Seif: I want to be prepared for whatever ETF 3.0 is

Entrepreneur is strengthening is company and, as ever, looking to the future. He tells Wealth Professional how he was "misinterpreted" and why he's betting on Ethereum's blockchain technology

Seif: I want to be prepared for whatever ETF 3.0 is

As befitting one of the industry’s leading entrepreneurs, it’s been a busy time for Som Seif.

On Friday, Seif’s Purpose Financial LP acquired 100% of Montreal-based online lender Thinking Capital Financial Corp in a deal said to be worth more than $200 million.

The acquisition followed an interview where Seif made headlines after he reportedly talked about how ETFs will become obsolete, explaining how his latest venture, Ethereum Capital Inc, is throwing its weight behind the Ethereum blockchain technology, which Seif believes could be a game-changer for the industry.

Seif said he was misinterpreted by the “obsolete” headlines and is merely following his instincts as an innovator by searching out what the next incarnation of ETFs could be; what will disrupt ETFs in the same way they disrupted mutual funds.

He said: “My comment was, we’ve done this because we need to be prepared for the situation, what if ETFs become obsolete? What is the technology that could make it [obsolete]? I’m not saying blockchain is it. What I’m saying is, it has potential.

“There is a powerfulness to this technology. For example, just by the virtue of the concept of the tokenization of things, a security can be issued for such low cost and a low time, you can tokenize anything ultimately.

“So you could effectively create a family of ETFs in the blockchain that could become, at some point in the future, more relevant than the family of ETFs in the real world.”

Seif said ETFs are still a great structure, if a little noisy right now, but insists he “just wants to be prepared for what ETF 3.0 is, and that’s what [Purpose] is preparing for”.

The Bay Street veteran believes most industry players will have their blinders on because they get stuck in their legacies and boxes they live in. He said: “That’s not who I am. I’ve never been that person. I’ve always led innovation in our industry. That’s what I do. So I do not believe the ETF industry is going obsolete in the next 7-10 years but it would be stupid of us to believe it would never become obsolete.”

Seif believes it was vital for his company to have a seat at the blockchain table and said we are only three-to-five years away for the commercialisation of the technology. He said there ultimately will be only one protocol platform and, right now, he is backing Ethereum to be the winner because it houses “all the developers, mindshare, and innovators”.

He said: “My guess is five years from now we will see a very different perspective of what this technology looks like and in 10 years our entire industry perspective will look different.”

He added: “We have to cut through the noise of the cryptocurrency type of perspective, and I think that’s what bogs down people’s perspective of blockchain. It’s the technology of the blockchain that matters now.

“As a result of that, the tokens that are related to the protocol layer – in the case of Ethereum, Ether – is a really valuable asset in the case of building a business on top of Ethereum because in itself it is a token of utility. Meaning that to be able to access the Ethereum network, you need access to the ether token, so owning that is very valuable. We don’t look at it as a currency; we look at it as a utility.”

Despite Seif’s enthusiasm for blockchain and his belief that it will become mainstream, he advises against the average investor putting anything other than a small percentage of your portfolio in the space. The reason: it’s just too early.

He said: “My view is I would not be putting significant amount of personal wealth [into the space] unless you are intimately engaged in maybe a developer, a technologist that is in the space already. I do think people should have exposure to it but my view is that bitcoin and things like that are not necessary things you want to be chasing.

“I do think bitcoin, by the way, has a shot as a store of value in the long run just because it’s the first. You don’t know about anything in the crypto space unless you know about bitcoin and therefore it has an allure to it.

“But our view is that Ether is the asset you want to own. I wouldn’t buy any of the mining companies, I think there is a bubble in mining and it’s because of the infancy in this space.

“The enterprises that are being built on top of the tokens themselves, those applications, those businesses have not yet been formulated or developed. So there is nothing for people to say I’m going to go and buy that, other than the currency or the tokens and in my opinion right now, I’d look at Ether as the token you’d want to own if anything because that’s where most of the value will accrue in the next 24 months in my opinion.”