Zoth – DeFi Dynamics: On-Chain Real-World Assets

Zoth: DeFi Dynamics : On-Chain Real-World Assets

SPEAKERS

• Jason Fernandes, Co - Founder of AdLunam Inc.

• Pritam Dutta, Founder & CEO of Zoth

Hello Jason, Hello Kim

hello, everybody, check sound, check sound. Can everybody hear me? Okay, awesome. Let's get started. Welcome, welcome. Welcome to Diving into Crypto. This is your host, Jason Fernandes, co-founder at AdLunam. This program is about sharing insights, strategies and journeys with thought leaders, movers and shakers and candlestick watchers. This program is brought to you by AdLunam, the all in one web3 investment ecosystem, empowering early stage startups. Feel free to use the reaction buttons as you heard just from the speakers. At the end of the program, we will open the room for QnA's from the audience. Your questions can be sent across to our Twitter account at AdLunam Inc., if we get cut off from the show, do come back to AdLunam Inc, and you'll find a new link that'll lead you back to the podcast. Okay, let's get started. Today. We have a very special guest for you that would be Pritam Dutta that is a founder and CEO of Zoth with over 15 years in FinTech, ecommerce and web3. Pritam is a founder and CEO of Zoth. He's built a successful FinTech venture and ztech unit of AbinBev managing. Over 300 million in annum, the venture aim to address the financial needs of MSMEs customers of AbinBev across the world. Pritam, do you want to just jump in and say hello and tell us a bit about yourself?

Hello. Am I audible,

yes, you're very audible. Hello, yes, you go ahead.

Hello, Jason. Am I audible? Hello, everybody. Yes, you're

please, go ahead. hello, yes, hi, Pritam, you're audible. Please go ahead tell us a bit about yourself, kind of how you got into Web3, and you know bit about your journey.

Am I audible?

Hi, Pratham, you are definitely an audible. We'd love if you can sort of jump in. Tell us a bit about yourself, how you came into web3, a bit about your journey so far. If you we are, it's nice to see you again. I'm glad to have you on the show. So, yeah, I'd love to talk to you a bit about kind of how you got here.

Hey, thanks, Jason, and glad to have this opportunity. You know, I still remember fresh first meeting almost five years ago,

random, right that we see each other here. I mean, so for the audience I Pritam had invited me many years ago to his to an event at Kimberly Clark in Bangalore. But yeah, Pritam, take it from there. It was really good. Yeah, it's really good to reconnect.

Yeah, life has come full circle. So hey, so I have been in the web3 space now for close to eight, nine years started my journey as a investor. Have been an early believer in this space, started with Bitcoin and then went into various altcoins. Been across the whole FinTech space. Earlier worked across primarily building businesses which are into providing financial access and more, I would say financial power to small and medium businesses across markets like Latin America and Africa by journey with, I would say blockchain as a full time career started about during the NFT hype days. Had a opportunity to build the advisor NFTs, which were one of the top NFTs At that time, kind of recording over 100 million worth of eat sale in a matter of four hours. That kind of led to, you know, lot of interest we saw companies started leveraging blockchain, stable coins for own treasury, global cross border, money movements, payments, and finally, it led to Zoth. And been building Zoth over the last one and a half years, primarily based out of Dubai, but pretty much kind of moving around all different location as needed with the job and yeah, really loving it and the and the opportunity. I believe that the whole web3 crypto space brings I have been all I have also seen the early journey of E commerce, like, if some of you might be aware, there's a company called Flipkart. So was a very early player in this space. So I saw how the whole ecosystem changed. And I believe web three is exactly at the same moment now, and it's time that, you know, it becomes the front and center of the whole tech then. Wage of tech revolution.

Yeah, you know, for them, I'm curious. A lot of people come into crypto from a philosophical perspective, or, you know, some of them come, come, come at it from a financial perspective, like maybe they invest as other people are from the developer perspective. Think that that can solve a problem. You know, a lot of people sort of believe, right, very strongly into the whole concept of decentralization, is that you sort of, what is your entry into web3, what got you passionate about this?

