years, but most of them are intermediaries. When you want to raise funds, although many people are willing to provide us with funds, giving us 6% or even 4% of the circulating shares. If it is a smaller amount, at least 10% of the circulating shares. This is basically just a drop in the bucket.

This surprises me. We have seen the internet disrupt every business by eliminating intermediaries, but it has not yet disrupted the investment banking business—although it has slowly begun to show signs. This is also why these traditional banks are starting to invest heavily in digital securities because they realize this is serious.

How do we make money from this? For us, only digital securities make sense, as I said before, we are just continuously confirming what this industry represents for our business, such as lower costs, lower fees, and less regulation, which is not only meaningful but also the most important for customers because they can set it up easily. If it is Reg-A, you can trade a digital security every year, or even earlier, and most importantly, you enter the basic layer.

We are still a small company; if I want to turn it into a billion-dollar business, I must do everything I can. I love this industry and am willing to invest, and we also need to let investors know that they will be huge beneficiaries of our digital securities investment. If you are willing to take risks, this is the benefit you want, and this is what we need in this market. It is just more transparent, and that is the real reason I feel excited. I believe we are ready.

Kyle: You just mentioned regulations; everything we do is fully compliant regarding data disclosure. You need to conduct financial audits, hold investor summits to share data, and make a lot of financial disclosures. But is this voluntary, or is it a necessity due to the complexity of regulations? How does this work?

Frank: It is voluntary, and that is why it is so special. Right now, it is voluntary, but in the future, it will be necessary. If you are a holder of digital securities, you will have to achieve this compliance, and I also know that the U.S. plans to regulate this industry; look at how Coinbase has grown to where it is now.

In Coinbase, if some of those tokens are considered utility tokens, that’s fine. If you look at Ethereum, Litecoin, Bitcoin, or other coins, they all have a certain level of security.

I bet 70% of the companies with a market value of $100 billion do not fully disclose all information… or maybe I don't need to bet because I have done research; you won't find any information about them. Do you know how much insiders own? Even if they can generate revenue, outsiders will not get any information. They do not have dedicated sites for their utility tokens, so you ask me what exactly I am investing in? Now no one cares because it is a bull market, and everything is going up, just like Dogecoin rising 400% in a few weeks, but to be supervised, these points will eventually be focused on.

How do exchanges grow? There are usually two ways to grow: one is an increase in trading volume, which will heavily depend on the industry, and we do not want this situation to continue. What other methods are there? Bitcoin often falls back 20%, 30%, and this phenomenon happens frequently, but now you will find that liquidity is gradually decreasing.

This is what happened in 2018. They wanted to go public, but due to the market crash or other influences, they had to stop releasing financial data. This allows them to gain more trading volume by issuing digital securities on the website, and that is when you see this industry about to take off.

With Coinbase's IPO, they are forced to regulate it, and this will change the game. You must have audited financials, and you must ensure that tokens are set up, which is relatively friendly to investors. Investors gain equity, and only then will everyone really see this industry take off. Although these actions are currently voluntary for institutions, I believe that within the next 6 to 12 months, this will become a necessity. I think this rule will make many people decide to leave the industry because real data will be fully disclosed. That is to say, perhaps within the first 10 minutes of talking to someone, you must know whether they are just talking nonsense. Not talking about growth or other matters, but that is not what we want in this industry; there are many businesses, small restaurants, cars, or anything else, and two stores are choking it; maybe I want to open 50 stores. How did they do it? When small business owners cannot go to investment banks or get loans from traditional banks, this will become a way to obtain funding. This is something people can invest in at the base level, and with Coinbase and regulation and everything, I think it will bring more security.

Although this is hard to say in our industry, you need to know that your assets are safe, you need to understand the financial situation, and you need to know insider information, which is why we voluntarily do many such things. Although this move is costly, we still firmly execute it.

Kyle: This is a significant advancement because we are setting this standard, and we will also serve as case providers. As you mentioned, if you have a great company and an attractive investment opportunity, there is nothing to hide, and no reason to feel discouraged by a temporary setback.

