I'm here to talk to you a little bit about what everyone has been talking about for the last few years when it comes to cryptocurrency; but I'm here to talk a little more about the reality of what's happening, as opposed to what we see in the headlines. And is this what is missing when it comes to institutional implementation? And a little about me, although she was very kind to promote me, I am one of the co-founders of MyDinh. I was a consultant to the UNICEF Crypto Fund. I contribute to Forbes Crypto.
I write for CoinDesk. All this is to say that I've been doing this for a very, been doing this for a very, very long time. And I've been lucky enough to have the opportunity to interact with many of the best people in the field, to be interested in them, and to receive useful information that is truly a pleasure to share. So, what is Miden? Miden is the next generation ZK blockchain .
Last year we raised $25 million from a16z crypto, 1kx, Hack and many others. The idea is that to date we have mostly seen blockchains as either fully public or fully private. And we see that there are problems with both of these areas. One creates a world where there is dystopian financial oversight. And the other creates a situation where it's actually quite easy for illegal acts to occur, and that's not good.
And what we've seen when it comes to solving this problem is the idea of creating permissioned chains. And while I don't think the average person is concerned about decentralization, they are concerned about the idea of counterparty risk. So we looked at creating a blockchain that solves the question of how to ensure privacy and compliance for individuals and institutions at the same time? And we mainly focused on what does engaging these institutions look like? So why is institutional implementation important at all, right ?
And the reality is that the scale and trust it brings will actually lead to the mass adoption we were looking for. A billion people won't show up because of a billion people who start playing with meme coins playing with meme coins . This will happen thanks to a billion people who will have access to real money in financial institutions that will move to blockchain. And what we saw, actually, with TradFi, is that the 2024 bull run was started by BlackRock launching their ETF. However, the reality is that the current state of affairs is that we are mostly in pilot projects.
We are not fully deployed yet. So that's me on stage last week on the left, yes, with the head of digital assets at Invesco, their two and a half trillion dollar fund, and then on the right with Al Meldinberg, who heads digital asset strategy at Morgan Stanley, another two and a half trillion dollar company. And in bringing together some of these thoughts, I've been fortunate enough to talk to some of the biggest and best people and institutions that exist. So, I boil it down to three things: the institutional perspective, right? The first is risk, compliance, and predictability.
Another is liquidity, compatibility, operational clarity, and operational clarity, and finally, one of the things we hear about very often is regulatory clarity. And why did the implementation stop? So, despite real progress, there are actually de facto delays in many aspects. A lot of the pilots don't scale to production levels, you know, when you think about the fiat assets that are in a lot of these institutions, compared to what we hear about when it comes to what they have in terms of cryptocurrency, it's very different. So, there is a very big difference between what we hear about in the headlines and what actually happens behind closed doors in the boardroom.
And the four barriers to addressing this issue fall into these categories: technical, regulatory, compliance, operational and management, and then cultural and organizational. The first of these, in terms of technical barrier, is privacy compliance, which we aim to address. These institutions must be able to comply with the laws that they are simply obligated to comply with. And to date, we have n't really had the opportunity to do that. Um, there are compatibility issues.
If you look at the different chains, the fragmentation and liquidity between them, and what does an attempt to overcome them look like? And I mean, not to mention all these modern hacks, what's happening with liquidity pools? The average person doesn't even know what that means. There are real delays in calculations when you try to do something. Financial institutions need to figure out the funds at the end of the day, and you can really think of most of them as really inefficient sets of databases that have reconciliation processes, but they've been able to figure that out over the last 100-plus years.
There are not enough storage service providers. We need more redundancy in this. To be honest , there are still not enough stablecoin providers. There are huge challenges when it comes to risk management tools. There is nothing, at least in terms of institutional level and then liquidity depth.
If you are one of these large organizations that thinks about the amount of capital you want to use, you will destroy the price charts. So, can you actually deploy this in real-world mode and turn it into something, or is it just a fun toy for retail? And these were some of the real questions that came up during conversations with these people. Next come regulatory and compliance barriers. Now, regulatory uncertainty regarding token classification token classification , tax rules, etc.
was very real. Even as a founder, we didn't set up an offshore company in the United States because my lawyers told me it was entirely plausible entirely plausible that the SEC could decide we had a problem and they could freeze our bank accounts and we wouldn't be able to actually get paid. Now, if you told me that I was starting any other company in the US, and you told me, " you told me, " Hey, you're not doing anything illegal, but I'm just letting you know that the government can come after you." They can seize your assets. They may try to arrest you."
You would say this is absolute madness, but that is the reality we live in. And while Genius has already passed and we are hopefully achieving clarity, this is something that is very concerning to these institutions. Auditing and reporting are things that are very boring but extremely important, and we don't have the complex things that were actually built to be able to do that. Insurance deficit, right? Insurance is a very real thing that needs to be done for these institutions, and just think about the hacks that we've seen in just the last 3 months, and what it would look like if there were real, like, hacks on banks, and they had to deal with things like that, and we just laugh at it and think it's a very real thing, but for these institutions, it's a very real thing.
