Digital Assets: The Risk of Staying on the Sidelines | EBC12

Yes, yes, yes. Everyone is welcome. Today, we are going to have a very interesting conversation. Today, we will be interviewing Mr. Joseph Saliba, Vice President of Caixa Banking Group .

He has been working at the bank since 2012, so it has been 15 years. You could say he is a veteran in the fields of finance, technology, and consulting . He has experienced many of the things we are currently going through in the digital space and on the internet . It seems like a very interesting conversation is about to unfold . Mr.

Joseph, please briefly introduce yourself, and I would like to ask you a few questions. Thank you, Victoria. Well, I don't consider myself a veteran of the banking industry . Because, as will be an interesting part of the conversation we will share later , I have gone through , I have gone through three jobs in my life . The first was the travel industry .

It is also related to what we are going to talk about today . Next, I expanded into the fields of consulting, outsourcing, and technology . And third, it’s a bit difficult to say how many years I’ve worked in each field . Because then I feel like I would look too old . The third was the banking asset management sector.

I did various things at Cassis, but my main role was to grow the company , and I did quite well over the past 7 to 8 years . We grew Cassis into a leading company in Europe and established Cassis's position to always be prepared for new technology and infrastructure opportunities . This is also very relevant to our discussion today . thank you. Thank you, Joseph .

So, shall we get started? Today, I will talk about the current status of digital assets . First, could you briefly explain the current status of digital assets and your forecast for what they will be by the end of 2026 ? Yes, well, whether digital assets actually exist is no longer an important issue. Whether it actually exists is no longer a matter of debate.

Yes, I am convinced that digital assets exist . What we are currently maturing, or frankly speaking, figuring out, is how digital assets will bring tangible economic value to the financial industry . And more importantly, especially for financial institutions, the question is what new operating model should be introduced . And that is exactly the part we are building . Digital assets are already with us.

The question is not whether it exists or not; of course, it will exist. The question is how blockchain will lead the financial industry in a better direction by adding value, efficiency, transparency, speed, and programmability . I think we are right at that point now . So, we are conducting experiments in this field . When I say "experiment," I mean that I am actually conducting an experiment in reality .

You are not trapped somewhere . At least at Cassis, money market funds and ETFs are being tokenized . We launched our own stableco in India. This is to process all transactions India. This is to process all transactions on-chain .

Without stablecoins or digital currency, you would have to use fiat currency outside the blockchain , which would inevitably halt the transaction process . So, we process payments and settlements smoothly through stablecoins . As such, we are making various efforts, and above all, the most important thing is for financial institutions to distribute these products . Because if you have issued tokens, you must be able to distribute them effectively . We are making significant progress in this area .

For example, Ant Group, a subsidiary of Alibaba, supports whale investors in distributing tokens through its own blockchain . Look forward to seeing how much momentum these movements will generate in the future . Well, so, in my opinion— as a true veteran who has experienced various situations—I believe that a positive storm called blockchain is raging, and that this storm will completely turn the financial industry upside down. This is how I view the current situation . thank you.

Yes, of course. With on-chain money market funds, on- chain ETFs, and even your own stablecoin currently under development, you are ahead of many financial institutions, aren't you ? I will discuss this part in more detail later . Because not everyone views the blockchain industry that way . However, another point I observed is that banks in Europe are entering the blockchain field .

Of course, not all banks are doing so, but thanks to MiCA, many banks are participating . This is a very encouraging phenomenon. Developing is a very encouraging phenomenon. Developing various types of products on-chain, issuing stablecoins, or providing cryptocurrency trading services for customers . Yes, that is the case for Europe .

However, looking at the United States for example, it is also interesting to examine how large fintech companies and cryptocurrency exchanges are trying to become all- encompassing exchanges . In Europe, banks are ahead when comparing fintech companies and banks , but in the United States, fintech companies and cryptocurrency exchanges appear to be ahead of banks. Why is that? And where are we going ? Are we going in the same direction ?

What could be the reason? As you mentioned, in the United States, cryptocurrency companies—that is, digital asset companies—are growing very rapidly and competing to become exchanges that encompass everything in the financial industry . On the other hand, U.S. banks are struggling to catch up.

Why are banks struggling to catch up ? From my perspective, first of all, the U.S. capital market is much more dynamic than that of any other country. Therefore, it can be said that financing is relatively much easier .

This is very helpful. However, I think there is another phenomenon as well . Before Trump was elected president, there were regulations that penalized U.S. banks if they invested in cryptocurrency .

