Signals Through the Noise: Ownership versus Reality

[00:00:04] This is the Crypto Hipster Podcast. This is not a traditional interview show. These are perspective-driven conversations with founders, builders, and independent creators shaping what comes next.

[00:00:26] We go beyond headlines, beyond hype, and beyond price to explore ownership, freedom, and opportunity in the digital economy. Where builders talk freedom, not price.

[00:00:48] Most tokenization projects talk about access. This one is making a much stronger claim that when the token moves, legal ownership moves with it. But that only works if the legal system, the registry, and the financial system all stay aligned.

[00:01:09] So today's conversation is not what the future might be. It is just a test of whether that actually holds right now. So when the token moves, legal ownership moves, so I want to say it clean. Token transfer equals legal transfer?

[00:01:29] Yes. The critical step that has been developed, and this is part of the maturation of the tokenized industry, is that the entire legal infrastructure and regulatory framework has to sit in the runtime of the blockchain in order for legal ownership to move at the speed of data, which it currently doesn't do.

[00:01:54] The data moves at the speed of the data moves at the speed of data, but the real-world asset almost sits in perpetuity somewhere else. When wrapping an SPV, the legal recourse ends with the SPV. It doesn't end with the final underlying asset. Got it. So is that always, is it always true that legal transfer equals token transfer, or is it only under certain conditions?

[00:02:26] Well, in terms of the conditions that are required, it's very, very deterministic around the type of chain that you're using when tokenizing. So right now there are two or three chains that are fairly prominent. Public chains we are all fairly familiar with. Private chains and private permission chains. The public chain obviously is a consensus-driven technology that has no legal recourse whatsoever to any underlying asset.

[00:02:54] It stays very much in the decentralized space. Permission chains and private chains operate differently. They give a different level of compliance, but they're still specifically not tied to the underlying asset. And any kind of compliance is a bolt-on that occurs on top of pretty much a public chain.

[00:03:15] The third type of chain is a regulator first, a regulator native chain, which is something that we have developed at DropRWA, which it has from first principles built in regulation, legal framework, legal determination, and legal framework, which allows for any changes in the underlying real world assets to be reflected without the immutability of the chain being broken.

[00:03:43] And these are applications that allow for that legal title to move with the token in a way that hasn't been done before. So what you're saying is what has to be true behind the scenes for that to hold is that your state rectification framework has to work. And how does that work? It's different than what we've ever seen before in the blockchain industry.

[00:04:09] I think the primary is let's take an example of the Saudi real estate is a great example where the regulator is the owner and operator of the chain and is the source of truth. So the tokenized deed that sits on the chain that's operated run by the regulator is the anchor for any subsequent token that is issued on that chain.

[00:04:34] And that's the critical component is that as an authority or a node that is effectively determining the source of truth and the deterministic finality of a transaction, it can always and must always go back to those truth nodes, which would be the regulator, would be the courts of justice.

[00:04:57] It would be any compliance layer that was already embedded in the runtime before any asset gets onto the chain or into the market. And these are very novel ways of looking at blockchain technology and its efficacy in the real world. Got it. So the legal title is actually recorded on the blockchain or is it recorded in the court or somewhere else?

[00:05:24] It's both. It's recorded on the blockchain as a tokenized deed in the real estate example at the regulator and the registry. So it's it's that's the foundational step that is very different from the current sort of tokenization platform provision that's out there. If you think of it in another way, it's going bottom up rather than top down.

[00:05:47] Top down is that there are tokenization platforms out there that can create a tokenized wrapper for almost any asset. But it isn't actually anchored into that asset in the jurisdiction and the legal jurisdiction that that asset sits.

[00:06:04] The lack of having this basically caused the issues that we're aware of globally where real estate developers basically have created the wrappers that Chris was just talking about. They've sold their properties and their tokens under certain conditions that are not approved by the regulator in the country where the asset resides.

[00:06:30] And this posed a conflict. This is why institutional investors basically kind of jumped into the pool and then back off a little bit because of the conflicts they ran into. So now the Saudi example was a world's first in terms of embedding the eligibility regulations in the chain itself.