I think my biggest aha moment for me was, you know, really seeing the whole financial infrastructure that is that that is being built, especially leveraging web3, and I, I spent a lot of time building businesses in markets like South Africa and Nigeria. To give some context, you know, those markets, the local currencies, have gone through pretty much like a free fall over the last few years, and there has been a sudden surge of the population actually, kind of getting into crypto, driven by not by just trading or trying to earn that extra money, but just survival. And that's what struck me, that this space has the opportunity to really level the playing field. You know, it's need not be where you are born will always define the access to opportunities that you might have, and web3 really kind of break those barriers. So for me, that was a trigger point prior to that, you know, I was seeing, I had a sense of skepticism, but especially last four or five years, when I saw the huge adoption of especially products which have found right product market fit in people's lives, like stablecoin, I started, kind of realizing the impact it can potentially make over the years to come, and hence, God got all in

awesome, uh, specifically about Zoth, though I'm curious tell me, kind of how Zoth got started and how your journey with that specifically began. What was it like getting your team together? Was it like a team, you know, kind of putting all the people that you've known before you work with, you trust, put them together in a team and see what happens?

I got it, got it. And in terms of, by the way, I interact with your team a bit at an event in Bangalore, and it was very professional. I think we all got sort teachers, which we're very proud of. But yeah, I mean in terms of, you know, let's say on Chain Finance, what do you think? How does that sort of approach, the liquid address the liquidity, liquidity challenges faced by sort of more traditional markets. I guess that's one of the problems you guys are trying to fix,

right? Yeah. So see, the thing is, what we see as an infrastructure which connects traditional finance and your on Chain Finance. Now at one end, you know you have this large treasuries, individuals holding stable coins, native crypto assets, their own treasuries. You know there are various yield strategies that are available, but each of them have their own inherent risks associated with it, especially if you know they are in the very high APR at what we typically do is we'll bring very packaged traditional products, and we bring them on chain. For example, we do short term trade finance, which is primarily providing working capital for businesses for their short term liquidity needs, which are typically very short cycle, like seven days, 14 days and 12 days, fully insured and backed by collaterals or bonds, which are typically publicly created corporate bonds generating yields on themselves. Now all of these products are quite prevalent in the traditional market, and lot of institutional investors in those local markets have access to it, but the moment we bring it on chain, it opens a pool of liquidity. It opens access to a very new form of capital to these kind of asset classes. So businesses have a new source of liquidity, and investors also have a new source of or crypto native users have a new set of assets that they can access to get access to it. The second advantage is the secondary collateralization. So once you basically have these assets on chain, it generates way more secondary utility for it. For example, some of the Zoth products can also be put as a collateral across leading lending defy lending protocols. And, you know, stables or eat or Bitcoin can be borrowed against it now that provides a multiple secondary layer of utility or yield over the over yield, creating an ecosystem which is basically grows in both ways. So at one end, our financial institution businesses can have a new source of liquidity that they can address, and at the other end are primarily our customers and our users who get access to these assets. So builds this bridge which makes it easy and we typically serve emerging markets, primarily building this bridge, creating it, reducing the friction that's in between.

God, yeah, to find my mute button there. So what are the key factors, would you say, driving the market adoption of tokenized assets? I mean, what potential implications could widespread adoption of, you know, tokenized traditional assets have on Google financial markets? I mean, if you if you were to tokenize, you know, so many traditional assets, like, you know, gold and another app, even real estate, for that matter, and essentially throw that on the blockchain. What you know, implications would that have global financials?

