Blockchain – the mysterious and seductive technology upon which Bitcoin, and so many other cryptocurrencies, are built. As our industry continues to grow, there are more and more applications to this novel form of technology, invented by Satoshi Nakamoto when he wrote the Bitcoin whitepaper back in 2008. 

Today I interview the CEO of Brightvine, Joe Vellanikaran, on another one of those applications. Brightvine are a blockchain-powered fixed income platform that connects issuers of high-quality, real-world assets with digital investors.

Back in March, I interviewed Joe on the announcement of a partnership with Angel Oak Capital Advisors, the technology venture arm of Angel Oak Companies, which works in innovative mortgage solutions. The goal of the partnership was to leverage Brightvine’s platform in exploring new investment avenues for investors.  

Today, they have announced the first result collaboration of this partnership, the first-ever bank subordinated debt issuance that leverages blockchain technology, called BFNS 2022-1 – a $147.55 million securitisation of subordinated debt.

Naturally, I had a few questions. 

CoinJournal (CJ): Can you please summarize how exactly this capital raise and project being carried out on the blockchain is an advantage, for those who may be unfamiliar with your approach?

Joe Vellanikaran (JV): In a typical securitisation, the process of coordinating up-to-date documents and data across multiple participants is a manual and labour-intensive process. The Brightvine Portal allows for instant validation of each document against the blockchain’s immutable records, ensuring that the documents being used across all parties are always accurate and up-to-date. The distributed ledger ensures that any time a data point is updated, those changes are populated in real-time across all stakeholders.

 

CJ: We interviewed you on the partnership between Brightvine and Angel Oak when it was announced back in Q2 of this year. This is the first collaboration – did you delay it as a result of the contagion in the markets?

JV: Our partnership with Angel Oak is right on schedule – we have been actively working with them since our last announcement to ready the Brightvine Portal to support a variety of their asset classes that can take full advantage of the Portal’s key features, including a more efficient securitisation process, real-time data distribution across parties, and blockchain validated documents.

 

CJ: How much has the chaotic last few months and bearish turn affected this partnership in general?

JV: Many large institutions have come out as champions of blockchain technology in recent months despite any downturn in the crypto markets. If anything, using the best technologies to create the most secure, efficient and accurate financial infrastructure makes sense now more than ever. We see our partnership with Angel Oak and the results of BFNS 2022-1 as the first of many exciting announcements in a long-term collaboration.

 

CJ: The real estate market has shown signs of softening recently, what are your thoughts on this?

JV: We have been hearing pleas from government agencies and other organisations for the private sector to step up and help with the housing markets and that’s what we are seeking to do. Brightvine’s goal is to increase liquidity for mortgages, fixed income and real estate by building a new technological infrastructure that can connect these markets to new forms of digital investors – whether rates go up or down, people will still need mortgages, and our role is to help increase efficiencies on the back-end of that financial infrastructure. 

 

CJ: Do you believe as many crypto projects will go under this cycle as they did in the previous crypto winter?

JV: What we are seeing in the crypto market right now is a slight contraction and correction as projects succeed (and fail) while traditional and cutting-edge companies alike are trying to prepare for a Web3 future. As we emerge from this crypto winter, the next great wave of companies and products will also emerge – and the winners will be those that bridge the gap between TradFi and DeFi and create something new that enables digital transformation to usher us into a truly decentralized future.

 

CJ: How are the Fed’s rate hikes which obviously affect mortgages, impacting this collaboration and business model going forward?

JV: With the Fed increasing rates it makes it harder for people to afford loans, but the demand for housing and the need for mortgages isn’t going anywhere. We believe that the efficiency and new demand Brightvine can drive to these markets can help reduce these rates over time.

 

Sticking investable assets on the blockchain is a common pursuit in today’s world of cryptocurrency. While the benefits are many – some of the most notable include greater accessibility, reduced friction and fees, and the potential to split up illiquid assets – the challenges are also plentiful. 

Brightvine, a blockchain-powered investment platform that connects vetted issuers of real-world assets to digital investors, is one such firm tackling this challenge. Today they announced a partnership with Angel Oak Ventures, the technology venture arm of Angel Oak Companies, which works in innovative mortgage solutions. The partnership will look to leverage Brightvine’s platform in exploring new investment avenues for investors. 

It’s salivating to think about the impact on the wider financial market if real estate and blockchain can be merged successfully. The notoriously illiquid and inaccessible real estate market could be transformed if anyone could ever crack how to successfully tokenise these assets. To get answers on why this is such a challenge, the progress being made, and what exactly this partnership with Angel Oak entails, we interviewed Brightvine CEO Joe Vellanikaran. 

 

CoinJournal (CJ): People have long fantasized about real estate living on the blockchain, but so far the progress has lagged behind other sectors within crypto. What do you think the reason is for this?