[00:06:54] So any token that gets generated basically it is generated with the conditions and the compliances that you can take this token into any market. It will always enforce the compliance terms that will make the regulator in the country where the asset is approved of the transaction no matter where this transaction happened on any platform, whether it's a crypto platform or digital asset platform.

[00:07:22] That's what creates the difference and brings the confidence of the financial institutions in this market under this mechanism. And the compliance rules are they are they stored on the blockchain or are they still in the courts? Yes, actually both. It's the compliance and legal regulations that sit in the court is replicated inside each runtime of each block.

[00:07:53] As Faisal said that it's almost the the example our colleague go ups uses is the bouncer and the nightclub. You know, it's it's you won't let you in unless you have all of the credentials. And so that the asset cannot get to market unless it also complies with all of the requirements of the of the of the jurisdiction.

[00:08:19] To say everything complies of this jurisdiction. So you you you you you tokenize the ownership for the legal transfer. Everything goes the way you planned and it works just fine. And ownership is on chain. Say Lazarus Group comes along and Lazarus Group hacks the token on the blockchain, which has a legal title for a house ownership.

[00:08:47] Does Lazarus Group now own your house? Yeah, it's a great question.

[00:08:54] So, no, it does not, because ultimately that the hack would be identified and the replicable or the parallel, let's call it digital paperwork that sit at the registry in the kingdom in the country where the asset resides would not match the ownership record where at to the point at which the hack occurred. So, so it would be a mismatch essentially.

[00:09:23] And if we're talking about drop chain, Jamil, we've created this chain since we've been interacting with sovereign companies basically that needed full control and full security on their chain. And such a hack won't happen. I mean, as of today, we're already post quantum secure. And the way the chain operates is very different than any other open chain or open slash private chain.

[00:09:53] It's you can't as a community. You can't control the chain to fork it or dictate how it behaves. The regulator or the owner of that chain basically have total full control on how the chain behaves. Great question, though. I love the idea of thinking about someone breaking into a wallet and stealing your house from from a million miles away. But yeah, it's just not possible. I just want to know, like if the blockchain and the registry disagree, who, who, which one wins?

[00:10:23] Yes, that's so in technology code is law in in drop RWA law is law. Got it. So what's the need for your blockchain? Because it's faster, cheaper, simpler, gives full transparency. It allows for a buyer and a seller to see every component of the actual token in real time.

[00:10:47] So you don't have to worry, for example, is is the legal structure for this token Sharia law or is it common law? Is it civil law? What is the legal framework of the asset that I'm buying? This is all very visible. So there are these the level of transparency for this is really important because it generates liquidity because it gives buyers and sellers ultimate comfort and transparency.

[00:11:20] So as far as jurisdictions that recognize this, I know you mentioned Sharia law and I wasn't going to ask about that, but that always conflicts with regular law. So when you say law is law, you know, law is code, which one of those two, you know, where do you where you have a conflict? Which how does that play out? Yeah, it's a great question. I'll take that.

[00:11:40] So basically the law that you want to prevail is where the law of the asset or where the asset resides. That's the law you want to understand and you want to respect the the value of the chain is it creates an opportunity for complex assets, not simple assets only,

[00:12:07] but also complex assets to be liquid and to be traded on any other platform, not just the secondary market within Saudi Arabia. I want to take it to other secondary markets around the world. And that's the value of the chain. It extends the tradability of these complex assets, whether it's real estate or minerals or oil or energy or any form of real world asset.

[00:12:32] So today what jurisdictions recognize your blockchain and your record system? We respect the the the the jurisdiction that the asset is in no matter where that is. I mean, we work with assets in Europe as well as North Africa, as well as Saudi Arabia, several states in the US.

[00:12:56] Yes. And any any any jurisdiction in which the the legal infrastructure supports the tokenization of assets is recognized or is able to recognize our infrastructure. So I was going to ask you about permission if it's permission by geography or is it by you saying it's all it's global? Yes. Yeah.

[00:13:19] Yeah. OK. So, you know, I want to talk about the banking and settlement layer because that plays in here, too. Right. So none of this it all sounds good, but none of this works without the banking system. Right. So where do you sit in in that stack?

