Privacy at Scale Evolving Digital Assets for the Future Economy

Good morning. Thank you for joining us this morning. It's an absolute delight as ever to be in beautiful sunny Abu Dhabi. Um I'm really delighted to be on such an esteemed panel. Um we're going to get straight into it.

We're talking about privacy at scale, evolving digital assets for the future economy. Um, Simone, can I start with you, please? Can compliance and privacy coexist? Thanks, Emma. I'll just briefly introduce uh myself and Elliptic.

So, I'm the CEO of Elliptic and we provide um risk intelligence and decision intelligence for onchain data. Um and uh I'm the CEO and uh can privacy and compliance coexist. Um interesting question. The fact that we're even talking about that question on a stage at Abu Dhabi Finance Week, I think really demonstrates how far the the industry has come, particularly this year, this kind of breakout year for institutionalization. Seven, eight years ago talking about privacy was very much a deep sort of philosophical discussion and now it's very much a more practical technologyled discussion.

It's uh one that we're having through sheer necessity. We're seeing that institutional adoption happening and that is what is forcing us to reckon with these these uh challenges of transparency on chain and privacy on chain. When it comes to compliance, I think that's a false dichotomy to think about are they at odds with each other. I know that's a very um sort of traditional concept that those two things can't coexist. Actually, what we need is for them to be mutually reinforcing.

Um and you know, I'm sure that there are lots of views on the panel about that. Um but certainly there are many ways to be compliant while also protecting privacy. We need privacy and compliance for continued adoption.

Okay, perfect. Thank you. Um let's hear from the panelists. What do you think?

I absolutely I believe they agree. So I'm Fi. I'm from the Midnight Foundation. uh midnight we've launching an L1 um that enables rational privacy, programmable privacy. So I come from a two decade plus career in financial markets or work for one of the largest hedge funds.

In that world you find price discovery, liquidity discovery, execute, settle, move margin and it's between you and your counterpart. It's private and yet you can then disclose compliance requirements as required to your compliance team to your regulator provide filings. So it already exists in the digital world in the financial world that we all live in in the blockchain world that we have all adopted uh with the advent of Bitcoin and the pro programmable sort of programmability through um Ethereum and other blockchains that came and followed. We all accepted that decentralization and this truth layer which allowed dissemination of information of borderless payments, controls, asset ownership, disintermediation that that truth can only be acquired through transparency. That is not accurate.

Transparency and truth aren't the same thing. and large financial institutions are not going to put their assets on chain and and disclose not only what they own but what they how they trade into those assets publicly. So we at Midnight believe in an ability to have programmable privacy where you control your data and metadata completely offchain, present proofs on chain and then through the smart contract enable what you share, when you share it, with whom you share it. And that might include sharing it with not only your counterparties to open gateways to transactions and asset management or lending and borrowing, but also opening that up to potentially compliance teams, tax accountants, and others. Thank you.

Um, Azim, what are your thoughts?

Uh, hey everyone. I'm Azim. I'm the co-founder of Maiden. We're a privacy preserving blockchain that raised a $25 million seed round from Andre Horowits and others earlier this year. Uh, the entire premise of what we're building is that compliance, privacy, and scalability can coexist within a blockchain.

And I would say one of the biggest things has just been that there's a sort of regional difference in understanding what that actually means. And so currently in the west when you're in the US uh the idea of privacy tends to be equated with the North Korean Lazarus group being able to funnel money into a nuclear program. But when you come to places like here or in different parts of Asia, uh the idea of privacy is much more uh connected to what a Swiss bank account would be like. And we're in the place now where the technology exists from people like this looking at what it's going to take for us to do institutional adoption and compliance is absolutely going to be a necessary component that I think is moving forward and a big part of it just going to be the regulations and so uh later this month uh Hester Pur the commissioner at the SEC is hosting a privacy roundt where they're talking about a lot of this at length and I think that as soon as we see some of those regulations sort of come into play we'll see the rest of the world, sort of copy them and see how we're able to move forward on that.

Thank you. And Mike,

uh yeah, hi. Uh I'm Mike Reed. I lead partnership development at Franklin Templeton for everything we do in digital assets and we've been in the space for quite a while. Uh develop Am I allowed? Am I too loud?

Is this okay? Okay, great. Thank you. I never know. Um there's no monitors or anything.

Uh so um you know, we've been developing on on blockchains for quite some time. We we've led with public blockchains. We developed on nine public blockchains first before developing on any kind of private blockchain at all. And really it was all driven by customer demand where um what we found is that the more cryptonative excuse me cryptonative clients um they're fine being on a public chain. They love it.

