Episode 7 – Nicole Anderson

Emerging Tech Talks interviews Nicole Anderson, managing partner and CEO of Redsand. Redsand Lab is a venture building practice that helps design, build and run token based business models. 

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Good morning everyone and welcome to another Emerging Tech Talks with me, Donavan Whyte. Today I have the pleasure of sharing the mike with Nicole Anderson managing partner and CEO of Redsand. Good morning Nicole and thanks for sharing the mike.

NA: Hi Donavan, good morning, great to be here.

M4: Now just as a very quick intro from me: Redsand Lab is a venture building practice helping design, build and run token based business models. But I wonder for our audience, Nicole, if you could just put a bit more flavour round that. Tell them what you do and how you help companies.

NA: So Redsand actually has two parts to it – absolutely right, our labs business has been building ventures holistically for the last 8 years across a number of areas in financial technology innovation. But moreover for the last 18 months we’ve focussed almost entirely on helping enterprise mandates – large, mid-size companies – rethink their future using blockchain and tokenisation. Anyone who is anyone knows that blockchain – when deployed with bravery and enthusiasm -gives you license to change the game. So it generally calls for a very different way of thinking about your business processes, how you design your technology roadmap and the people you hire. So we form satellite businesses to test this new concept for companies. So that’s our lab activity. And because of our passion in the space and actually because we had a team of geeks who have traded crypto for equally long we have found ourselves drawn into the world of crypto assets, building portfolios and trading actively and that has allowed us to shape a crypto desk. We perform active trading for clients, institutional clients only, helping them get exposure to crypto assets.

M4: So the business has evolved and is still evolving really…

NA: Every day is a lesson in this space, absolutely, and that’s what makes it so exciting.

M4: So what’s your passion, tell us what drives you and what makes you get out of bed in the morning.

NA: So, I think the Redsand environment and world is testament to what drives me, I love to push the boundaries and look at new things. I sat down with my wealth manager actually (which is quite an irony in itself) the other day and he tested my risk profile, which he does every five years or so and over the years, specifically as I’ve been involved with Redsand, my own risk appetite has gone way up! I tested a 5/6 so, you know, I’m actually one measure away from being in a casino, I guess, in terms of risk appetite. So, I love the world of risk, trial and error and hence innovation. And London is an amazing centre for that because there’s so much opportunity to deploy freethinking and look at the future so that is really what drives me.

M4: Absolutely, it sounds like you’re totally immersed in this – which you need to be. I’m not sure of your risk appetite at 6 though for being in the crypto game…

NA: 5 out of 6!

M4: Oh 5 out of 6 is very different. That’s much better, I was a bit concerned then. So, listen, how does an institution decide if it’s the right time to get on board? How does an institution that’s obviously concerned about mitigated risk, concerned about shareholder and stakeholder value – how do they make that decision and say yes this is something that we need to do and should be doing?

NA: Well, when we’re talking about blockchain, when we’re talking about crypto, there is definitely a differentiation here – so experimenting with business models in blockchain of course is something that’s on the go. I don’t know an organisation or institution that isn’t doing something. We could argue, and I could certainly argue the case for what I’ve seen as market-ready applications, ventures and propositions using blockchain. Those have been slow to come by but nevertheless the momentum is growing there. If we take in the crypto opportunity and the investment potential that institutions should consider when investing in crypto assets – well that’s a completely different game and we demarcate our audiences and our stakeholders quite significantly between the two.

So what does an investment management function consider when they look at crypto? Well, first of all, the first thing we say is you have to understand this new asset class, it is fundamentally completely different to any other traditional asset class of the past. The mechanisms for return, the deep understanding required of the technology and the fact that this is essentially an asset that has its own terminology, its own reference structures and its own valuation potential – mean that they are having to get their knowledge way up. So there is a big knowledge curve to attack… so once they understand the landscape, then what we’ve found most effective is then helping them get into the market by simple, very small test trades, and testing small exposure to crypto assets so that they can understand certain pairings of crypto, they can understand the volatility potential and very often this is exactly the right way to expose some of the more progressive clients to the asset class. There was a time, 18 months ago where the throwaway comment on the airwaves was – if you’re getting into crypto you put aside what you’re prepared to lose. We’ve moved away from that I believe, you know, our findings, in terms of the activity we’ve been involved in and the return value that we have returned back to clients is generally, if you’re bullish, we would say 6%

M4:.. and 1 or 2% (if you’re not).. I’ve been watching your videos…

NA: Oh, brilliant. Yes so that is generally the kind of portfolio exposure we would expect to deliver to our clients, so we’re quite confident in exposing them to that. But, you know, there are all other kinds of restrictions that institutions need to think about. The knowledge is the first thing, then they need to consider, how do they protect their clients and educate their clients. Where in the value chain do they sit, are they going to get exposure to crypto assets and train actively themselves? Are they going to rely on a desk, you know, an external desk to fulfil them – and then there’s all kinds of things they need to consider there. And then the last thing they need to consider is of course regulation. The regulatory landscape across the world is highly diverse and this gives them both opportunity and threat. You know, many institutions are considering regulatory arbitrage depending on where they set up their fund structure or portfolio exposure. So, armed with that I think most institutions are ready to go to the next level.

