Building Trust and Transparency in Digital Assets | European Blockchain Convention

foreign [Music] welcome to the panel on building trust and transparency in digital assets um I'm David Korea and I'm going to be the host for this panel today we've got a great panel of experts here from all sorts of areas in the crypto and blockchain world and I'd like to just introduce them in no particular order we've got Benedict angara who is the communication and branding lead at bitpanda we've got Dorian Vinci Leone who's a business development manager at kucoin we've got Philip various who's the head of r d at euroclear and we've got Benedict cucacha from uh Luca who's the head of sales and business development in Europe and he is um standing in for Suzanne Moorefield who couldn't be here today unfortunately um so let's get started so a lot of the time when I think about trust in digital assets I actually think about the underlying aspects of the blockchain that actually promote trust so the immutability of the transactions themselves the robustness of the architecture because of the fact that it is distributed and if you take down one part of it the rest of it is still going to be there um in your opinion Philippe um what do you think of the technological advances that promote trust when working on a digital assets product um first of all I think trust and safety is very important in Euro clear where we are more in the traditional business um of course safety is quite important we have just to give you an ID more than 35 trillion of Assets in our Digital World mainly equities bonds and and funds but which means that safety and trust is quite important now when we go about trust of course and we talk about crypto or DLT I think it's important to make the difference between the two crypto we know that there have been some hot period last year but that doesn't require question to me the technology which is very robust and if you look at the number of central banks that are today having a program on DLT I think according to the figures of the bis it's more than 90 percent of the central banks in the world having a program on DLT and some of them already in Productions it shows that there is a trust you can imagine that the central bank would be maybe the most conservative type of companies looking at that at 90 percent worldwide level is is a signals so um quite importantly as well is maybe to look at the type of technology and there is a big debate between private and public blockchain or DLT platform for us and for the central banks this is mainly the permissioned type of um of platform and mainly for regulatory reason we have to make sure and the same for the central banks that we control access to the business we have also to provide a privacy confidentiality all those components that are quite important and that's required to have some intervention if I may say on the way we run the activity which lead us more to the private type of setup now you're going to save it well then does that mean concretely well the value for us is mainly the cap capacity to be able to dispatch in real time data that everybody can trust and that's important and build on those data if you look at the market today and the reason may be why the market is still in t plus 2 it's not because we are not able to settle it's not because we cannot do atomic settlement or whatever is because the market is organized in such a way that for every single step in the chain in the process you have to go through different system and to reconcile across all those systems if everyone could of course have all the position share in a common system and be able to trust this data as soon as they are created and then react on those data we could certainly move from tps2 to tps1 or even tp0 end of day and I think this is the step that the dtcc is trying to do in the US so for us this is the challenge and this is why we are currently building a GLT platform for your Urban tissues with that in mind that will be released this year and very exciting project indeed sounds extremely exciting and definitely getting to t0 or T1 it's super important just to reduce the risk and settlement I mean it's it's a super important thing and we can't lose lose sight of that so uh so great to hear that you're advancing so much in that in that field um so this this is a question um for uh Benedict um at Luca um so it took all of uh 15 minutes to have our first question around FTX today I was timing it on my uh on my watch um so after this big um let's say Market events where there is a question of Foul Play um do you think on one side do you think that that really makes the general public have um you know a doubt in digital Assets in general blockchain crypto etc etc and on the other side what do you think that the Regulators can do to be able to or Regulators or governing bodies or working bodies can do to be able to build in structure to regulation and and put some order in standards without actually stifling Innovation I don't know if you comment on that so so the last part makes it stifling Innovation that makes it probably a bit more complicated to answer that but to start with um lack of trust or has the public lost trust in digital assets and you're referring to FTX I would just start by saying that probably um whether it's lighter Shadow I guess that's a common um that's something that everybody knows FTX is not a crypto related issue I would say that the clear-cut criminal case and that will happen in crypto from today and tomorrow no matter what regulation will bring regulation will not be able to prevent things of that happening um that that's um that's on the one part and I would also argue that there's probably not a lack of trust but people have started to realize that if somebody and I'm not referring to any specific case if somebody's offering you an apy of 95 something must be wrong I guess there's a clear rule saying that if something is