What's Next for Digital Assets in 2024? | European Blockchain Convention 9

[Music] 2 1 okay good what is it now afternoon yeah good afternoon everyone um some of you will have already had lunch um us Spaniards we're still a bit far away from that um but thanks for attending uh this panel and thanks for thanks to the EBC for for hosting us here I'm joined today by uh two great speakers um Jor um uh s i I said it right yeah yeah surprisingly yes regulatory council at WX and Doon romin is that right okay director of emerging technology at London Stock Exchange so uh I think it's going to be a very interesting panel we're going to talk a bit about you know what's next uh for uh digital Assets in in 2024 um you know more or maybe uh less from like a startup perspective or uh yeah when Moon perspective and more from like a more serious application and um an Institutional perspective so the first question I want to ask both of you and uh you know whichever you can start but um it's which challenges and Milestones uh do you foresee in 2024 from our regulatory aspects what things in terms of regulatory changes are you looking forward to and and what things are you still looking at like is this going to go the right way or is this going to become a hurdle for our for the businesses you are concretely in and for your for the industry in general right so uh yeah maybe I can start with that um you know since I've been um involved in this space this question stand still is regulation um going going to kill uh the innovation in the blockchain space um I I definitely don't believe that way and um there are many important regulations coming in needless to say people have already talked about uh MAA coming into space um in the UK we will see a more robust uh more extended regulation uh similar to uh fmsa um you know uh framework um some of them already in place like travel rule and uh Financial regulations regime which are very important for UK and US perspective but I would like to speak um because as um from uh WX perspective we are working on uh other areas than uh than UK and EA we we are in us we are in Australia we are in uh APAC and we see not only in UK and us but every jurisdiction is exp uh you know expanding their regimes in terms of Regulatory Compliance so what does it mean uh in um in the shortest sense it means that it is bringing trust to the um to whole industry because um you know robust regulation will mean more risk management robust regulation will mean um real controls being in place uh which are very vital for uh I think individual trust uh in the sector um and this will be the main K uh I think for from regulatory perspective What could go wrong with that I think almost nothing what could go wrong uh is is is a risk for uh companies who don't appetite who doesn't have the appetite to to be complained companies who doesn't have um sources to to be complain I think only risk uh that that this robust regulation uh process is uh just maybe a conciliation uh area or time uh for uh smaller companies who doesn't have the appetite of or resources to to comply um yeah I to totally agree I I think um one of the interesting aspects of Regulation and maybe speaking first about the crypto side and then I'll talk a little bit about the sort of tokenization side of more traditional financial instruments I think certainly on the crypto side when we see sort of the materialization of MAA as largely the the sort of world's first fully comprehensive framework for digital assets what it brings with it is certainty right it's certainty for businesses that want to scale services in this market certainty for investors certainty for intermediaries and that's a really important factor if we think about sort of some of the signals we've seen over the years in the crypto space we saw sort of over the last bull run a lot of institutional demand for crypto and a lot of friction uh around large institutions being able to step into this space they're very risk averse when you're a heavily regulated um financial markets uh uh organization you have certain obligations that you need to make and it becomes very difficult to enter into markets that don't have that certainty so I think that's a big piece I mean if you look at in terms of scale crypto today is shy of a trillion dollar market cap in terms of size whereas you know listed Equity globally is 112 trillion that's just listed Equity um so I think there's a lot of opportunity to see institutional Capital flows come into the crypto space what you need is that is that sort of regulatory framework to provide that sort of underpinning that gives certainty to you know some of the larger institutions to actually then start to make ways into that space and then moving away from crypto um certainly you know we have seen a lot of interest in the pilot regime in Europe and how that's taking shape and certainly in the UK with the announcement of the fmis FMI sandbox should I say and largely providing a means by which companies like us at the LG can look to adopt these Technologies to try to drive new infrastructures around how we build greater efficiency in our in in our more more sort of traditional markets so looking at you know private assets looking at opportunities to enter into spaces where today there isn't a lot of infrastructure full stop um where there's a lot of fragmentation there's still a load of sort of paper-based manual processes where literally by digitizing let's say you know a private fund for example you can take settlement times down from you know 30 days 45 days to a day and even shorter and that can itself Drive opportunities for liquidity provision and scaling of demand for some of these instruments so I think there's a lot of opportunity there and I think this the sort of the the the basis of how that Innovation can really start to take shape is really predicated on regulation I I I agree I we you know we we get a lot the questioning crypto of like how is crypto driving value for real world you know uh applications like you know what has crypto done to to provide real value and so on so forth and there are things that you can do in purely like digital purely defi Etc but if you want to add value here like in the physical world you got to play by some rules in the physical and those need to be said and enough time has passed that Regulators know crypto to be able now to uh