Fireside Chat: Fireblocks X Standard Chartered - TOKEN2049 Singapore 2022

um so my name is Stephen Richardson I I head our Asia Offices here at fireblocks uh and what we're going to try to do is take the next 15 minutes to really ask some tough questions that maybe a lot of crypto folks have wanted to ask of Banks and their ability to really compete in this space and so uh with me is Renee and just wanted to give you a chance to do a quick introduction about yourself and and your work at Center chartered yeah thanks David hi my name Michelle I look after digital assets for Standard Chartered Bank I get to work with our Ventures team our institutional banking at Retail Bank on everything from crypto trading all the way through to central bank digital currencies and stable coins awesome so we'll jump right into it um I was in a conversation with a large Bank um where the head of digital assets for that bank just said when Banks choose to come into digital assets they will absolutely Crush traditional crypto firms and payments trading liquidity management Market making Etc right I think if you talk to a lot of crypto native folks they'll say that's a pipe dream and so I guess from your perspective working at a bank do you actually believe that Banks can be disruptive in the space and compete with crypto native players that have established themselves over the last few years I mean tough questions right off the bat I love it so I think it's really interesting where um banks have had a very privileged position in the market we're regulated we've been well supported by um you know infrastructure government Market position and all that sort of stuff traditionally and I think it's hard to imagine a world where that wouldn't be the case at the same time we've got what is a fundamental change in the fabric of the way Financial Services can be built and are being built so I think the the challenge you know it's it may be that there are some very successful banks that do do a great job um in a digital asset enable enabled economy but I think it is important to recognize there's a heap of work to happen there is a lot of cultural change there is a lot of investment there's a lot of learning that needs to happen and talent that needs to be acquired in order for traditional institutions to be competing in the same way as crypto native firms are and I think that so you know I guess in answer to your question I think everybody's slightly wrong um in that I think the way that the ecosystem is evolving will actually mean that the business models that exist today are not actually well equipped for a fully digital asset enabled ecosystem or economy yeah but I I guess look I think you mentioned regulation and this point of privilege that banks have by being regulated um but this explosion that we've seen in the crypto native space has come by this idea of taking risks right Innovation comes out of taking some level of risk yep right at Banks you guys have entire teams that are built to mitigate your ability to take risks and so if you think about new and disruptive models around business how can a bank really operate in this space if it doesn't fit within a framework that your compliance or risk teams understand today and therefore leaves you I think at a disadvantage when you're talking about competing for retail dollars or cons institutional dollars in the crypto space so I mean that's that's a really good point where we've got we do have risk infrastructures which are designed on historical Technologies historical events that have happened in financial services and are designed to stop us from being terrible at the same time that can prevent us from being excellent um what is important though is is two things right so um first of all actually we need to learn a lot as institutions um if I one of the things I often say is that you know if you're a banker who isn't paying attention to what's happening in digital assets and crypto you're you're not too dissimilar from a doctor who's not staying abreast of medical journals right the the big issue I don't I don't think the risk management is the issue as such we've got better tools to manage risk we can be our job as institutions is to manage risk to protect our clients to stay stable to generate Financial return and we've got much better tools to do that when you come you know when you come across digital assets and when you're looking at digital asset enabled Financial products so it's more about making sure that the team's working on that actually have the awareness and the understanding of how Financial Services is actually changing to be able to to respond to that Innovation so I think it's you know I don't don't see that the I think that there is an advantage to being unregulated and being able to experiment with things in terms of really innovating new ways of doing stuff but turning that into products that work sustainably for institutions requires a significant amount of effective risk management so I think it's a balance between the two but in no way do I think that Banks by their very definition oriented towards innovating in this way I think that we have to work very hard to participate in this ecosystem in a way that makes sense in a way that fits with how we're regulated but do you think that Banks actually want to work hard at doing this I guess is the question right I think the challenge that at least I see is that banks in general um typically tiptoe into water right like they don't make a full and complete jump into new technology and there's lots of considerations right and so when you talk about you know basically building that or going into that at unprocessed driven way do you think that banks are actually incentivized to operate in this space um I don't think banks are incentivized to operate in this way and I think we are potentially looking at a you know almost an Extinction event potentially coming up where Banks who are able to orientate and to innovate and to lean in and do things will survive and those that can't won't so I think it's hard to say well all banks aren't acting or all banks are acting the ones that are effectively able to mobilize themselves to challenge themselves to do things differently and to and to um do that precisely and take a stand and have meaningful conversations with Regulators with the ecosystem with clients are the ones that will end up surviving what will happen for those that don't is the business opportunities will migrate to new infrastructure they'll migrate to new ecosystems and the banks will be left without deposits they'll be left without clients they'll live without being left without an ability to make money so that's kind of the extreme downside case so I guess one of the things we try and do from a from a standard Charter perspective is have forthright conversations lean into the ecosystem in ways that make sense for us and our clients um and you know