too good to be true it probably isn't and FTX has probably brought that in many of the other cases has brought to the mind of the general public oh yeah that's actually true if somebody is offering you 95 that must come somewhere and if you don't know who's paying for that you are probably doing that so I would say it's not the lack of trust it's probably more people are now realizing oh there's something we we get a probably should take a closer look at and I'm not saying that I analyze everything that I'm investing in but probably like just because something is going on on Twitter and there's like all these hashtags trending it doesn't necessarily mean that it's a good investment I guess that's that's uh to answer that part of the question and the other one with I mean regulation will come one way or another I guess that's um that's just that's just evident it will happen um and the best thing that we can do as an industry as Market participants as service providers all of us on stage and everybody else coming here to the uh to the EBC is trying to work with regulators and trying to not influence but help them to regulate it in the in the right way and again I'm not mentioning any specific regulation stuff that happening in the staking environment and so on but that is what happens if you're not working um or if you're if you're not putting enough effort in it to to educate people and I would say we in Europe we are probably in the more privileged area of having Regulators that actually do listen so um my colleague Suzanne who's not here today unfortunately she's actually sitting on a couple of working groups helping regulators and governmental bodies to put sort leadership and and inputs to um to develop in the right way that's that's the best way without stifling Innovation I can't answer I guess it's a balance between like regulating something that is in development um I guess we shouldn't forget that all The Regulators that are out there they're not I would say they're not [Music] um they're not in the privileged position having overly much resources that it can allocate to that so a lot of them will have to deal with other topics next to blockchain and crypto and all of that stuff so um I don't think we should expect them to be ahead of the curve uh in that sense that's I guess the way to put it yeah that that I I definitely see that I think that a lot of the people that are in the regulating bodies are Innovation Specialists who have had to become experts in the crypto field and some of them do it extremely well um I I mean from from my point of view I also see that um the regulatory sandboxes that are being set up all of these kind of you know regulatory Sprints that are happening at this point in time are super important as well so I don't know if you have the same opinion on on any of those things as well so I in general would say the standard answer to that is I appreciate regulation if it goes into the right direction rather than enabling business rather than preventing it and I guess if you're following like just what's going on in media you can see just different approaches that Regulators take across the world and yes I do appreciate like regulatory sandboxes in a specific way that allows like innovative ideas just to prosper and see how they would work out in reality so the I guess the short answer to this yes regulatory sandboxes are appreciated thank you so another question now about this it's actually interesting we had an example about this in the EU specifically when they were actually drafting uh Mika before it was actually voted on they had these attempts at looking at exchange business and how they would try to regulate us and what they would want from us in terms of possibilities for users with sending and receiving crypto and at the beginning they actually thought that it was a possibility to constrain us to be able to reverse transactions on the blockchain so that's just to say that's something that's obviously not possible for a totally decentralized blockchain like uh Bitcoin or Litecoin whatever and that's something that they learned from from experience from listening to us and speaking to us as uh companies that are actually part of this ecosystem so there is room for improvement there like At first the reaction was obviously people were very concerned very worried about this kind of approach but in reality when the law was finally passed this was not the conception that they had anymore so there is room for improvement and even laws that are being set now they can instill improve in the future like there is constant discussion between certain institutional bodies and crypto related businesses situation that we have right now is not fixed it's clearly a moving um like moving landscape and like we have to stay tuned to really see what's going on and how it will evolve in the coming months and years I suppose it's kind of like a learning process for both sides right doesn't it I mean the so on one side you have the The Regulators who are understanding the technology on the other side you have the technologists who are building towards more regulated products so it's something that we'll have to do together that's really interesting I might have just add a little little tab to that if we look at regulation I understand that regulation often especially in the crypto industry when we're growing a lot of new Industries and areas of expertise um is something new but the underlying reason why we have regulation to close the circle with FTX which is a scam in the fraud case naturally is to make sure that the retail customers all of us who use crypto as asset classes and for the underlying technology to make sure that these people have regulation to protect them and if it may be with the case of sandboxes our personal experience with Regulators is to have an open conversation somewhat of a of a partnership and therefore be in the Forefront together with The