Interviewer: And we're coming to you live from Definition at Token 2049 in Singapore, and of course this is the event where institutions and builders in tokenized credit, yield, and stablecoins meet, and it is powered by Accountable, the verification layer bringing institutional finance on chain. Joining me now is Eustace Pangonis, Chief Legal and Structuring Officer at Alcum. Eustace, it's a pleasure meeting you.
Eustace Pangonis: Likewise. Thank you for having me.
Interviewer: Of course, and let's start with this because some of the viewers watching us right now could be new to Alcum. So what does the company do?
Eustace Pangonis: So we are a bridge between structured products that are linked to the trade finance and the liquidity providers such as investors and professional capital allocators which gain an exposure to the trade cycles that are formed by the underlying businesses that carry that need capital for doing business. And this is what we do. We issue structured products for investors to access.
Interviewer: Right, and let's talk more about you because your role covers both legal and structuring, and what does that involve actually day to day?
Eustace Pangonis: So bridging also a gap between the business side of things and also the legal side of things, having, let's say, both feet on two sides, bringing the gap of what is required legally and what is the capital and what the market really, really needs. And to make the structuring offering make it attractive, it is a hard job to do when you have necessary regulatory limitations, and this is my, my, my job.
Interviewer: And how do legal agreements and smart contracts actually work together in an on-chain credit deal?
Eustace Pangonis: So in essence, the relationship between an on-chain and off-chain is bridged by the issuer. So issuer issues a product that is, that is defined very, very clearly off-chain, that the rules of the game are made clear to the user, to the investor. And the built-in logic, some of the built-in logic in the, of the deal is then replicated and moved on chain. So if we, for example, one of which is net asset, the value of the, of the product, how the product is valued, how often the product's mark-to-market value is updated, what are the redemption mechanisms, what are the allocation mechanisms. So parts of the product, key parts of the product are structured in the on-chain like that. The rest is purely legal relationship and is managed between the two parties, which is in our case is us as the issuer and also the investor.
Interviewer: In a short while you have a panel here at Definition where you will be talking about scaling private credit on chain. From a legal point of view, what needs to become standard in your opinion?
Eustace Pangonis: Uh, from the legal point of view, um, that it all comes down to private, with private credit, it all comes down to the origination. Where does the private, the underlying business, where is it situated? The relationship between them and the issuer and the investor, that's where the rules come into play and legislation is tackling it very, very well. We have a lot of trade. This is a trade finance relationship. Trade finance products are already in existence for many, many, many years, especially what we do for, at Alcum, but in terms of managing when things go wrong, that's where the legal part comes into play of how to enforce the investors' rights, how to liquidate the underlying assets in order to make the investor whole. So from the legal standpoint of view, harmonization. Also efficiency, local market efficiencies in the commodities world in which we live in, for example, and at Alcum where we focused are, for example, jurisdictions such as in Central East Asia. They do not have necessarily really, really clear, they do maybe have clear rules, but how they are enforced is a completely different matter and that's the job of the issuer to underwrite those risks and to make it very, very clear for the investor what, what is the risk profile of such a product and then so that the investor can make an informed decision.
Interviewer: So I just asked you about what needs to be standard. Let me ask you about this. Where does every deal need its own tailoring in your opinion?
Eustace Pangonis: Every single deal needs tailoring as the world of finance, the world of trade is complex. It's not, it really depends on the relationship that they built between the, the underlying relationships that are being built between the underlying businesses that whether they are in trade, whether they are in investments, whether they are in financing, all of that has to be tailored, looked at, and analyzed and for companies like us and others to underwrite those risks to communicate very clearly to the investor what are they. So my answer to this is every single deal, every single deal.
Interviewer: OK, so you just mentioned some places that still need modification, let's say, needs support in order to have this business running better, but which jurisdictions in your opinion are actually making it easiest to build this kind of business?
Eustace Pangonis: I would say it's Europe, in Switzerland, in, we have pretty solid frameworks. It is although true that it all comes down to part of it is regulation and another part is the regulators themselves. Some, in some jurisdictions, such as for example in, they really want to hear and understand what the market participants want. And the same is also with Switzerland. Maybe with the EU and such as EU jurisdiction, it's maybe a little bit harder. Their attitude is not as much market focused and listening very, very closely to what the market participants want and then adapting to those wishes very, very quickly, whereas some other jurisdictions do.
Interviewer: And when an institutional investor is looking at an on-chain credit structure, what do you think makes them the most comfortable?
Eustace Pangonis: I think it's a combination of a few things. Number one is the jurisdiction of the issuer, how issuer controls, what controls does the issuer have, where is the underlying business, and how is the private credit risk underwritten? What is the model behind it? How do you treat different parts of the private credit? Those are paramount for any discussion to be taken anywhere further for the investment to be made.
Interviewer: OK, let's end this with Alcum. What's next for Alcum over the coming year?
Eustace Pangonis: So we are working on actually modeling, on the modeling of how to underwrite private credit in commodity, commodity markets and commodity, primary commodity, not paper commodity, primary mining recycling markets in jurisdictions such as Central East Asia in order to bring those businesses and their, it's on chain for, for you and all the world to be able to access and, uh, and yeah, and be the bridge between the, between the two.
Interviewer: All right, and we wish you the best, best of luck with that and it's been a great pleasure talking to you today.
Eustace Pangonis: Likewise, thank you very much. Appreciate it. Pleasure.
