Today Tanya of unbound is speaking with J. Bradley Hall - founder, chairman & ceo of ICON CAPITAL RESERVE SA. GOLD BACKED DIGITAL CURRENCY
Tanya: Hi Brad it is great to reconnect with you after seeing you when spoke at the Citizenship Summit event in St Kitts.
Brad: My Pleasure Tanya, I know both John (Gainor ICON-COO) and I really enjoyed St Kitts and Nevis.
Tanya: I recall from your presentation you were talking about digital currencies and gold, topics that are important to our readers, so let’s start there. What is all the fuss about Bitcoin?
Brad: Tanya that is great place to start. Bitcoinis certainly the most well known of about 500 digital currencies that have been recently launched. Admittedly most of these are a bit of a joke (pun intended) but Bitcoin is being taken seriously as there are now about US$5 billion of the tokens circulating.
Tanya: Brad, so Bitcoins are tokens that circulate on the web. Is that correct?
Brad: Well sort of. Bitcoins are actually a catch all that refer to the tokens but also the protocol or block-chain that the tokens are registered on. Now stick with me here. The block-chain acts like a distributed ledger system or a global financial database where you can digitally make ledger entries and the tokens represent those ledger entries and can be exchanged between parties in a transaction.
Tanya: And these tokens have traded for as much as US$1100 right?
Brad: That’s correct and now they have dropped about 70% year over year, so they are currently trading at US$325.
Tanya: Ouch. That must sting. So let’s say I had my tokens last year and they have gone off a proverbial cliff. What can I exchange them for?
Brad: I’m glad you asked that. Perhaps you can find someone who will give you US$325 for them. Or you can exchange them for an asset that someone wants to sell.
Tanya: So the coins themselves have no real or what do they call it? Intrinsic value?
Brad: Correct. We can talk about the difference between price and value all day.
Tanya: But what about those guys, I think they call one of them Bitcoin Jesus, who claim that Bitcoins are going to a million dollars?
Brad: (laughing) Ah yes, you’re referring to Roger Ver. And I actually bumped into him in the Islands after the conference. He is a bright guy and has been involved since early on and I would place him in the category of those who think there is more upside than downside with the tokens.
Tanya: That seems a little crazy to me.
Brad: We agree on that point. In fact the federal reserve was quoted as describing BTC tokensas “an electronic token without reference to any underlying commodity or sovereign currency, and is not a liability on any balance sheet. Owning bitcoins amounts to nothing more than having the ability to move these bitcoins in the Bitcoin ecosystem. As such, a bitcoin has no intrinsic value.” We at ICON agree and see the tokens as a claim check with nothing to claim.
Tanya: So what will happen to all these tokens if they crash?
Brad: Well I suppose that is why there are two sides to every trade. Those going long and those going short. Keep in mind the tokens themselves have proved that the blockchain works but they have no intrinsic value. I’ll dip into my book of metaphors for a moment. Imagine that the block chain is a giant virtual safety deposit box. The keys to the box are the tokens and in the case of Bitcoin tokens the box is empty.
Tanya: Presumably you can put something in that box though?
Brad: Exactly! And that is where this gets interesting. What we at ICON do is take those tokens and redefine them. We turn them into DIGITAL BEARER BONDS ™ (DBB’s) and use applied mathematics to create a description of what the bonds can be redeemed for. For example we have created DBB’s called AUREALS™ that are defined as a 1 gram weight and measure of gold. Now you have tokens that have universal value and we actually vault gold in free zones around the world that you can exchange the AUREALS™ for.
Tanya: This sounds like modern day alchemy.
Brad: (laughing) In a sense it is. We can takeany set of cash flows or real assets and create a description for them using applied mathematics. Again using math and encryption we register these assets in the block chain and then issue digital tokens we call DIGITAL BEARER BONDS™ that are like your keys to that virtual safety deposit box I described earlier. Once you have registered the assets and have the keys, you can trade them securely and discretely anywhere in the world, in seconds.