Regulators to come up with regulation that do exactly that protect the End customer protect the retail investors that are not the experts on this topic as most of us in this room would be right so I believe there is a a good good bridge between Regulators Us in the crypto industry to make sure to provide an environment where everyone can have a fruitful life there yeah yeah and it's it's a hard balance I think between between that and allowing Innovation and not stifling Innovation and that's very difficult for The Regulators to get right but that that they are they are getting there I think and I see it's definitely a lot better than it was five years ago where we didn't have any clear regulation at all um so so that's really good um so so for you Benedict uh just a quick question on misconceptions so I think for me a lot of the um lack of trust in crypto um you know not necessarily from from Regulators but also from the general public probably not people in this room who are very much involved in crypto but but more generally um it comes from these common misconceptions which are often based on negative aspects of crypto itself so for example it's heavily used in the black market or the majority of it is using the black market which is probably not the case these days because the majority is actually used in investment right um from a communication advisory point of view how do you think we can kind of change the hearts and minds of the people so that they don't have these um let's say common misconceptions and they can kind of get rid of this like negative negativity around crypto which I don't think is really fair um to start my answer in the previous panel it was a brilliant discussion on a very similar topic um for me the misconception with crypto is somewhat a little bit laughable because when you consider how much um money Fiat currencies are used on the black market which is physically not traceable with actual physical cash crypto on that side is is way safer because it's fully transparent and we have enough tools as everyone knows to track the path of crypto through the blockchain technology right so in that sense for me I see it's super important to more or less repeat and repeat and repeat this point on platforms that we all get access to uh for example this com this convention but the underlying issue for misconception in my opinion is the lack of knowledge and I'm gonna go very broad here in more or less saying looking at my brother who lives in a small town in Austria he doesn't know how money works properly right and don't get me even started trying to explain crypto to him right so in my opinion and this might be a little bit of a bold statement why do people need to understand it in the first place same as I believe not very many not many very people understand the blockchain technology in itself and it's very similar to the internet when it came up no one do you know how an email actually works in the background we just use platforms that make it extremely user friendly and convenient for us to use the essential added value to it in my opinion to gain back the trust is a through working together with regulatory arms definitely but also if you look around at players who enjoy currently a lot of trust which they have built up again from 2008 Are banks regulated institutions and I believe the Big Challenge from a communication standpoint as well by underlying the trust in an asset form is to start trying to work together with people who enjoy a lot of trust in the industry I know that the web3 discussion and Banks is a little bit a different one um but yeah that that would be one of my aspects from a company perspective also looking back at the history of bitpanda for the last nine years Building Technology and providing easy to use access to our users uh we now shifted our Focus or split our Focus to offer the same seamless access through banks via and simple API again not taking away for the banks to fully understand it but to understand a the benefits of offering that asset class and additional asset class like fractionized stocks Commodities and so on to an ever-growing demand of users and Retail customers especially that read about it for the last 10 to 15 years and FTX in my opinion even strong as this argument because the demands I mean you guys are still interested in crypto right even though FTX happened but now I believe the shift is coming from understanding that not the asset class itself is the issue but actually the company is selling it to you as a very very blunt example do you guys want to have your salaries paid to a bank account in based in Hong Kong or the Bahamas or do you want to have it at the bank you trust right meaning a partner you can trust that for me is is an approach to try to con convince the ever-growing Battle of trusting crypto yeah I think I think we're going to get more more and more institutions um more and more big players uh that are getting involved and I suppose that that will mean that there'll be more access to more people people will be more informed people would trust more the companies that that uh that are using it and that's that's really important and that will change the way that people think about things um maybe just a word about it and link with regulation that we just discussed um the traditional business is heavily regulated I have to can believe really really regulated now the reason for that as you said regulation is there to protect the End customer and each time that there is a crisis each time that there is a fraud The Regulators come back and put a an additional layer on the existing regulation we are still paying the subprime crisis of 2008 15 years later I mean I don't know if everybody was there but 15 years later we are still paying that and this is why I think regulation is necessary but it's important for crypto to go for regulation because there was I heard another panel self-regulation that was