generate Frameworks that um you know you know are are able to attract all of those assets that currently live on chain and tokenize them and and really leverage uh digital assets and you know it's great to see um that you know London Stock Exchange uh group is is is betting into this um what are and and this is maybe an opportunity also where I would like maybe both of you to explain like I don't think you need to explain what the London Stock Exchange does right because I think that's pretty clear but what what are you doing with digital assets right why is it something you're exploring um and in the case of WX right like what do you guys do um how do you integrate digital assets into your operations um yeah from WX perspective digital assets has been always the heart uh of YX YX uh was established as a um crypto first uh Crypton native uh firm uh also providing payment services and um it was founded in 2014 and and um was the first first company that actually got the principal MasterCard uh membership as a crypt native uh firm and has been providing payment and crypto Services since then uh in Mar jurisdictions um the you know that being said that you know crypto has always been uh the the hard uh and and center of vrex but um VX has been exploring also uh NE web3 applications defi um or like um for example noncustodial wet and and other uh dii applications as well together with uh more uh complex products uh that could also attract not only um exchangers or or uh you know individuals but also sophisticated investors can uh also uh get uh into uh WX platform and and make a use case so that's been uh warex um Center and um that's why um started with only with Bitcoin because when uh WX was started it was Bitcoin was the only star but now uh over 100 tokens and um over uh maybe 200 different uh products uh users can uh really bring digital Assets in uh in their use cases as they wish so this is what wrex has been doing um so so what are we doing in the digital asset space I mean largely as an organization again I don't need to explain what the LG does but I mean our bread and butter is in providing what we call financial markets INR structure so you know it's it's sort of mission critical Enterprise grade critical National infrastructure that powers you know the financial markets and economic systems our Focus uh with respect to the use of this technology is largely looking at how can we evolve our business how can we evolve the way in which markets operate and the way in which um customers transact in and around um financial securities we see there's a lot of opportunity um specifically when we look broadly across various asset classes to think about this problem through the lens of a common set of technologies that enable us to digitize instruments manage their life cycle end to endend on a common common Ledger and then provide services against those assets in a largely ubiquitous way DLC provides a really great way for us to think about that problem we think about some of the operational efficiency gains around ad administration of assets asset servicing distribution of cash flows and funding with respect to whether it be coupon payments on in the case of bonds whether it be dividend payments in the case of equities and certainly opportunity to scale and grow liquidity through efficiency and settlement too so that's these are some of the Keen areas for us I think the other lens that's interesting is when we look across the space clearly there's been a lot of Investments by large scale institutions in this market specific to tokenization there's been scaling and sort of maturing of specific platforms but largely these are led by individual in institutions Banks um and it's hard to scale Beyond one's own ecosystem I think one of the benefits that we have today is you know we are largely you know a service provider to everyone in the street we are neutral party we build and and convene markets so it creates a great opportunity for us to look at this landscape and sort of see your positioning for us to bring the market together can we think about you know interoperability can we think about standardization to really help scale an ecosystem and scale liquidity through that um doton it must have been quite a challenge um you know to lead this initiative in in a company where where probably many of your competitors peers some of them even see it as a threat um some of them you know don't don't maybe don't believe in like what's what's from a personal from a like professional learnings uh what's the experience been so far you know what learnings have you found what what things as much as you can share of course but what things didn't work in terms of you know the learnings you you've taken from trying to implement this Frontier technology into a business that you know has been doing pretty well without it so far right and um how's that been I mean us like many institutions it's you know we've been on a journey right um I would say there's sort of two interesting areas um with respect to that that we sort of experienced one is largely you know as as many other institutions have sort of gone through it's this the education problem you know for the longest time we've seen a very close correlation in terms of sort of the perceptions of blockchain is a technology with crypto assets and all of the associated um you know reputational constructs that come with that um I think thankfully the landscape has moved on I think what's become very clear through you know multiple sort of series of PC's over the years by other institutions as well as our own um it's really helped to solidify that understanding that actually the technology has application beyond the sort of esoteric crypto assets you see in in that ecosystem and even engaging in that ecosystem we you know there is an interest for us we have um footy russle indices on crypto today we're exploring other products and services largely on the periphery of our of our business but but I think the other um sort of interesting point to the journey for us has also been thinking about where where should we play and where is our right to win and it's really around you know we are pro providers of mission critical infrastructure today certainly when we look at sort of where we have the most impact in that space it's largely sort of public markets that's sort of our bread and butter where