【Blockchain in Korea】Cabin Capital Devin Huang: Is it the right time to layout STO?
【Blockchain in Korea】
13days ago

The full text is a total of 3915 words, expected to read 8 minutes.

Editors note: Coinin is the Korean blockchain media headquartered in Seoul, South Korea, it relies on industry head resources and community advantages to form a huge influence on the media.


Coinin is the Korean blockchain media headquartered in Seoul, South Korea, it relies on industry head resources and community advantages to form a huge influence on the media. It is known as an upgraded version of the blockchain field 36Kr.

Coinin recently launched the "Blockchain in Korea" series in South Korea, visiting the top blockchain practitioners in South Korea and promoting exchanges and cooperation between China and South Korea. In the new phase of "Blockchain in Korea", Coinin invited Devin Huang who is the Founder of Cabin Capital to talk about "Is it the right time to layout STO?".


Guest introduction


The 38th phase of the "Blockchain in Korea", Coinin invited Devin Huang, Founder of the Cabin Capital to talk about "Is it the right time to layout STO?".

Devin Huang : 

Founder & CEO of Cabin Capital

Founding member of STOCOOP




Allen: As an early practitioner of the digital securities industry, could you talk about the stages that have gone through in the process of becoming the founder of Cabin Capital? How did you connect with the blockchain industry?

Devin Huang: I entered the blockchain industry in 2013 and I am an early investor of digital assets. Of course, there was no “blockchain” concept at that time. China’s blockchain community was small and there was no stratification, now we define the industry participants, we will label the other party with “third-party services”, “project parties” and etc. The core participants were only 300 people, because I live in Hangzhou, so 5-6 years ago also participated and organized the early construction work of the Bitcoin community in Hangzhou. When Vitalik entered China in 2014, the Ethereum China meetup Hangzhou Station Roadshow was organized by us. At that time, everyone was very astonished about the format of initial coin offering fundraising that relied on community resources.

From the the builders of the early communities to the investor, I transferred my role successfully, but in the second half of the 2014, the industry was in depression so the industrial structure was quite simple at that time, and many speculators and derivative gainers disappeared. I later divided them into five major players, the first is the exchange, the second is the mining industry, the third is the third-party service (media, financial service providers and etc.), the fourth is the opinion leader, the fifth is the project party. The first and second are the fundamental interests of the industry, the trading was handled by exchanges, mining industry doing the issuing, the other three major players basically carry out businesses around the former two, are derivative benefit.

When the industry winter came after 2013, I realized that when the fundamental interests were challenged, the derivative interest risk resistance ability was weak, because the derivative interests represented by the media had closed down a lot.

Therefore, at the beginning of 2017, when the industry gradually recovered, I was conscious of the need to bind individuals to industries in order to cope with the uncertainty of the huge fluctuations in the industry. Therefore, I slowly transferred my identity from the earlier community builders to the investment related to the transaction, and of course the industry situation after 2017, gave us a huge opportunity.


Allen: Please introduce the Cabin Capital. What was the original intention of the Cabin Capital? How is the strategy layout and current status of Cabin Capital?

Devin Huang: The establishment of the Cabin Capital is in fact inevitable and contingent. The official registration of the Cabin Capital was in the first half of 2018, but my personal investment started in 2014 and 2017. The official start of the Cabin Capital is actually later than others, and there is no glamorous background, it is developing step by step. I have already gone through a full cycle, and have a good understanding of this industry. Some outsiders seem to be quite uncomfortable but I can endure these phenomena especially the possibility of this circle and the exceptionally high risk. After 2015, I have been supported by about 40 old friends. The one who knows me the shortest time has also know me more than three years, but they are actually very inexperienced about the investment in the blockchain. I have described this industry to them. I said that this is a black forest. There are many opportunities but the risk is high. So to survive in this forest is like a hunter needs a wooden house to avoid danger. Afterwards, most of the 40 people became the original LP of the Cabin Capital. The original intention of the Cabin Capital was to help these dozens of old friends who do not have enough knowledge of the industry to hedge the risks. There is no particularly complicated motivation.

Because I have a very long relationship with the early LP, I understand that trust is not easy, so the Cabin Capital has more or less conservative elements in making actual investment decisions or external cooperation, and cherishes its own feathers.

