EBC22 | A New Era for Financial Services

three two one [Music] hello good morning good morning everyone I'm pretty excited for this panel um we have pretty big names here and what we will cover in today again all the trends that we'll be shaping the cryptocurrency scope in the next few years so I will quickly introduce today's speakers we have Jonathan from suyed CMO and the head of sales of wheat Panda Gonzalo VP of government Affairs of American Express ripta's Chief commercial officer for bitmax and Michelle your marketing director of deep coins are big plows please for them great so let's start with the first question because we do have quite an interesting panel and a few things that we'll be covering um so the first question will be for Jonathan uh what kind of financial services will become vital for the financial ecosystem in the next few years well that's a quite broad one but maybe a good entry point to the panel um and we guess that um we will see that the ecosystem will expand quite a while from what we know we just had a short discussion on this side regarding cryptocurrencies and how they will be implemented in the area and realm of regulated Financial entities and we see that there's still quite a well lack of knowledge and and lack of will to implement I guess but I think the the prerequisite to get into that um is as well modularity we as well touched briefly on the aspect that um the ecosystem or the I.T system is better to say in the financial entities um are quite monolithic and are lacking flexibility to adapt and that that's going to be crucial if we want to enter a new era of financial services where it's easy to adapt and to connect and to offer a value added for a very specific area and Target group good thank you so much for that input now Gonzalo same question but now moving forwards to Payment Solutions um how do you foresee the world a few years from now in terms of integration of new crypto payment gateways well it's um quite difficult to say since uh evolution of payments and crypto is going quite fast we've seen that the last few years that Capital markets Financial Services uh International schemes paying companies have embraced or starting to embrace crypto consumers uh have definitely embraced crypto for in the case of Spain we have four million and a half users that whole crypto in one way or another so it's definitely growing [Music] um when something grows it brings the attention of legislators and Regulators especially when we can see that some systemic risks can emerge the latest developments of Celsius or land or Terra Luna are an example of issues that put on the radar of regulators potential problems that might arise and normally regulators start legislating before issues happen especially when we take into account uh presidents as the one of leban brothers that uh were very problematic and they definitely don't want to avoid it especially in a sector that is still not regulated our companies are in a kind of testing mode as is our case or the case of payments in general and now recently actually a few weeks ago Amex Lodge in its first crypto product on with hand of Abra so just wanted to highlight a little bit more on that how do you think crypto rewards credit cards will be impacting The Lending payment industry The Lending and payment industry in 2022 and 2023 talk talk to us a little bit about that partnership and how it has impacted your sector specifically while Abra so the partnership with I'm with you in Abra and American Express is uh is part of this uh learning experience and dancing experience in which uh we're involved uh every single company in payments or financial services is monitoring learning and following from very close uh crypto developments specific use case are something that are still being started because uh from a payment perspective payment with crypto is not cost efficient and is not a a possibility yet um Abra was created in 2015. it was Advantage with Amex started from the very beginning and this is part of uh the bet on Innovation and evolution that Amex sees on payments the card that Abra puts into the market for the time being in the United States aims at uh making payments available and at the same time providing its users with a crypto back being able to trade with crypto borrow to crypto Holdings or even earn from interest it's at a very early stage but we definitely see that it's a good learning experience in which we definitely want to uh be part of it great thank you so much great partnership harness purchase I think again we do have quite big names um with bitpan and bitmax together and one thing that I want to jump on is the role of cryptic changes in the in this new era for financial services so what do you think um probably rip this you're going to start first what do you think it will be the role of crypto changes in ensuring Financial stability in this new era and more importantly how crypto changes are building this secure Financial Market infrastructures to increase adoption in the next few years thank you for that question it's quite um important to if you reflect what has happened in the last couple of weeks in the spot Market but as well in the derivative exchanges as often our platform in order to gain trust and stability it needs a robust platform and it needs a robust service provider I don't believe volatility in in essence is a problem our market makers did a tremendous performance in the last couple of weeks they made a lot of money um and reason for this is because the system is stable the system is robust the system is scalable and in an ideal scenario you combine a stable system as a stable infrastructure with a regulatory umbrella I guess the times of operating in the shadow World under some kind of dodgy license from God knows where is over um Godzilla mentioned it um financial institution institutional adoption of the crypto space will only happen in a regulated environment it's a big step already for financial institutions to tap into crypto assets or secure securitized assets or tokenized Assets in any shape or form it's a big step to move in the direction for technical reasons and they do only want to partner with