Caleb Thomson (Yale SOM 17), Head of Compliance and Regulation at Swiss Realty
Caleb Thomson is Head of Compliance and Regulations at Swiss Realty and a Senior Principal at Infosys Consulting. By using the Ethereum blockchain and rule-based smart contract technology, Swiss Realty is tokenizing commercial real estate assets to increase operational cost-efficiency, market liquidity, and access to institutional real estate throughout Switzerland. Previously, Mr. Thomson served as a Product Manager at NY Green Bank, where he managed outsourcing and automation of their covenant reporting and tracking solution among other projects. He has also served as a Senior Program Management Consultant on regulatory compliance of BAML’s OTC Derivatives Prime Brokerage, a Technology Strategy & Implementation Consultant for Cork Technology’s international expansion, and a Management Consultant on Technology Strategy & Transformation for a number of IBM products. Mr. Thomson earned his MAM degree from the Yale School of Management, specializing in Law, Diplomacy & Globalization.
The Politic: What’s your background, and how did you get involved in blockchain/crypto?
Caleb Thomson: I worked as a technology strategy consultant with IBM and then for myself for about 8 years before I went back to school and ultimately graduated from Yale SOM. I had a friend from IE Business School in Spain and he contacted me about releasing a new ‘coin’ that was backed by real-property investments–the plan was to release it very quickly and capitalize on the market hysteria to provide initial seed capital for a future investment platform build-out.
What blockchain-related projects are you working on at Infosys and Swiss Realty? What are the most promising use cases?
My primary blockchain-related project is Swiss Realty. My consulting work does not directly deal with blockchain solutions. Many of the ‘legacy’ solutions in place are actually very good at identifying accounting breaks. While blockchain solutions are incrementally better, they typically require ‘multi-party’ adoption and standardization which can take time.
The most promising use case is probably transborder payments, and I would expect central banks and the IMF to create some sort of blockchain solution in the future. Other interesting use-cases involve reduction of agency costs and risks: supply-chain tracking systems for regulated products and other cases of classified raw/intermediate/final goods (e.g., pharmaceuticals and organic food), and the enablement of localized payment systems and capital formation in developing regions and under-serviced areas.
The problem with supply-chain tracking is the opportunity for fraud, generally any time when a human touches or has access to a product. While blockchain can provide some trust in data accuracy, human ingenuity remains a risk.
With regards to localized payment systems and capital formation, I think this is what makes the Libra project by Facebook so compelling. Although, somewhat ironically, Facebook is not the most trusted name at the moment, and they have very little to protect their idea–aside from enabling Facebook profile/user-verification. In the end, I suspect there will be something very compelling which is ‘Libra-like,’ but it will probably not be the Facebook project.
What’s Swiss Realty’s value proposition? What’s the market you’re targeting?
We provide additional sources of liquidity for commercial real-estate development projects. It’s a huge market that is bogged down by bureaucracy and non-standard contracts and agreements. It is projected that there is an estimated $97 trillion of infrastructure investment necessary globally through 2040–with an expected total funding shortfall of about $18 trillion. So, there is a real need for more efficient methods to source capital and provide liquidity, reaching a larger trusted audience sooner.
What are the relevant KYC/AML regulatory and compliance requirements? Any tangible implications for your project?
As part of Switzerland’s recent Fintech legislation, the KYC/AML requirements are actually very manageable, and they can be provided by a third-party service. However, the costs of KYC/AML can be very expensive in Switzerland and a real constraint on calculating the minimum investing amount for our offerings. In EU and the US, it is much less expensive to validate potential investors for KYC/AML.
How do you deal with jurisdictional concerns? Is it possible to expand between Switzerland and Lichtenstein?
Lichtenstein is a member of the EEA (“European Economic Area”), making them something like an ‘EU-observer.’ The venue (‘jurisdiction’) has a rich and long history of banking and financial secrecy and is very interested in maintaining that position in the 21st century.
The Lichtenstein FMA and Swiss FINMA, the respective financial regulatory bodies, are very cooperative, and FMA approval can provide access to the EU market–there are some additional requirements for offerings and Germany and France, but meeting those requirements is possible.
The EU more generally operates under substantially similar UCITS legislation for collective offerings and investments, and each state has slight variations in how the rules are applied and defined. EU financial passporting is a key component of the common market approach, meaning that access to one EU financial market generally implies access to all financial markets (RE: four freedoms: freedom of movement of goods, services, labor, and capital).
What are other Swiss-based companies doing in the space? E.g., Elea, SwissRealCoin, Blockimmo, Swiss Crypto Tokens AG
Generally, Switzerland is one of the most favorable venues for crypto/blockchain finance-related opportunities. However, the market has generally become weary of these investments since 2018: Investors are now looking for real traction, real customers and revenue, and a tangible value add.
At Swiss Realty we have entered into a partnership with Steiner AG, one of the oldest and most storied property development firms in Switzerland. I am less sure of the real progress of the other stated companies.
Technology adoption takes time–while blockchain solutions are incrementally more efficient than ‘legacy’ payment and accounting systems, blockchain still requires much greater socialization, education, and acceptance to bring these types of changes into the mainstream. I suspect it could take much longer to implement than the most ardent enthusiasts will insist, and the real opportunity is in doing something practical that either helps existing financial professionals to be more productive, or somehow automates back-office activities and budgets.