was the bank was promoting before the limit crisis 15 years ago but there is always one guy it could be FTX could be another one there is always one guy creating the mess so you need to protect to make sure that it is done and the more you collaborate the nicer the regulator will be so it's not they are not enemies and should not be considered like that they have a role to play and if the crypto world gives the hand to them could be better than the opposite I I think you know so the regulator and also government as well will eventually have some advice for their citizens around around this and I think it won't be in the uh let's say in the hands of the commercial Banks or in the hands of private companies to be able to kind of give this kind of advice as well I think that eventually when we get to a point at which the regulation is open enough for people to be able to really use cryptos kind of more more generally I think that potentially also governments might weigh in and give the give their systems advice as well hopefully Financial advice from governments that would be fun um so so Dorian a question for you so for me um one of the you know one of the biggest leaps of trust um for crypto is actually using it as a payment um service so if you want to I don't know buy something you need to know that what you're using to pay for that thing um is secure and that it works properly um uh gft alongside a collection of Banks and also other technology companies we launched a thing called the udpm which is a payment Network for um stable coins and also in the future cbdc's a couple of countries like El Salvador Central African Republic have also a legalized Bitcoin as a legal tender um what's what's your opinion on this and what do you think the impact is from a uh economic point of view when financial markets move across to these new payments uh let's say rails that based on digital Assets Now if you can comment a little bit on this your opinion on that so it's a pretty large question to start with and so it will be more in my opinion and my take with my background in economics than kucoin's opinion as this is like more of a broad concern than just like the way an exchange operates and what kind of activity we have to do and things so actually this kind of payment system that we see right now relying on stable coins and being implemented more and more and preparing the field for cbdc's technically speaking we we have not seen any any problem with it technically speaking it works like uh this is not the issue as you mentioned it's more like trust but when you think about it uh you watch already trusting a digitized financial system already every day every day your bank account is just numbers on the screen and you're trusting it to do to process payments to process wire transfers like you tell him to do it because we have been relying on these digitized aspect for transaction for and for the traditional Finance industry for decades now so this is already a starting point I don't think this is that much of a switch actually the the boundary has already been crossed in terms of digitizing the process in our minds at least so making it uh from with the cbdc emitted by a central bank minted by a central bank that's an official body regulatory body for people for most people the the Gap will not be that huge um so that's the first thing then regarding like what kind of impact it will have if we go back to economic theory they are more like a broad impact first it will reduce transaction costs so that will make us do business more efficiently by cutting transaction costs we are probably stimulating economic growth in the near future thanks to this we are cutting some middleman making the whole process more efficient that's like the most obvious aspect to it then in a second well in second parts we can look at another aspect of the question is where we stand when we ask this question so we are in a system where traditional Financial system is working more or less properly you can rely on it to send money to your contacts to your friends to your family this is not the case everywhere on the planet actually you mentioned Salvador and the Central African Republic there is a reason why the developing world is more interested by this technology than the traditionally called developed world because their financial industry doesn't work the way our does it's way less integrated even sometimes just doing a transfer between two banks of the same country but two different banks will be really will take you time and will probably be something you have to argue for and argue with the bank so that they really realize this transaction so that's why in some part of the world this is like much more interesting and much more convenient than we would think here so in this regard it will bring more inclusion financially speaking to these people for people who are underbanked or who don't have banks at all this will definitely be a the source of more financial inclusion at least that's what we expect and that's what we hope for and then in a third time you you mentioned the fact that we trust our banks and we want to receive money at our banks and there is actually also a necessity for that is that it's a very oligarchical Market in its structure the bound the cost uh to enter this Market are very high and what this Technologies are doing is that they're actually reducing the costs and the power is to entry on this market so that's very interesting because we are bringing more competition in something that was definitely oligarchy just by the way it's organized naturally because these costs are are just so huge you cannot start a business and go ask for these licenses and have the have the possibility to Mint your own currency like nobody will let you do this nobody will so right now we have the technological possibility to do it with it comes the regulatory challenges that we are facing at the moment but in the