So I think, you know, I have been in crypto since, as I mentioned, like, 10 years, and this whole asset tokenization debate has been around since then. The problem is there are two fold challenges that we see. One is that, you know, people say everything in this world will be tokenized. Yes, it will be, but it will take, take some time. And also see the biggest challenge is adoption and kind of really getting retail interest even now in the RWA sector, specifically retail, is not there. It's primarily institutions who are driving the adoption and the usage. So what I believe is that the first wave of this sector, RWA sector, and it could become big, would be products which have global price prediction possible, which have global price standards, like treasury bills, which have become one of the for example, tether is now the largest holder of USD bills, and lot of crypto Treasuries are holding on chain T bills right now at the same time. Products, for example, bonds, five. Financial instruments which have shorter lifespan, lower liquidity, would also find more traction, because these products have can have easy price Oracle they can be integrated with New Age price oracles to get the price feeds and integrate these products and bring them on chain. So what I believe is that the first level of tokenization would be bringing this financial assets on chain, the barriers to entry are currently obviously KYC, KYB, the lack of retail interest. But I think that's changing over a period of time as more and more definitive and traditional financial products mix. But yeah, tokenization of products like real estate, tokenization of metals, minerals, you know, things like that are still a bit far away. And I believe it's a kind of multi year journey. The first step has already started.

So you mentioned, you know, sort of regulations What do you think the how do you think the regulations impact the tokenization of traditional assets? You know, what? What changes do you think? What changes you think are necessary to sort of support the industry and ensure it's continuous, because there's always this sort of back and forth between regulation innovation and on one hand, you want to protect the investors, but the other hand, you know you also don't want to stifle innovation. So what's what do you where do you stand on that debate?

Yeah, so first of all, I think there is a five very fine balance between regulation and regulatory overreach. I believe, you know, no innovation has happened ever, and regulation has always come later. The problem in the crypto space is that, you know, it's not just the regulation. It also appends lot of established businesses drastically. For example, you know, like, lot of money, money transmitters, payment networks, banks see crypto as a threat. So there is always this mindset, hey, this is all rug pull, all this on that. So what I believe is primarily there needs to be a very fine balance between the two. And I think markets which have very proactive and friendly innovation, friendly regulations like the Middle East, especially Dubai, Bahrain, even in Switzerland, I've seen more and more adoption. And this is not just RWA sector. I think the whole crypto or web3 sector as such, has this challenge of what I would call multiple lack of clarity on regulation. It's going to take time, but I think it's not fair for us to also accept regulation to be there from day one. It's an evolving process. It's getting better, but it definitely is not there yet.

Yeah, I mean, also there's not any regulation. I mean, there's, there's quite a bit of regulation that, you know, seeks to protect investors, but doesn't quite give a path for regular companies to figure out how to, how to do it in a safe way, how to, you know, run their business in a safe way that's not going to get them in trouble with the regulators, right? Like they haven't. Even, from the even from the perspective of the United States, they haven't, you know, clarified what they determine is a security and what they determine is a utility. That's like one of the main problems. What do you think the what are the measures in place to ensure your security and transparency? Of on chain, you know, financial products.

So, you know, I can talk about what we have at Zoth means we typically operate under regulated MCD out of Luxembourg, which primarily allows us to kind of follow some of the guidelines and stipulations that comes with the regulations there. And most of our products kind of are structured, either through there or through our entities in the UAE or multiple other players in terms of safety and security. I believe that you know, as the space is evolving, there are multiple challenges that comes, for example, just few hours ago, there was this test I think a very famous security company did on an exchange, and, you know, it realized that there has been hacks, etc., or smart contract issues. So I think those, yeah, those, and it is millions of dollars worth of test fees that they took from the company, kind of, you know, it's all over the news. But my point is that, look, this is an evolving space. The only difference in crypto with any other innovation is it really deals with, you know, so called, people's money, or, you know, the, you know, tokens, which are basically kind of money, or there is a profit model, which makes it a bit more tricky. But I believe if you look at AI, or you look at, you know, any other e commerce, I remember from my very early days when, you know, companies like Flipkart were getting built, my friends used to get calls from the enforcement directorate that, you know, as if they are doing something very different, or, you know, even aI mean, there have been lot of regulations to lot of push to bring regulations to control AI. So I believe that it's an evolving space. The security and safety structures are not built. I think more and more companies, especially once they go at scale, try to bring the right infrastructure in place to make sure that things are more streamlined, there is more safety, security, smart contract, audit, regulation, separation of customer funds that happen, but, yeah, I mean, this industry is, is, you know, if you consider us with traditional finance, I would say traditional finance would be an 80 year old, and crypto will still be in his diapers, so it's a long journey to go, and it's a fast, evolving space. Yeah, you're right.