we think there's a lot of opportunity for us is you know can we see this as a growth strategy potentially to scale our business and scale infrastructure into Market that don't yet have that and we think that's a really interesting opportunity looking at private assets private asset classes Etc so you that's been sort of a a key part to some of our analysis and some of our thinking and we've been you know validating some of these ideas with Market players and sort of exploring where we go I think there's a sort of key um aspect to this it's really around if you can build a single technology similar to what's what you see in the web fre space that allows you to define a sort of common infrastructure that can support multiple asset classes that then becomes really interesting you know if you contrast that with the sort of Legacy model of largely siloed infrastructures on a parasit class basis that sort of EX exent in the market today and uh Jenner um you know you guys at WX it's not like you are you know building something that didn't exist before you have decided to take on some of the largest companies in the world uh by leveraging digital assets and Levering blockchain technology which you know it's easier said than done of course so so uh I think that that has a lot of Merit what has you know digital assets blockchain um enabled you to do that Legacy players are not able to do what Edge uh is it giving you and and also you know it's a second question but what role are you playing in uh bringing mainstream non- Crypton native uh people to uh digital assets uh yeah sure I think that's um very interesting from uh two perspective in my mind first uh uh what actually warx did was um to uh to First not maybe first think but first um established you know um cryptos could be like very well used in Daily payments like you know buying a coffee buying yourself a beer or or croan and um MasterCard and Visa partnership ships uh allowed WX to do that um quite a while ago now it's not a secret um many companies can uh can do that as well but apart from that warx has um established himself um as a very trustful um you know source for um using uh inventing new use cases and um that's what actually made WX survive um at least two crypto Winters if not three um because you know um unless you are good at bringing new um people into space you know using new cases or like um using trusted bands like for example payment companies like um MasterCard and visa to to gain individual trust into crypto um you you can't you can establish that um it's simple for example um a very simple example that I can give that my mom and my my dad they wouldn't buy you know Bitcoin if they didn't you know have a you know car to spend on that but even if you if you teach them how to buy they wouldn't buy because they they wouldn't know how to use it but now um with the use cases like WX and any many others uh within the industry now um there's a chance that you can uh gain trust from these people uh to uh to bring them into space and maybe they can you know they can like it and do much more yeah yeah I agree I think sometimes you know we're too much at the frontier of innovating in the techn technology and that is good for all the people who are in that Frontier but then you have all the mainstream users and you really need to think about okay you know all the crazy things we can do it's good to research them and to know how to do them but maybe we need to leave them for a bit later and do a middle step where we do you know a bit of a bridging and then we will bring these people to that Frontier to all the crazy things that you can do uh after that right and you know staying on that part of innovation uh maybe do you know what what um Innovations in in the technology are you and in the space are you looking forward to um you know what challenges uh are you foreseeing uh for institutional players such as you or the ones that uh you know you work with uh for the future you know there's a lot of technologies that are coming up from zero knowledge proofs to others that maybe are not as related to to to what you guys are doing like account abstraction and so on like modular block blockchains like um you know layer twos and scalability like thank sharding you know and all that stuff but what are the things that you guys are looking forward to the most and what are the things that you're the most scared of um for the coming year or two good questions um so I mean I think given sort of our unique position in the space I think there are sort of maybe a certain set of problems that we would need to Grapple with you know if you're providing infrastructure to large Banks who are going to be issuing billion dollar assets there's a certain level of sort of resiliency Security robustness in infrastructure that we need to think about one of the big challenges with with sort of looking at this technology is when you look at the sort of public markets not public markets public um chain space um that that there is a nency in and around these Technologies and their ability to solve for those types of risk profiles certainly even the you know the volatility of gas is a big problem operationally for you know a large Enterprise to be able to manage their operational cost which today you know from an infrastructure standpoint would largely be relatively stable but then becomes very unpredictable and you need to think about how you're going to layer sort of risk management and hedging strategies into your op Ops profile from a treasury perspective it's just something that a lot of Institutions are just not familiar with so I think for us the key is thinking about you know where do we start and then where do we get to certainly for us we see there's value in public chain when you think about that from a sort of distribution and access perspective uh around getting access to these instruments but we think there is a clear clear need to start with a narrower scope more control to potentially private network but certainly looking at the types of technologies that are consistent with the Public Public public Ledger space and I think there's an evolution and if we think about some of the Innovations in the space that are interesting to potentially get us on the way there I think rollups is interesting I think especially on the ZK side some of those Innovations will really help us think about