Ultan Miller is the CEO of Hecto Finance. He previously founded one of the first FCA-regulated digital asset investment banks and has been active in the crypto space for nearly eight years. He is joined by co-founders with extensive traditional finance experience from institutions such as Lombard Odier, Barclays, and Goldman Sachs.
We recently sat down with Ultan Miller, CEO of Hecto Finance, during Abu Dhabi Finance Week to discuss the shift in private markets and how his protocol is building the infrastructure to make pre-IPO equity accessible and liquid.
Hecto Finance positions itself as the world’s first tokenised pre-IPO company index, aiming to transform the private equity sector by making it accessible to a broader audience through secure, compliant, and liquid blockchain infrastructure.
Read more about Hecto’s strategy for the private markets and their partnership with the Canton Network in the interview below.
Hecto positions itself as the world’s first tokenised pre-IPO company index. What core inefficiency in today’s private markets convinced you this needed to exist, and why now?
The main inefficiency in the private market is almost intentional. Managers prefer to keep their companies private longer rather than going public. There are various reasons for this. For instance, public scrutiny faced by figures like Elon Musk with Tesla has prompted many to consider the downsides of being public. Additionally, fund managers believe that remaining private offers them more control over pricing. We observe this as a long-term trend, in which many of these firms may never choose to go public.
The reason we believe Hecto is feasible now, rather than in the past, is that the environment for tokenisation has fundamentally changed. In the past, people were very resistant to the tokenisation of securities. Now, with shifting political and regulatory landscapes, the environment is entirely different. We have industry leaders like Larry Fink and companies such as Robinhood driving the push for tokenisation. Additionally, the arrival of Canton is a game-changer. It is the first blockchain to gain genuine support from Wall Street, having raised significant capital from major players like Goldman Sachs, Citadel, and HSBC.
Pre-IPO equity is notoriously illiquid, fragmented, and difficult to access. What structural barriers does Hecto remove, and how does tokenisation finally unlock a continuous market for these assets?
The primary barrier is that many companies restrict secondary transfers to maintain control over their cap table. We overcome this by leveraging the deep networks of our team, which includes seasoned private bankers who have sourced these deals for years. This expertise allows us to secure access either directly or via SPVs.
In cases where direct ownership is restricted, we utilise legal structures like forward agreements or total return swaps. By aggregating these distinct methods on-chain, we convert these otherwise locked assets into a tokenised product that offers continuous liquidity.
How did you approach constructing the index? What makes this economically sound rather than just “putting stocks on-chain”?
Our approach is founded on extensive experience in traditional finance. We are engineering a robust financial product supported by diverse and legally sound exposure strategies. Specifically, we utilise a combination of direct share ownership, forward agreements, and swaps to ensure the index effectively tracks the value of “Hectocorns,” companies valued over 100 billion dollars.
By diversifying these exposure methods, we maintain the index’s robustness even if specific issuers restrict direct ownership. Ultimately, the aim is to create a product that is fully accessible across both TradFi and DeFi.
You’ve argued that tokenising pre-IPO assets opens new pathways for capital efficiency and global liquidity. What new behaviours or market structures do you expect to emerge when this index is freely tradable 24/7?
My aim is for Hecto to become synonymous with these prominent pre-IPO companies, just as the public markets refer to the “Magnificent Seven.” We want the Hecto asset class to be tradable everywhere, whether on-chain, from a centralised exchange, or directly from your brokerage account.
We are witnessing the emergence of a new category that will be defined and organised to complement the existing financial landscape. In five or six years, we expect this sector will undergo a phase similar to Bitcoin’s current stage, characterised by broader acceptance and clearer regulation. We aim to be the catalyst that elevates this asset class to that level.
Many chains have promised enterprise-grade infrastructure over the years, only to fall short. What did you see in Canton’s architecture that convinced you it’s the only viable home for Hecto?
The network’s technical architecture is unlike anything we have encountered in the blockchain space. It employs a programming language called DAML, which differs significantly from Solidity or Rust, but everything has been designed with traditional finance in mind, from privacy and compliance to the inclusion of legal documents within the network.
This emphasis on compliance at the protocol level has been highly beneficial for us. However, the most significant differentiator is the economic model. The incentives they have crafted are very innovative and are likely to attract a vibrant ecosystem of builders seeking a secure, compliant, and regulated environment for regulated assets.
Canton’s Proof of Stakeholder consensus model allocates block rewards to applications rather than validators. How is Hecto using this to build a sustainable liquidity-incentive programme for the index?
This is a crucial distinction. While Bitcoin allocates all its inflation to compensate miners, Canton dedicates a portion of emissions specifically to reward developers. This provides us with significant token incentives to effectively drive liquidity for this asset class.
Such a structure is difficult to replicate on other blockchains. It enables us to address the liquidity challenges inherent in private markets by using protocol-level rewards to deepen our markets.
You’ve described Canton’s ecosystem as already “battle-tested.” What does that look like from your vantage point as a builder?
It appears to be genuine institutional backing. When reviewing the cap table, with half a billion dollars raised from firms like Goldman Sachs, Citadel, and HSBC, it is evident that this is not an experimental network. We are collaborating with DRW, the trading group behind Canton, to build this into a universal product. Having partners of this calibre in TradFi gives us confidence that the infrastructure can support high-value, regulated securities at scale.
Tokenised private-market exposure touches multiple jurisdictions and investor classifications. How does Hecto architect for regulatory clarity without compromising the openness of tokenised markets?
It is a challenge, and unlike some who adopt a more relaxed approach, we are strict about compliance. We are issuing under the VARA framework in the UAE. VARA has established a special treatment for security tokens that grants them a unique status, exempting them from certain standard SCA rules. This simplifies distribution and broadens the asset class to a wider audience.
However, we must be cautious in how we promote assets globally. We collaborate with distribution partners who hold the necessary licences to deliver these assets to consumers and institutional investors across different markets. An end-to-end focus on compliance enables us to operate without cutting corners.
What risks still exist in tokenising and indexing pre-IPO assets, and how is Hecto addressing valuation opacity, corporate actions, data sources, and fairness for investors?
A primary risk is access and approval, particularly the risk that companies may block transfers. We design around this by maintaining multiple exposure methods, including direct shares, forward agreements, and swaps. If one route is restricted, we utilise alternative options to ensure the index continues to track the underlying value accurately. Additionally, we work with sponsors like Tokenvest to ensure our issuance framework is robust. By combining these structural workarounds with professional sourcing from veteran private bankers, we mitigate the risks associated with valuation and access in the private market.
If Hecto succeeds, what does the pre-IPO market look like in five years?
In five years, we will see security tokens reach the same level of maturity that Bitcoin has achieved today, with full regulatory certainty and widespread acceptance. We expect the category of private companies worth over 100 billion dollars to expand, as firms remain private for longer.
We aim for Hecto to be the leading asset manager for this private equity sector, similar to how BlackRock developed products for public equities. We are already receiving interest in launching other indices, such as a robotics index, sports teams index, or even a specific “Musk index.” Our objective is to present these products in a way that makes the asset class accessible and liquid for all.