I mean, I think the accessibility of DeFi products is so what do you think, like I was saying, What do you think the accessibility of defi products means for small and medium sized SMEs,

yeah, so for us, for example, they don't really interact with the crypto, and directly, they primarily are receivers of the loans or the primarily The investment that comes the most the interfaces we basically serve as the infrastructure. The first step for them is really getting on board. They get on boarded to our infrastructure, which is typically an on ramp, off ramp player. And you know, like most of the transactions are then recorded on the chain and presented like presented and available to everybody to check and verify. But yeah, means it's, it's kind of still, uh, evolving process for most of the end customers, which is this, medium sized businesses. They, as of now, they only interact with our on ramp offering players, and it's, and that's we want to make it very easy for them to come to crypto once, you know, once the scale and size is reached, kind of get the full onboarding in place.

Yeah, actually, one of the, one of the interesting use cases of blockchain that I saw was sort of invoice factory and sort of enabling people to buy, you know, running operating capital debt for, you know, companies and allowing them to have operating capital so that they don't have to sort of go to banks and get things like that, because sometimes that can be a challenge. So I'm curious if you see any, you know, interesting use cases in that end, or if somebody planning on doing that in India, for example?

Yeah, so, for example, we do traditional we do invoice factoring. You know, that's one of our core products. We have a don't do it in India, primarily because, you know, most of our liquidity is sourced in stables, and that primarily is pegged to US dollar set of now. So we primarily look at jurisdictions like the UAE LATAM, and that's where primarily our focus is. It's a very good model, because in a lot of these businesses find it hard to get short term liquidity from traditional banking institutions. And for markets like the UAE, where banks do not even take a very proactive role in the financing, there is a big gap to be filled, a big white space which, you know, like crypto can fit. For example,

yeah, you know, you mentioned the UAE, and it's like, it's, it almost seems like every crypto company, or every company that's remotely in that space is very, very active in Dubai. I'm just, I'm curious if you guys have worked, you know, with the administration there at all, and try to see kind of Joe have any products locally, you know, targeted at the UAE market.

We are, we have, we have an entity based out of international feed zone, and it's also licensed there. We are very actively working with some of the top players in this space, both from the traditional finance as well as defi finance. See, in our case, the model is a mix of on ramp, off ramp, as well as what you call multi jurisdiction. So we don't really focus our entire operations in one jurisdiction, because if you look at the whole cycle, it flows through multiple jurisdiction. Currently, all our licensing infrastructure is in Luxembourg, but our intent is to kind of scale it across different locations.

So in terms of users, do you have a lot of UAE users? Or where are sort of users based out

of most of our users are currently institution, especially for our products, and they are based across Europe and Japan. Some of our customers, which is kind of end borrowers, are based in UAE, who are typically regulated financial institutions.

Got it. So either way is sort of an institutional play, both from a perspective of on both sides of the market. Yep, got it. And so in terms of the competitive landscape for tokenized traditional assets, what's the, what's the landscape out there, like, what are the main players? What are the sort of, what sets apart from other companies, and what are sort of other companies doing in the space?

