Granite’s Hisham Akram

On the sidelines of the EnterpriseAM AI Forum, we spoke with Hisham Akram, CEO of Granite Financial Holding about Granite’s efforts to tokenize its money market fund, a process that the company has initiated in a controlled regulatory sandbox environment.

EnterpriseAM: Granite entered the FRA’s sandbox in August. Can you tell us what you are actually testing?

HA: Essentially what we're trying to do is test the best cases for tokenizing a money market fund. To do that we had to enter into a sandbox which was like a controlled environment where we can test certain concepts to see if they can be serviced by existing regulations or whether the FRA needs to enact new regulations to accommodate us. The main idea is to put all our data on a blockchain, tokenize a money market fund, and then look at the different use cases for it.

EnterpriseAM: Why test a money market fund first?

HA: Money market funds are being tested first because they act as "quasi-cash" with daily price discovery, making them the simplest assets to tokenize. There are existing use cases for money market funds in other developed countries that have already been tested. What you would be able to do is use it as a medium of exchange. It would act like a currency or a credit card. So imagine having a tokenized fund like Granite on your Apple Pay. You can actually go to a store and transact using a tokenized money market fund. It would be instant. It would be great for merchants because they get the money instantly. They don't have to wait for card collection.

EnterpriseAM: What does tokenizing a fund do in practice for the investor?

HA: I just mentioned one use case. You can essentially tokenize any physical asset. You can tokenize a building, an apartment or even a piece of art. Imagine for instance a very nice painting that is quite expensive. It’s worth USD 1 mn and uh you only have USD 10 k but you want to be a proud owner of that particular painting. You can buy a fraction or a portion of a particular asset which would have been tokenized and then you would be able to exchange it with anybody who wants to buy it but first you have to divide it up. So having fractionalization is the first outcome and then being able to transact; buy and sell that physical asset be it art, an apartment, a piece of land, or car, can take place very easily once you've achieved the tokenization.

EnterpriseAM: Does this remove the need for a fund administrator?

HA: In our case tokenization does not eliminate the need for a fund administrator. A fund administrator acts as the source of truth for us as a fund. He's the one entity that knows who has bought and who has sold. So when you tokenize a fund, you have to use blockchain technology which is predicated on smart contracts. Ultimately that data will sit with the fund administrator and he will continue to be the source of truth but it will change how the fund manager does business. I will not need to have APIs to communicate with him and tell him the transactions, the redemptions and subscriptions that have taken place at the end of the day. He will see everything instantly in real-time and so will the FRA.

EnterpriseAM: Are you looking at other types of fund tokenization in the future or just money market funds?

HA:The only fund that we have at Granite is the money market fund so that’s the only one that we're looking at tokenizing and as I said that would probably be the easiest and simplest fund to tokenize and the easiest to use in practical application. But if we can do it with the money market fund, in theory we’d be able to do it with a gold fund, a real estate fund, and art. The possibilities are infinite and the money market fund is a good starting point.

EnterpriseAM: What makes a money market fund easier to tokenize?

HA: Because money market funds are quasi cash. They're not exactly cash, but you know the underlying value of the fund on a daily basis. So it's very easy to have this price discovery and in our case the unit is one pound.

EnterpriseAM: What happens after the Sandbox? HA: The reason we entered into this experiment is to find out whether or not new regulations are required. There are certain KPIs that have been defined that will determine the success of this particular exercise and then we'll see if we need new regulations or not. In the interest of time, I hope we don’t, but if we do, I'm sure the FRA is going to be very forthcoming and cooperative because they would like to see this kind of product come to light but there is no particular timeline in mind. You can read more on how Egypt is on the same tokenization track as the UAE in our MENA + edition here.