AMA With Bob Reid — April 2024
Q: Everest has been tokenizing for years; Everest has identity sorted; Everest has licensing and connections.
What is the proverbial, ‘flip the switch’ moment for Everest? Is there still more to be done on the dev side? What links the present to then?
Bob: The basics for tokenization are working today. So, let’s look at product/tech/compliance requirements, and the associated use-cases to tokenize…
- Fiat & Treasury Bills
- Crypto
- Financial Instruments
- Physical Assets, Real Estate, Cash Flow
Tokenizing Fiat requires you to custody money in a bank, mint & represent the money as a token, and put in the compliance flows just like you are a bank or payment/electronic money provider. Since you’re mirroring money in a token, you need an MSB license in the US, and similar in EU (plus you need either a VFA or EMT license in Europe). The way Everest is currently architected and licensed, we will allow users to BUY EUR.c or MXN.c, and separately convert those “vouchers” into crypto or something else in our ecosystem. So, we are not a payment processor (which would, for example convert EUR to USD); Everest’s flow of funds is more like selling gift cards, which are redeemable for various services and items in the Everest ecosystem. This helps us be more cost-effective in the fiat-on/off ramps.
Tokenizing Crypto. Yeah, it sounds weird, but it’s actually what is happening — and it’s important. The easy one to envision is wrapping BTC on EverChain, so in effect we are offering swapping services to Uniswap (yep, even swapping on Ethereum mainnet), but without gas fees for the txn; since we’re centralized, we obviously need our crypto custodial license. The more interesting use cases of late are a bridge and a utility token. Bridges (where centralized management controls the smart contracts that burn-n-mint are rapidly becoming subject to custodial requirements) require effectively tokenizing or management of those crypto assets on various chains. Also, we have our first utility token that was originally minted on Ethereum, and we are wrapping/mirroring that on to EverChain. So, akin to the $ID token, there will be balances on both chains, and users will be able to choose if they want to purchase and swap for $12 gas fees on Ethereum, or for FREE on EverChain.
Tokenizing Physical Assets rides on most of the same infrastructure as the above. The first token, backed by over $250M in physical assets, is being minted on Ethereum mainnet, and we’re looking at pulling a bunch of those tokens back to EverChain. So, everything is “built”, but requires customizations, new contract + audit, and some legal & custodial modifications (i.e. taking $250M in what is effectively collateral/TVL).
Tokenizing Financial Instruments rides on the same platform, and we have regulatory approval, but the customizations regarding API calls, passing of KYC data, account registration, regulatory logic, and sign-offs are significant. To give you a sense, even though we are able to show swapping of ETH to AAPL today, the sign-off process by broker/dealers takes months.
Flipping the switch? Tokenizing Fiat for payments (we’re quoting two deals that are over $5M/month each). That should do the trick. Tokenizing Crypto (more bridges and more tokens are coming to us), so this use case will probably be driven by regulations, and MiCA 2.0 should flip that switch. Tokenized Financial Instruments…..swapping to/from stocks is very attractive, and we have distribution partners signed up; that should flip the switch. And you can imagine that since MiCA and MiFID have so much overlap, Everest is looking into attaining our own broker/dealer license, which would allow us to move beyond swapping to actually issuing shares on-chain. One would think that would flip a switch as well. Tokenizing Physical Assets…..look for a $20M token sale this summer in which we facilitate custody, tokenize and exchange. You’d think that would flip the switch. BTW, we’ve got a few of these deals in the pipeline, so it’s pretty easy to envision more of these flipping the switch all the way to Valhalla.
Q: The newsletter teased the idea of RWA stock dividends & holder voting rights. Is this something we could see coming through Everest?
Bob: Yes, dividends and rights are something you can see coming via Everest. For those who don’t know, lots of tokenization projects don’t pass through dividends and rights because they are essentially minting a “derivative”, whereas Everest is not taking that approach.
Q: Can we get an updated forecast from Bob on how he sees MiCA enforcement playing out into 2025?
Bob: I see MiCA enforcement already starting. Take a look at the delisting of a few stablecoins from various exchanges…..which means there was likely a call or a nod to the exchange from a regulator that said “hmmm, do you think XYZ will be compliant with EMT requirements on July 1, 2024?” And the exchange, not willing to risk a fine or loss of license, started to remove these coins.