Yeah, so you know that the whole RWA sector as such is kind of quite broad. Zoth sees itself as an yield play, which includes both permission, which is typically RWA, and permissionless, which is definitive yield where, where we what are the some of the top players in this space, especially on the permission yield side, is on the finance maple and centrifuge, while on the permissionless side, it's aggregated like Pendle or Athena. On the more permissionless side of things, adsorth, where we primarily focus on is bringing products which kind of innovate more on the UX layer side of things. So for example, you know, it's still very difficult for an institution to find defi native yield, or, for example, very safe and securely. At Zoth, we have, we have built this UX layer which allows our customers to get like based on their risk profile, choose the type of yield that they want access to it, you know, both RWA based and both permissionless and leverage out of it, our strong focus is emerging markets, especially that's where most of our assets are originated From, which also gives us an edge because of our strong physical presence, as well as deep understanding of these markets. And third, you know, like strong focus on the user experience part, you know, defi or whole web three, as such, the user experience is still a pain for a lot of people. That's an area we kind of have, especially like prioritizing in, like bringing that single interface layer, giving the access to people for access to it,

got it. And what do you see the relationship between traditional finance and DeFi evolving over the next day?

So I think there will be only one finance which is decentralized finance going forward. You know, it's, as I mentioned earlier. It's currently like an 80 year old man and a baby in diapers. But what I see is that the baby, which is DeFi running faster, scaling, getting more and more assets getting tokenized most and more approaches getting utilized, and this becoming the giant working closely with the traditional finance. So I believe that already large brands like BlackRock, we are working closely with some of the partners like MasterCards and chartered, etc. What we really see is that there will be a big play of this traditional player coming heavily in the decentralized space, and there will be only one form of dominant financial infrastructure, which is decentralized finance.

Got it, and where the technological advances sort of facilitating integration of railway access into DeFi ecosystems. I'm curious, from a product perspective, what's been sort of innovation?

I think the biggest integration between TradeFi and DeFi has been stable coins and. Pretty much the entire stablecoin Business is well based on the spread that they earn from the underlying US Treasuries, which is like the most simplest form of traditional finance that you can get. The second is primarily leveraging some of the traditional finance instruments like T bills bonds as collateral and using them for defi trading. So I think it's still very early days of linkages between real world infrastructure, in assets and defi infrastructure. But yeah, means it's kind of currently already happening.

Got it? And can you tell us about sort of Zoth track record? What are the sort of the good case studies and learning case studies of what sort of application of real world assets in the industry?

Yeah, so, like very specifically for us at Zoth, you know, we have financed the funding gaps. For example, in Latin America, we have worked for financing entities linked to Ministry of Singapore, especially in the UAE, we have been able to kind of finance some of the suppliers of the largest coffee chain, so kind of really creating an impact. We are currently working on few deals which will bring carbon neutral infrastructure to UAE, primarily finance to our jobs, proprietary infrastructure. So yeah, means there are multiple case studies which actually are, you know, it's not just being the trading that happens. It's actually bringing real impact to businesses, companies in this in the real world.

Got it. And can you tell us a bit why waste Here the future of web3 and the crypto industry? Hello, hello, yeah, I asked a question in terms of where you see the future of web3 and the crypto industry? Where do you see enjoy?

Hello, yeah, okay, great. What is your first philosophy? Do you tell me, like, kind of what keeps you going? What keeps you focused? What are you kind of hoping to achieve?

So look, I worked across different industries. Started my life with retail, went to e-commerce, then did ventures, then did FinTech and crypto. I believe that you know somebody, a person, should reinvent himself every cycle, because, uh, peak of a mountain is the foothill of another mountain. So that's my life. Journey has been I started when I started, for example, in crypto, I had, I knew nothing, and now, over the years, I had the opportunity to learn and build. And I believe that you know that learning that which keeps me going, I don't really need a vacation from my job because I really love what I am doing. And yeah, for me, learning is the most important thing. Am I getting better? Am I learning? Am I am I building the best in class, product, the best in card experience and creating an impact with what I am doing. Yeah, and that keeps me going. And for me, the biggest motivation to be in this space has been that the kind of impact means, when I saw personally the kind of impact USDT has been driving in LATAM, or, for example, small businesses in South Africa accepting payments in USDC, because Rand has gone for a tail spin. I can, I can really feel the opportunity that this space can provide. And, you know, that's what kind of attracted to me there. And you know, for me, it's all in means it's a lifetime

that's awesome. And just in general, you know, I'm curious about what your thoughts on Bitcoin are in the market. Is Bitcoin one of your, one of the reasons you got into crypto, like, what are your thoughts on Bitcoin? And sort of where you think the market is away.

