In the world of startups, there's never a dull moment. Just when you think you're cruising along with incredible momentum, a curveball out of your control can cause you to adjust in mid-stride and navigate macro-headwinds.
Valentin Preobrazhensky had a simple and brilliant idea in December 2013. He wanted to develop a peer-to-peer marketplace to increase the transparency and lower the deal costs of home loans in emerging markets so that more investors could enter, and banks could more efficiently sell loans off of their balance sheets at a fair market value.
With a background in hedge funds and marketplace software development, he launched AIBanks, rebranded to LA Token earlier this year, which has become one of the most interesting cryptocurrency startups. By 2016 he had built real traction around the platform. 25 investors and seven banks had successfully completed over 1,000 transactions through the platform.
And just when it seems that nothing can slow this entrepreneur and his team down the industry gets a dose of regulatory reality that forces them to make some on the fly adjustments in the last 24 hours as the SEC uncovered two major unrelated frauds that sent yet another ripple through the cryptocurrency markets.
Preobrazhensky and his fans now face some notable skeptics like the Financial Times and plenty of other real-time decisions to navigate as LA Token announced today that it will no longer sell tokens to U.S. investors on the heels of the breaking news overnight and fraud cases filed against two other ICOs by the SEC.
The drama leading up to the announcement
LA Token, which stands for "Liquid Asset Token Protocol," was explained to me as a mechanism that makes sure that the link between a token and underlying asset is legally and technically enforceable. It enables a peer-to-peer contractual rights transfer between the two parties.
The first trade of tokenized Apple stock occurred on the platform this past August 19, and spawned the opening of the company's ICO a week later. In just three days, the company attracted over $10 million from approximately 3,000 contributors. The money is being used, according to Preobrazhensky, to fund the full platform trading development to allow global real estate assets to be tokenized and traded through the platform.
The second and third rounds of LA Token's ICO attracted an additional $7 million in the last 30 days to allow for the development of the debt and commodities exchanges. They were poised to close out the final round of their ICO in the coming week with a hard cap of $40 million.
This would allow them to fund the development of the full release of complimentary exchanges for trading rare works of art and other more illiquid hard assets without a middleman.
In a video chat via Whatsapp this week, a spokesperson told me, "We have a solid core business, team, and value proposition. We believe we can capture up to $400 billion of the total trading volume in the market by 2020 and over $1.2 trillion of the trading volume by 2025 through our platform."
Several big names also believe him and are on the board or advisory team, including Cecilia Mueller Chen (former COO of UBS, chief compliance officer at China Construction Bank and senior regulatory officer at Deutsche Borse), Mike Jones (former CEO, MySpace), and Anish Mohamed (Hyperloop and HSBC advisor).
Why this story matters
LA Token is interesting because it's setting out to build a bridge between "the crypto economy and real economies" according to the company's website. It does this by providing a decentralized exchange that enables investors to trade non-bank and non-digital (hard) assets, from Apple or Tesla stock to rare works of art, using cryptocurrencies.
The fascinating innovation is that in the very complicated and volatile world of initial coin offerings (ICOs) and cryptocurrencies, LA Token seems to have zeroed in on a trillion-dollar niche. They aim to become a bridge to merge the two worlds of centralized banking and Wall Street trading with the wild west of decentralized cryptocurrency investors for a potential healthy marriage of opposites.
This is definitely a story to watch in the coming weeks. As entrepreneurs, we can all relate to the roller coaster ride and highs and lows--and I look forward to watching seeing how Preobrazhensky stays level-headed with his team to navigate stormy waters.
A disclosure: I don't own any LAT in my portfolio. I am not a registered investment advisor or qualified in any way to provide investment advice. Investing in cryptocurrencies is highly risky and volatile.