The outbreak of initial coin offering throughout 2017 had a very big impact on me. At present, the global market value of crypto digital currency is more than 170 billion US dollars. Since the birth of Bitcoin, especially from the stage of market value of 5 billion US dollars to 50 billion US dollars, "transaction" has become an important frontier for the expansion of the market value of the global crypto market. Pushing hands are also the main driving force for the development of industrial scale before 2017. After the birth of initial coin offering, relying on the “Issuance of the bottom layer”, the global market value of crypto digital currency was pushed to a scale of 3-4 trillion US dollars in one year. Within one year, the industry gone through other industries' 8 years which relied on “the bottom of the transaction”.

On November 29, 2018, the Cabin Capital and OpenFinance, SECURITIZE, SPiCE VC jointly created the first compliance order in the history of STO development. In 2019, the Cabin Capital was launched STOCOOP as a founding member with the Gibraltar Stock Exchange and  OpenFinance. STOCOOP is an international digital securities distribution cooperative organization, currently there are 13 members, they are the early core builders of the digital securities industry.


Allen: Do you think STO is an upgraded version of initial coin offering? Or is it an IPO in the blockchain field? What are the differences between them? What are the difficulties of launching the STO?

Devin Huang: STO is not an upgraded version of initial coin offering. If only from the perspective of financing, STO inherits some functions and attributes of initial coin offering, but STO is a complete industrial chain with a clear division of labor. From this perspective, STO and initial coin offering are not the same thing, at least not a simple upgrade relationship. I am more willing to refer to the STO industry as the digital securities industry, namely Digital Security. Since 2019, you will see that DSO instead of STO has used in some scenes and contexts. There are three big structures in the digital securities industry, one is securities certification, such as the tokenization of RITS, and the second is the securitization of tokens, such as the many traditional initial coin offering projects. STO is only an industrial entrance in this industrial structure, and it cannot fully represent the whole industry of digital securities. Many industrial builders have different business functions, such as coin money asset standards, transfer agents, securities custodians, brokers, ATS transactions, there are not new in nature. They are the products under the influence of regulatory regulations, and the products already existed.

Many people try to discuss the future development of STO with me. I think why the future existing is that there is still insufficient area. STO itself has two relatively large problems in the current development stage. Of course, the biggest premise here is that most of these problems are existing in the STO business system based on American law.

Firstly, the systemic problem which means insufficient mobility, which is mainly manifested in the fact that the primary market is afraid to invest and the secondary market cannot be issued. The second issue is the structural problem. The industrial form of STO is bound by the regulatory form of the host country. Due to the different regulatory patterns of different countries and the separation of each other, the industry itself should be indispensable for the division of labor and the coordination of global business. In the actual development process, the industrial builders are over-supplemented due to uneven business development, and the business is idling. The problem leaves room for bad money to drive out good money.

In addition, the business output ability of the industry's top tier core builders are insufficient under the constraints of systemic problems. About the internal software and hardware support, they even not sure about how to balance business progress and compliance risk, the establishment of business norms and management mechanisms still has a large amount of retention work to do. At the same time, there are still vacancies in the construction of mobility infrastructure around security token. Apart from the secondary market, asset management and distribution tools are rare.

Therefore, when I was communicating with Mr. Qu Ming, I felt that their current work is meaningful to the healthy development of the digital securities industry. We are the early builders of this industry. When I see the tools and teams that can benefit the industrial development emerge, I feel gratified.

As early builders of the industry, we were also impacted by structural and systemic issues. Therefore, at the beginning, we felt that we must promote STOCOOP, an industry organization established around the global business cooperation mechanism. I don’t care about contributing more at the early stage. Whether it is a matter of affection or interest, there should be someone get the things done. Only the industry is healthy, then those practitioners of the industry have the possibility to settle down and talk about the future.


Allen: What types of institutions or projects is suitable for STO? What are the risks of STO? How should we deal with these risks?

Devin Huang: First of all, we know that STO is still in the early stage of chaos. Its rules and industrial structure are in the process of development from point to line and block. There is no clear standard for the definition of assets. The STO project implemented in accordance with US securities regulations does not mean that there are no problems. Some of the digital security industry US core builders do not have a very clear standard for screening assets. This industry has just started. If I have to talk about an asset screening standard today, I can share you a framework which is used by the Cabin Capital when we screening projects.

We will divide the projects into three levels. The first one are those project s that had already been listed in the US, especially Chinese concept stocks. Because they have a clear structure and a certain asset scale, the compliance risk can be controlled so they belong to the first level projects.

The second level are those traditional high-quality asset with real business and a relatively satisfactory profit margin. The third level are some blockchain projects that we are satisfied with in many dimensions such as the team.

