Post FTX Collapse What's the role of CEX by Zack Guzman Jason Lau

I am um Zach Guzman the host of the community-owned show coinage uh I'll be moderating this one here excited to have Jason Lau up on stage with me uh the CEO at OK coin and Jason there's a lot to get into actually and we have no opener so we're just going to dive right into this because the crowd's already warm but last night vitalik was talking a lot about this back and forth between decentralized exchanges and centralized exchanges and kind of where we're at and there's a lot to get into around regulation there's a lot to get into around customer experience and we'll start with what he said last night because he called out two things around Sexes and dexes one being fees and the other being the user experience and those are the things right now that centralized exchanges have used to stay on top for a while but now as you see it and now as we're in this new normal in this bear Market what is your estimation of how those two centralized exchanges and decentralized exchanges are interacting with each other right now yes Zach thanks for that um first of all I'm not the founder of okay Kona MCO but it's great to be here it's a it's a the other thing is I don't like that whole centralized exchange versus decentralized exchange uh uh terminology I think I think for users it's very important um that they have that choice available to them and it's fantastic that they now do have that choice and ability to choose you know what's important to them uh from that user experience standpoint uh so to get down to vitalik's points about fees and uh user experience fees I think it's it's very obvious that when you do things off chain in a centralized manner on a centralized database it's going to be cheaper right that's just establish infrastructure people know how to run that you get higher throughput you get just better um performance out of that at this time you know I think you know we might and we possible very well could get there on chain but at this moment vital is absolutely right I mean that there's a no-brainer there and but there are a lot of teams that are trying to solve this right maybe with roll-offs maybe with uh side chains or maybe even other layer ones that are trying to approach this uh scalability and throughput issue so do that um this develops I think it's good for users again to have choice and for there to be competition on the on the user experience front also a no-brainer right it's at this point um my mom my dad can't use a wallet at this point it's just too foreign it's too tough yeah too many steps friction's way too high so uh for uh a company like us we are able to deliver that familiar web 2 experience for them and again I think we'll get there on the decentralized front uh but might take a little bit of time yeah and yeah I mentioned regulation and that's another interesting thing because so many people think about the us as being the end-all be-all for where all crypto exists and clearly that's not been the case uh I'm reminded of the doe Quan interview that we put out when it was so much focus on how are you going to be regulated in the US and he's like well I'm in Korea it doesn't really matter um but you guys are in 190 different countries so you're you're dealing with a bunch of different regulatory markets I mean how do you look at maybe that piece in trying to be above board in all of those and which ones are kind of the key players when it comes to driving some of them uh right you mentioned you know there are a lot of countries that we operate in um we're licensed uh and headquartered here in the U.S uh so obviously we work with the U.S Regulators on the state level but also on the federal level um we're also licensed in Japan uh we have a a license from the FSA there so and also in Europe we were licensed in Malta we're licensed in the Netherlands um and we're looking at more places we're working with the Singapore uh Mas to to persist um to get our license there so bottom line is I think there needs to be communication between industry players like us but also Regulators I think um there's just been a lot of talking over each other and behind the scenes I think there is there is a lot of work behind the scenes being done to make sure that uh Regulators understand what is happening how do we run our businesses and what's good and bad we think and and they think for the industry it's important that again I think that users should have that choice and not have regulation or enforcement end up cutting off a service or something that users actually value we've seen that in certain places um and I think it that's that's probably the wrong way to do it in my opinion there's there's obviously a way where you know we can work together industry stay all stakeholders together and make sure there's that there's that customer protection uh and security for users yeah the the customer protection piece is interesting because you can think about it in a different in a few different ways right best price best execution all of those things that you know you come from the traditional Finance world so you know how all that goes there's real strict regulations just specifically built around that to make sure that customers are getting kind of the best execution around it and maybe there are still criticisms of the old system and the way that it's regulated too but how important is that piece of it right you mentioned the ease and going back to those two points around customer experience it's it's easy but as we saw with FTX if something like that goes down you need the transparency as a user to know all that stuff too so what I mean we've talked about proof of reserves the industry's been looking at a lot at that pretty