[00:13:39] The great question. So the the the the the banking partners are super important because they are the you know, effectively the either the issuer or the or the distributor of the asset. And they play an important role. So in terms of the the way in which the company has built a roster of investment banks, both bracket banks, financial services institutions.

[00:14:04] It's critical. That's the reason that the technology creates in institutionally investable assets without that technology. The the the the the the RWA tokenized RWA world runs into trouble, as Faisal said earlier. There there are compliance requirements in major financial institutions that really prevent a lot of the of the of the of the buy side from buying tokenized assets right now, tokenized real world assets.

[00:14:33] And so the banks coming in and approving our infrastructure and saying, OK, we understand that this is the most compliant way to bring this asset to the market. That is why they're partnering with us to co-issue or to to buy or to distribute. So I understand what happens when the token transfers on on on the chain. Right. So you're paralleling the real world here.

[00:15:03] So in the token when the token moves on that, when the token moves on a blockchain, it's it's easy to see. It's simple to see. But the fiat process is injured in so many countries. You know, when when the token ownership moves and you're saying illegal transfer moves, how does that how does that work in the track fireworks? That's be recorded there, too. So there are different settlement options. One is the normal bank transfer.

[00:15:29] So the transaction actually does not commit until that is satisfied. So the bank transaction basically is recorded in there in the blockchain, in the settlement layer. Therefore, only then the ownership transfers. And this is because of the current state we're in in Saudi Arabia.

[00:15:53] We in in the option where we have a stable coin, then the asset transfer would be able to move as fast as the data moves. So the settlement layer would be instantaneous basically because of the money transfer instantaneously together with the transaction. And this is true for any other jurisdiction, whatever you have a stable coin option.

[00:16:20] Then, you know, that just reflects immediately on the transfer of the deed of the token. If you're using any of the banking channels or the other payment options, basically the payment has to be satisfied before the transaction is committed. So I know there are some banks around the world that still, you know, we wish would recognize blockchain activity and blockchain technology.

[00:16:49] Right. But quite often they're not. Right. So when the token, you know, what happens if a bank doesn't recognize the transfer on the rails? What happens if they don't recognize the blockchain transfer? What? There's a disconnect. When you mean the bank doesn't recognize the transfer, you mean the transaction have failed for some reason? Yes.

[00:17:15] So basically the transaction doesn't commit. The token does not transfer until that is satisfied. So my, my bigger concern here is can a bank freeze the economic reality after when the token says it's moved on the chain, can a bank say, okay, we disagree with that.

[00:17:36] And there'd be a, there'd be a disconnect between, you know, who says what the bank says, owns the, the transfer owns the property versus what the blockchain says. And what do you do about it? I mean, look, this, the, the, normally the sender, the, the, the, the, the bank sending the money basically does not object to the transfer.

[00:17:57] And if they do object to the transfer, it's immediate. It's normally the receiving end that objects because of either KYC or any other, uh, issues, basically. Um, uh, uh, in this case, then, you know, you can either choose a different road, uh, route to, uh, um, uh, deliver your payment or basically resolve the issue over there.

[00:18:20] But unless that is satisfied, that token is not transferred. It is in transition basically to be transferred, but it does not lock that transaction until the payment is satisfied. Okay. So you found an ASIS where, where your, the banking system, the fiat system has disagreed with your blockchain system and what have you done about it? We haven't, we haven't seen this case yet to be honest.

[00:18:47] No, the booking and custody is usually fairly straightforward, uh, in, in, in the, in the same way that it is in, in the fiat world. Uh, you know, we were working with banks that are, you know, very capable of custodying, booking and settling these transactions. There's more than a hundred thousand transaction that has happened so far in Saudi Arabia. And, um, none of that, uh, the payment basically was an issue, but you know, mind that all of them are local.

[00:19:15] So you were talking about transfers, uh, in local banks or among local banks. Uh, but the same could be applied to international banks. I mean, these days, uh, there's no much difference between a local bank and an international bank. Except in the time delay, it might be, uh, it might take two to three working days sometimes in, uh, international banks. But, but, but I, I, I think it, you make a good point.