The main risks of STO mainly has two aspects. First is market risk and second is the compliance risk. And the market risk mainly represent mobility. In particular, some asset structure design is unreasonable or large market mobility is insufficient, which makes investors lack of effective exit mechanism. Therefore, we are currently exploring to do some compatibility design by splitting assets and etc., to ensure that some of the qualified investors obtain a small amount of mobility in the early financing process. Of course, I also saw that the current STO issuance financing introduces the concept of “storage escrow certificate”. This is a very conscious phenomenon, indicating that the industry is trying to break through the mobility bottleneck.

The second is compliance risk. For some special projects, continuous supervision is very necessary. This does not mean that the project will be go well after the completion of the law firm's early compliance check. In particular, some projects that have been listed in the US of the early stage require long-term consideration when doing asset structure design and asset divestiture.

How to solve the problems that STO currently has, we have a lot of work to do, and the burden on the shoulder is heavy. From a systemic point of view, I mentioned that the key to solve the problem is in the hands of "time and development". You can't do it, you need to wait for a big trend to push it. About the small structural issues, we should try to solve the imbalance of business development first. Is the American product good for us? Does it apply to China or Korea? Not necessarily, it refers to so how to regulate business norms, how to make the early builders of the industry familiar with business operations, and design the early mobility under the premise of compliance and stability for different types of assets. STO can only be valuable if assets have the mobility, so they need to invest in infrastructure and invest in a globally compatible and compatible design.


Allen: You said that "The basic development of the digital securities industry is limited by the regulatory structure. The emergence of this industry is precisely the result of the spillover effect of the development of the blockchain industry, seeking a benefit from a compliant portfolio in the existing global regulatory structure, which may be the real name of STO.” How to understand this? Could you interpret the latest regulatory status of STO?

Devin Huang: If STO is still considered as the STO of the United States, then STO is hopeless.

The development of the digital securities industry was originally evolved from traditional financial markets, so you will see that the regulation of digital securities is not as unregulated as it is for digital currency regulation, because securities laws are available in every country. However, the transaction of trading digital currency is lack of supervision in the international environment where the definition of digital currency is not clear. Well, since there are laws and regulations in the reality of digital securities, the development of digital securities industry is of course affected by the laws of the country. If the regulatory structure is similar with the United States’ regulatory regulation, then mobility is a problem. If it is framework regulation, then compliance is insufficient and the industrial form will be vary.

Therefore, about the global STO industry, each country has different industrial forms because of different requirements of its own national supervision. In the United States, for example, the existing US STO industry builders' business functions are originated or transformed from the traditional American ATS market. In the STO field, I believe that the major players know the “G2” concept which means the resources of China (Asia) + the industrial chain of the United States. Before 2017, the industry structure of the bottom is incomplete, because there is only transactions, no issuance, why the issuance is appeared? Because the power of using trade to drive industrial development has come to a new stage. Everyone enters the blockchain industry and wishes to do exchanges, wallets and quantify. They all essentially hope to cut into the blockchain industry through the form of trading, but what are the consequences of repetitive construction? The more the exchanges are established, the industry is worse with less mobility, and more competition. So later the United States said that they will issue a Bitcoin ETF. In essence, it also hopes to use the "trading bottom layer" to obtain mobility. Until the emergence of initial coin offering in 2017, it really complemented the shortcomings of the secondary scale development of the blockchain, and the emergence of the issurance reached the industry spillover effect.

STO, indeed, the industry chain started from the United States at the beginning, but if it is only limited to the United States, then STO will not promising. The business nature of STO is the issuance, and its industrial motives are germinated by the blockchain's access to global mobility for unlisted assets or long tail assets. So the real market for STO is the compliance issuance in the global arena, the role of investment banks, or the role of asset management or industrial infrastructure are critical. They are pioneers and need to combine the compliance frameworks of different countries, it is necessary to make assets comply with or not contradict the laws of the United States and to be compatible with the EU's regulatory framework to achieve the flow of different types of markets in the global market.

Now, I am gratified that there are already industry builders who are looking for assets in the global arena, looking for the right regulatory portfolio and designing compliance solutions. All of this, with reference to the development of digital securities in the United States, also jumps out of the limitations of the United States.


Allen: At present, US STO aroused much attention. Please analyze the stage advantages of STO using the US STO cases. Is it the right time to layout STO? If so, how should the blockchain projects preempt this opportunity?