closely I mean what is the answer if it is all about Choice also making sure that these centralized exchanges are providing the transparency attached to it for individuals to make the right choice I think to be fair I think that's a question uh uh that us as a whole are trying to find answers to right I think uh you've been in the space for a while SFI aged terribly this last year Jason um yeah this year was a bit more interesting I'd say um but look it's it's a process right I think users are learning um and then you know the type of information they need to do their own research to understand what they're dabbling in is also increasing right and and for businesses like us I think it's on us to make sure that our users are educated and have access to um the resources that they need and we at least for okay coin we try to make that very clear right up front you know when when we we focus mostly on beginners you know we're trying to help them get from their local currency into crypto and learn about all the cool stuff that they can do so it's not just you know not solely about trading or things like that it's about um you know just understanding and learning so that initial experience is actually very important in our in our opinion and then when they dive into things like dexes um it's tough I think we're all trying to figure that out there have been Infamous Dex hacks too right and so it's not like Dex good centralized exchange bad or anything like that I think even Within These these buckets there's spectrums uh and transparency is uh is something that we should absolutely strive for yeah I think oh I think it's pretty fascinating too to think about how easy it is to fall into the Trap of decks good sex bad or just even regulation good regulation bad because as I think we've all seen uh it was a question that was talked about fervently all of 2022 and then we saw how it ended with uh the FTX collapse but when you think about those regulations specifically as a centralized exchange probably more closely dealing with Banking on-ramps and off-ramps right when we talk about Fiat and conversions like your mom and your dad using it to move cash into crypto last night Caitlyn long was talking a lot about regulation and particularly what the SEC uh you know all the Regulators really are looking to do and this again is a U.S specific question but when you look at that piece of it uh kind of blocking off the banking sector from working with crypto everyone's looking at that as a major issue not just for growing the space but for prices where development goes and obviously if you don't go through a sex and you're just dealing with a DEX maybe you don't need to worry about any of that but how big is it when you think about the big players in the space institutional investors just cash flooding into crypto I assume that has to be a major and rather important piece that not a lot of people are talking about when it comes to completely severing the banking relationship with crypto yeah I think obviously be the most recent uh uh I guess trouble player in that space um we want to see a thriving crypto and Banking and payment system right we want uh solid infrastructure across the board and so it's a bit disappointing to see uh you know that the news around silvergate we hope they pull through um but yeah I think it's this challenge of having certainty and Clarity around what you do especially for financial institutions um you've been covering Finance in in financial institutions institutions for a while you need that to be able to operate solidly right and so um I think there are some open questions here in the U.S right now but luckily I think there are also you know there's a competitive uh landscape where there are alternatives and there are competitors who will I think step into um deliver the the services that our crypto industry needs and you know I think this this we've seen this play out in other countries also where there's um there's just a bit of hot and cold element to it uh it's a bit cyclical unfortunately but um I'm hopeful that you know we get to a place where you know it's it's just normal right like ultimately for consumers we want it to be easy and safe um and I think we will get there well I mean what have you seen in those uh discussions or maybe the developments around it right because you know that's another thing where it's easy to say oh all of these agencies are set in one Viewpoint that crypto is bad and if you listen to Caitlyn long last night talking about all these things and she's been in the room with the fed and you know their their branches and a lot of these uh congressmen and women as well and it's not that it's not the case that everyone views crypto as bad um so what I guess are the most important things that they're trying to make sure is handled and again maybe it's different in different jurisdictions but generally in those discussions as you've seen them how how has that maybe been helpful or hurtful for you at OK coin and just the space in general yeah so for to our industry right she's fantastic uh she really does deliver true value for us as an industry and push us forward too um I think I think those conversations are uh like like you've identified there are Senators there are Representatives that take a very different perspective on you know how regulation should be executed um and you know we are also in those conversations and we're trying to make sure that at the end of the day users need back to back to our core points right they want transparency they want to understand what they're dealing with and then uh companies also deliver on those core tenants of making sure that there is consumer protection um and so how we get there I think fortunately at least in the U.