[00:19:38] I think this is where, um, one of the, one of the key technological advances that we've made in, in this forward state rectification, um, uh, capability really differentiates from the current market. Because there is, there is this capability to understand that in the real world, there are failed trades in the real world. There is a dispute, uh, resolution mechanisms.

[00:20:01] And in the real world, there are, uh, effectively judgments that might say, uh, this, this, this was actually wrong and needs to be reversed. Um, when, when you're dealing with almost any other, um, chain capability that's out there, the ability to rectify that without breaking the mutability of, of the chain and, and forking it and, and effectively making a, uh, making redundant all of the previous transactions, um, doesn't exist.

[00:20:29] And, and so that's why when we built this chain, it was, it was for this exact sort of real world, um, solution in mind, because we don't live in a perfect world in, in the current trad fi banking system. There are failed trades every day, um, that end up in a dispute in the courts and so on. So the, the, the, the, the most important thing I think to take away from that is that unlike any other service, the reason that, um, the financial institutions are very keen to work with us is because of that capability.

[00:21:01] So give me an instance where there has been, there, there, there, there, there's just, you say, you've spent millions of failures in the banking system. I agree. The banking system is not efficient at all, but had, there has to be some kind of conflict, right? Where you have, have you encountered a conflict where there has been disagreement and how have you settled that? No, as, as, as Faisal said, we, we haven't actually come into this situation yet and, and it's, it's perfectly possible that we will.

[00:21:28] And when we will, those legal recourses will take their jurisdictional path, meaning that in the real world, in the real legal recourse, um, everything is, is, is immutably data driven. We can, we can, we can have effectively support, um, that real world legal challenge or that real world legal recourse with the information that's on the chain. So can the tokens be, can your token, can, can say there, say there was a problem.

[00:21:56] Can the tokens on your blockchain be frozen or reversed in such a case? Yes. And that's the distinction, the major distinction between drop chain and any other chain out there. It moves the way the jurisdiction, uh, jurisdiction law wants the case to move.

[00:22:15] It reflects that it's not, um, uh, you know, it's not limiting, um, in, in, in, in such a way that the court has to take consideration of the limitations of technology. Okay. So your chain isn't fully 100% permission less it's programmable permission. It's, it's owned and operated by, by the, by the, the source of truth.

[00:22:44] So whatever, whoever that owner and operator is, it operates under its own permissions. So the source of truth is not the blockchain. It's a legal jurisdiction. Correct. Correct. And this is the only way that you can gain, um, confidence in the transactions that are happening on this infrastructure.

[00:23:08] And I'm especially talking about, uh, uh, financial institution confidence, because in no way any financial institution wants to invest its money in a resource that, uh, might, uh, run into, uh, you know, a conflict that they can't resolve. Got it. So since you haven't faced the situation yet, I like to do it here. You see, so you can trust that.

[00:23:30] And, um, so I say, say the, say the token moves, the registry updates, but the bank flags it or freezes it. Right. Do I still own it, but can't access it? Or can someone else hold the token, but it be blocked from the financial financially from the asset? How does that work for me? Look, that that's a, that's a great question.

[00:23:54] And I think it, it takes, uh, us into an area where as technologists and as the technology infrastructure provider, we're capable of supporting whatever that, that real world pathway looks like, um, from a technology perspective.

[00:24:10] So what we're saying is right now, um, if a court judgment comes in to say that you're wrong and the, the other side of your argument is right, then whatever that court order says, the technology and specifically the blockchain is capable of, of, of, of, uh, reattesting and, and effectively rectifying, uh, that, uh, without breaking immutability.

[00:24:36] And so, uh, Columbia will have a different legal recourse pathway than, uh, Wyoming, which will have a different legal, uh, pathway than Dominican Republic. So, I, I, um, you know, in terms of our capability to support that legal pathway, that's, that's the innovation that we've delivered. How that looks on a jurisdictional basis is, is, um, not something that we have, you know, the capability to sort of answer on a, on a case by case basis.

[00:25:10] So is ownership real if settlement can be stopped? Is ownership real if settlement can be stopped? Is ownership real? Um, great question. I think it's deterministic in terms of if the payment has been made, then you own it. Yeah.

