Security Token Insight featuring David Gosselin of DBBMcKennon - YouTube

Adam Chapnick: The security token industry is here, and it's not too late for crypto

enthusiasts and investors of all types to get involved.

Amy Wan: Coming up on this episode of Security Token Insight, a look at the latest security

token investing news, highlights from the Security Token Academies Security Token Summit

in New York.

Adam Chapnick: Plus, we've got an expert interview with accountant, David Gosselin, and much

more on this episode of Security Token Insight.

Hey there everybody, I'm Adam Chapnick.

Amy Wan: And I'm Amy Wan.

Welcome to Security Token Insight, brought to you by Security Token Academy.

The security token industry is gaining momentum and will provide a key foundation for the

evolving financial Internet.

Adam Chapnick: The Security Token Academy will provide insights about this new era for

security token enthusiasts, investors, and issuers, and we thank you for coming along

on this exciting new journey.

Amy Wan: All right.

Coming up on today's episode of Security Token Insight, in your security token investing

news a historic announcement from the SEC Director of Corporate Finance, William Hinman.

We've got an expert interview with accountant, David Gosselin.

Hear his thoughts on the biggest hurdles facing the security token space.

Plus, highlights from the Security Token Summit in New York, and how you can involved in our

next event in New York, this Fall.

That and more is coming up on this episode of Security Token Insight.

Adam Chapnick: Okay.

Now it's time for your security token investing news.

In a historic announcement at the Yahoo Finance All Market Summit in San Francisco, Securities

and Exchange Commission Director of Corporate Finance, William Hinman, said, “They will

not classify Ethereum or Bitcoin as securities.”

Amy Wan: This comes just a couple weeks after SEC Chair, Jay Clayton, said cryptocurrencies

are not securities and that the definition of security Hinman's statement represents

the SECs official stance on Bitcoin and Ethereum.

It will be treated as a commodity and that the name isn't important, but the way it's

sold, promised, and behaves is the key deciding factor.

Adam Chapnick: AlphaPoint, a crypto services company that helps make illiquid assets liquid,

successfully raised 15 million dollars in their first major round of VC funding.

The Fintech Company announced that they raised the capital via Mike Novogratz's Galaxy Digital,

the self proclaimed cryptocurrency merchant bank.

These funds will help AlphaPoint continue to develop their regulated based asset token,

which the firm introduced last month to provide liquidity in the real estate market.

According to the company, it has developed a software that allows a token to be freely

traded while also insuring compliance with securities laws.

Amy Wan: The Security Token Academy is on the leading edge of the security token movement.

We've been to security token meetups and conferences from coast to coast.

Adam Chapnick: I had the pleasure of speaking with accountant, David Gosselin.

A partner of DBBMcKennon, at the Crypto Invest Summit in Los Angeles.

We covered everything from audits, to reviews and regulations in the security token industry.

Take a look.

So, accountants have suddenly assumed a very important role in this new tech wave that

we're in, right?

I think there's a lot of new consideration that people have to think about when they

get into this frenzy of investing.

What do you think have been some of the biggest hurdles that people are encountering that

are new for you?

David Gosselin: I think in the securities token space, the biggest things for all these

token ICO companies, whatever you want to call it, is they're going to have to start

going through regulation to do this legally.

And part of that is using a registration, or an exception for the tokens.

A lot of people have talked about regulation A+, regulation crowd funding, regulation D.

Some of those mechanisms require audits, reviews, accounting, and the process of doing that

is sometimes slow, sometimes difficult, and the companies that are built to break barriers,

to expand rapidly, are not always the best suited to take care of the historical accounting

so it can be audited when the time comes.

Adam Chapnick: Yeah, absolutely.

That's interesting because I had in my head that we were going to go in that ... All these

crazy investors jumping in, “I want to be in Bitcoin.

I want to be in Ethereum.”

All of these things.

And all of the challenges that have come.

You talk about the issuer.

That's interesting, because you talked about regulation crowd funding versus reg A+, for

example, they have different requirements that you have to have.

One is an audit, the other is a review.

David Gosselin: That's correct.

Adam Chapnick: What is the difference?

David Gosselin: A review is less than an audit.

A review is we look at the financial statements and we're doing inquiries and we're looking

at analytics.