S there is a ability for us to have a debate and work through those um it is it's good to have those conversations um and so you know maybe pending some legislation of action you know we'll we'll we'll see where we end up but I'm optimistic that we'll get somewhere uh that works for all of us other countries you know they've they've I think it's great to see other countries experiment and maybe give us here in the US some data on what works and doesn't what's fascinating right now is Hong Kong um after having been a bit cold over the past years through crypto now opening up and setting up a regime for businesses like us to register and get a license and operate there will be limits on how re how much retail consumers can participate um but I think it's a start I think it's good and we've seen the same in Singapore and Japan like I mentioned earlier yeah and I guess you know just stepping back and philosophically thinking about this as the title is setting us up to debate Sexes indexes but just thinking about it philosophically like you said said it has served web 2 kind of Simplicity of getting your money into the space even entering it has served as an on-ramp for a lot of people and the activity on dexes has continued to rise quite a bit as well so I mean how do you see those two things in our playing is kind of you know the metaphor is once you're in the tent you know what crypto's all about you can use a DEX and it takes time and everyone has their own Journeys there but how do you see the two mixing when it comes to the next I don't know five years as the space evolves because you know we're in a much larger eat Denver venue this time around there are a lot more people interested in it there are a lot more people building than there were even just a year ago so I don't know what the future looks like to you yeah I I by the way has just been amazing to see all the energy and all the people building and experimenting on new things that's um that's just that's just so bullish for the industry and and as a whole going forward uh so on our side as part of our larger group we have uh okx as part of our group and okx actually does take a almost self-disruptive um approach to that we have we have this web3 wallet and interface where we do connect and support all the dexes and make sure users can you know compare and learn about how to use a on-chain experience um and so you we also saw coinbase right launch it launch a layer two I think companies like us do know that the future is that way right um it will take time to get there and we will need to help users understand why we need to go there uh and so that's our role as a centralized exchange we want to onboard we want to expand we want to educate we want to make sure users get a good experience and then gradually progress through the spectrum of decentralization or whatever the path towards a decentralized uh future and to be fair not everyone's going to get there not everyone even needs to get there again we need to have choice right we need to have solid options for users up and down the Spectrum and make sure they know what they're doing uh I think all of us have a part to play in that uh so yeah I think many of our companies you'll see will try to disrupt ourselves uh because that's in core to our mission and core to our our uh our um existence is to get there right get to that decentralized uh land or whatever Utopia of decentralization that theme is obviously it's been around the crypto scene since Bitcoin was launched is all about you know decentralizing whatever it may be um and specifically on that I don't know let's talk about risks because sometimes I feel like you know in fireside chats we don't talk about what is looming Beyond just regulation but what are the actual problems and what's being solved and when you talk about centralization I guess 2022 was weird and I kind of had a front row seat to see both of these things fail because you can talk about FTX but then also Tara being a project that collapsed which arguably may not have been decentralized as much as it was claimed to be but that was a project that was trying to decentralize the idea of stable coins and it failed and if you look at FTX and that failing obviously there are a lot of technical differences but panic and people exiting things seems to be a constant theme around that um whether it's centralized or decentralized so when you think about risks in general and I know you've been in this space for a long time but when you look at risks as they exist now is centralization still like one of the tops for you is it really needed to continually decentralize everything that we don't need to decentralize everything right um there are we we always need to think back to why do we need to do that why do we even need a blockchain for some things why do we need a token for some things I don't know you know there are a lot smarter people out there that have maybe found answers to that but the answer is we don't need to do everything on chain uh because there are trade-offs to doing so I think the most important thing is there are trade-offs and there are risk to doing so yeah um you know you look at you look at Dows and governance cool experiments uh but sometimes you know if some projects are more centralized than they seem then maybe you didn't need that right um I I don't think centralization is a is a bug actually I think it is a feature for for certain services and and use cases and I think it's just boils down to we don't want we as in just a user we don't we want to have the ability to use the services and tools that make sense for me and if that's a decentralized uh to or or not then I should be able to use and choose that I think that's where we want to get to for some people they will want to interface with someone they need to trust and they want to trust a centralized entity for example they want to have someone that they could call up if there's a problem right that's that's okay and we need to recognize that but at the same time we should build everything uh with the expectation that uh choice is is going to be there and users will increasingly demand that yeah and I think that's one of the things too when everyone looks at regulation the idea of losing choice or like having to play into only one system and having a centralized Authority like the government choose exactly what that should be is always dangerous in general um for the last few minutes we have up here we got about six minutes left when we talk about looking forward right and pulled calls uh the piece that you just laid out in terms of not everything needs to be