regulated entities because if I'm a regulated financial institution I cannot put my clients assets funds into risk with somebody not being regulated so there must be an even power gaming Battlefield and only those exchanges who have received or will receive shortly a regulatory shelter and umbrella will succeed and the rest will move more and more in the kind of Shadow and dark world and there are fans for it I mean not everybody likes transparency and and and and and and Regulatory guidance but if you are talking about Mass adoption and and bringing the digital space into the next level it needs to be a fully regulated environment yeah yeah on top of that I completely agree I think you know to some extent C5 changes are that Financial you know infrastructure that those FMI as you mentioned and we're responsible for not only what you all mentioned but also educating people right getting education out there within deep coin where the Small Potatoes exchange but uh we of course with all of our trading functions and everything we make sure that we have some sort of learning in the app whether whether it be a question mark next to the function or within our help center to make sure that people are you know educated about what's going on in the trades especially with like derivatives and leverage funding uh I think that it's very important uh you know to make sure that assets are separated from different wallets and you're not you know getting forced liquidation and and losing thousands of dollars right which did happen to a friend of mine so uh yeah you know all these things are important for building trust in the community having that transparency like you mentioned I think uh ruptus uh those two key words that you used uh trust and stability or core to you know what centralized exchanges actually do um I think engagement with The Regulators is a key theme for for most centralized exchanges um you know it's great timing this week uh bitpanda has actually just had registration with the bank of Spain as a vasp you know I I mean I know a number of our peers have have vast registration across Europe as well um I think that with uh the inter the the publishing of Little Miss gillibrand a couple of weeks ago um that that's probably going to prompt European Regulators to really firm up Mika and deploy it as quickly as possible I don't think they want to get beat into the post uh by by the US Regulators um and I think centralized exchanges are uniquely placed to be able to engage with regulators and ensure that any Financial Market infrastructure that's built is done so um with that context in mind yeah now I pretty much agree with the two of you now which assets crypto assets um do you think it will be leading the retail Market in the next few years specifically in retail let's leave the investors uh the institutional ones um aside which crypto assets and services will be the ones that crypto changes are now focused on which are the ones that will be leading the market uh baby Dodge to the Moon yeah no now in all seriousness uh I'm not sure but I think what we're dedicated to is just making sure that there's a diversification of assets you know available to investors whatever they you know of course you want to have projects that are vetted and you know well thought out but just making sure that you're allowing that for the average crypto people it's my take and maybe I think the ETFs are kind of cool love to see how those evolve I guess the crypto is not going to disappear again anymore I think it's it's going to be established as an asset class or as a new underlying it's not even as I'm concerned I had the discussion with any early on I mean in in fact crypto currencies are nothing else but FX as we used to trade FX 30 years ago now we trade Bitcoin it's the same old thing um just booked post trade a bit more difficult than normally you trade Fiat but in terms of additional products um I think the new technology is going to lead into a substantial decrease of production cost of new products if you consider how a stock is issued as in an IPO process how bonds are issued um how Dividends are paid how funds are monitored and and maintained and dividends in a fund are dispatched to the holder of the fund this to me sounds like a historic history book and not a lot has changed in the last 30 40 years now is the time where all these processes are changing with the help of smart contracts with the help of blockchain with automatic Ledger with transfer of assets with instant payments because the blockchain knows who owns the asset or who deserves the dividend payment is instant transferred this is going to make a tremendous change in the financial world going forward and I guess this is not necessarily meaning that stocks will not be traded anymore I mean you can't beat in terms of speed at least until now you cannot you cannot beat the speed performance of a fully electronic tradable stock on Etc Stock Exchange in Frankfurt you can't not any blockchain protocol is fast enough to do handle that kind of volume but in the post trade if I consider how clear stream in Frankfurt or AMF in in euroclear in in France how post trade settlemented assets Holdings are maintained that is just very antique and new technology will enable to strip down those prices and of custody the price of product production and which is to the benefit of the of the N2 users very very interesting view Andy yeah I mean I think it's a quite an interesting question to someone who works in an Institutional exchange so um I'll try and maybe answer this from the perspective of our institutional clients and then how that relates to the to the retail client base today service um so I think that um I think the next 18 months are going to see um an acceleration of of two streams within the retail market so massive acceleration of mass adoption uh and then a real sophistication of the products that are available to retail investors and you know the latter will be facilitated by better regulation and better oversight I think when it comes to the mass adoption um you know for me um it's going to be game five um you know I was on a panel this time last week in Brussels and we were