Backing Backed: Tokenization is all you need

Since securities first traded, public capital markets have served as the cornerstone for individual economic well-being and global commerce. However, financial inefficiencies - including regulatory capture, counterparty risk, and other analog practices - have limited access to markets and their efficacy to mostly states with robust financial infrastructure. 

To simply explain the state of today’s markets, despite computers having existed for 7 decades and billions of dollars of investments into new financial tools being made, the vast majority of the world’s populace is still unbanked or underbanked. Thankfully, secure tokenization on open networks like Ethereum can and will fix this, taking our analog system cybernetic. 

We are excited to announce our investment in Backed, a company at the forefront of tokenization. By leveraging the Swiss DLT (Distributed Ledger Technology) act and networks like Ethereum, Backed lets anyone access open, secure, and composable capital markets.

Here’s how Backed works

Via its issuer in New Jersey, Backed issues tokens that are backed 1/1 by an underlying security. Underlying assets are held by a licensed Swiss bank under the DLT act. The DLT provides regulatory clarity and stability and ensures best in practice security via an ultimate guarantee of ownership on the underlying asset. 

Tokens are issued on Ethereum and other networks and tied 1-to-1 to the underlying asset via an external securities agent and a Chainlink-powered Proof of Reserve oracle. Assets can be equities defined by sovereign law, bonds capturing the risk-free rate, or more savvy instruments like Exchange Traded Funds (ETF) and other financial assets.

To access Backed, eligible entities and investors onboard with Backed and then purchase bTokens using either stablecoins (like USDC) or fiat wires. Regardless of the network they’re on, Backed’s bTokens are freely transferable once issued, making it possible for anyone to cheaply and securely access the world’s best financial assets and markets.

Backed’s offering includes 7 fixed income products (US bonds ETFs, Euro Bonds ETFs, Corporate bonds ETFs)  and 3 different equities (with some interesting ones on the way). Subject to terms and conditions, tokens are freely transferable once issued, making them fully composable and atomic with Ethereum’s existing applications and liquidity. 

What makes Backed great?

Stakeholder rights and governance have evolved substantially since the Dutch East India Company first offered shares conferring ownership to investors in 1611. Since then, structures designed to align group incentives have been (mostly) jurisdictionally bound, limiting participation to the region of origin.  

Through tokenization, particular jurisdictional strengths are amplified globally. Needless to say, we deeply believe this will have a positive outcome for both issuers meeting new demand and for emerging participants who will have access to mature capital markets for the first time. Beyond this, platforms like Backed can drive all markets on-chain, opening access and making capital programmatic through secure tokenization.

Critically, tokenization will create novel pressure on governments with extractive or unstable capital practices by letting people “vote with their dollars” to exit a local regime. We believe this will be a subtle yet powerful force, much like television or other technology sowed the seeds for capitalism to take root in communist countries. 

Much like local fintech companies like Nubank catalyzed economic change in Brazil or platforms like Robinhood enfranchised retail traders in the United States, secure and open tokenization can let anyone be a trader, saver or investor of the world’s best assets. 

For the majority of the world, the power to reach economic sovereignty beyond their local regime through Backed has immense potential. 

The team

Backed is spearheaded by Roberto Klein, former managing partner at BHK Investments, Adam Levi (PhD), co-founder of DAOstack, and Yehonatan Goldman, former COO at DAOstack. Together, we believe this team has the shared depth and breath to help push capital markets on-chain.

In addition to the founding team, notable senior management include Bernardo Quintao, previous Head of International Business Development at Mercardo Bitcoin; Yotam Katznelson, CTO at 21Shares and VP of R&D at Securitize; and Giorgio Giuliani, Product Lead at SumUp and Head of Product at N26.

Open programmable capital markets

The 2017 era gave an early (albeit frothy) glimpse at the potential of tokenization. In 2024 with more mature networks and greater regulatory clarity around the issuance and custody of legitimate assets, the time for capital markets to go on-chain is here. 

With the opportunity to give countless people access to open, programmable capital markets for the first time ever, we couldn’t be more excited to partner with the Backed Finance team in their mission to be a standard-bearer for secure and open tokenization.