M4: So it sounds very much like a test and learn at this stage – and engaging organisations like yours to support them from an expertise perspective as well. I think that an asset class like this and technologies like this are constantly changing and every single day there’s new innovation. What stage do you think we are at – are we at the innovation stage or the early-adopter stage? Where are we with this asset class and technologies?

NA: I think we’re at the early adopter stage – so there is now, I feel, given that we do this all day long – we’ve moved beyond the push-back and deep scepticism, there’s general recognition that crypto assets are here to stay and that has been amplified by some of the more progressive regulators around the world, the fact that the FSB is now working alongside the G20 finance ministers to understand how those regulators and central banks get their heads round virtual assets including crypto assets is a big thing and of course the world still looks at the FCC and whilst the FCC has fundamentally taken a stance of basing their approach to crypto and their guidance to crypto on Bitcoin which they classify as a cryptocurrency not as a security – they are beginning to think about how regulated entities in the US get exposure to crypto assets through the likes of financial instruments like ETFs. So when these bodies and associations and central authorities begin to actually publish guidelines – by the way there’s an amazing 300 page global crypto regulatory whitepaper that came out yesterday by the FSB – you know the world is moving and so I think we are very much at the early adopter phase.

M4: Yes and I think it’s worth noting that not only government and institutions that are taking positive steps forward, the likes of JP, dare I mention, City Bank, Fidelity and Northern Creek are all doing exciting things as well and all taking positive steps forward as well.

NA: Indeed they are and all in very different ways, covering exposure, covering big considerations of custody, looking at the spectrum of risk profile and how they develop instruments to cater for various appetites in risk for crypto assets. So it’s fascinating to see how diverse the approach and the adoption of building portfolios and cryptos are.

M4: Absolutely. Now I know that Redsand work with many customers and clients in this space – I just wondered if you could share with us a use case where there has been an adoption of the business model and it showcases digital assets or crypto technologies?

NA: Sure, so funnily enough our best showcase is a client (I’m not able to share too much detail of course) but it is a client that is not a financial services organisation – they’re actually a company that have been a pioneer in sustainable real-estate development. They are Scandinavian based, they have built their business based on the best of the best in terms of delivering quality in sustainable environmentally sensitive buildings but also their entire commitment to quality has been paramount… now, you know and I know that investing in anything green has been pretty low return for most investors and property is probably the most expensive asset class to enter and the slowest to get your return on.  So, we’ve been working with them to transform the investor experience in return by tokenising all their properties so, number 1, giving investors a lot more flexibility in how they assign portions of their investment allocation so you actually make portfolios much more liquid so investors are able to reassign their funds across a portfolio even before these properties are completed, but also the transparency of seeing what goes into these buildings what goes into the supply chain, how things are being delivered, will they be on time – is of immense value to investors

M4: Ethical investment…

NA: Ethical investment, absolutely. Now the fantastic thing about this ecosystem is that we built an entire – the whole platform strategy, the tokenised platform strategy will mean that every project they build or deliver will be listed by themselves and open to investors but they could also equally use this tokenised funding platform for third party developers. So, that’s blockchain tokenisation use case: very strong, very powerful and it’s accelerating tremendously for them and that’s great news. But of course what they’ve also been mindful of is readying the merge between fiat and crypto. So they are looking at ways in which they can get crypto investors involved in digital securities and vice versa. So they are using this platform as a convergence between pure crypto assets and tokenised securities.

And by the way this is coming, I mean, we’ve seen Julius Beyer in Switzerland, I think one of the first to develop a unique portfolio for high net worth individuals combining crypto and tokenised securities, which is deeply encouraging. And then of course, when you start looking at some of the major exchanges, looking at the experimentation of tokenised digital securities, I think we’ll start seeing some of the major cryptos being featured on formal exchanges and we’ll see some of the other way round, we’ll start seeing some tokenised securities – not some, I think it will probably move even faster the other way – being listed on crypto exchanges. We could talk about crypto exchanges all day long but look there are more than we could possibly even begin to debate and plot on this very large boardroom table and there’ll be massive consolidation they just cannot be sustained – they don’t have the volumes and they don’t have the liquidity, but bringing on a pool of tokenised securities into what they list will add huge weight and viability for many exchanges. So this is definitely a strategy for them as well. So, anyway, that’s the world we’ve been involved in.