Uh everybody sees everything all the time. I can check my balances 24 hours a day, 7 days a week. Um, we found some of the regulators actually like that as well because instead of having to subpoena us for trans transaction records, they can just see them uh available on a public blockchain. So, a lot of folks like that. However, uh, you know, the more sophisticated the investor in terms of like traditional hedge funds and groups like that, privacy matters a lot.

I mean, there were there were people who run big trading shops yesterday on stage talking about what a concern privacy is in this space. So, uh I I think I think both are going to I think both of those things, public and private uh layers are going to exist and I think there's going to be hybrids as well that do a little bit of both. So, um yeah, it's a pretty pretty interesting space that's developing right now.

Thank you. It's certainly very timely. I think I don't know about you, but you know, walking around the conference, one of the main conversations I've been having with everyone is about privacy. Um Mike, staying with you. Um what what do we need to do to make it work?

Which part?

Well, how do we how do we move forward? How what's you know, are there any examples out there of how, you know, privacy and compliance work best together? How do we what's the, you know, where do we want to get to? And I know we don't have long, so we might not have time to get regulations quick. Yeah.

I I think um uh and by the way, I'll be around if anybody wants to talk more about this this topic, but uh I I think choice is what's important. pro providing the end investor with a choice of what they what they want to do. Um because again some people care, some people don't. I think there's two super powerful forces that we all underestimate uh in this space. Uh economics and inertia.

So like e economics everyone gets really excited about the potential and where things are going but but it's not quite there yet. Um and then inertia a lot of the incumbents are just stuck. They just the systems work. Like a lot of the traditional systems work and they maybe aren't the most efficient and aren't the best, you know, think think about like treasury management, liquidity solutions. They work.

We we run a money fund on chain. We we approach some of those players and they're like why who cares like why? And so you have to come up with things like you know functional differences and stuff like that that that take advant we have a we have a thing where income occurs in our product by the second. So now if I send it to you in the middle of the day, uh you acrew half of the day's yield and I acrew half of the day's yield and when the income drop occurs, we both get half. That that can't happen on traditional systems.

So things like that new functionality are really what's driving people towards some of these new solutions. But that that inertia thing is pretty pretty challenging.

Tammy, what do you think's important?

It's a great great question. There's a number of things. Um choice. So again at midnight what we're enabling is choice. It's a public permissions blockchain but we have counterparts partners who are coming who are regulated counterparts with UK banking license licenses in Bahrain or Singapore and other jurisdictions.

And what they recognize is they want to put deposits or assets on chain privately but have the ability to share that information not only with regulators for but for open up other solutions. So if you go take the money market fund example in my hedge fund days I had3 4 billion dollars parked in money market funds that to reduce credit risk at the banks I would park it in the money market funds um but as I did that I lost margin and loss of margin excess is a loss of liquidity or ability to put a trade on quickly at midnight with counterparties exploring how you take a a unit of a fund that's a hedge fund a private equity or a money market fund and you can selectively disclose proof of the underlying portfolio proof of its wham proof of its composition in terms of cash deposits versus uh more longerdated maturities. Are they public gouvy securities? Are they uh more corporate securities? If you can provide that proof, then something that money market fund, that hedge fund unit can be used as collateral for other purposes.

It unlocks other gateways. But it's more than just assets. Data is money. Data is monetized by everybody every day. whether it's the large Mac7s whether it's asset managers and others.

So we're exploring how data for medical firms clinical trials supply chain logistics military all of those things can come to a public blockchain where they can create permission pools. But if you're going to do that, not only do does the technology need to evolve, you need to get over the inertia of convincing people this technology works, but you need regulation that understands that proof zero knowledge proofs are also can be accepted as addestations of identity or accreditation.

Thank you. Um, what is missing do you think?

I think it's just time to be entirely honest with you. Uh, we're absolutely at a place where I think the technologies are being made or exist. Uh we've been chatting with folks that would be able to help, for instance, handle the KYC issue that would come up so that you can have a non-custodial wallet that can still show KYC as they're going about doing things. And a lot of it is just especially as we get towards institutions, the kinds of deals that you're looking to make happen, they comfortably take a year or two. You know, I've done onchain deals with the UNICEF, Shell Oil, the American Cancer Society, and in the past when we were doing those deals, it took a year to get the deal live after we had already agreed to what it was that we were looking to do.

And so, I think a lot of it is just we don't realize it yet publicly, but the conversations and what's needed to be done for compliance and privacy and everything to be on chain are absolutely already in motion.

Thank you. And Simone, what are your thoughts on what may be missing or what we could do to improve things?

Yeah, sure. So, I think it's really important that we don't underestimate how difficult and slow the development of this might be. On the technology side, things are moving really quickly and we have some really great examples on the stage of folks that are building really technical complex solutions to this problem. But the policy and the regulatory discussion doesn't move at the same pace. So one of the things that we have to be really wary of is how do we how do we help those conversations progress in parallel?

