The New Frontier of Token Custody and Real Estate Transactions
Token custody provider Prime Trust has been busy this year– between partnering with Vertalo to improve the state of real estate transactions, to providing custody for the first Reg A+ token deal, and joining GHV for three major events. We sat down with Prime Trust’s CEO’s Scott Purcell and the SVP of Business Development, Jimmy Bingham, to speak with them about the company’s success and how Prime Trust’s past experience with fiat rails and security compliance has led to where it is now.
Token Custody for the First Token-Based Reg A+ Token Deal
Question: What was it like working on the first real Reg A+ token deal? How did your role as a token custody provider help in that process?
Purcell: Well, honestly, while it was absolutely exciting to see the first token Reg A in the industry and to be a part of it, to us it was simply another Reg A securities escrow. Being a token custody provider didn’t help at all, it was our experience with fiat rails, securities compliance, accounting and escrow that mattered. Prime Trust has, I believe, serviced approximately 50% of all successful Reg A’s. We provide escrow, transaction technology, compliance, funds processing, accounting and other services to scores of these, which I suppose it what made us perfect to handle the Blockstack offering as, from the regulatory and financial services side of things, it was business-as-usual.
Question: What is your unique spin on token custody? What is something that companies get wrong about custody solutions?
Purcell: Trust companies and clearing brokers have held custody of assets for generations. Non-securities tokens are just another asset class for us to hold and report on statement. Securities which are represented by tokens are little different than securities represented by paper certificates; we have to have appropriate processes in place to hold, protect and account for the securities. The most common thing that custodians get wrong about custody of digital assets is to charge for custodying them differently than they do other assets that they hold.
No custodian charges customers basis-points fees on the value of shares of Apple stock they hold. Or on the value of real estate held in an account. Or on the value of municipal bonds held in an account. Yet these custodians, often newly chartered trust companies created by people from technical backgrounds who have little to no experience in financial custody, are seen charging fees on exactly that when it comes to digital assets, which to me is absurd.
Partnership with Vertalo to Improve Real Estate Transactions
Question: Briefly describe what the partnership with Vertalo will do for your team. How will it extend your reach as you grow?
Bingham: The short version answer: I believe together we’re building a groundbreaking real estate investing platform that really has the potential to change the way people invest in real estate globally.
Now for the long answer: real estate transactions are still mainly conducted in the same manner as they have been for half a century; using outdated infrastructure, legacy technology, and multiple third-party intermediaries. The result of these inefficient practices are costly and complicated transactions that make real estate investing an expensive and lengthy process for both the investor and the issuer. Today’s issuers and Real Estate Investment Trusts (REITs) must deal with the complexity of asset and investor management, lengthy ownership transfers, regulatory investor compliance, expensive business operations, cash and dividend flow, and fraudulent transactions by bad actors.
With the formation of our strategic partnership, Prime Trust and Vertalo are able to jointly offer these REIT platforms a turnkey white-label solution for the real estate investment space, providing a tokenized real estate investment platform that’s easy to use, cost & time efficient, global reaching, and includes all the functionality needed for capital raising, asset governance, automated compliance, investor management, and custodial solutions.
There are many benefits arising out of the creation of this turnkey, white-label platform for both the issuer and investor. Probably the greatest of the benefits is the enabling by an investor to convert their analog certificates to tradable digital securities. Thus, allowing the investor a path to 24/7 asset liquidity via direct listing with partner exchanges and ATS platforms.
It is crucial to understand the opportunity that exists in the tokenization of real estate. This development can be compared to the evolution of instant messaging platforms over “snail mail”. Real estate companies, specifically those in the investment space, are becoming increasingly aware of this transition and are really beginning to embrace the benefits of this new technology across all sectors.
Problems that Token Custody Providers Solve
Question: What problems do Token custodians solve? How does Prime Trust differentiate itself?
Purcell: The same problems that custodians have always solved. We can better secure assets than people can do themselves directly. We can enable ease of secondary trading on exchanges and new ATS’. We can ensure settlement of transactions such that all parties recieve what they have bought/sold and the consideration for it. We can provide a single statement showing all assets. We can handle tax reporting. We can hold assets in a variety of account types, from simple custody to IRA’s to college savings to asset protection trusts. We can provide a wide range of fiat rails. We can perform – and take accountability for – AML and KYC compliance. And so much more.
Prime Trust differentiates itself by offering all these services to the digital community, and doing so via API’s and advanced technology that no other custodian can match.
More information about Prime Trust can be found on the company’s website.