For example, a large asset management company launched a cryptocurrency and deposited the cryptocurrency on a platform like Coinbase, while depositing US dollars in a bank. This is because banks did not directly hold cryptocurrency . In other words, banks were reluctant to invest in cryptocurrency due to regulations . Of course, this situation changed after President Trump's election , and now banks are belatedly jumping into the cryptocurrency market . The situation in Europe is a little different.

Well, as I mentioned, European capital markets are not as strong as the US to foster fintech companies, but European banks are very concerned about the dominance of US stablecoins . They are worried about falling behind in the new world being formed by blockchain and its infrastructure . So, as regulations developed in Europe, a framework was established for banks to invest framework was established for banks to invest . Of course, banks have sufficient financial capacity. This is exactly what we are doing.

Due to all these circumstances, European banks became enthusiastic about the US market. However, eventually, the two countries will head to the same destination. I think so. We will eventually reach the same place through new industries, new infrastructure, and many changes . Yes, so basically, the reason U.

S. fintech companies are ahead is that banks under previous U.S. administrations were unable to take any measures regarding the digitalization of cryptocurrency . Another reason is that the scale of investment attraction in the United States is enormous .

Therefore, we were able to secure sufficient funds to build a larger capital market and create an all-encompassing exchange . On the other hand, the scale of investment attraction in Europe is much smaller . Therefore, European fintech companies have not secured enough funds to build an all-encompassing exchange . And as you mentioned, banks have been concerned about the entire cryptocurrency market and the Euro, that is, the US dollar, the world's major stablecoin. yes.

European banks have the financial capacity to promote the introduction of such cryptocurrencies and the development of new products. That 's interesting. However, I think that ultimately, we are heading in the same direction . great. So, while I mentioned that European banks have accomplished a great deal, shall we talk a little about the challenges and constraints that still need to be addressed ?

I would appreciate it if you could clearly tell me about three or four problems regarding the introduction. In my opinion, technology itself is not a limitation . On the contrary, it is the opposite. You could say that technology has advanced tremendously. What I am talking about regarding technology today will still be being discussed three months from now .

By that time, the pace of technological advancement will be truly astonishing, and the new infrastructure will be of great help in providing much more functionality . Therefore, the technology itself is not the problem technology itself is not the problem . However, I think there are various other difficulties think there are various other difficulties . I believe the first and most important task is business feasibility . Speaking of digital assets, it is clear that they will become the mainstream in the future, but currently, their scale is not large.

Although some exist, most are at a very negligible level. Therefore, it is not an easy matter for financial institutions to make massive investments . This is because the business feasibility is not yet clear. To start investing, you need conviction and vision To start investing, you need conviction and vision , and we will look into this in detail shortly . Therefore, the biggest difficulty faced in the market can be said to be a lack of business feasibility .

Yes, this is the first one. The second is regulation. Regulations have second is regulation. Regulations have improved significantly compared to the past, improved significantly compared to the past, but they are still not completely clear . For example, we have made significant strides in the digital asset sector and are providing retail customers with specific functionalities available in the existing financial system .

However, we found out that we cannot provide these features . However, we found out that we cannot provide these features due to the MiCA (Digital Finance Act) . It is possible with MiFID, but not with MiCA. So, we are currently deliberating on how to resolve this issue and are consulting with regulatory authorities. There is a lack of clarity in the regulations, and there are also issues with overlapping regulations.

As a global bank, we operate businesses throughout the European continent, including Europe, Switzerland, and the UK, and different regulations apply in each region . The same applies to Asia and the United States . All of this causes difficulties. This is the second difficulty . The third is the operating model .

Since we primarily do business with financial institutions, their requirements differ from those of general retail customers . Financial institutions require everything from . Financial institutions require everything from trust relationships and security with companies like ours . Therefore, how can we operate everything we currently do in a sustainable way ? All of this governance and the security of digital assets are by no means simple .

For example, in existing systems, checking whether assets are held is relatively simple. However, conducting verification on the blockchain is complex. Consider the cases where you need to protect customers when trading with a broker. A different process from the existing system is required, and a new process must be built for this model to function properly. Although this complexity entails difficulties, if I could choose, I would say that the most difficult part is us—that is, ourselves as experts .