decentralized is one that's pretty interesting for me as a man who's now trying to build out a community governed show uh having worked at Yahoo and CNBC I think decentralizing media is a very interesting use case but that's for me and this is a fireside chat with you but when we think about bold calls looking ahead for the future as I said you've been in the space for a long time really smart guy what are your bold calls for kind of where we go because we've seen these Cycles before I think it's fair to say last night if you were here listening to vitalik calling us the Builder's market right now for everyone who's flushed out who is here just speculating they're gone now and we've seen that before but now that you have this kind of new momentum the bad stuff's out maybe not all of it but some of it what do you see as kind of carrying this over into the next cycle that's going to be there decentralized media is going to be so hot thank you no but I'd love to learn maybe later or hear about what you're doing but uh my take is that um like you said you know we this is our 10th year as a business um and we've seen all these Cycles play out um lessons learned from our side is that um you have to keep building you have to keep investing um you have to keep finding those pain points that users are actually uh experiencing and trying to solve for those that that is the Focus right we we need to get more people into the space learn about the space um and whatever comes of it is is ultimately going to be useful um and so you know I I media usually likes to ask me about like price and you know markets I mean people do like price that's cool but like we're here at Ethan but we're let's not talk about price but if you look at that but what's the price it's gonna be yeah in a month what's the price going to be um but if you look at the developer sentiment and activity all-time highs um across all types of ecosystems uh there's just so much cool stuff happening and I think for us where our mission is to empower the projects and the developers but also our users and connect them with that that is so exciting and I'm just so bullish to see what comes up it's it's always not it's never what you expect it to be so I'm I'm I'm uh uh you know shy to to give a concrete sort of prediction but look there's just so much happening and I think this year is actually going to be we're going to look back at 2023 and think what an amazing year it was I think I know I mean I think it is always funny that people do harp on price so much and I wouldn't just ask for like a just throw out a number but it's always interesting to look at leaders in the space and what metrics they pay attention to um you know I don't know if I can mentioned salon at a conference like this but you know we've talked to a few different people in terms of looking at metrics on specific chains and what they're watching to see that they're moving in the right direction if you look at the space as a whole what are you looking at to make sure that okay there is this piece working well uh and I'm seeing an inflection point here and that's why maybe don't give us an exact price but what metrics you're looking at as as have that make you extremely bullish on where we're headed puts out a report on developer activity in the space and they sort of analyze GitHub commits and everything across different chains it's always fascinating to see which ecosystems are growing and um and uh you know increasing so you can kind of get a peek at what's happening at the sort of underlying behind the scenes for for different ecosystems that's one obviously you want to look at the on-train metrics right um active wallets transactions all that stuff that's usually reflective of something if there's no sort of skewing of metrics uh you know some sometimes there's a there's a airdrop or something that that skews things but those are very important for us to look forward right and see which ecosystems are booming where's the activity where people interested in and then obviously we have our own internal metrics on users that go and look at hey I'm I'm interested in X or interested in why um those are also important that allows us to reach out and make sure that you know if users are trying to learn more about X ecosystem we want to make sure those resources are available to them as they progress through that Journey we've got about a minute and a half left so I'm gonna app I'm going to wrap with this last question which you know we've seen in these last Cycles kind of things leading the excitement and the enthusiasm I think nfts were a huge thing that brought a lot of more like new people into the space and never touched crypto before but that was huge and now it's a weird mix between like crypto ogs who don't want to talk about nfts and they roll their eyes at it but then you got a lot of people who are in the space because of nfts when you think about this next like Turning Point does that matter at all what do you see as the next thing to draw people into the space and into the tent on the topic of nfts I think it's super important that nfts have and we should encourage nfts as a broad concept right um it's just so much more relatable when you tell someone hey look this is a digital asset that you can own it's it you know it's yours it's Unique it's got all these maybe cool colors and art and all that stuff it's relatable like someone walking down the street can understand that they don't necessarily understand the need for decentralized money and like you know and all that stuff like or maybe even yeah derivatives and complex you know options like this that's not necessarily that's cool but it's it's Niche almost by definition and so I'm excited you know there's now nfts on bitcoin you know people are really bullish I've been hearing about that all across the conference it's just fun to see um you know all these ideas you know being cross-pollinated across ecosystems and we should all work to advance those narratives right I think everyone should own a try and own an nft play around with it I think nfts are gonna come back I don't know whether we're hot or cold right now but kind of like D5 1.0 2.0 whatever for sure version we're on now I think we're gonna come back with nfts that actually have something unique to them Beyond just uh uh you know something collectible I think that's sort of version one it's it's exciting well as a man who put out an ft is a cone his show at coinage media I appreciate that for your for your show exactly it's a good way to end all right Jason now everybody thank you so much time appreciate it man thank you guys