And then tax complexity, tax complexity tax complexity , and you know, when you think about sending money across the border, like, who would it be with ? And it goes back to the rules, like if your money crosses three borders, where are the tax laws on that? And then there's the reputational risk, right? I mean, imagine I was talking to the New York Knicks a few years ago when we were at another company and we were discussing the idea of a logo on their jersey. And they said they completely abandoned the idea of negotiating with cryptocurrency companies because they were in the final stages of making a deal with FTX before it fell through.
And these are real things. Um, operational and management barriers. Um, counterparty risk Um, counterparty risk . I had to learn what a service level agreement is, but these are very common things these are very common things that are implemented in institutions that don't actually exist. And this creates operational risk.
Um operational risk. Um , transparency of management. I mean, anyone who has worked in, I don't know, let's talk about the DAO. For example, there is simply the theater of decentralization. Usually, "whales" work behind closed doors and control everything.
Today or yesterday there were people complaining about how the DAO worked for Morpho when it came to being able to sell tokens for their most fun pleasure for their latest fundraiser. Um, concerns about supplier lock-in, economic incentives. I mean, to date, there hasn't been a single token model that actually works. I mean, giving away a bunch of free money and creating sales pressure through drops through drops is not how you actually create demand for what you do demand for what you do . But this is what is advertised as the industry's best standard.
Cultural and organizational. Uh and organizational. Uh , the pressure on quarterly earnings was one of the things I didn't think about. But around this time last year, I remember talking to one of the big financial institutions and asking them, "What made things so difficult ?" And she said, "If you think about the balance sheet that we have in fiat currencies and the fact that every quarter we publish earnings reports that the people who actually run the company are very quick to report, we need to make sure that everything goes well when it comes to the quarterly earnings report because it impacts the stock price.
And there's just not enough cryptocurrency on the balance sheet to really prioritize it when these things happen." Er things happen." Er , lack of talent. I mean, if you think about it, most of us are used to it, but, you know, you can't hire someone with a JPEG file like a pickle or a monkey and who doesn't want to put their name out there as someone who's supposed to be your best developer. Um, risk aversion culture too, right?
These are people who have been doing things the same way for decades and decades and decades. The idea of implementing new technologies that are intimidating with all these things is very difficult for them. And so, because of that, from a reputational point of view, they are extremely conservative. And then, internal knowledge gaps. This is definitely one of the biggest things I've seen is that the people I've seen is that the people who are the evangelists behind closed doors for cryptocurrency are usually not the ones making the final decisions.
And over the last few months, maybe six months, I've seen that change more and more as management decides that this really needs to be important. Part of that is because, you know, over the past year, if you look at Robinhood's quarterly earnings reports, you'll see that over 50% of see that over 50% of their earnings came from cryptocurrency. But the reality today is that the people who are advocates for acquiring digital assets are not the ones who can actually make decisions. Then they have to convince a bunch of other people. When I was on stage with Kathleen last week with Invesco, one of the things she told me that was extremely unexpected was that she said that every time they launch a new product, 50 different teams have to sign on to it.
This means sign on to it. This means that even after that even after you reach agreement, you need 50 different teams to say "yes" to something. I planned it very quickly . If you think about technical, non-technical, internal and external aspects, what do these "buckets" look like roughly ...And where is the industry progressing?
I don't want to leave this on a dark note. Privacy technologies are doing a great job. Of course, I'm biased to believe this, but this is one of those projects that has made significant progress. Stablecoin regulation with MiCA and J Finance. I hope the clarity will pass.
We have seen a bunch of institutional DeFi pilots. I think the idea of DeFi as a word will soon disappear and we will just call it blockchain finance. I really hope it happens sooner. But there are a lot of events happening, a lot of hiring, and institutions are realizing that this is actually important, which is ironic because everyone in cryptocurrency thinks cryptocurrency thinks we're in this terrible abyss. What needs to be done to bridge the gap?
So, in my opinion, it means working with regulators, developers, and institutions coming together to figure out how to solve these problems. We need to focus on trust, compliance, and, for God's sake, usability. And then a long-term vision, not short-term hype. This whole industry is built on the premise that every 6 months there are a few new projects that are the biggest and most important, and then they launch a token that does well for about a month and all the TVL they bought disappears, then the incentives disappear and everyone just waits for us to move on to the next project. We need to be able to really step away from this, both as an industry from this, both as an industry and not just as individuals, so that we can focus on what makes sense in 3 sense in 3 , 5 and 10 years, so that we can be taken more seriously.
Yes. Thank you very much.
Automatic transcript — names and jargon may be misspelled.