I believe you’ll see a bunch of national regulators offer “provisional” passes to big players until they can catch up with implementing regulations, and associated audits, approvals and the such. For example, BaFin might not be ready by July (TBH IDK), but I don’t envision them turning off CommerzBank; I do highly doubt unprepared regulators issue new licenses to smaller newcomers until they are up to speed. Also, keep in mind that places like Poland had previously issued “crypto custodial” licenses, but the requirements to get those were nowhere near the level of MiCA standards…..so all those custodians are scrambling to develop everything required; and many of the national regulators are playing catch up to publish the regs, hire the staff to audit, verify, put new laws in place, etc. Again, I’m feeling very good about Malta.
MiCA 2.0 + Transfer of Funds Regulation (TFR) is coming quicker than you think, and I expect that to be enforced on DEXes in 2025; possibly earlier. And since the SEC recently gave the Wells notice to Uniswap, I think you’ll see other DEXes start the process of becoming compliant. Come to papa Everest!
Q: In your Shark Tank pitch, you mentioned that you have been approached with a buyout for selling the company. If that were to happen, would all ID holders be bought out as part of a sale?
Bob: Everest is a licensed, centralized corporation with management. The $ID tokens are held and administered by THE Foundation, a separate entity that is effectively run like a DAO. Everest has a relationship with THE Foundation to accept $ID tokens for services. So, hypothetically speaking, a large player like Elon, Uber, Plaid, Bolt, a broker/dealer, or bank could acquire Everest……and the $ID token functionality would continue, albeit with a likely HUGE spike in transaction volume and amount.
Q: Who will be able to purchase the tokenized RWA assets? Will it only be via Everest Exchange? Or will they be available to anyone who has integrated the Everest widget?
Bob: Anyone with the widget should be able to access RWAs; there may be a few different widget configurations (i.e. no KYC, swapping-only for a partner, or fiat-purchasing with KYC from Everest). That said, we will not offer tokenized financial instruments/stocks to the US this year, as that would likely require a nationwide ATS license; and even if we could ride on a partner’s license, it is prudent to wait until after the election. We are also talking to a few other CEXes and DEXes that are interested in selling tokenized RWAs of physical assets.
Q: Dear Bob, a question about the tokenization functionality with transaction fees and burns. Are the tokens being purchased before burned, and if so what is the exact mechanism behind that?
Bob: If I understand the question correctly…..tokenization of anything usually requires a level of customization and API access, and we price that into a deal (i.e. they’ll buy 100k $ID tokens from the open market, or from the development fund). In the case of buying from the development fund, they can’t sell those $ID tokens on the open market, as it provides them access, and if they want to stop access, then the tokens are returned back to the development fund. When transactions occur, like selling of an RWA token, then the transaction costs XX amount of $ID tokens, some of which is burned per the formula.
Q: Can you explain more about the $250M in custody and $20M tokenized? What is the difference between the two? Can you give us a timeline of when this will happen?
Bob: We are taking $250M in assets into custody, and we are tokenizing the initial $20M. There are some very sound reasons on a legal and tokenomics level to do it this way, and I’ll go into those details this summer when the first of these tokens is launched.
Q: When can we expect to see the multi billion dollar mining conglomerate’s activity on EverChain?
Bob: This summer. ☀️
Q: What happens to the project if Bob unfortunately dies or becomes disabled? Contingency plans, key man insurance, etc.
Bob: I’m not as key as you’d think. Probably akin to Vitalik being more of the face of EF these days. The Everest platform is humming along, and at some point I may even want to take a vacation and let Fink drive for a bit :). Yes, we have contingency plans.
Q: Bob states in an article that “we recently signed a partnership to custody and tokenize a utility token”. Sure there is an NDA right now but can Bob share what area/market this “utility token” is used in?
Bob: Yes, this particular utility token is used to power AI applications.
Q: Has Everest done anything to be a part of a community at large in order for its tech to be embraced/leveraged/used in a wider scale/in mass adoptions?
Bob: Yes, and to give you an example, the amount of time and conversations with Chainlink are significant. We all like each other. For example, Everest could use Chainlink for price feeds, NFT pricing, CCIP, etc., but it’s much easier, cheaper, faster if we do it internally. Similarly, Chainlink could use Everest to make $LINK a payment vehicle for fiat-on/off ramps and likely double their revenue, but they are currently focussed elsewhere. We’ll see in the future. Similarly, we recently worked with Coin98 (millions of users) to start promoting a few things.
Q: We saw ID tokens being sent out of original wallets. Can you elaborate why?
