Morningstar Magazine - February/March 2018 - 60

Investors

Investors and Innovators
These entrepreneurs are making
the potential of blockchain technology
a reality.

Q&A

Lawrence Johnson

The blockchain space is flush with white papers,
proofs of concept, use cases, and technologies looking for problems to solve. At
a Morningstar Fintech Forum on Dec. 15,
we hosted representatives of two companies that
have built actual businesses around blockchain. Ashish Gadnis is founder and CEO of BanQu,
which enables people without access to the
traditional financial system to build an economic
identity and enter the global economy.
Vincent Molinari, CEO and chairman of Liquid
Markets Group, is co-founder of Templum,
which created a platform for the primary issuance
and secondary trading of tokenized asset
offerings-that is, initial coin offerings, or ICOs,
that are securitized. Templum links investors with
innovators such as BanQu.
Equity analyst Jim Sinegal, who follows
blockchain technology while covering banks and
the payments industry for Morningstar, led the
discussion. The participants' views are their own
and not necessarily those of the organizations
they represent. The conversation has been edited
for length and clarity.
Jim Sinegal: How about if each of you starts off with

to open an account for her. We got into
an argument, and the guy kept saying, "I can't
bank her, but I'll bank you." That's where the
name BanQu comes from.
It's the best elevator pitch I can give you
because it's about that mother in eastern Congo.
Even though she had land, she had a
harvest, she had three different microloans, and
she had lived through 50 years of conflict,
she didn't exist because there was no way for her
to prove those critical elements of her life.
That's when I realized the value of blockchain:
It is a ledger that can store her information
in an economic passport, if you will. That's what
BanQu does. We allow people who live in
extreme poverty to own, access, and monetize
their data, and that allows them to improve
their situations.
Vincent Molinari: Liquid Markets Group's
wholly owned subsidiary Liquid M Capital is an
alternative trading system, a quotation
bureau, and qualified matching service. Our
affiliate Templum is a fintech company
focused upon blockchain and smart contracts.
Templum Markets executes its securities
through Liquid M Capital, which is focused
on digital assets and distribution and secondary
trading of regulated token offerings-
to differentiate from ICOs.

an elevator pitch?

Ashish Gadnis: The best way to explain
BanQu is to go back to 2014, when I was
volunteering in eastern Congo. I was working with
women farmers, and one of the women had
made a little bit of money on a harvest and wanted
to open a bank account. The local bank refused

Morningstar February/March 2018

We operate at the intersection of the
modernization of securities law and innovative
technologies, to work with the regulators
and create holistic marketplaces that have investor
protections, anti-money-laundering provisions,
and suitability requirements.

Sinegal: Ashish, why are you using blockchain rather
than another type of technology?

Gadnis: The data of that mother in eastern
Congo sits in the silos of multiple organizations:
the NGOs, the microfinance institutions, the
anchor buyers, and so forth. If any of these actors
pull out, her data goes with them. That's
problem number one. Problem number two: If a
war breaks out or a conflict begins, and she shows
up in Rwanda, say, as a refugee, all her data
is reset. The 2.5 billion people who live in extreme
poverty and the 70 million refugees that I
represent here today are walking around with
a big reset button on their head because anytime
something happens, they lose their data.

Blockchain is a distributor ledger that allows
that mother to access, own, and monetize
her data. It allows all parties in a transaction to
have an equal copy of their transaction. If we use
blockchain in a trust ledger mechanism in a
permission network, that coffee grower in the
Congo can now rightfully access every transaction
she is involved in. They become part of her
identity, and she can build a history. I come from
30 years in traditional software and databases,
and they're one-sided: I capture your data, I
own your data, and I can do whatever I want with
the data. Whereas in the distributor ledger
model, that mother now has equal access to that
data in a way that's secured and portable.

Regulating Tokens
Sinegal: Turning to the securities side of the issue,
Vincent, can you give us an overview of the
difference between a standard ICO and a regulated
token offering?

Molinari: Most initial coin offerings are
being done in a manner that suggests they are
utility tokens. With utility tokens, there's
no accountability from the issuer to the
token holder, no share ownership, voting rights,
or profit participation. There's been
no regulatory framework, no governance, no
investor protection.

We take a different view. My partner Chris
Pallotta, who is the CEO of Templum,
and I had a lot of experience prior to the JOBS

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