Do things make sense?

Are they adhering to GAP?

We ask the founders, the controllers, “What's going on here?”

It's more inquiries, analytics.

We're hoping to get to the root of any big issue, and we're providing limited assurance

about what's going on in the financials.

An audit is more of a deep dive.

We're actually testing transactions, invoices, confirming with third parties to get more

assurance.

It's not absolute assurance, it's more assurance so an investor can rely on it more so than

they could on a review.

Adam Chapnick: Interesting.

What's the difference in expense that a company should ... Not what you charge, but as a-

David Gosselin: The golden question.

Adam Chapnick: Yeah.

As a rule of thumb that's been one of the hurdles in regulation crowd funding and reg

A+.

David Gosselin: Yeah.

Yeah.

It could vary widely.

Adam Chapnick: Yes, of course.

David Gosselin: I talk to people that I've been a couple thousand dollars for an audit,

7500 bucks for an audit.

Adam Chapnick: Wow.

David Gosselin: For a brand new company.

Adam Chapnick: Okay.

Right.

From there, yeah.

David Gosselin: Doesn't happen often.

Adam Chapnick: Okay.

David Gosselin: They shouldn't probably be doing a reg A+, but it happens.

Up to six figures.

Very easily.

I would say that if I had to peg it to something, I would say an audits going to cost you three

times the amount of a review, at least on the bigger side, and much more.

It's pay three times on the lower end, but as you get to be bigger companies, that variance

is going to be multiplied even more.

Four, five, six times, probably.

Adam Chapnick: We have two different offerings that have been happening.

There was the frenzy in 2017 of the ICOs, all kinds of craziness going on.

Some good, some not so good.

David Gosselin: Yeah.

Adam Chapnick: Are there perils that the companies from 2017 are going to be facing that they

maybe didn't take into account?

David Gosselin: Sure.

There's the obvious, there's the tax stuff.

And I hear all the time that some of the declines in Bitcoin and Ethereum and all that stuff

in April, because people are trying to get cash out of their position to pay their taxes,

right?

Adam Chapnick: Yes.

David Gosselin: I think for me, the biggest part is when companies go through this in

a regulated manner, which really is not any of the 2017 companies, it will be the '18

and '19 companies.

It's not the first year that you go through it that's going to be the issue.

I don't think most of these companies are going to be inherently difficult to audit,

so long as they have the proper controls in, the accounting's in place, they're normal

companies developing some type of technology.

The question is, and my position has always been, the hardest part is, you do this token

offering, it's approved, it's relied on an exemption, let's say a reg A+.

Then they take the security token and try to utilize it for goods and services.

There's no accounting mechanism that exists, software that can track a security and your

position when a transaction for what good and service.

We have to be able to audit it.

I think, personally, the failure of a lot of the companies going through the security

token, it's not going to be in '18, it's going to be in '19-'20 when they have to report

audits and financials for the first time.

Adam Chapnick: That is fascinating.

David Gosselin: I don't think they're going to be able to do it.

Adam Chapnick: That's so interesting.

If I'm hearing you right, does that imply that the most responsible, forward thinking

companies are going to separate out from token and keep it security only?

And if they need some sort of utility, like a second, that's a utility?

David Gosselin: No.

Some of my attorney friends have definitely suggested that.

Adam Chapnick: Really?

David Gosselin: My question always is, are you sure that utility is going to be a utility

and not also a security?

Adam Chapnick: Wow.

Right.

David Gosselin: That's the hardest part.

I think if you're doing it completely by the ... Compliantly and you want to continue to

be reporting and be auditable, you have to issue that security just like a shared common

stock or a preferred stock, or whatever you want to call it.

And you can't bring it back through your company for goods and services.

Because there's no mechanism to audit that, yet.

Adam Chapnick: The question, as an entrepreneur, putting on an entrepreneurs hat, let's put

it that way, is the issue that there needs to be a mechanism?

Or is the issue that there isn't one and there shouldn't be one?

David Gosselin: No.

I think there absolutely should be one.

For this space to really take off, you're going to need one of the exchanges.

Everybody talks, like tZero and- Adam Chapnick: Sure.

David Gosselin: That's one thing.