Frank: Even with MERJ, it is an exchange, not an alternative trading platform. The amount of information they need is so large that it is hard to believe; from an auditing perspective, over the past three or four years, they have looked at every bill, every invoice, every digit of all documents, and thanks to my team for doing a great job. We are a real business; we grow, we have financial data, we have the stamp of approval from audits, and all of this shows investors that these are reliable and trustworthy real numbers.

Kyle: From a fund perspective, we want to talk about Coinbase or the blockchain and cryptocurrency field. What are your views on Bitcoin? Are you bullish or bearish? Do you think it is about to be or has already been taken over by digital securities? Does it have a place in the market as a dying industry?

Frank: This is a valuable question. In my business field, you can never remain neutral. Personally, I am bullish on the entire market; it’s just that people may not have this awareness yet. You should know that in January, the price of Bitcoin was around $20,000, then it approached $60,000, and now it is still holding strong at around $55,000.

Do you know what the next catalyst for Bitcoin is? Right now, the U.S. Securities and Exchange Commission is trying to break regulations and launch other IPOs. IPOs in this field are frequent in the market, but what institutions really care about is to participate in it practically. Those who own Bitcoin know that there is a lot of leverage in this industry because almost every platform can utilize and achieve 10, 20, or even 30 times the effect.

This thing is great; even if you see it, it will bring some useless tokens, but these will eventually be corrected and will not continue to rise linearly. I have been doing this for a long time; if any asset has not experienced this, then everyone can enter the market with peace of mind.

Some fluctuations are normal; if it falls back, there is no need to be surprised. But I personally own both Bitcoin and Ethereum; I am a loyal believer in this industry. I have held digital currencies for a long time and will continue to hold them. However, I do not recommend you continue to buy at this time. If the price goes up, at least you own it, but if it goes down, you can buy more to lower your cost basis, but the price fluctuations undoubtedly indicate its instability.

I believe this trend exists in the long run. Crypto is here; it is disruptive and easily makes us overlook other things, such as the significance of DeFi promotion and the emergence of NFTs. Now digital securities are a significant development direction. NFTs have digital characteristics but can also represent collectibles. I wonder if everyone is still playing Pokemon games. In the game, you cannot get Pokemon at will; you need to exchange cards. My young daughter spent $10 to buy a card. This is like earlier baseball cards, which can soar to $150, and the value of paintings and other items will undoubtedly rise. Among the many collectors I know who own collectibles, one person owns a painting worth about $40 million. Now, he can sell part of it and digitize it. Every time he sends out 10 copies, he can earn copyright revenue. I believe the next trend in the digital economy industry is NFTs and digital businesses. At that time, everyone will be able to sell any product they want at will.

This sounds crazy; some are indeed good, but most are terrible. However, these digital collectibles are indeed, and this will not be a liquid market for collectibles. So we are now providing a liquid market for collectibles.

For the New Jersey Nets, Spencer Dinwiddie, who plays for the team, has already completed the digitization of his personal contract, which makes sense. This method ensures that the contract is marked, and Spencer can receive all the money in advance, which benefits all related parties, including his family. Because he pays a high interest rate for every pledge. I believe the entire industry is full of vitality and will achieve rapid development in the next year or two, at which point everyone will know what digital securities are.

Kyle: That's great; thank you so much for joining us. At the end of the program, could you share with our audience how to access information related to business progress, digital currencies, industry operations, etc.? This way, they can truly understand this industry and further invest or participate in some form.

Frank: Everyone can visit Curzioequityowners.com for all important information. If you want to buy our tokens on MERJ, please visit Curzioresearch.com. If you are interested in our newsletters, we will produce related videos for you to review. You are also welcome to follow us on Twitter.

Kyle: Thank you for your participation.

This concludes this episode of Security Token Insiders. Once again, thanks to STM partner RedBlock for their strong support. The interview series will also be translated into Chinese and shared with the audience in the Chinese-speaking community. The development of digital securities has a global trend, and we hope to unite capital markets from all over the world. Thanks again to industry pioneer Frank Curzio for participating. If you have any questions or want to express any opinions, feel free to leave a comment. You can also contact us through LinkedIn, Twitter, or other means.

Thank you for watching.