[00:25:30] If that then is disputed and the real world legal process kicks in, then the real world process has to end before the determination of your legal ownership or not, which would be the same as if I bought a plot of land in the U S and the lot lines were incorrect. And I said that my neighbor has five feet of my land. Uh, do I own that five feet whilst we're going through the court process?

[00:25:57] Uh, the reality is it, it stays kind of locked until, until that process plays out. Uh, and again, I don't want to take us into a legal opinion here with technologists, not lawyers. Um, but, but ultimately what we, what we have delivered and what we've delivered, I believe to the satisfaction of institutional investors and sovereign issuers and governments and ministries is the technological capabilities. for the future to take us into the legal way of getting involved. Because if you feel for us, let me, you know, first of all, I'd have a, you know, my, the ability to do so. To support it.

[00:26:25] Uh, to add more to that, Jameel, also, uh, there are. two major conditions that needs to be satisfied before the ownership is transferred. One is eligibility. No matter where you are, basically, you just want to make sure that under the jurisdiction where the asset is residing, you are eligible to own this.

[00:26:49] Second is payment. Once these two conditions happen, there's nothing that stops the ownership transfer. Not the bank, nothing, simply. So it sounds to me like your blockchain will expand and you will take on more users and more owners around the world. So I'm wondering if your system gets stronger with scale or

[00:27:16] becomes fragmented or more fragile? Interesting question. So as it is the case in blockchain, basically, the more value you have on blockchain, the stronger the blockchain actually grows. And if the blockchain is prepared

[00:27:45] to scale and interoperate, there's no reason why it shouldn't grow stronger. We are not a standalone system. We do integrate with other blockchains in the space. We do integrate with other traditional financial systems in the space. You know, there is a need for this kind of financial infrastructure to support and bring

[00:28:08] in new assets and new investment into the blockchain world and vice versa. The blockchain world really needs to support and evolve the TradFi world because there are hugely illiquid, complex assets sitting on balance sheets around the world that both governments and large institutions would love to make liquid and be able to move them around the system, you know, more frictionlessly,

[00:28:34] cheaper, simpler, and with more transparency. And so as we evolve, I believe that there's a commonality around the usage. So you're looking to scale and interoperate and that is someday. But right now, are you prepared, say something, say we had a massive explosion in the industry and you needed, you know, to scale and

[00:29:00] interoperate? Are you prepared right now, today to do that? The the there's two ways to scale. One is in geography. Two is in value and types of assets that we're taken on. Currently, we're focused on infrastructure, minerals, energy and real estate. Therefore, the values because of the nature of transaction, especially when it comes to minerals

[00:29:28] such as gold or energy, such as oil or electricity, basically the values that are massive. So we're scaling already in terms of value. The second part basically is expanding in geography. We do have a jurisdiction onboarding process, basically, that is completely agile and quick when it comes to

[00:29:52] operating in a new jurisdiction. If it doesn't, then we have certain structures that can work in that region. If it does, then we have other structures, more variety of structures, basically that it can operate. We have them ready. So sounds to me that you are in a position where you can scale.

[00:30:15] So blockchain must transform TradFi because TradFi has been, at least, you know, where I am, has been relatively predatory. To say the predatoryness increases by 100x and incentives, you know, turn totally against compliance, you know, and you're reliant upon compliance. What happens to you?

[00:30:46] And that's an interesting hypothetical. So the industry would be effectively turning us back on 30 years of more compliance and going into a non-compliant world. I think that there is a reality around trust in any financial system. And I think throughout history, not just the last 30 years, the highest trust mechanism

[00:31:12] wins. And so when you're thinking about, you know, TradFi evolving into this market, there will continue to be a range of, let's call them, you know, credit rated assets out there that have an underlying system that will either be very trusted, somewhat trusted or, you know, the Wild West. I'm old enough to remember when,

[00:31:40] you know, hedge funds came into the TradFi market many years ago in those first five years or so, every hedge fund that popped up also disappeared really quickly because they lacked the compliant infrastructure that they now have. And so as we look at, and this is where I see it, because on a daily basis, I'm speaking with regulators and banks and, you know, sovereign issuers, I see that they,

[00:32:07] what the market's asking for is the institutional rigor of TradFi, but in the digital capability of blockchain. And the combination of those two things are what we deliver to the market, which is, you know, in your hypothetical, it would make no sense for us to be the most, you know, compliant way

[00:32:31] to deliver these assets. And that's not where the market's going. The market is going the other way. So, the challenges between the global compliance layer, Sklansky, and what you've built on your blockchain, how do you address, how have you addressed them in your technology build?