And as I said at the beginning, the fact that we're even talking about this at finance week does really demonstrate how ADGM think about it. Not all regulators think about it like that though. And so it is in incumbent on the ecosystem developers, the financial institutions, the analytics companies to bring the regulators into that conversation because this is about trust. You you know you know uh I've used this analogy which is is terrible but with our space it's like that old carnival game where you hold on to something and it's buzzing so hard and and you hold on to it for as long as you can to win the big bear. We're at that moment right now where everything that the time point is so strong like the economics thing that I mentioned earlier, it's coming.

We all see it. Uh we just, you know, we're holding on and being like, okay, once everything is built, uh the people will come.

Yeah. And I just add to that, I was in a panel last week with three uh tier one investment banks and they're innovation leads or digital asset leads and all three were asked what's leading them to this space and they said regulation. And I was disappointed because I said innovation should lead regulation, not regulation lead innovation. And where innovation technology, we're at the right space. Take mid and what they're doing, what we're doing at midnight.

Zero knowledge proof existed at the time Bitcoin and blockchains came about. But just applying the two of those allows a world of permissionless networks with privacy enabling solutions. I'm glad to see Azim on the stage talking about what he's doing because at midnight we're doing something very similar and involving that. But what we need to do now is to sit with counterparts like Simone at Elliptic and go and sit with the regulators and help educate the regulators as to what it is. And I'm glad to see that here in Abu Dhabi and in the region just generally that they recognize that the technology will advance solutions not only for financial assets but also for society and they are very actively and very proactively involved in taking that a center stage and moving it forward.

So it's not that's why we're here in Abu Dhabi finance week is to engage with counterparties uh of that type.

But let's not forget that the transparency of the blockchain has been used by all of us to advance adoption.

Yeah,

we have been in some sticky spots as an industry. You know, we've we've experienced some really challenging moments, whether it's hacks and scams or

complete company failures, and we have used the transparency to rebuild trusts with the wider population, using the transparency to demonstrate this is how we can identify and go after money launderers, using transparency to demonstrate proof of reserves, whatever it might be. So, we have to be measured here. And I think this the hybrid approach is what's really powerful. We have to be measured in how quickly we move from transparency to privacy and acknowledge that there are lots of counterparties and stakeholders that we have to bring on the journey with us. So thinking from a really practical perspective well how do we do that?

We build ecosystems and protocols that have these hybrid features built in. The analytics capabilities also have to evolve to say okay it's not that everybody should be able to see everything all the time. We can create layers of permissioned visibility so that the right people can see the right things when they need to. Regulators have a certain view so that they're comfortable. They're going to be able to see everything they need to when they need to.

The banks want to see a different kind of view and so on. there's a full spectrum there. So that uh sort of concept of you know a federated permissioned uh viewability I think is going to be really important and has to be built into all the layers.

We've got two minutes so and I know we need to wrap up but I want to ask you a super quick question. um you know we're hearing about you know the tech is evolving quickly regulation maybe not as quick although I would say we in my role I work a lot with regulators and they are very engaged with industry and you know willing often to sit down and learn will 2026 as we look at many different jurisdictions you know laying out you know their different regulatory lands do you think if we were here in a year much will have changed on this discussion or will we be having the same discussion I would say we'll be in a good place. Hopefully the market structure bill passes by February, March. I've been chatting a lot with A16Z about that. Uh the midterm elections next year in the US could slow things down in terms of getting things done.

But I would absolutely say that a year from now, we'll be in a much better position around this.

Amazing.

Uh I'd say to anybody who's working with leg regulators, be collaborative, not combative. Provide education. Have as open a line of communication as you possibly can. Um, and that's kind of what we found to be the best way to approach it.

Yeah, I think we're going to be in a very different place even from where we were sort of six, nine months ago. The level of discussion around privacy has evolved immensely and I would expect that to continue.

Yeah, look, I think next year you see an evolution of these hybrid type solutions. Technology is advancing. The halfife of technology is getting shorter and shorter. uh we see that I remember getting the first ever mobile phone back in the late 90s and technology today and the way blockchain is advancing I think you'll see more adoption more recognition more engagements but I want to go back to one thing and the theme of the topic privacy is not about hiding anything or obiscating anything what privacy gives you is choice a choice to make a decision whether you share information to engage to create trust and once you have privacy and choice you get freedom and freedom and choice give you empowerment So it's about empowering users within our networks within Midnight to give those type of solutions and yeah I look forward to what the next year brings.

Wonderful and exciting 2026 ahead. Thank you so much to my panel. Thank you to the audience and enjoy the rest of your day.