Graeme Moore, Head of Tokenization at Polymesh, on No-Starters for TradFi Investors and More | Ep. 368

Cryptonews Podcast host Matt Zahab recently sat down for a chat with Graeme Moore, the Head of Tokenization at the Polymesh Association, a not-for-profit dedicated to the growth of the Polymesh blockchain ecosystem.

The two discussed building a blockchain specifically for highly regulated assets, as well as the five key pillars of Polymesh (governance, confidentiality, compliance, settlement, and identity).

Moore explained that TradFi is being crypto-ed and crypto is being TradFi-ed, and talked about tokenizing the Old Stone Church in the USA.

Banks Want Diversity, Not Complexity

Polymesh is a public permissioned blockchain built specifically for regulated assets.

According to Moore, the team has talked to many banks. These are the entities that largely control the flow of assets – and they don’t want to be beholden to one specific technology, he stressed.

They will use different types of tech and different variants of each tech. For example, they use different blockchains for different needs.

This way, they can have “some kind of diversity within their own tech stack,” Moore said.

That said, they do not want overly complex technology that will make any process more difficult and expensive rather than smoother and cost-effective.

Notably, Polymesh is API -based, not smart contract -based. The assets are built at the base layer, and users don’t have to build smart contracts on top of it.

Therefore, banks and custodians find this approach useful. “That just brings them at ease,” said Moore.

Five Pillars: No-Starters for TradFi Investors

Polymesh’s talks with the regulated players in the securities market revealed a massive finding: a pattern.

The team encountered the same issues, which they boiled down to five main areas: governance, identity, confidentiality, compliance, and settlement.

These are what Polymesh focused on, aiming to provide solutions.

Governance

Let’s say there is a chain split, said Moore. What is a bank to do? Stop trading hundreds of billions of dollars for a month until they select a chain based on some parameter?

“When you tell your investors, hey, at some point, this weird thing might happen that’s only applicable to blockchains, and you just have to stop trading, or you have to undergo some type of internal board meeting to decide which asset is the real asset. That’s just a non-starter for them,” said Moore.

Polymesh provides one canonical version of the chain. As it deals with financial securities, the chain is more centralized.

Identity

Polymesh always checks identity to verify that users are who they claim to be.

The reason is that regulated entities want to know whom they are working with and where the money comes from / goes. For example, does it finance sanctioned groups or countries?

Confidentiality

“JPMorgan doesn’t want Goldman Sachs to see when they’re putting a trade into the mempool for an asset,” said Moore.

No financial institution wants this, especially with the kind of money they’re working with.

“Their tiny 0.01% edge can lead to huge gains, huge losses for them,” he added.

People cannot fathom the pissing contest that’s about to take place between billionaires.

“You have HOW MUCH bitcoin? Hah, peasant!” pic.twitter.com/gpHlROfA9X — Graeme Moore 🅿️ (@MooreGrams) July 15, 2024

Compliance

For Polymesh, compliance and asset creation are baked into the base layer, Moore remarked. The blockchain understands what a token is.

Ethereum , for example, did not do this, he said. “What ends up happening on Ethereum is everything is smart contract. You have a smart contract talking to a smart contract, and it becomes really computationally expensive to do anything.”

Settlement

If somebody knows a user’s blockchain address, they can send them anything at any point, and it can’t be refused. “That’s not something that is very appetizing to us today,” Moore commented.

This doesn’t fly with banks. Regulated entities don’t want to receive anything they haven’t previously vetted and agreed to.

On Polymesh, “settlement works a lot more similar to how it works in the traditional market where all parties in the trade affirm settlement constructions and then settlement takes place,” Moore explained.

Traditional Assets Getting a Crypto Wrapper

The Polymesh team has noticed a fascinating thing happening in the TradFi world. Regulated entities are taking Bitcoin and “putting the institutional TradFi wrapper around it so that people can invest in it.”

That’s not all. They also put the crypto wrapper around the TradFi institutional product of US Treasury Bills and money market funds.

“I think we’re going to see more and more of these ‘traditional assets’ get the crypto wrapper [and] crypto assets get the traditional wrapper around it. It really just depends on the investor,” said Moore.

As the cost of tokenization decreases and its efficiency increases, regular people will be able to do “this kind of money Legos thing”: create a structured product in a vehicle, click a button, put a wrapper around it, and place it on-chain.

That can be anything, such as buying pieces of multiple apartments with very narrow specifications.

That’s the most exciting long-term thing, Moore said.

Tokenizing a Church and Crowdfunding $2.5 Million

In August this year, the Old Stone Church in Colorado, USA, was famously tokenized on the Polymesh blockchain through its partner REtokens .

The goal is to raise $2.5 million to buy the land from the owner, who has been renting it to the pastor.

“We think this is such an exciting thing that’s going to spread throughout the country and maybe even throughout the world,” said Moore.

Polymesh doesn’t do the tokenization. Instead, it provides the blockchain and the infrastructure to make it easy for others to tokenize things, he added.

Meanwhile, Polymesh has plenty in the pipeline.

REtokens decided to tokenize $30 million in real estate assets via Polymesh back in May this year. Subsequently, they announced an additional $60 million.

Also, in late August, Polymesh partnered with AlphaPoint, a global provider of digital asset infrastructure for exchanges, brokerages, payment networks, and banking, to offer efficient tokenization solutions via an easy-to-use API.

AlphaPoint, among many other projects, worked with the CME Group and helped the El Salvador government set up the Chivo wallet

“I’m sure some people have used an exchange where they had no idea AlphaPoint was the actual exchange under the hood that’s running the tech,” Moore noted.

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That’s not all.

In this interview, Moore also discussed:

• the exciting experience of working as the creative director at Spartan Race;
• his first crypto job at Polymath in 2017, building tech for security tokens specifically;
• running into issues with Ethereum and deciding to “build a better blockchain,” launching Polymesh in 2021;
• working with Token Tracks: music NFTs on Polymesh, with automatically enforced royalties;
• emerging RWA areas: real estate, titles, and carbon credits;
• writing ‘B is for Bitcoin,’ the first ever ABC book about Bitcoin;
• OpenSea receiving a Wells notice from the US SEC;
• The possible effects of the US presidential election.

You can watch the full podcast episode here.

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About Graeme Moore

Graeme Moore is the Head of Tokenization at the Polymesh Association, a not-for-profit dedicated to growing the Polymesh blockchain ecosystem.

He is also the author of ‘B is for Bitcoin,’ the first-ever ABC book about Bitcoin.

Before Polymesh, Graeme was the first employee at Polymath and the creative director at Spartan Race, among other roles.