Atomyze CEO Jeanine Hightower-Sellitto Discusses Digital Transformation for Commodity Markets
EPAM recently interviewed Jeanine Hightower-Sellitto, CEO of Atomyze LLC, to discuss her company’s groundbreaking platform, which will modernize commodity markets by digitizing products, starting with metals, thus opening up a wide range of assets to more investors.
1. Before we take a deep dive into blockchain and tokenization, tell us about Atomyze and the company’s mission.
Atomyze is the U.S. arm of a global FinTech platform that’s focused on modernizing the commodity markets, starting with metals. Our goal is to build a new and innovative platform to allow institutional investors to access commodities without the customary delays and logistical challenges in the current market, so that investing is fast and easy. By making the storage and trade of commodities like metals much simpler, we expect to open markets to investors that have never had the opportunity to consider commodities.
In addition, our platform will connect suppliers and manufacturers so that both sides can find efficiencies across industries, such as automotive, medical and consumer appliances.
2. Atomyze wants to re-envision commodities and expand access to commodities. Why is this important, and why now?
Commodity markets are ripe for development. Most people expect to buy equities with a couple of taps on their smartphones, instantaneously acquiring stocks or mutual fund shares at a competitive market price. Commodity markets don’t work that way today. Instead, they are needlessly constrained by antiquated processes and technologies. For example, some metals, both precious and base, are expensive and logistically challenging for investment managers to access.
Further, during the pandemic, interest in commodities has developed around a need for flexibility. Take palladium, which is used in catalytic converters to help reduce carbon emissions. An auto manufacturer would likely have a rigid, annual contract with a palladium supplier to deliver a set amount on a regular basis, say monthly. But you can’t build a car remotely, so many plants had to either halt or slow production due to the pandemic at various times based on their local COVID conditions. This left many manufacturers with either a surplus or deficit of palladium, which is expensive to transport and store. Our platform enables you to right size your inventory needs. This is the future.
3. This is a good time to talk about tokenization. Could you explain how that works on the platform?
Tokenization is a simple concept that is incredibly powerful. Using blockchain, we can securely assign title to a physical good in digital form.
In the auto manufacturer scenario that I just described, we’re talking about what we call “supply chain tokenization”—digitizing assets so they can be transferred easily among manufacturers and producers.
The other reason to tokenize is for investors. An “asset-backed token” would be assigned to a bar of metal sitting in a vault, for example. Tokenization in this case means that each bar is identified with a token, which includes a serial number and is tracked monthly by an audit. The token allows investors to freely transfer ownership via the marketplace without having to physically transport the bar of metal. This is really exciting because it will also serve to expand the marketplace by attracting new investors, who will be drawn in by the ability to experience a seamless transaction at a low cost. And you won’t need tens or hundreds of millions of dollars to invest. Tokenization will open up new opportunities for even small institutional investors.
Blockchain enables both types of tokenization and comes with the added benefit of associating metadata with the unique token. That means a market participant will be able to track the specific mine location from which a bar of metal originated, as well as every previous owner of the asset. Blockchain/tokenization offers enormous potential to track environmental, social and governance (ESG) metrics that are so important to investors today. Another environmental bonus with our platform is that it cuts down on moving materials across the globe needlessly.
ESG investing struggles now with tracking information, especially through the supply chain journey. Blockchain helps do that with ease so that investors truly know what they’re getting. And when we help connect investors to greener producers, then producers are incentivized to produce more earth-friendly products. Just as some shoppers are willing to pay more for organic milk, some investors are willing to pay more for green commodities. By connecting like-minded buyers and sellers, we can support and encourage ESG values.
4. Why has Atomyze chosen blockchain technology as the technology solution? What are the benefits of that approach to investors?
We couldn’t build the same platform without blockchain, which is inspiring innovation across many industries. Blockchain enables the security and traceability that the market needs. Investors want returns and blockchain helps make the overall cost of trading competitive. The efficiency blockchain delivers to trading carries over to efficient costs as well. The transaction costs for investing in metals via blockchain are really competitive relative to using a broker. Blockchain provides a direct transaction, including clearing and settlement, with no intermediary. It’s an elegant, instantaneous solution.