Joe Vellanikaran (JV): There are two main reasons: Low awareness in the real estate industry of the benefits of blockchain and poor infrastructure to support real estate tokenization. The real estate industry is incredibly sophisticated with well-trained, financially savvy individuals tapping into many options that currently exist to finance their investments. However, most appear to be unaware of the benefits that blockchain provides for real estate, such as greater liquidity by reaching a broader based of investors and efficiencies gained through automating redundant functions through smart contracts. Even though crypto and blockchain have been around for over a decade, there still isn’t a technological solution that properly appreciates the dynamics and nuances of the real estate industry. That’s where Brightvine comes in. 

 

CJ: The press release outlines reducing “friction of traditional secondary markets” as a benefit to the tokenized approach. Can you please elaborate on what you mean here?

JV: Despite the sector being many times larger than equity markets, there is no NYSE for mortgages, real estate, or fixed income products. Sales and transfers of these assets are privately negotiated, requiring significant due diligence and transfer costs. Brightvine enables the seamless transfer of asset tokens across transacting parties — all while reducing audit costs through blockchain-based validation of documents and data.

 

CJ: What demographic are you targeting with the Angel Oak partnership – DeFi investors looking to diversify their portfolios by adding real estate exposure, but staying within the realm of crypto?

JV:  That’s right, but we are also targeting institutional and accredited investors in traditional finance who are looking to invest in asset classes that are too difficult to audit and track without Brightvine.

 

CJ: Will this make real-estate investment more accessible, given the typically large and illiquid investments can be fragmented on-chain?

JV:  Yes. We enable fixed income and real estate asset managers to raise funds from blockchain-based investors using tokens. These funds are typically financed by large institutions and rarely trade. Tokenizing the fund allows a broader investment base to access these high performing alternative asset classes, which are typically closed off to most investors.

 

CJ: What would you say is the biggest motive for an investor to invest in a tokenized real estate asset rather than via the convention trad-fi route? Or is this simply for investors who cannot access such vehicles outside of crypto?

JV:  The biggest motives are access and flexibility. This route provides greater portfolio selection and customization as well as the ability to easily trade your tokenized assets on a secondary marketplace. 

 

CJ: I joined the waitlist to join Brightvine. Why is there a waitlist, and when do you expect to open this up?

JV:  This year, we will be launching a platform that enables investors to purchase and stake digital assets on Brightvine.

 

CJ: Will Brightvine continue to focus on real estate, or do you have plans to tokenize more asset classes?

JV:  Brightvine is currently focused on the mortgage, fixed income, and real estate industries, but we’re always exploring new possibilities and open to pursuing other asset classes in the future. 

 

CJ: How could mortgage issuers benefit from your product?

JV:  We offer mortgage issuers access to the Brightvine Portal, which is a secure management platform that increases efficiency, security, and liquidity for mortgages and MBS. Loan originators and issuers tokenize their real-world financial products into digital assets, enabling the easy transfer of validated data with third parties such as investors, broker dealers, and RIAs. Additionally, issuers use the Brightvine Portal to coordinate and conduct primary offerings of digital assets to investors.

 

CJ: What do you think the future holds for tokenized stocks? Do you think either tokenized stocks and real estate will ever become mainstream, pulling capital away from the trad-fi sector?

JV:  I strongly believe that trad-fi and DeFi will eventually merge. Trad-fi is filled with scores of incredibly intelligent, hard-working, savvy investment professionals. It may take some time, but I believe the industry will adapt and adopt blockchain to enable all asset classes, from equities to fixed income. Eventually, we won’t even be talking about tokenization. It will simply be the technology driving a new financial market that is more efficient, transparent, liquid, and accessible. 

 

CJ: Do you have any fears surrounding regulation here? For example, tokenized stocks and other similar securities have been under tight scrutiny from authorities as to whether they represent securities. Will this affect Brightvine or their investors?

JV:  We respect and encourage regulation of the industry, and as a result, compliance is at the core of Brightvine’s products and offerings. Any securities offered on Brightvine will comply with the proper guidelines of the appropriate regulatory bodies. 

 

CJ: I’m from Ireland originally, where it has been very difficult for young people to secure mortgages since the GFC, with many getting caught in rental traps. Somewhat of a hypothetical question, but do you think tokenized real estate and mortgages could have a chance at lessening this problem eventually?

JV:  Yes! Let’s say the general public in Ireland is interested in improving homeownership countrywide. They could create and fund a blockchain-based liquidity pool that algorithmically purchases mortgages of borrowers in Ireland. This product increases liquidity for mortgages while the immutable ledger of validated data reduces expenses related to mortgages. Increasing liquidity and reducing expenses improves pricing for borrowers. Better pricing means that more people qualify for a mortgage which in turn improves homeownership. 

Additionally, the investors in the fund likely will receive a greater return than if they had left their funds in the bank! Brightvine will be launching a product to address this very problem later this year.