how do we build private networks that Define canonical assets where you can then synchronize the sort of a synthetic mirror of those instruments on across multiple Ledges scaling all the way up to public that therefore you can provide sort of core services with highgrade um non-functional requirements on a layer of trust um with with assurance and then you can then scale into provision of access and distribution at a much more broad uh layer so there's interesting models there right that we'd like to explore as the market evolves certainly the other aspect that sort of credential ises this thinking is privacy for us certainly you know large institutions transacting regulated Capital flows and and and uh activities they don't want their competitors to see what they're doing even in so far as they don't even want visibility of the transactions to be made available because it provides a sort of correlator signal to other Market participants so I think it's it's clear for us that these are problems that are very hard to solve privacy being a big one and certainly in a um commonize way across different Technologies so our thinking is let the innovators in the web fre space continue to evolve these Innovations to solve these problems and we'll use more pragmatic means to sort of hedge ourselves but also keep the optionality open over the longer term to be able to leverage them the good thing about that problem I think is that both institutional as well as like the most Crypton native probably the the the one Frontier where they're most where everyone's most focused on for different reasons is is privacy right one is more of a ideological reason the other one is more of a practical reason but I think it's probably where most of the research will go into in the in the coming years now that SCA scalability is seemingly not not there yet but solved at least theoretically right um Jenner you know you guys are a very different Beast of course what are the Innovations uh you know that that you're looking forward to the most and what are the challenges that you that your business is looking forward the most um yeah sorry not looking forward most uh threading more yeah no um I I don't think that you know me personally um nor wirx would uh be afraid of any Innovation because you know we have seen this space uh is growing through innovation and uh you know you throw thousand ideas and uh and then you know two of them works but this is this is how the system uh grows actually and especially in the blockchain space uh but we are particularly interested in uh you know NE defi payment cases that that um ORS can bring uh experience into because it's been uh on traditional payments uh and uh and crypto uh together for a while and then um you know Def and blockchain based payment um system systems like uh you know specialized uh chains uh are uh something that definitely will be interesting uh in next couple of years I guess for us yeah and that's definitely also nedge you can keep over your competitors right I mean there's a a a product portfolio or product options you can give that they can certainly not give right yeah exactly I think uh you know you need to be you need to be stay ah at this uh pace and it's not easy in the space yeah I I I don't think we can talk about what's next for digital assets and not talk about the the the cbdcs right uh which is a Hot Topic and I'm going to put you on the spot DT here you know what what's your what's your take on cbdcs you're either you're probably going to win 50% of friends and 50% of enemies or something like that probably no um I mean I think cbdcs it's an interesting area right and I think that there's a lot of sort of divided views on the sort of viability and efficacy of of sort of the the proposition I mean I I look at it through two lenses you have the sort of on the side the retail lens which is it's all about how do you scale an infrastructure that doesn't break the existing economic model largely right you think about how um Banks provide a pivotal role in how central banks administer and manage monetary policy and if you bring in uh you know an infrastructure and a provision like cbdc they may undermine that in some form that may have unanticipated knock and effects right so I think that's a key area of interest for policy makers central banks in how they think about the designs of cbdc to try to solve privacy is the other very significant consideration but more so just the value proposition I mean I don't think that's really been crystalized yet in the context of sort of retail where I think on the opposite side you have the whole sale angle where I think it's very very clear that cbdc has a very strong proposition for large institutions that are transacting in large scale Capital flows where today this is driven through centralized rtgs infrastructure delivered by the central bank to the market through large scale intermediaries like Central Security depositories if you can facilitate a much more distributed infrastructure to to to allow for the distribution of of mzero money that's effect effectively riskless um into the the sort of wholesale markets it provides a lot of interesting opportunities for use cases and scaling those use cases more broadly to hedge for certain types of risks that exist in those ecosystems and certainly from a an efficiency perspective when we think about digitization of financial securities having the opportunities to have the cash on on a similar or common infrastructure again creates really really unique and interesting efficiencies there too so I think from an Institutional perspective and in on the wholesale lens there's a lot of opportunity um and I think the the the proposition is clear I think on the retail side less so yeah I agree I I think it's it's you know it's one thing where where crypto natives uh from a retail lens were not the biggest fans of cbdcs but then at the same time like one thing that that that many of us believe as well is that the cbdcs created a bigger need for you know not all token classes but at least the the cryptocurrency uh token uh uh class right uh Bitcoin and so on um so it can be its biggest enemy and friend uh at at the same time but it's it's definitely a Hot Topic um thank you very much uh janer and Doon it's been a great panel and thank you all also for for attending um and we'll see you all around here at EBC