This month, Barcelona-based tech startup Brickken announced its selection to participate in the European Commission’s (EC) European Blockchain and Distributed Ledger Technologies (DLT) Regulatory Sandbox.
The sandbox aims to accelerate the development of blockchain technologies and platforms by putting startups and regulators in pan-European countries in direct contact, to test new products and services in real-life environments.
In its June 13 press release, Brickken stated that its inclusion in the sandbox represented “another milestone in its mission to revolutionize the tokenization industry” and “another step towards the adoption of blockchain by institutional clients, banks, and capital markets.”
CoinGeek caught up with Brickken CEO Edwin Mata to discuss the company, its involvement in the sandbox and what it hopes to achieve in the coming year.
About Brickken
“We are a tokenization platform, what we do is allow companies of any size in any country to be able to tokenize their assets, that is digitize whatever they want, such as real estate, equity, debt,” explains Mata. “We’re in the field of just providing the solution for companies to be able to tokenize themselves.”
Co-founded in Barcelona in 2020 by Mata, Yassir Haouati, Bram Duindam and Dario Lo Buglio, the company’s stated mission is to “empower businesses and individuals to tokenize assets, democratizing investments and revolutionizing asset management,” and its vision is to “create a global ecosystem for accessible digital asset ownership, transforming finance through innovation, transparency, and growth.”
Brickken provides technological support for anyone looking to enter the market without the need to develop their technology, as they can rely on Brickken’s infrastructure, which offers a “frictionless entry.”
Since its 2020 inception, it is now active in over 14 countries. The company has tokenized more than US$200 million in assets and boasts over 50 clients. According to Mata, there has been a recent boom in interest recently.
“Starting November, we saw an uptick because institutional players started talking about tokenization. We had BlackRock (NASDAQ: BLK), we had a tokenized bonds, and various other players entered the field. So that allowed us to really enter the market, because we were already here with a great product and we understand the wave.”
This was reflected in a busy couple of months for the company, which saw it announce in May its selection to participate in PricewaterhouseCoopers’s (PwC) Scale program. Scale aims to assist tokenization and digital asset companies “scale up,” through a rigorous 12-week curriculum that includes masterclasses and personalized mentorship from subject matter experts.
Now Brickken heads into the EC sandbox, and Mata hopes it will usher in further growth.
“We want to test this bond structure. We want to go to the next level – can institutional players use blockchain for funded structuring?”
He goes on to explain that the sandbox is not just about testing products and growing the company; it’s also about increasing cooperation with regulators.
“In a perfect world, I believe we can benefit [from] the connection between the regulator and the private company,” says Mata. “In this sandbox, we’ve got 20 different companies with different 20 different use case, and it’s all about explaining to the regulator what we’re doing day to day… to explore technology and legality with the regulators and also receive feedback.”
This is one of the main goals of the EC’s sandbox, increased transparency and communication between regulator and company.
The regulatory sandbox
The EC, part of the European Union’s executive branch, announced the blockchain regulatory sandbox in 2020 to provide an environment for testing use cases for blockchain tech and digital assets as part of the European Blockchain Services Infrastructure (EBSI).
The aim was to provide legal certainty through facilitating regulatory dialogue and cooperation between innovators and regulators at the national and the EU level.
“DLT [distributed ledger technology] use cases participating in the Sandbox have the opportunity to demonstrate their innovative solutions and highlight their needs regarding regulatory guidance and legal certainty to regulators and supervisors in a safe and confidential environment,” said the EC at the time.
Participants in the sandbox would receive legal advice and be able to develop their regulatory understanding and extend their network and reputation through their participation.
The EC explained that the dialogues would be held “across industry sectors and geographic regions, which will help to identify and communicate best practices in the interest of the wider EU/EEA blockchain community. The sandbox is open to use cases based on any blockchain infrastructure.”
In terms of benefits to regulators and authorities, they would be able to discuss regulatory issues that have arisen on a national level in a cross-border setting with other EU and national regulators making use of the pan-European Sandbox framework that is established for this project. Regulators have the chance to support applications of use-cases for the sandbox that they find particularly relevant for a regulatory dialogue.
The sandbox was set up to host 20 blockchain startups annually, running until 2026. Companies (including start-ups and scale-ups), non-profit organizations and public bodies with a validated proof of concept can apply, with applicants vetted and selected by a team of academic experts from European universities. The EC then matches these companies with the relevant national and European regulators for a “constructive dialogue on the most relevant regulatory issues.”