And in terms of the ETF, the Bitcoin ETF, the Ethereum ETF, you think that is going to have an impact on the industry in general and particularly, let's say source particular business plan, or where do you think that's gonna land,

also directly? No, but I think see the any ETF, which brings capital to the whole ecosystem, is good for Zoth, because ultimately it's an exit liquidity. It provides the crypto native. Ecosystem, wider liquidity boost. So I believe it does indirectly help. Means, as the whole we are a crypto native company. We are building the infrastructure for a financial order which is not there, possibly not fully there now, but would be there over the next few years. So any further injection in capital, any more liquidity coming to this space just makes it better for us. So definitely, yes and yeah, means we are kind of quite confident that, you know, that's the way things are going to move in the future.

Awesome. I'm going to give it a second to see if there's any questions. Excuse me one second and see what questions there are from the audience. Awesome. So we have Eric who asking, what are the risks involved in in investing in tokenized assets?

So depends on the kind of asset that you are investing in, I believe that you know, tokenized assets double the risk. Say, if you buy a real estate directly, you have, obviously the risk of the price, but tokenized asset bring the risk of the smart contract also, and then there is a regulatory standpoint about it. So hence, like I am very bullish on tokenized asset which have clear priced oracles, like treasury bills, private credit, money, market funds, where there is a clear price identification, price discovery possible. I am less bullish on real world assets like real estate, minerals, watches, which have you know, it's very difficult to really know their actual worth and the chances of fraud are higher.

Awesome understood snowy as how do you collaborate with other industry players to foster innovation? Andreas common challenges, who are some of your industry partners that you sort of really look to again,

Yeah. So we work very closely with Huma finance. We work closely with stablecoin issue words like circle and tether. We work closely with other credit players, like brick and infrastructure players like Brickken and yeah, we are actually part of various alliances and coalitions like tokenized asset coalition or credit collective, which allows us the opportunity to kind of work with various players in the industry and move the needle forward.

Got it? Yeah, I mean the whole industry is driven by partnership. It feels, it seems like Omega asks what regulations have been made in place for RWAs organization. I know you mentioned this. You talked about regulation a little bit earlier. I'm curious, are there any regulations in India around RWAs, and sort of, how does that work?

We don't do anything in RWA. I believe the India market has significant regulatory challenges at this point now, and at Zoth, we have taken a weight and what approach. It's a large market, sizeable opportunity, but we want to kind of work in more markets where there is more regulatory clarity to start with, and then kind of focus on the Indian market.

Got it so we're actually going toward the end of this show. But you know, I really enjoyed it. I mean, the reason I had you on, uh, yeah, so I think it's been really, we're drawing towards the end of the of the show, and it's been really great for me, because I think, you know, we met a lot of time ago, and meantime, you got off started. So it's this amazing company. Now I'm curious, what's your personal philosophy, you know, what keeps you going as sort of the last question, but you can sort of end with some words of wisdom, maybe for young entrepreneurs or, you know, maybe for people that are maybe not as successful, that are working or to get them,

No, that's very well said. I don't think there's anything more important than zeal and sort of grit, True Grit, right? I mean, especially in the crypto industry, is probably the number one requirement. But yeah, thank you so much for your time. It's been great having you, having you on. I really, really enjoyed that. And yeah, very excited to see where you know crypto is going to go, and I mean, your result in particular, obviously, and yeah, thank you so much for attending and everybody else. We're going to be here soon on W to crypto. Look forward to seeing you guys again. Thank you so much. Thank you. Alrighty, thank you. Everybody have a good day. Bye.