Tokenisation of Real World Assets : An Interview With OpenTrade CEO David Sutter

David Sutter is the CEO of OpenTrade, an institutional lending platform that provides users access to a suite of on-chain credit products for tokenized real-world assets.

Through OpenTrade, institutional investors can lend USDC from their own wallets against investment-grade collateral and earn stable, predictable returns.

David, an erstwhile Head of Network Strategy for Centre and Chief Product Officer of Marco Polo Network, is a crypto industry veteran with a deep understanding of the application of blockchain and other DLT technologies in financial services and markets.

David, congratulations on your fundraising milestone. Can you tell us a bit about yourself? What's your route to blockchain and DLT?

Thanks a lot. We’re certainly thrilled to have such great companies, funds, and angels backing us so early in this journey. My route to blockchain is fairly unconventional.

A kid I knew in college dropped out to “mine Bitcoin.” At first, I thought that meant turning big rocks into small rocks. I read Satoshi’s white paper and fell down the proverbial rabbit hole.

I dropped all my post-graduate plans and started working on a Bitcoin hot wallet, one of the only in iOS at the time, and have been working at the intersection of financial markets and blockchain ever since.

For all of that time, I’ve been focused on the tokenization of real-world assets, blockchain-based payments, and the huge potential they have to rewire mainstream financial services and markets. OpenTrade is really the culmination of that experience and conviction in the direction of travel for financial markets.

Circle's Head of Global Policy, Dante Disparte, told me in a recent interview that blockchain technology needed to be abstracted away. Do you agree with him?

Absolutely. The path to a billion users and mainstream adoption lies through a time when the words blockchain, crypto, and digital assets stop being used, and instead, we’re talking about products and use cases - the what and the why, not the how.

By and large, the UX for most Web3 and digital asset products today is inferior to Web2, and that needs to change - and is changing. All of the complexity associated with current blockchain products needs to fall into the background to make them usable by the masses.

Can you tell us about the founding of OpenTrade?

Jeff Handler (OpenTrade co-founder) and I were working at Centre, the consortium of Coinbase and Circle that provides standards and governance for USDC.

During our time there, we saw a huge need and demand for institutional grade lending products for USDC that brought real utility value and real assets to the market, as opposed to the speculation which was rampant at the time (and still is, to an extent).

Prior to Centre, we spent several years working with fifty plus large financial institutions and multinational corporations on blockchain-based products for global trade and payments and immediately recognized both sides of the market needed each other.

Web3 desperately needed real use cases and real assets, and TradFi desperately needed tokenization and digital cash like USDC. OpenTrade is a technological, legal, and operational bridge between the two worlds.

Can you explain how the tokenization of Real World Assets(RWA)can inject more liquidity into DeFi?

This is a two-way street. I think RWA tokenization will bring traditional players on-chain, and this will lead to much more liquid on-chain capital markets.

Going the other way, I think RWA tokenization will open up previously illiquid asset classes to an entirely new investor base, increasing liquidity. For example, supply chain finance is a huge market that still runs almost entirely on spreadsheets.

The vast majority of liquidity is provided by a very small number of large banks, and there is a very small secondary market similarly dependent on manual, spreadsheet-based processes.

Tokenization of supply chain finance products can make investing in supply chain finance assets as easy as buying a stock on Robinhood and supporting a liquid secondary market for the assets.

This will open the business up to a huge world of new investors, support more efficient capital allocation, increase the velocity of assets and lending capacity, and, accordingly, increase liquidity. The race to the one billion crypto user market has begun.

You described OpenTrade as the first vertically integrated Defi platform for tokenisation. Can you explain how it works?

Technologically, we have a protocol that is a series of smart-contracts on Ethereum and Polygon which supports the end-to-end tokenization and lending flow. On top of that protocol we’ve developed a web application that provides an intuitive user interface, but others are free to develop their own interfaces on the protocol and it's designed to be composable across many different applications .

Lenders go through KYC before being onboarded, which concludes with white-listing their wallet(s). Once onboarded, lenders can make loans in USDC through the platform and earn interest.

It embeds USDC payments and financing directly in B2B networks and platforms. Borrowers can request supply chain finance and working capital loans automatically from their existing interfaces, like an e-invoicing application.

The financing is provided by lenders on the OpenTrade platform, who invest in the on-chain structured products. Circle provides the end to end payment flow, at the end of which USDC or USD is deposited into the borrower’s account, whichever they prefer.

Off-chain we have partnered with an FCA regulated investment firm, Five Sigma, who oversees all of the origination, structuring, underwriting, and off-chain operations for the products. This allows us to dynamically originate and structure a wide variety of products based on investor demand, offer low fees, and operate to a very high standard of professionalism and compliance.

What are your expectations regarding OpenTrade? Any parting words?

OpenTrade is a technological, legal, and operational bridge between traditional financial markets and digital asset markets. Going forward, traditional borrowers and lenders and digital asset borrowers and lenders will cross that bridge and become one and the same.

The end result is flatter, smarter, more efficient, and more inclusive capital markets on which entirely new businesses and products can be built. We’re just thrilled to have a role to play in this generational shift.