In a recent interview with blokt, Polybird CEO Harish D. Gupta discussed the future goals of his developing security token exchange, along with one of its methods for regulatory compliance. Due to the strict laws and regulations in the securities space, Polybird will implement the concept of ‘Chinese Walls’ to ascertain compliance across various jurisdictions.
Details of the Interview with Polybird’s CEO
Harish D. Gupta, who previously worked for J.P. Morgan and Barclay’s Investment Bank, is the CEO of Polybird. Given the blockchain industry’s highly anticipated wave of tokenized securities— the benefits of which can be understood through our security token guide— Polybird aims to establish a third-generation global exchange for securities and assets on the blockchain.
Gupta recently sat down with blokt for an interview about the recent developments and future plans of Polybird. Below are some highlights from the interview.
Polybird aims to offer a compliant platform for the trading of such tokenized assets. The trading experience will be very similar to today’s popular exchanges such as Binance, Gemini, and Bithumb, says Gupta. The aspect that will set Polybird apart from all others, is the many different asset types that Polybird plans to make available. These will include assets such as tokenized equities, tokenized bonds, tokenized commodities, tokenized currencies, and even the ‘traditional’ cryptocurrencies.
A very important topic of discussion, especially considering the SEC’s recent charges against EtherDetla’s founder, was decentralized exchanges. Given the highly regulated environment of financial securities coupled with an interest to attract institutional investors, Polybird plans to stay away from decentralization, says Gupta:
“In a highly regulated environment such as the securities industry, we do not believe decentralization is ideal. For instance, decentralized exchanges (DEX) offer users to take custodianship of their assets, but institutionally speaking, most buy-side firms are mandated against self-custodianship, so the value proposition of DEX is useless at institutional level, which brings the most volumes in financial markets.”
How Polybird Prioritizes Regulatory Compliance
As a global exchange which aims to connect investors across different parts of the world, and therefore different regulatory jurisdictions, Polybird faces a significant obstacle: regulatory compliance for all users. They plan to tackle this through the concept of ‘Chinese Walls’.
The concept is not entirely new— ‘Chinese Walls’ are fairly common in traditional financial circles. In essence, they block trading access to those who are ineligible. Access is barred not solely to participate in such forbidden trading, but even to merely view the offers. In this sense, an investor will not have access to review all trades that he or she is not eligible to conduct.
This is one major strategy, says Gupta, that Polybird will utilize to ensure regulatory compliance throughout different jurisdictions:
“Each jurisdiction has its own set of regulations and regulatory objectives, which may or may not match with other jurisdictions’. Yet it is critical to stay compliant in not only one jurisdiction, but all jurisdictions simultaneously. To achieve this goal, opportunities on the platform are selectively visible, often referred to as “Chinese Walls” in the investment banking industry.”
All-in-all, we see Polybird as preparing for the new era of finance: tokenized securities.
“Multiple financial institutions have been issuing bonds on blockchain. We see that this trend will trickle down into other asset classes and within the next decade, most financial assets will have a digital version of the asset—token.”
What do you think of ‘Chinese Walls’ as contributing to compliant security token trading? Will such a strategy become an industry standard? We’d love to know what you think in the comments below.
Tim Fries is the cofounder of The Tokenist. He has a B. Sc. in Mechanical Engineering from the University of Michigan, and an MBA from the University of Chicago Booth School of Business. Tim served as a Senior Associate on the investment team at RW Baird's US Private Equity division, and is also the co-founder of Protective Technologies Capital, an investment firms specializing in sensing, protection and control solutions.