actually talking about um you know the the business model of the gaming industry and you know who is going to be the first mover of the mainstream gaming companies to actually you know uh jump onto the crypto bandwagon and I think yesterday it was the GTA 6 is going to have a an in-game currency so I think you've you've now seen that that's now been the pivot um I think obviously nfts are going to you know continue to to be Mass adopted especially when you see like real world applications of those uh whether it's fractionalizing property whether it's fractionalizing or um or or securitizing really anything at all um and then I think that you know back to my point about the sophistication of the products available to retail investors you know um I think in a derivative space um those are those of us who come from Trad fire are very used to the dominance of of US dollar denominated derivatives I think especially for European retail investors I think things like your futures Euro options um could really come to the fore and that'd be very exciting to to be able to service um our institutional clients who are there and servicing their retail clients with those products I really like your point of view on that and actually I'm going to introduce an extra one here which ones which products do you think are going to gain less traction in the institutional space in landing well you say lending and at 10 degree but the end I was mentioned yesterday during the panel and I think Tim Grant from Galaxy digital managed to make the right message here lending and borrowing is part of our economic system without boring and lending everything is not going to fly far that's for sure so it's a question of how do you monitor your risk and how how you control your risk and when do you pull the plug and tell the customer guy I'm sorry you have to eaten up your margin either you bring fresh funds or you have to close your position and that's that's how the world goes around so um the question will be is there a traditional Finance financial institution Bank type of thing willing to take that role of a prime broker custodian um collateral provider um our classic slap desks stock lending and boring that's what it is I guess it will not disappear it just will be more controlled and people make sure that the funds are really there and when somebody wants to withdraw the funds that the funds should still be there that's that's the key that's not the question of lending it's the question of how to control the risk for Lending yeah I can agree more actually and I was being facetious when I said lending um I think those of us who saw 2008 um really the last few weeks you know it wasn't the end of the crypto world it was just crypto's version of 2008 and I think you know there was plenty of Lessons Learned out of that I think the the tradify market is infinitely more sound than it was um you know 15 20 years ago and I think the crypto Market will will also benefit from whilst it's been very painful for a lot of people and a lot of individual investors and it's very sad um the overall crypto Market will very much benefit from the lessons learned over the last eight weeks as well so you know to the point about lending products you know I don't think we're going to see you know really silly apis anymore I think we're going to see you know a real fine-tuning of the risk tolerance of uh the institutions that offer those products well Andy specifically has the years of experience in tradify so um if you don't mind me asking which products in chat file do you think that it will be key to trying to translate into like crypto space that in next in the next few years okay um it's a good question um so you know if you think about the child find markets um most I mean to ruptus's point most of them are severely Antiquated I mean they're running off of infrastructure processes Concepts that were founded you know decades ago um I think if you take even you know the most liquid trading products on a planet FX or FX uh the infrastructure for that is is is terrible really I mean why are we in a world where it's still t plus two settlement um you know so I I do think that uh and obviously some of the major players on Wall Street and and European banks are you know are you know dabbling in real-time settlement and I do think that there will be you know a lot of innovation I do see it coming first in the FX Market you know we're already seeing it um in in the in the crypto market so you know we partner with companies like um BCB which you know enable us to do real-time settlement which is actually your also facilitates us to do real-time settlement not only in crypto but in Fiat too so I think you're starting to see the cross-pollination of of uh real world blockchain technology into traditional Finance oh I couldn't agree more it's um it's an additional product sweep that I can see is going to make his way through is um making unbankable assets bankable this is something which is of key Essence I visited most recently a couple of um Geneva based private Banks sitting on trillions of dollars of assets under custody and very wealthy customers and they own a lot of property and even the account manager the wealth manager of this guy they don't know the exact number how wealthy is my customer and if I don't know his precise wealth I cannot give him the best service because I don't know what his liquidity situation is so if I tell them we can actually tokenize this building and it gets a price tag and there will be exchanges where you can trade non-banking plus it's suddenly making bankable and you find market makers who will be able to price that piece of property and provide a bit of a spread and you can do fractional trading it enables a lot of alternative essay classes and ways of of servicing uh wealth customers if you add new products to it and the technology is there for it it just needs to be the willingness of the banks of the financial institutions to make that step and it's as Andy said the systems are just crap to be honest sorry my French but it's just crap and the the the impact of blockchain in the core banking system cannot be underestimated because you are com