I believe that integrating digital assets into existing systems while complying with regulations such as security, anti-money laundering (AML), and know-your-customer (KYC) is the most difficult part in terms of human resources rather than technical aspects . Therefore, Casa has not only established a new Digital Asset Business Division , but is also conducting training across the entire organization, including not only the operations department but also the risk management, finance, and compliance departments . It is to educate on what the new architecture and infrastructure mean, and more importantly, how to integrate and find solutions to provide to customers . This allows institutional clients to enjoy the same level of security whether they invest in digital assets or traditional assets . Investing in existing assets is probably the slowest change.

Although the pace of technological advancement is very fast, the speed at which organizations adopt it will be slower than in other fields . This is a very interesting point. To reiterate, the first problem with financial institutions is the lack of clear business feasibility analysis. The second is regulation. Europe has the MiCA (Financial Information Analysis Act), but it does not cover everything .

So that is the core issue. The second is the operating model, that is, the difference between existing systems and new technologies developed for digital assets . The question is how to fuse, that is, integrate, these two things . And lastly, you mentioned it as a problem with people's way of thinking, right ? There is a risk management department, a finance department, and an innovation team, and we must make both the risk manager and the compliance manager understand that they need to adapt to change.

Because they have been doing the same thing for decades they have been doing the same thing for decades . It is a really big challenge. Therefore, it is very important to create education and cultural change , and education also costs money. Yes, that's good. Now, let's talk a little more about MiCA and various jurisdiction models .

Of course, there are various jurisdiction models, and asset management methods differ as well. How should I handle this situation? With different situations unfolding in Europe and the U.S. , how can we drive greater adoption ?

You mentioned Switzerland, the UK, and Asia, but I think MiCA is a very excellent system. MiCA brought us two major advantages . First, it increased credibility. Especially in Europe, when doing business with a counterparty, the first thing asked is, "Are you compliant with MiCA ? Have you obtained MiCA certification ?"

asks. This gives confidence to both us and our customers This gives confidence to both us and our customers . Second, and this is the most important advantage for me , is that regulations in this field have been unified across Europe . This is a very big advantage . This is because, if you look at the existing regulations, there were different regulations for Italy, Luxembourg, and so on .

MiCA brought these two major advantages major advantages . On the other hand, what MiCA has not yet achieved is an increase in trading volume. However, I believe that MiCA has clearly laid the foundation for growth . In addition, I was unable to resolve the friction with the existing system I mentioned earlier, particularly the organizational and operational models. However, we believe we are heading in the right direction .

To speak about other regulatory aspects . To speak about other regulatory aspects , each jurisdiction operates according to the existing financial system, priorities, and philosophy . Therefore, ultimately, the same regulations will not apply everywhere . The same MiCA does not exist worldwide; rather, there will be US MiCA, Asian MiCA, UK MiCA, and so on . You must remember that the goal of these regulations is the same .

It is to protect investors, keep assets safe , and ensure transparency, regulatory compliance, anti-money laundering (AML), and resilience anti-money laundering (AML), and resilience . All of this is a common goal . So, anyway, I am optimistic that even if these regulations are not exactly the same, they will have commonalities and enable interoperability . In that case, global companies like ours will be able to operate our business while encompassing all these regulations . This is my perspective on regulation .

By the way, as a side note, when do you expect this kind of interoperability to become possible ? Yes, of course, I mean regulations for each jurisdiction and market , as well as the point where these regulations are interconnected . When will it be possible? Will it be 5 years from now, or 10 years from now? How long will it take?

Hmm, I'm not sure. Of course, I ca n't tell you. It would be good to know, though. If that had happened, I would have become a billionaire . However, I think it will happen gradually.

yes . However, the demands of financial market participants will require such interoperability . What I mean is, if it is a global U.S. bank, it must operate business everywhere .

So, we will have to put pressure on regulatory authorities to be more flexible in this regard . So I am optimistic about this part. It is very good. It is very good. So, let's talk about where we are headed, and, as I mentioned once again, about a new industry that moves all kinds of financial assets on the chain and builds new asset classes and products .

Shall we talk about where we are headed, and perhaps add a little bit of your past story from the early days of the internet? I think it is important to look back at the past first when talking about where we are heading. This is because history sometimes gives us good lessons . I may be different from most of you, but I have experienced the Internet age firsthand . I used to work in the aviation and travel industry.

When we discovered the Internet, we thought it was really great. So we said, "Okay, I run an aviation technology company called Sabre , so how about putting the Sabre icon in front of the Microsoft logo ?" I thought so. "Then, everyone would be able to use the internet simultaneously when they buy a computer . That would be great.