[00:33:02] It's fundamental to the build. It's ultimately the trust stack was built with compliance and, you know, institutional rigor in mind. And that's why when we have stakeholders or nodes that are in this, in this transaction flow, actually putting their, you know, their names to this, this data inflow and this data outflow, that's the critical part. So, you have to have

[00:33:31] a trust stack that gives institutional buyers and sellers a reason to trust the transaction. And that's what we've done where we have effectively given that ownership anchor in the legal jurisdiction, that everything in the runtime gives comfort that the, that the compliance is there. But then once that asset is in the market, in two, three years time, that data still has to be there. That data provision

[00:34:00] is really, really important. Meaning if, you know, if the investment is a hydro dam in Bhutan, I want to be able to see immediately on the blockchain, what the energy production was on a, minute by minute or hour by hour basis of that investment. Firstly, if I own it, that's really important to me. And secondly, if I'm looking to buy it, that's really important to me. So when we're working with, you know, these energy providers or these issuers that might be issuing fixed income

[00:34:28] instruments around such something, something like that, it's critical that the data provision is, is, you know, there and very much trusted. So if it's real estate, it might be a Chesterton's. If it's, if it's oil and gas, it might be, you know, an ad knock. If it's, it's having that data provisioned by

[00:34:52] a very trusted node is enormously important to make that an investable and continue to be an investable token. Basically also, I would like to add that the architecture in blockchain basically allows for any type of contracts to manifest itself on the chain. There are different types of contracts for

[00:35:18] owning real world assets. Oil is different than gold and these contracts are quite complicated. They're not straightforward. So far, the ability that, that, that helped us basically to scale in different types of real world assets is attributed basically to the architecture that we have over there to be able to

[00:35:45] absorb any type of contract, contract just the way it is. As those contract changes, then you, uh, your permission blockchain changes along with the contracts. Correct. The owner of that blockchain would be able to change, uh, the commission without the need to fork the chain and repeat all of the

[00:36:07] previous, uh, transactions. So having that adjustable blockchain allows you to not have to fork the blockchain every time a contract changes. Or require any kind of consensus, which is, which is the critical point, uh, of, of that component of the technology. So this, this, this is, you know, this is

[00:36:29] driven by the need to deliver the upside of blockchain technology to, to, to the, to the market without some of those hurdles that they, that the compliant nature of that market requires. Um, so one last question. I'm an institutional real estate investor. I have a con I, I, I, I want to rely upon a blockchain that

[00:36:55] I know that'll work for me globally. What you offer more than other people do is what? From an investor point of view. I want to know that there will not be, uh, a situation where, um,

[00:37:19] in a conflict with the regulator, where the asset resides. That's the number one. And because that has happened in different jurisdictions, uh, uh, previously, this is the first thing that, um, an institutional investor is going to ask about because they're not investing, um, a chunk of change. They're basically investing massive amount of money. They want to make sure that, uh, uh, this amount of

[00:37:46] money is basically totally secure from a regulatory, uh, perspective. Um, the, the second thing I want to know is where can I, can I trade this token that I bought out of this chain and where can I trade? I don't want to be limited in my distribution list. Um, this is why we're integrated with both

[00:38:15] rocket banks, basically where we cover the entire world, um, North America, South America, Europe, far East, um, and, uh, the middle East. I think these are the two main things that any investor, um, uh, basically is looking at whenever they're choosing a, an investment on a

[00:38:39] chain, the rest, sorry. Um, the rest has to do with the deal itself, like the IRR, how lucrative is the deal itself and the assets, uh, that they're investing in. So this only works if four systems stay aligned code, legal registry, jurisdiction,

[00:39:06] and banking. If any one of them breaks, ownership doesn't fail cleanly. It fragments.