5. Atomyze wants to connect the entire ecosystem—investors and owners of physical assets as well as commercial users to buy and sell digital assets. What are the benefits to this approach?
We see a world where investors and assets don’t have to be separated from commercial users. Over time and with the right licensing, they can be on the same platform, interconnected. That’s the vision we are working on. In the near-term future, our platform will offer a number of benefits.
First, liquidity is crucial. Tokenizing physical assets is the single best thing you can do to improve liquidity. Instead of a limited pool of participants, you are bringing in new buyers and sellers. Transparency, which we touched on, and the ability to track metadata is an enormous benefit. We also talked about flexibility for supply chain contracts. Lastly, risk mitigation is a key benefit. In terms of the negotiation and settlement of contracts, today there is a lot of human involvement that brings a host of opportunities for risks and mistakes. The process is lengthy, and a counterparty could change their mind. Tokenization (blockchain settlement) is instantaneous.
6. You’ve worked with disruptive technologies in the past. What inspired the platform?
Our backers are a consortium of companies, some in the metals industry. They looked at their own businesses and saw that many of their commercial processes were ripe for development. The market is primed for change, and we have the right technology to foster that transformation. I was attracted to Atomyze because I want to work on market development with new asset classes. I’ve spent my entire career in FinTech, mostly on the securities market side. During 14 years with one of those FinTech startups, I watched our business—equity options—transform from a completely manual market, where humans were standing on trading floors clutching paper tickets and pencils, to a fully electronic business, where computers are trading with computers. That seemed fast, but now changes are happening even faster. The trajectory will be the same, though: We build it, there will be some resistance, people will adopt it and then they can’t remember how they lived without it.
7. You will first start by “tokenizing” metals. Why are you starting with metals? How do investors buy, sell and invest in metals today?
For precious metals, like platinum and palladium, there are exchange-traded funds (ETFs) but that’s not the same as owning the asset. Futures are another way, but they can be expensive and require a lot of management. Spot investment requires a broker, who would generally only deal in very large transactions. We know there is demand for an alternative because there currently isn’t a good access point.
Industrial metals like nickel, copper and cobalt are even more limited to investors because they can’t be accessed through ETFs or futures. Our platform opens entirely new avenues for institutional investors of all sizes. They can get direct, titled ownership of a metal, without buying into a trust or futures, and they can design their own portfolio—maybe investing in the metals that go into manufacturing electric vehicles, for example. Metals are a desirable, non-correlating asset with genuine investment appeal.
8. What are the future plans beyond metals?
We’re looking at a range of commodities, including some ESG-friendly products. The asset must have real-world backing; in other words, we’re considering physical assets you can verify, audit and secure, so we’re not talking about cryptocurrency. Keep an eye on us.
9. What do investors like asset managers and wealth management firms want or need in the future? How is Atomyze proposing to address these challenges and opportunities?
These firms need their products to meet strong compliance, licensing standards and regulations, and blockchain makes that easier. Unlike crypto, our platform isn’t open to everyone. Atomyze is regulated and has banking-level standards, so buyers and sellers must go through our know-your-customer (KYC) process.
10. Tell us about the Atomyze platform from the customer experience perspective—will there be a desktop or mobile app to access the marketplace?
Our platform is fully integrated. Institutional investors will likely prefer our desktop app, and we expect some market makers will want to access our platform through APIs. Customers will be able to log on, see the products and watch markets live. The platform will offer a variety of order types, including a request-for-quote function and a benchmark function to allow people to buy and sell once daily at a certain benchmark price.
We’re trying to bridge the old world with the new by accommodating different trading styles. The world we’re coming from in metals typically sees a price set twice daily and that’s their reference. The new world expects a continuous, liquid order book where they can buy and sell 24 hours per day.
11. When will the platform launch?
We’re gearing up now for a Q4 launch.
12. What is the key takeaway that you would want an investment manager or trader to know about Atomyze?
It’s important to emphasize that we’re providing two features for the marketplace:
- the ability for producers to tokenize inventories, and
- the ability for investors to buy, sell and exchange ownership of assets.
We have a product development team considering what’s next, so we’re interested in hearing from investors. We’re looking to expand beyond metals in the next year.