However, you said that while people would great. However, you said that while people would look at flight schedules over and over again , they would never make a reservation . In other words, people would only look at the schedules and not book . This is due to the anxiety about entering things like credit card information online . No one thought they would trust the internet .

On the other hand, regarding travel agencies—you may find it hard to believe, but some of you may be aware— 80% of travel at the time was booked through travel agencies. Direct bookings with airlines accounted for only 20% . Travel agencies did not resist change and turned a blind eye to reality . It goes without saying that the entire industry collapsed a few years later. There are many examples, such as Kodak's digital photography and Blockbuster.

We must take what happened as an example . Today's internet is not blockchain." There are two differences. yes . However, one lesson we must learn is that changes in infrastructure bring about tremendous changes to the entire industry .

That is the current situation. This is because new products and new possibilities will be created . And if you do not . And if you do not adapt to and accept these changes, you will fall behind . This is my opinion .

The first is this . The second point, which is a lesson we learned from the internet and something that is still happening today , is that business models were not clear in the early days of the internet. The issue was how to generate revenue, unlike the existing method . The same is true today same is true today . The question is how to prove the business feasibility .

However, as time passed, it became clear, and the internet did the same. And huge platforms like Google were born. This is the second lesson. The third point is that not all internet companies have succeeded. yes .

There were also companies that failed as the bubble burst. 2000. Blockchain companies will probably go through a similar process as well. But eventually, everything will change . So, if I were at a financial institution today, I would be wondering what I should do.

This is because each financial institution has a different approach. Let me give you examples such as banks, asset management companies, and asset managers . That will be a difficult question . This is because there are basically two options. Will you sit back and watch trading volume increase before jumping in , or will you launch a massive investment without a business feasibility study ?

Under normal circumstances, it would n't be an easy decision. I would like to suggest a third option . It is to attempt a pilot project . However, it must be . However, it must be based on strategic investment.

What is strategic investment? This means you need to start learning what the new infrastructure is and what blockchain is . What is that capability ? How does it work? And this process must be carried out across a significant portion of the organization .

If this problem becomes serious, we need to consider what impact it will have on the organization and what needs to be and what needs to be changed . Therefore, not only operations but also basic knowledge training is important. Another point is important. Another point is how it will affect the product and what kind of product can be produced . If it is a pilot project with strategic goals, thorough preparation can be made without pouring massive funds , but some investment in such training is necessary.

That way, if the wave of change comes—which I believe will certainly come—I will be able to catch up quickly . Otherwise, if you have not made . Otherwise, if you have not made these preparations when the wave comes, you will fall behind . This is because it will take too much time to train, adapt, and execute everything . We have already been in this field for several years and are learning new things every day.

We are learning every day and conceiving new products every day . So all of this takes time. That is why I think running at full speed might not be the best choice . However, I think waiting is clearly a very dangerous approach . Therefore, from the perspective of financial institutions, waiting is taking the greatest risk waiting is taking the greatest risk .

Thank you , Jo. Do you have any final words you would like to share with financial institutions final words you would like to share with financial institutions ? From my perspective, the last thing I would like to say is that I believe there are two worlds. These are existing traditional finance and digital assets. I do not think that ultimately, one side will assets.

I do not think that ultimately, one side will win and the other will disappear . Ultimately, I believe the right direction is to take the advantages of both sides . This is because traditional finance provides significant added value in terms of security, governance , and ensuring that the entire system remains robust . On the other hand, blockchain offers many advantages in terms of speed. In terms of 24/7 operation, transparency, and the programmability of financial products, this is truly remarkable.

I believe that if these two can be remarkable. I believe that if these two can be combined and converged to a common standard , it will be a successful formula . That is really amazing. Thank you, Joseph. To summarize, it seems you have a very positive perspective .

As Caixa said . As Caixa said , it is one of the banking groups that is much more active than other financial institutions in Europe . The statement that doing nothing is the greatest danger was interesting. It is also worth noting that a clear business feasibility analysis has not yet been conducted . Therefore, we still need to study this part .

However, even if a business feasibility analysis has not yet been conducted, you must invest in technology and develop new products . And you must invest in ensuring that various teams within the company understand technology and opportunities. By doing so, you will be able to produce a business feasibility analysis . I hope so. And someday, demand will also arise .

Of course. thank you. Thank you for today. thank you. Let's move on to the next session.

Thank you, Joseph. thank you . thank you. Excellent.