end in a third time we will probably see more and more competition in in this field regarding like payments regarding the emission of money and how it will be organized within States and between states so the that's the the three main approach three main points we could um I guess we could Envision in the near future again thank you that's very comprehensive answer and I I agree with a lot of the points there um so this this is a question for each one of the panelists maybe we'll just go in this direction for Philippe uh on uh to um Benedict um so maybe in just about a minute or so uh what do you think is the biggest challenge at this point in time to be able to improve uh transparency and digital assets uh products and solutions well in terms of transparency I think what is important is to be able to to have a view on who is holding what when it is necessary certainly for the Securities Market this is the one of the biggest challenge there is today nobody that has a view for one specific Security on all the investors which is sometimes needed for the issuer himself or needed for the regulators and that's a big challenge today there is a lot of process to try to identify the final investors or for the final investor to be recognized for him to take an action to vote on something to exert certain rights Etc so there in transparency DLT could help a lot by making sure that those data can be accessible depending on certain rule of course and that will put oil in the machine for sure to run everything more smoothly which is the challenges that we have in our in our businesses today again Benedict so I guess the e the easiest answer to that question how to provide more transparency is buying our products that's uh probably the short answer that I would give um the longer answer would be it will take time and I guess the biggest hurdle for that would be and we mentioned that a couple of times on stage is probably education uh the good thing is everybody can do something for it I guess going to the EBC is one part of that um getting your knowledge from the internet media resources I guess there's a lot of things that you can you can learn for free you don't have to pay for expensive courses I mean if you want to you can if you need a diploma for whatever reason there's there's plenty of opportunities today that hasn't been the case like four years ago um or a couple of years ago either but um that's just a natural development that will take time so educational knowledge that is one of that um and yeah um the time will tell I mean maybe just coming back to something that we mentioned earlier no matter how far regulation will go there will always be cases like wirecard and wrong FTX all of those regulation will not prevent that regulation is there to protect like what we already said like every client or a private individual the world is entering the space and no matter how hard regulation will try there will always be someone waking up that is dumber than what you can ever imagine so we will not we will not be able to print I guess it's a fine line between regulating the right way and over regulating and making it harder for everyone that's that's what shouldn't happen and to close that remark again it's education its knowledge and whoever shares that and whoever guess that is probably uh will benefit from it we actually think there is an actual thirst for knowledge but not only knowledge about how these things work but knowledge about what's happening behind the scene that's why we started implementing this proof of Reserve mechanism that we are showing every month like every month we update it and we're actually looking to work with the auditing firms auditing companies that are recognized in the space to try to audit our whole like a whole balance sheet but the problem is it has never been done and right now like we had this experiment with Mazar a couple of months ago and they retracted themselves from uh there's their own statement because like they are not sure about the doability of what they are doing like this is a really something that since it has never been done the first one who will do it will take risks and I guess nobody's super keen on taking risks this year oh maybe in the coming years this will be a different perspective but the fact that we're providing these tools not only that like we're also providing now a coupon wallet so it's a non-custodial wallet that you can use obviously like any non-custodial wallet to keep your own assets and then come to trade on the exchange and Safeguard your your assets under your own responsibility as soon as you need it and this is kind of the first step in a direction where we envision more hybrid Solutions between non-custodial and custodial because yes as somebody mentioned in a previous panel and I think I think that person was right not everyone will go non-controllable like this is not a mass-market product that can be understood by the mass in current circumstances and our goal is still to reach this adoption this massive adoption so how to do this is probably to fit each type of individual customer with the type of products that they would be most likely interested in meaning that if you're ready to step forward and have custody over your own assets then we will probably provide you the tools to do so we'll provide you the products to do so and um we are thinking even about ways right now technically speaking we're investigating in ways of trading from your non-custodial assets and still be able to access the services of a centralized exchange so these are the ways that we're exploring at the moment to see if technically speaking it is doable and if there is a real interest into it for from users overall so all these questions are being addressed now and maybe that's also due to the circumstances like due to the circumstances we have more time to build people are not so like following markets as much as they were the the like