comparing apples with bananas and people do not know how to get a security token or a crypto position in a core banking system and in order to risk manage it in order to what do I have to have Capital position in it how do I produce a report that the customer sees in his statement this is what he holds in crypto and this is what he holds in classic bonds it's very complex and that's the that's unfortunately the time designing Factor how much our financial students willing to invest in the new technology and how long does it take and new challenges trade Republic bitpanda um all these Neil Banks they come up with state-of-the-art new technology they don't have that problem that the classic Finance has and that's why I'm so bullish on all these neo-brokers and financial institutions would now come with this blockchain based fully electronic adaptation systems which is going to be the future [Music] here it is in the last few months and you have a pretty pretty similar view to rip 2 so what's your yeah yeah exactly it's just what I was thinking when these two were elaborating about the issues on post-trading Services um that um the issue is that you have a settlement system that takes two days until this the Securities arrive or any as it arrives at least two days to be honest um and that's exactly what we are tackling it's wired right to enable that we have at least for the institutional side for regulated Financial entities uh ecosystem where you can move any kind of asset and um I guess from a Trader's perspective uh it is an interesting solely trading a certain cryptocurrency you want to move it against something different because you want to have different viewpoints you want to have different expectations then you start getting liquidity into the market and um I think that's as well key to the adoption part of um cryptocurrency not not this not the only prerequisite but I think it's one one core element to get that into the financial infrastructure we have and to make it compatible and you said already cryptocurrencies are scalable um I think they have to become interoperable as a next step and and that's pretty exactly what we want to offer that ecosystem some ways can start establishing different use cases on top of it and the different financial services that you can book if you want to need if you want to use them if you need them and to combine it in your unique way and there's exactly the part of modularity and interoperability to combine it with scalability and what we are experiencing right now is the technological depth of classic institutions that's such a burden that's what I try to emphasize with the monolithic design of I.T infrastructure and of course newer players have an advantage because they don't have to deal with the technological depth but they will get to that issue soon as soon as they think I guess and um we'll have to find a way around it as well so um I guess it will be interesting to see if there is some kind of core petition I guess to collaborate uh on the infrastructure side and to get the different entities together with the common sense that on the business side there will be competition and it will be fierce just um just to follow on that point as well so you know coming from someone who works in a crypto exchange I want to drive volume onto onto the exchange all my peers do as well um it when you when you kind of look to the institutional client base the clients that are going to do that are going to be the asset managers and you know one thing that's going to get asset managers up and running is the right reg environment the second thing is and when you talk about real world traditional Finance problems and where blockchain can solve them is in the allocation process so anyone who's worked in traditional finance and worked with asset managers knows that allocations are a mess so quite often they're done post trades so a block trade is done and then an asset manager communicates you know which funds um parts of that trade are then allocated to the number of fights that break out between Banks and asset managers when this goes wrong um you know there's breaks um the the business that can get the allocation process right on the blockchain between asset managers and and the exchanges or anywhere you want to trade is the one that's really going to win in this game I think really really good way to put it now I do know that there are a lot of questions out there um because we have quite big names in the panel and every point of view was very interesting so I will entertain probably 10 minutes of questions um we'll open the Q a any question to the speakers any questions no questions Chris okay I too apologies I cannot see you because of the light uh Chris we like to go first and then uh my question is a changes how do you see the landscape evolving of centralized exchanges versus decentralized exchanges and even the potential for traditional exchanges coming into space uh it's a great question um so obviously I'm biased to centralize crypto exchange um you know I think in terms of um trading we have the edge in terms of latency um crypto is inherently of volatile so in volatile asset classes you want to reduce latency as much as possible to reduce slippage and then obviously to to avoid p l um so you know I think that that's where centralized exchanges have have the edge um I do think that um there is going to be a really important interplay between um C5 and D Phi um you know I think that there are custody products out there on the market which enable clients to you know effectively have a bridge between the two worlds um so I don't really see it being um uh whilst I'm biased towards the centralized exchange world I don't really see it being one's going to win over the other I think the two will coalesce together so centralized exchanges are really important for onboarding new people and bringing in you know new crypto users you know or just anybody that's retail-wise that doesn't know much about the crypto space I think C5 is really you know where you're going to get that safe wallet right I understand you're not going to have your own private keys but if you're new to this world you kind