But you're also going to need service providers, wallet providers, whatever you want to call

it, to ensure that the transactions happen the right way, the same way, every time, that's

reportable.

And they're going to have to go through what the biggest companies in the world go through,

which is service organization control reports.

Auditors coming in, testing controls, when you get your fidelity account, you rely on

it because you know it works.

That's because the controls have been tested, and tested, and tested.

These service providers, technology providers, they're going to have to go through that same

thing so people like you and I can rely on their outputs some day.

Adam Chapnick: Amazing.

What about on the other side?

For the average Joe who got himself an account on Coinbase and then started day trading for

six months, and then got out.

But, he's flat.

Or he's down.

David Gosselin: The tax side of it?

Adam Chapnick: What happens there?

What are the concerns?

David Gosselin: The concerns are really tractability and accurate reporting.

People have come to us with an Excel file with 10000 transactions.

And it's like, “What do you want us to do with this?”

It's extremely difficult.

Even many, a whole lot less transactions could be difficult.

I know there are people, there's people at this conference that are working on the software

where you can basically input the data and it will tell you what your taxable gain is.

That needs to happen, because it's not happening like it should, quite yet.

Adam Chapnick: Is that all, just to get a little wonky, is that all based on the first

in, first out principle?

Meaning, whatever you bought first and whatever you sold first, does that count?

David Gosselin: There's different acceptable bases and the ways to calculate that.

Adam Chapnick: Mm-hmm…

David Gosselin: It's going to depend.

Adam Chapnick: To watch additional interviews, be sure to visit our website securitytokenacademy.com

and click on the interviews page.

There are new financial opportunities for investors in the security token industry,

the best part, you can be a part of it.

Take a look.

Recording: It was a new beginning.

That spread around the world.

It had fascinating and mysterious foundations.

But it was more than just a new payment mechanism, it was just the first wave.

The first wave of a new financial Internet.

Then a second wave appeared, a new way to raise money.

ICOs emerged and took off in 2017.

Billions were raised.

But regulators voiced concerns and took actions.

Now, the third wave is about to begin.

A new era, powered by security tokens.

New possibilities for investors, and issuers.

The third wave is motivated by two drivers, reducing regulatory risk and seeking financial

opportunities.

The third wave of a financial Internet can both power financial business, and securitize

and tokenize existing assets.

Although security tokens emerged in 2017, 2018 is the time for security tokens to be

traded.

But a new world of security token trading requires security trading organizations, and

that's why we are today.

You may not have been present at the birth of the first wave, when Bitcoin began.

You may not have been present at the dawn of the second wave, when ICOs started.

But you are present today, as we approach the third wave of the financial Internet.

The new era of security tokens.

The countdown clock is ticking, the launch sequence is starting.

It's pre-ignition stage, but it's going to happen.

Soon.

Amy Wan: The Security Token Academy just hosted the first every Security Token Summit in New

York City.

It was the first conference to focus on the emergence of security token trading organizations.

This groundbreaking, sought out event brought together the key players in the industry to

learn about the new directions in security token trading organizations.

Adam Chapnick: Yeah.

The day long event zeroed in on security token exchanges and trading organizations.

The best and brightest spoke at our summit and we captured it all on video.

There were keynote addresses from David Weild, the former Vice-President of NASDAQ, and Bruce

Fenton, CEO of Chainstone Labs.

Plus, panel discussions, interviews, and much more.

If you missed out on attending this sold out summit, don't worry.

You can still get an inside view to what the top experts had to say about the future of

the security token industry, and where security token exchanges and trading platforms are

going this year and beyond.

Amy Wan: You can purchase all of the videos from the event for just $99.00.

As bonus, you'll also receive a free one year membership to the Security Token Academy.

Adam Chapnick: Also, mark your calendars for our next event, in New York, this October.

You won't want to miss it as we launch the start of the security token industry.

You can learn more about the event on our website securitytokenacademy.com, and click

on the events page.

Amy Wan: All right.

That's it for today's episode.

Be sure to follow us on Medium, Telegram, Facebook, and Twitter.

And don't forget to subscribe to your YouTube page so you don't miss out on any of our videos

and expert interviews.

I'm Amy Wan.

Adam Chapnick: And I'm Adam Chapnick.

For everyone here at Security Token Academy, thanks so much for watching.