Devin Huang: The advantage of the United States is that the industrial chain is relatively complete. When we conduct businesses, resources are useless so we had to use the US industrial chain to digest resources. In addition, we need to evaluate the US industrial chain division to ensure that this asset is suitable and handed over to them. We don't want to bring uncontrollable risks to asset issuers. Secondly, I would like to share with you that you should not only pay attention to the United States, but also value yourself and your country. We are Chinese institutions also Asian institutions, we are representing Asia, we should do a good job in the Asian market and master the resources of Asia, so that you can gain the right to speak in the global industrial chain of digital securities, and you should not ignore them. Now, global digital securities are infiltrating into the traditional securities trading field. As far as we know, the global ST publishing platform has more than 100 almost 200 platforms. And these platforms are not all located in the United States, they are also beginning to cooperate cross platforms. The head of the business specification is gradually clearer. I think it is a good time to participate in the construction of STO industry and help the early builders of the industry sort out and promote the formation of business norms. This is what STOCOOP has to do, but also the Cabin Capital has to do. However, investment needs to be rigorous and meticulous. After all, the return period will bring greater pressure on investors, and there are mobility problems, unless the asset structure design can make investors return to the secondary market and bring returns.


Allen: Blockchain Capital investment analyst Derek Hsue wrote about the IEO on Medium, and he believes that in the long run, IEO may not push the recovery of bull market. What do you think of this opinion?

Devin Huang: The IEO business has a positive effect on the exchanges, especially to the top tier exchanges. Its essence is to compete for the pricing power of high-quality assets. Therefore, IEO can become a normal business of the exchange and can exist for a long time. However, it is not a structural function that can promote the recovery of the bull market. IEO is a structural function, but the promotion of the bull market is not a structural function that can bring. IEO, as a small part of the bottom of the issuance, does not have this ability. The first big bull market after bitcoin entered China in 2013 was driven by the bottom of the transaction. 2013 is a representative year for bitcoin from OTC trading to global concentrated In-fIeld trading. In 2013, there were nearly 10 exchanges of a certain size emerged in the global arena, and the Huobi, OK was also established in 2013. From the OTC to the in-field of the market, mobility directly led to group benefits, and the price of coins rose sharply.

The bull market in 2017 was driven by the issuance of the underlying initial coin offering, and the market value of the global cryptocurrency during 2017 exceeded the market value formed by the trading bottom layer during the previous eight years. I think you should pay attention to this. If the next round of bull market hopes to surpass the first two rounds, then it is very likely that the bottom of the transaction and the bottom of the issuance will interact with each other.


Allen: What is the latest activities and future plan of Cabin Capital? In what ways does Cabin Capital hope to cooperate with projects or institutions in China and South Korea?

Devin Huang: Strategically, both I and STOCOOP members hope that I will continue to promote the post-construction work of STOCOOP in a pragmatic and rigorous manner, so I will contribute my personal knowledge of the digital securities industry and the market resources owned by the Cabin Capital to STOCOOP. At present, the Cabin Capital has completed the STO work of a representative company in the Chinese network car market. This is a high-quality asset. We will fully support China's high-quality assets connect with the US industrial chain.

Because the Cabin Capital is a builder of digital securities, we are open to all institutions that can help and support the healthy development of the global digital securities industry in Korea.


Allen: As a well-known person of the Chinese blockchain, you may know a lot of outstanding practitioners in the blockchain industry. "Blockchain in Korea" interview program is launched by [Coinin], is dedicated to exploring high-quality blockchian projects and practitioners. Could you recommend three honored guests to our program?

Devin Huang: I recommend Cloud Elephant Blockchain’s Huang Butian, SEFtoken, STOcheck, GSX GROUP and  BITMART.


Q&A Session


Q1: What do you think is the core of STO?

Devin Huang: The essence of STO's business is “issuance”. The emergence of this industry is precisely the result of the spillover effect of the development of the blockchain industry, seeking a benefit from a compliant portfolio in the existing global regulatory structure, which may be the real name of STO, it reduce costs and increase utility. There is a paragraph in the article I wrote before, which can be used as an answer for this question.


Q2: What is the latest progress of the STOCOOP organization?

Devin Huang: In April, we will discuss setting up a secretariat in Hong Kong and will sign the MOU with a new member, and will release the business specifications of the previous members to the public. (currently in discussion)

From: Coinin

This article is reproduced only, does not constitute an investment opinion


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