Cryptovest Exclusive: Q&A With Craig Mc Gregor, Co-Founder & CEO of DSTOQ
We got in touch with Craig Mc Gregor, co-founder and CEO of security token exchange operator DSTOQ, to discuss the future of the security token space and DSTOQ’s role in this emerging industry.
In the first week of October, we reported on the partnership between DSTOQ and æternity, a startup that offers unique tools to track real-world assets. We discovered that DSTOQ is providing a licensed security token exchange platform and is helping companies tokenize their assets. Cryptovest was interested to know more about this potentially major player in the security token industry, and Craig Mc Gregor didn’t hesitate to respond to all of our questions.
Mc Gregor co-founded DSTOQ together with Christian Nagel and Christian Peters. Previously, he was an investment manager at Oasis Group Holdings - a South African financial services company, and equity research analyst at Bloomberg.
In the Q&A below, you’ll discover why Mc Gregor and his team picked Vanuatu as the headquarters for the company, what are the benefits of security token offerings (STOs) over initial public offerings (IPOs), and how DSTOQ plans to handle the competition. Take your time and read our interview:
CV: Hi Craig! Do you think security tokens are the next trend in the financial markets?
CRAIG: I believe that security tokens are the natural evolution of not only financial markets but also the cryptocurrency market. Security tokens are an extension of an existing asset class that offers a variety of features and holds intrinsic value, whereas utility tokens can only be used within the ecosystem of the specific project it is associated with. Both types of tokens have their use cases, but it is becoming increasingly clear that demand is increasing for security tokens as a new financial instrument.
Security tokens are also strongly regulated, and we believe that operating within a sensible legal framework will help increase the mass-adoption of cryptocurrencies and blockchain technology for real-world usage.
CV: There is mentioned a stock exchange license from Vanuatu (for DSTOQ) - does it somehow specify the involvement of tokenized assets?
CRAIG: Yes, it is unique in that regard. We obtained a stock exchange license to allow and enable us to do three main things: accept cryptocurrencies for our exchange, tokenize securities, and conduct IPOs directly on-chain. The latter is effectively an STO.
CV: Why did you pick Vanuatu over let's say, Malta; is its legislation blockchain-friendly?
CRAIG: Vanuatu is very blockchain and innovation-friendly and sees the potential of this incredible technology. Over the last few years, we did an extensive analysis on different jurisdictions around the world and found that Vanuatu had the right mix of factors for our business, such as: no existing stock exchange, a need to improve access to capital in order to promote economic growth in the region, and the three special conditions for our stock exchange license that I mentioned earlier.
CV: Is DSTOQ more than just an exchange?
CRAIG: Good question actually – there are two main elements to DSTOQ: firstly we are a regulated stock exchange with a peer-to-peer trading platform, and secondly we also tokenize securities to be traded on our platform. What that means is that we have an end-to-end solution for the security token market. We tokenize traditional securities such as government-backed bonds, stocks, gold, oil, and more, and make them available to investors worldwide on our platform. We can also help companies raise money via STOs through both the creation of their security tokens and a platform for them to be traded.
CV: Will it help companies also issue security tokens and manage them?
CRAIG: The DSTOQ trading platform will launch at the end of this year with tokenized traditional securities. Following this release, we will focus on facilitating STOs. We understand that startups and companies all over the world, and especially in emerging markets, do not have access to capital markets for fundraising. Even in countries with incredibly high GDP growth rates, such as Ethiopia, companies struggle to raise money through traditional means due to a lack of financial infrastructure. One of our goals is to empower underserved segments and other promising projects on our platform, through the issuance of STOs.
CV: What are the advantages of your STOs over traditional IPOs?
CRAIG: Traditional IPOs require the existence of a stock exchange framework on which to go public in the first place. However, companies in many regions around the world do not have access to a stock exchange. Using the DSTOQ platform, companies can issue tokenized assets like equity, which can be bought by investors around the world. As a result, companies obtain unprecedented access to investment from around the world.
Nevertheless, there are still advantages of doing an STO on the DSTOQ platform for startups and companies in places where stock exchanges do exist. Firstly, it is incredibly difficult to go public on traditional stock exchanges. Not only do traditional IPOs take a long time – typically somewhere between one and three years – but listing requirements of traditional stock exchanges are very unfavorable towards young companies. Investment banks and legal counsel have to be hired, and registration statements have to be filed, reviewed, and approved. Also, a company typically needs to showcase a track record of significant revenue. These factors combined means it often only makes sense to list once a company is around five years old.
On DSTOQ, we aim to cut that number in half and at a significantly lower cost to companies.
CV: Does the security token space fix the issues and risks of initial coin offerings, given that most of the ICO firms have failed within several months. Should investors feel safe about security tokens?
CRAIG: I believe the ICO frenzy over the last year has come to an end, and both investors and projects are realizing that they need to justify what they raise and use it actually deliver on their products and promises. The rise of security tokens will fix many of the issues and risks posed by ICOs firstly because security tokens, much like traditional securities, are linked to real value and not purely utility.
In addition, the lack of regulation by lawmakers who did not quite understand the nascent utility token markets also increased risks, whereas regulators are very eager to work with the blockchain projects developing security tokens, which ultimately provides investors with more certainty and lower risks.
CV: How does DSTOQ plan to say ahead of the competition?
CRAIG: DSTOQ is one of the world’s first fully government-regulated platforms. Issuing real world assets in a tokenized form through blockchain is permitted by law. This is a huge edge for us, as we’re determined to launch to the market and provide security token services ahead of our competitors – many of which don’t have a license and don’t comprehend what it takes to develop a global platform for security token trading.
I believe we will stay ahead of our competition due to our understanding of the global landscape and our unique usage of blockchain to comply with the laws. In my opinion, many of our competitors will end up with localized businesses and restricted user bases that will limit both their liquidity and their growth potential. The same is not true for us.
Many existing exchanges are making big, and I see it, false claims about their potential. In the end, we’re going to differentiate ourselves through our product and our actions, not our claims.
We thank Craig Mc Gregor for his time and hope that the security token market will take a better path compared to many ICOs. We’re confident that DSTOQ, along with other market players, will contribute to the healthy development of this emerging industry.