Tanya: So If someone in Russia or China for example wants to transfer funds from their country, they can use your DIGITAL BEARER BONDS™ called AUREALS™?
Brad: Exactly! We utilize the most cutting edge cryptography to create a secure and discrete way to exchange value and we marry it to gold, the worlds most trusted store of value.
Tanya: I just had a light bulb go off. AUREALS™ could actually be an alternative to SWIFT?
Brad: A quicker and much more cost effective alternative I might add.
Tanya: So why would anyone use the bitcoin tokens when you appear to offer all the function and utility of the tokens and the added value of gold?
Brad: The short answer is they wouldn’t and in fact we are offering existing bitcoin token owners the ability to seamlessly convert to AUREALS™, which with fungibility with gold, offer a real store of value.
Tanya: Very cool. What else can I use AUREALS™ for?
Brad: Well we are working with a group in Switzerland to convert every financial instrument currently traded into an algorithm that we can register on the block chain and trade. Think about that for a second.
Tanya: Ok now I’m having visions of JP Morgan and Goldman Sachs. Are there use cases for AUREALS™ for our readers interested in Second Passports?
Brad: Yes there certainly are and this is a dialogue we have just opened with a number of Caribbean government officials. You may agree we have 3 key constituents in the world you operate in.
First, are your customers, who can purchase AUREALS™ using RMb, Roubles, USD$ or any currency they use in their home country. So let’s say they purchase US$400k of AUREALS™ in Shanghai using RMb. This is now secure and discrete and can be transmitted anywhere in the world in seconds. The holder has been issued two encrypted keys to the AUREALS™ (US$400k worth) sitting in the virtual safety deposit box. The same amount of gold is sitting in a non bank vault in the free zone in Shanghai, Singapore or Hong Kong.
Second are the developers who are marketing the passport-approved projects. A buyer can deliver one of the two keys to the developer who can verify (again in seconds) that the AUREALS™ (US$400k worth) have been registered in the block chain or distributed ledger system. Once registered they are what is referred to as atomic and that means no charge backs. Third are the governments who process the applications. We could even register the applications, id, police checks, everything in the block chain which is encrypted and can only be viewed by the holder of the keys which could be sent to the government in seconds.When the applicant is approved, they send the2nd key to the developer who now controls the AUREALS™. They can be used to pay suppliers, buy land, distribute dividends or converted to gold or USD$ or EC (or any other currency) on the island.
Tanya: It sounds like you remove the friction in a process that can get complicated.
Brad: Indeed we do. Seamless exchange of value, securely and discretely.
Tanya: The gold also offers insurance if things get choppy in the world economy as many expect.
Brad: Indeed. Gold is unique as a store of value. Holding gold and AUREALS™ is fatca compliant which is increasingly important and of course, think about the implications for local governments to accept AUREALS™ in their donation programs. Gold is a tier 1 reserve asset. Think of local island governments issuing AUREAL™ denominated bonds. The gold fungibility would probably drop yields from 15 or 16% to 4 or 5%. But I digress.
Tanya: I really had no idea how powerful the implications of AUREALS™ are. Will you come back and speak with us again in our next issue?
Brad: It is my absolute pleasure. We at ICON are changing the way that people can think about creating, trading and storing value and hopefully this was a thought provoking introduction into some of the possibilities.
Tanya: It was. Thanks again Brad!
J. BRADLEY HALL is the architect behind the launch of a number of successful companies and enjoys a reputation as a focused, energetic entrepreneur with 28 years of finance, M&A, operational, gold trading and fund management experience. Brad is a thought leader who has deployed disruptive new business models that challenge out dated and often vulnerable incumbents across cultures and geographies including: the Americas, Brasil, Western/ Eastern Europe, the CIS and Asia.
Brad’s extensive experience includes various successful start ups and hedge funds with investments in digital currency and physical gold trading, as well as pre-IPO software fund and a pioneering automated software factory. He is currently the Founder, Chairman and
CEO of ICON Capital, which is launching a new digital currency based upon physical gold assets. Brad graduated from Seneca College in Toronto where he focused on International Business, Finance and Economics.