let's say the momentum of the markets is not there so there is time to build for probably all centralized exchanges right now like we are all trying to find new Solutions uh bring more people in the space and at the same time provide products to people who are ready to go through the next steps and who want to custody but still be able to use all services to be there for them also again um I'll make it very brief because I agree with almost everything you guys said already um but again from a company perspective um yes education is extremely important it's a lot of access to education so I'm not going to Deep dive into this from a company perspection perspective what's wrong with my English today from a company perspective um I think it's essential to come up with procedures that your customer base over a period of time starts to trust you right and the right amount of transparency especially from a company perspective transparency is always like this fine line of how much do I want the user to know for security purposes I cannot give them the handbook to everything but they need to have enough access to understand how the processes in the background work to give them the capability of trusting a company right at bitpanda for example we hold more than 100 of our customer funds in Cold Storage so it's not connected to the internet right I'm gonna stop there looking at the time not that we're shooting thank you super interesting and thank you uh to all the panelists um I don't know if we have we have a few minutes now um so we have maybe two or three minutes for Q a I don't know if there's anybody in the audience that has any questions for any of our esteemed panelists we'll be over here I don't know if there's a mic going around for the audience members thank you thank you very much that was uh really interesting um so when we look at building trust transparency that would clearly be heading to increase adoption right to get more people using it and I found it super interesting when you were talking about payments and payments gateways and we can even think about the early days of the credit card you know when people said this is gonna it's gonna flow when you look at what we're doing nowadays with cryptocurrencies which Industries do you think are gonna be the ones that are gonna help to get that traction if you see my point something that you could see okay the Layman person on the street that is not that Savvy to say I can access this better using these kind of assets and of course we could say gaming right now but gaming is for you know the the generation way way younger than the people are here thank you who wants to take that yeah I take this one when you're talking about a classical retail investor like my brother or my mom right [Music] um I believe that for the broad public the most amount of trust they currently have regarding finances is still their Banks and I don't think this is going to change uh in the next coming years looking at possibilities for banks working together with cryptocurrency companies I see a huge potential right just have a banker look at the data they have from their users and see how much money actually goes from their user's bank account cash to cryptocurrency trading companies like kucoin like other exchanges or go even further and include stocks as well right so I believe the best step we can do from an industry perspective a cryptocurrency industry perspective is to try to come up with corporations new ideas product ideas to work together with those industry that actually hold a lot of trust and funnily enough that you mentioned gaming I know a lot of conservative people who who look away when it comes to gaming at all right so I think it's always hard to find the middle ground to con to include everyone but I believe for the broad public we need to go with companies that they trust right now we can go with a bold personal take right so I'll say real estate and I'll leave it like that real estate like the most individual and kind of asset class investment with crypto we'll see where it goes I guess one other element that you also just reading between the lines and request in your question is not only about the transparencies about like Mass adoption like what what needs to happen that this goes like like 10x or like the hockey stick that everybody is waiting for and my bold claim on that would be the industry that makes it possible that people are using it without knowing that people are using it and I'm coming back to the other question a bit before like in terms of misconceptions I don't know about you guys but whenever you talk to people about crypto there is no one not having an opinion I've never met someone who is not saying oh I don't know about anything so I just don't have everybody's going to have an opinion um and I would say it's it's similar to like emails and uh the early days of the internet and how a car works like like in theory I know how how an engine works but I don't really care just use it that's what I'm like focusing on and I guess the industry or that player that will make it possible for the user to use it without knowing hey they're touching blockchain because there's still these misconceptions and stuff and and it's gonna take a couple of years if not decades if that is if that is gone if you want to add anything or maybe just one word I think for safety in this case they have to meet two points the first one is to know what you are buying and that's come back to the education to make sure that you understand because it's quite volatile instrument all those cryptos that you understand the logic and two that what you buy is properly managed that there are no bad surprises and this is maybe the regulatory part to it to give you that trust on both components thank you unfortunately um we're out of time now but I'd just like to thank the panelists um let's thank all of you for being here and uh enjoy the rest of your EBC