As the EC put it: “The European Blockchain Sandbox has been set up and is being operated to facilitate the dialogue between regulators and innovators for private and public sector use cases. Legal advice and regulatory guidance will be provided in a safe and confidential environment.”
The sandbox was eventually launched in February 2023, and a few months later, in July, the first cohort of 20 projects were revealed.
The selected projects received regulatory and compliance guidance from a cross-section of European Union regulators based on their industries. The projects cut across several sectors, with transportation, culture, food, education, manufacturing, finance and telecommunications making the bulk of use cases.
Mata explains that the first set of cohorts were, more or less, just dipping their toes into the blockchain space, exploring, for example “a public ledger where you can like really see the transactions and put everything on the ledger.”
By comparison, he argues that this year’s selected 20—which was announced by the EC this month and included Brickken—demonstrates a greater diversity of companies exploring what blockchain can do, and working in areas that serve to greater amplify the potential of blockchain technology.
As well as Brickken—working in the trending area of tokenization of real-world assets—Mata gives the examples of fellow cohorts Hacken, which focuses on smart contract and blockchain security analysis, and DigiShares, which is “trying to get a tokenized real estate secondary market.”
Despite the diversity of projects, there is something all the various cohorts of the EC sandbox share.
“We’re representing the industry. I don’t know how many companies applied, but it’s important for the 20 companies on board to really show transparency to the regulator and tell them ‘we’re doing this in your field, how is going to be treated?’ Because others will come, it’s not like we’ve just inventing some weird sci-fi thing, we’re already in the market,” says Mata.
He goes on to suggest that the sandbox is “the perfect opportunity for the regulator to acknowledge the fact that this is here. It’s not just, ‘oh yeah, I’m going to test this thing now,‘ we’re already making a business out of tokenizing real-world assets, and they have to acknowledge that.”
For Brickken, this is a primary and crucial goal of the sandbox.
MiCA and regulatory uncertainty
The reason increased dialogue, clarity and acknowledgement between regulators and blockchain companies may be necessary, is certain impending regulation in the EU.
Namely, the European Union’s landmark Markets in Crypto Asset regulation (MiCAR), also called MiCA, which passed its final vote in the EU parliament in April 2023 and is gradually coming into force this year.
MiCAR brings digital assets, issuers, and service providers under a broad regulatory framework. Digital asset service providers, such as exchanges and wallet providers, must obtain a license from national regulators to offer services to EU citizens. Along with license mandates, MiCAR will provide new classifications for different digital assets, rules specific to those assets, proof-of-funds requirements for stablecoin issuers, and the requirement for any company seeking to issue digital assets/coins to publish a white paper containing information about the project, including possible risks.
The regulation became law on June 30, 2023, and the new framework will start to apply in two phases: the part of MiCA regulation containing specific rules applicable to stablecoins will start to apply as of June 30, 2024, and rules applicable to digital asset service providers will start to apply as of December 30, 2024.
“Unfortunately, right now, it’s a very messy situation because at the end of June, certain parts of MiCAR come into force, and the second part in December. The first part is around stablecoin, or asset-backed tokens, and we don’t even know which stablecoins and asset-backed are going to require a license,” says Mata.
MiCAR does explain quite clearly which types of assets will fall within its remit and what issuers and custodians of those assets need to be compliant. However, the confusion arises because, despite the looming end-of-June implementation date, it’s not clear if some of the major stablecoins are going to comply with the rules, and therefore, whether EU companies and investors will be able to use them.
“The most tradable asset-backed tokens right now are UST and USDC, and we don’t know if we’re going to be able to use those in Europe,” explains Mata.
UST, or Tether, is the most widely used stablecoin on the market, and USDC, issued by U.S. company Circle, is a close second. Both have signaled their displeasure with MiCAR’s stablecoin rules.
In February, a paper published by Circle criticized the EU approach as flawed, saying it would only push issuers away, while Tether’s CEO Paolo Ardoino stated in an April interview the company’s unwillingness to secure permission to operate under the MiCAR framework.
Despite complaints, Circle has applied for an EU electronic money license (EMI) and is currently awaiting the result. Its CEO, Jeremy Allair, also said that its goal is to bring its products and services into full compliance with the impending MiCA rules. It remains unclear whether the regulation shy Tether will follow suit.
“Just the fact that we don’t even know what we can trade, is going to be reducing the amplitude of what we’re doing on a day-to-day,” says Mata. “The fact that there’s so much uncertainty is definitely going to have a huge impact on the industry. It’s always a concern about legality, but also about innovation. There are countries that are not going to be able to access the top-notch technology, just because they feel like the regulation is overboard. It’s fine, you’ve got to protect the customer, but at the end, you cannot start blocking innovation.”