Bob: Generally, not Everest specific, I’ve seen selling pressure when coming out of a bear market, especially when early purchasers & others are unlocked after years of holding, and simultaneously revenues start increasing quickly. This is usually driven by multiple forces:
(1) Early purchasers may be six years into holding and be unsophisticated in their trading ability,
(2) Projects may have deferred costs quite a bit, and have balloon payments come due
(3) And going into a bull market with increasing revenues, it’s pretty easy to imagine projects that need additional fiat for the regulatory requirements of additional reserves (higher revenue = higher reserves), and/or to start the process of acquiring additional licenses.
The smartest strategy I’ve heard of (again, not specific to Everest) to prevent these forces and disparate players with various motivations from creating sell pressure is to take as much of that potential volume, and place it with a market maker so that it can be elegantly, and not disruptively sold into the market. I’m told that if this is astutely coordinated, this is the optimal strategy to minimize impact and save communities.
Q: Bob mentioned in the Shark Tank episode that they want to get a few more licenses. Could he elaborate what licenses exactly and what the rationale is in getting those?
Bob: EMI = custody of fiat, and MiFID = broker/dealer of financial instruments. Custody of money, stocks and crypto allows more seamless transactions, new revenue opportunities and increases assets under management. It’s worth noting that before MiCA, we couldn’t hold an EMI license and a VFA license in the same entity; with passage of MiCA, we are now able to hold those in the same entity…..with those two alone, Everest will be able to provide services like Custodia in Wyoming, but we’ll be able to offer to roughly 500M users and 32M businesses in the EU.
Q: Any chance he could elaborate where we are at when it comes to using tokenized stocks as collateral for additional loans? Could he tell us more on what we can expect in terms of first released functionalities?
Bob: We are starting with simple swapping to/from crypto. Lending based on collateralized stocks is a bit further out, but we received the regulatory approval required to offer those services.
Q: Any plans on tokenizing ETFs? Is this even possible? If so could I as a customer transfer my entire stock portfolio to Everest?
Bob: We’re quite possibly going to tokenize ETFs.
Q: Would love to hear more what exactly the partnership with Onex entails? Will it just be promoting current widgets and white labeling the products to Latin American banks?
Bob: Onex is not only selling and promoting products in LatAm, they also are integrating the widget themselves and helping us get fiat rails in the region.
Q: We know he loves fish tacos. But what music is Bob into?
Bob: Silence. Not kidding.
Q: What has been the coolest response from a new potential client been so far?
Bob: “Whoa, you custody, tokenize AND exchange? You’re like Web4, not Web3.”
Q: Multiple partnerships are using Everest, we had the fair drop, the charity announced today, the mining company upcoming.. beta wallet and retail have been rightfully shelved for b2b stuff, which is clearly going well.
When will nodes go live publically? Shouldn’t VNOs be going live publically?
What is needed to go to market still? Because it certainly seems as though Everest already went to market and the network is up and running… we just can’t run VNOs yet.
Bob: Running of nodes took a back burner during the bear market, as we had to focus on revenue-generating services. This will change as we progress and increase in size.
Q: What do you currently see as the major hurdles Everest and the industry has to overcome to onboard large accounts and make them tokenize a significant amount of their assets?
Bob: Regulation has been the hurdle to-date for the industry at-large, along with what is allowed on permissionless vs permissioned chains (i.e. quite a bit that can’t be put on permissionless chains).
Everest solved both problems for most assets, and is developing more this year specifically for financial instruments.
Q: What are the most appealing benefits (speed, cost savings, gaining liquidity faster) of tokenizing illiquid assets for your clients? In which industry do you see the most traction? Is there a specific region that has been more open than others (i.e. Europe where there might be more clearer regulation in place)?
Bob: Gaining liquidity faster is the biggest driver for adoption. We’re seeing the most traction in physical assets, and financial instruments (funds, stocks as collateral).
Q: What can the small man be excited about when it comes to Everest’s future releases (tokenizing his next real estate purchase, having an Everest IBAN, sending actual money flawlessly to other countries)?
Bob: 1) Tokenizing physical assets is top of the heap.
2) We’re seeing IBANs for b2b clients as well.
Q: Can you elaborate a bit more on the role Everest took in tokenizing the minerals for the mining client? Did you consult on legal aspects etc. as well or was it purely to provide the technical platform? What do you think made the client choose Everest over other competitors out there?
Bob: We advised on the full, end-to-end solution for the asset holder, including custody, tokenization on Ethereum and other chains, listing on the Everest Exchange, and other aspects. They found that everyone else in the industry did either custody, or tokenization, or monetization, and the prospect of managing and integrating 3–4 separate entities is daunting. Also, we are well-versed in the utility token field, so were able to add value in design too. 🗻
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