M4: Yes, fantastic use case, I think property is one of the assets that will be first to be materialised and to be taken on board by the consumer. So, the last twelve months in this space has been exciting to say the least – what’s your biggest learning over the last 12 months?

NA: Oh, gosh… there are many. I think the biggest learning is that this is probably one of the great levellers in finance meets technology. Yes we’ve had ‘revolution’ for the last 7 years but actually if we look at the success of innovation in market there’s been millions if not billions spent on innovating in finance over the last 7 years but what I find fascinating and what has been the biggest leveller and learning for me is actually: this is a completely new (to quote the terrible phrase) paradigm. And it is literally the levelling of the greatest financiers and brains in finance meets the greatest brains and capability in technology and it’s very humbling to be right in the intersection of it and I think what we do is try to bring these two very disparate worlds together so I think there’s very little room for arrogance the biggest learning is the continued learning and either side of the fence those that think they can apply old-world thinking or just reinvent or rehash what they’ve done before are doomed to failure. I think collaboration is key and of course the role of regulation learning alongside where this market is going because it’s not stopping. It’s unstoppable. So that would be my biggest take-out for the last 12 months.

M4: It’s been a leveller for a lot of institutions and a lot of individuals, absolutely.  Now, I know you travel all over the world speaking on this very subject and I just wondered if you could share with us in your opinion on what is the most progressive region with regards to this space.

NA: I’d have to say Asia. I haven’t directly been in Asia for a few months but the sentiment, my close friends and colleagues in the industry have, and whilst we are fixated by some of the economic and political orders of the day in Europe – we are deflected by some of the frustrating macro considerations – Asia doesn’t have that. The appetite is insatiable for learning and adopting this new technology and finance opportunity – so I definitely see that. We see flows, we see demand by mandates coming from Asia more than any other. There are two reasons for that, I believe, first of all there’s a positive openness and pioneering, progressive mindset that this is definitely something that we’re in a long run of future wealth-creation opportunities – that’s the one side. The other side is that of course there are some very big restrictions in certain countries and territories in Asia which are banning exposure to crypto and unfortunately people are finding ways around it through intermediaries, through brokers. So, we see both but I would definitely say that Asia is one. And then. It’s not big of course but it is symbolic – you are seeing this awakening in these quite small jurisdictions with very big voices looking at crypto and the new crypto economy as ways for which they can create economic development opportunities. And I think that’s brilliant, absolutely brilliant.

M4: Yes and again it goes back to the point that you mentioned about being a leveller.

NA: Yeah, exactly.

M4: So I mean just some stats around that as well – I was surprised to learn that the UK only has 1% of the total global trading of crypto on a daily basis. 1% which is about 200 million. Which says that we’re not really significant players in this so, moving on from that do you think that blockchain technology, digital assets and all of that ecosystem – do you think that should be added to the education curriculum for the UK and Europe?

NA: Oh that’s a brilliant question. I mean if you look at just user adoption – I don’t know if you’ve got children, I’ve only got stepchildren – but if I look at my team, you know, we’ve got huge diversity in our team age, gender, you name it and if I look at just the natural affinity to adoption of crypto in my own team amongst people of 25 and below it’s just completely natural for them to transact, for them to wealth create.  They take it very, very seriously. So that’s one thing. Then if you look at more formative economies in the world and you look at what crypto presents in terms of rails and in the ability to move money safely, securely, transparently… I spend a lot of time in Africa – massive market – and the demographics speak for themselves, young people are using and adopting crypto – we are being pulled into all kinds of projects and thought-leadership for how Africa adopts crypto. So, do I think so, absolutely, we’ve already debated you and I,  the viability of crypto, the fact that 2019 by many is touted as being the year for major adoption for crypto – institutional market is moving into it – it is not going away and therefore it is validated.

M4: Absolutely, and I agree with you wholeheartedly, I think if the UK, particularly I speak from the UK perspective, does not want to get left behind in the future years, this should be something on the government agenda, in education.

Thank you very much, Nicole, it’s been an absolute pleasure. Where are you going to be speaking next if anyone wants to come and see you?

NA: Yes, I’m going to be in Estonia in May, which will be fun, and in London in London Tech Week – so look out for me then.

This has been another mad4digital Emerging Tech Talk and we look forward to catching up with you soon. Many more exciting new talks coming up including Quantum Computing and the future of tech for education.