Arguably, this is where the EC’s regulatory sandbox can come into its own, allowing a space free of regulatory uncertainty for companies to innovate in cooperation and dialogue with regulators.
Brickken’s hopes for the sandbox
“The outcome of all of this has to be best practices. The regulator issued a booklet for best practices recently on last year’s companies, they understood what they were doing, and they flagged issues,” says Mata.
The best practices booklet he refers to is the EC’s best practices report, which examines the progress the sandbox and suggests “best practices” based on observations, feedback and dialogue between participants and regulators.
Part A of the report was published in February and covered the early stages of setting up the sandbox, the first applications phase, the selection of the first cohort, outreach to regulators and the beginning of the first set of dialogues. Part B will likely drop before the end of the summer and will cover the best practices and lessons learned in relation to the first round of regulatory dialogues.
The best practices and observations to come out of the early phases of the sandbox, with the first set of cohorts, included that the setup of the sandbox and application website worked well; there was “great interest from innovators”; and for use cases which incur a range of different regulatory topics, a more in-depth dialogue with specific regulators and authorities appeared to work better.
The EC’s full observations on the dialogue between participant companies and regulators won’t be known until Part B of the report is published, but such productive collaboration on best practices is what Mata and Brickken seek.
“We want to provide information for the regulator, and on everything that happens, but it’s also a challenge for us because we are so deep into the innovation field that we forget or neglect the fact that it’s highly regulated,” says Mata. “We comply with absolutely everything, but this is also our testing phase. We want to put the challenge, to break in and say, we know the game, we have been working at this for years, we have inhouse and external lawyers, we have consultants, we have all of this to leverage the fact that we are compliant.”
Spreading awareness is key for Mata, to regulators but also to the market at large:
“It’s always about how we can spread more awareness, and this has been one of the key priorities of Brickken because we’re always out there publishing, doing interviews, mass media, going to events on blockchain. We’ve already been to six events this year, and we have about 12 more before the end of the year, which is ridiculous!”
One such event was the London Blockchain Conference 2024 (LDNBlockchain24), which took place from May 21 – 23, and at which Mata spoke.
Brickken at the London Blockchain Conference
The annual London Blockchain Conference brought together businesses, academics, developers, innovators, commentors, and blockchain enthusiasts to discuss, learn, and connect on all things blockchain, Web3, artificial intelligence (AI) and regulation.
Mata was part of a panel on tokenizing real-world assets, during which spoke about a move from stablecoins to tokenized treasury bills and financial instruments—something he said was a move along the risk curve.
He also assured attendees of the conference that that regulations will still apply to tokenized assets, reducing the risk of market crash. Tokenization, he explained, is a new way of doing things, but it doesn’t fundamentally change the rules.
In terms of his experience of the London Blockchain Conference 2024 and reasons for attending, Mata says:
“We started in 2020, we have always been educators. So as a business, we still have to create that market, and that’s the biggest challenge. We want to do these kinds of events, where we always find partners, clients, and then on the back of it we try to spread, “the gospel” that blockchain has a lot of different functionalities.”
Mata recalls that his specific panel discussion on tokenization was, “one of the most approached panels… so I would say we had an impact.”
“That impact matters, but it’s also about how we can echo that. I mean, the immediate impact can be that maybe 100 people listened to you. You will then leverage that and amplify it to thousands. We always do that when we attend a conference, for example, on our socials, to spread the word.”
This is the common thread through both Brickken’s participation in the EC regulatory sandbox and attending events such as London Blockchain Conference—to spread the word about the technology and increase transparency, whether that’s with investors or regulators.
Outside of increased dialogue, from a more practical standpoint, through its inclusion in the EC regulatory sandbox Brickken will be able to develop and optimize its solutions within a secure environment, potentially boosting its acceptance among institutional clients, market operators, and bond issuers, as well as facilitating its entry into new markets.
Ultimately, the company aims to become a strategic ally for various capital market players, maximizing their operational efficiency and “fostering technological synergy” in digital asset management.
A goal that Mata believes is closer to reality thanks to the company’s inclusion in the EC sandbox.
“I’m optimistic to find out how much Brickken can grow, through getting ourselves into transparency with the regulator – the issuer of the regulations we’ve been working with,” says Mata.
“Transparency in blockchain matters, so I think it’s a great way to showcase if we can continue in the same way. Are we going to be accepted? Can we keep innovating? Can we keep supplying to the market? It’s a learning curve, even for us.”
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