of need somewhere you can go to you can trust to have a safe wallet with multi-factor authentication you know just a password for us if you want to withdraw to you have to put in we have at least three asset codes if you want to withdraw anything so we want to make sure that your assets are all in a safe spot so you know I think C5 exchanges are really great at that and onboarding people and then you know once you evolve and you learn more about the space you move on to D5 move on to other products out there I think you see a constant Evolution um classic exchanges are moving into the crypto space or in the digital asset space such as Stuttgart or six Exchange in Switzerland a lot of initiatives neuronex has just indicated deutschebers invested in crypto broker crypto Finance in Zurich so there is there is a there's definitely a direction from classic exchanges tapping into know-how and experience in the centralized exchange business for crypto and the next step in than the D5 space I think we are just about to learn walking I guess the D5 space is actually running so if it might take a bit more time to establish and get experience and an understanding for for investors how the central how the product as such Works before entering into the space so they will always be smart cookies around who are excited in new technologies and doing your own financial management and they're excited in nd5 products and projects and earn additional yields and or save even more costs for transactions um I think this is a process from one to the other and and remember what I said earlier on it needs it needs a regulatory umbrella to to get it going and in the D5 space it's even more difficult to find fully governed providers good thank you the three of you and the second question was it please go ahead as loud as you can so they can hear it would not be the Holy Grail I mean I don't know if it's the Holy Grail there's plenty of problems out there to solve um I think that real-time settlement does it does improve trust in the market and it also massively improves liquidity as well and you know I think so if you're looking to improve liquidity in the market which obviously will then improve the overall health of the the liquidity ecosystem then maybe it is the Holy Grail well and I guess um settlement side at least considering central bank money is missing in the ecosystem for as well crucial for regulated Financial entities you do not want to move Commercial Bank money and getting into counterparty risk that you could do indeed uh in in real time so I I don't know if it's the Holy Grail but um it's it's maybe the last puzzle or last element of the puzzle we are missing at least for regulated entities to truly get into that space because then you can achieve some kind of delivery versus payment um because for the time being all we can see is a free off payment as an instruction where you always have counterparty risk until the other side fulfills their Duty and um we could show last year in the Securities lending area where we actually moved Securities not cryptocurrencies so sorry for that but we moved um securities and in an optimistic way we achieved the delivery versus delivery State and uh showed that we could replace the Securities on one side and Achieve um delivery versus payments so technically this is feasible that's not an issue um but we're simply waiting on a solution or as well searching for a solution on Central Bank money on the blockchain or related to blockchain because then I guess there is no reason or there's no argument anymore to say we aren't able to enter this space I would set from a payments perspective until there is not an instant settlement it will be very difficult uh to get Merchants embracing uh crypto because the main problems that they are facing is trusting crypto and the possibility that if they accept some or other crypto while they are they do the clearing and the settlement the value has changed and they have lost the sales so when this will be solved it will be much more easier to get Merchants accepting crypto even if they will settle instantly sorry this is this is super important and um it's it doesn't come by surprise that a lot of um governments central banks are considering the initiation of a central bank Euro digital Euro digital pound digital remember digital Swiss franc whatever it is in order to for certain facilitate instant settlement without any delay and without any price risk and as you rightly say if you paid your Amazon order in Bitcoin in Bitcoin now by the time Amazon receives the funds they might not be equally to the amount you you owe to the company or into the to the seller so that's that's one of the key of the key initiatives how to speed up payments in crypto or use the help of of digital Center money um and I know of of various initiatives in in especially in Europe where where the idea is born products are done and I'm carefully using the word stablecoin because we just learned that not every stablecoin is so stable um if but if you use a central bank issued um stable coins I think that would be a great step forward Michelle we like to wrap up that one I think these gentlemen said it all great I'm just here pretty fast when if I'm allowed to add still to add is that especially in times of Crisis the instant settlement will be key because if you don't have the element of trust distrust or surprise if your funds or your assets will arrive in today's this might be the reason why you do not trade in the terms of CR in a moment of Crisis but if you know it's instant settlement there is no reason again holding you back and getting into the market because you know there is no risk in regarding the fulfilling of the duty of of the of the trade okay thank you so much um unfortunately we're running out of time so I do need to start including this panel has been an exceptional one thank you to everyone um I think that Andy Gonzalo Jonathan reputation Michelle will be around for questions if anyone please approach them I have learned a lot from them in the last two days and yeah thank you so much for attending this panel and thank you see you in the next one thank you very much can we go