we're not we're not going to fly down the um to the farthest edge of innovation in crypto because it's not who we are as an institution but we do want to lean into the ecosystem in a way that challenges what we're delivering makes sense I guess you know you can look at Germany right and the idea that you know Baffin has changed the rules around you know basically issuing Securities on chain right this idea of Central Security uh csds right and and having that central registry uh be able to be done by any kind of party that holds a particular amount of assets you can look at project guardian and things that have been announced by Mas right and you can see those as potentially loosening right of this regulatory or rigid regulatory structure to allow some level of innovation do you think that if that occurs or persists in the space that it will really put banks on the back foot foreign I think there's lots of things in the space that are putting banks on the back foot right so um but I think that the um what what Regulators are trying to do with this is Banks really have a job of protecting consumers and making sure that we're dealing um fairly with our clients and supporting The Regulators in maintaining a stable economy that's kind of our job right these projects are designed to invite Banks to participate in their ecosystem without diminishing that role that Banks play right now you know I think that I do think that's constructive I think it's really helpful um but I I would suggest that perhaps more than just that is required for for a bank to succeed um and I don't but I don't think it will prevent I don't think a prima facing prevents Banks from participating if that is still a choice for each Bank to make around how they lean in yeah so I'll get to you know we have fire blocks our technology infrastructure company we've built our company with 150 plus engineers and product managers Etc right hiring I think some of the best and talented people in the space Innovation actually takes having great talent yep um and the question is when you look at Banks and maybe some of the talent dream that you're seeing there uh the more competitive nature of companies like Finance buy a bit coinbase fire blocks uh you're competing for talent in a real way right do you guys have the talent that it takes that Banks to actually engage in this space in a meaningful way so I think that um it's it's it become increasingly challenging for banks to attract top talent yeah um and part of that is to do with the uh reduced speed of innovation which you talked about before based on uh focus on Regulatory Compliance part of it is that um you know engineering is kind of quite creative and needs space to be able to be successful it needs tools it needs an environment that's conducive to engineering I think every bank is grappling with that Talent Challenge and working really hard to solve it but I think it's a very Steep Hill to climb and I think it's a strategic risk for every financial institution in the tradify space to attract and retain the best talent right we've gone from a world where in in traditional Finance where technology and business were quite separate to the point where actually you know if you look at the way most crypto firms are built engineering is Central to revenue generation and so therefore pay incentives all of those things things line up to the profitability of the business and therefore it's a much more attractive environment for very capable Engineers right but I look the challenge for me is that if you guys are not able to attract or potentially working hard to get past that Steep Hill that you have to climb then are we expecting too much to say that banks are really going to participate in this space in the next year or two right if it takes you know a year or two years for folks to build custody infrastructure uh let alone trading infrastructure other infrastructure across the board can we really expect that you guys will participate in a meaningful way and you know what does that mean for actually entering into space as a whole yeah I mean I'd be I you know I I'd be surprised if that is a an industry expectation but um I think that I think you're right I think it I don't I'm not sure that that is of you know an expectation I think it's I think it's on us as institutions to make decisions about where we how we support our customers and where we want to play make no mistake the customers of banks are asking for access to this asset class and it's on us to learn to how to deliver that to attract the talent as you talk about to make sure that we have clear strategic you know alignment to make sure that we have open and effective regulatory dialogue and if you get all of those things right I think that as an individual institution you have an opportunity to play any institution who is not able to get those things right will really struggle do you think you guys will engage more on an acquisition basis more as an industry as a whole right I mean if you look at retail and fintechs right you're at the acquisition of curve by PayPal you've seen acquisition of multiple different firms and from a technological perspective do you think that is the path in that most institutions will try to take or do you think that they will try to develop Talent internally to be able to then compete so I think I look I honestly think you'll see both um I think if you look at what you know if you've got a essentially heavily VC funded company that already has a you know a war chest for acquisition acquisitive growth is much easier if you have a um if you have a um listed company that has a you know very steady performance over time it tends to be oriented not towards Acquisitions and it has to grow organically yep so it will be very much dictated by a firm's profile their valued a book um their aspiration and also their ability to buy firms that are aligned with their values and their and their regulatory obligations right I think that's that's going to be what drives that I don't think there is any path forward which doesn't require education and talent development for traditional financial institutions I know from speaking to my colleagues other banks that there is a vast difference between that the person who knows the least about crypto and the person who knows the most and and you know Finding depth of understanding of a digital asset space in a large organization is incredibly hard so this is the last question um you know at Firebox we always say we've tried to find the anarchist in the bank right someone that has enough clout right to get things passed but they believe disruption will be vital um you know it's hard to find that Anarchist in the bank right it's people's jobs are at risk Etc so for someone like yourself or for other banks in general what's the biggest challenge that you foresee really building and scaling a business in digital assets I mean it's interesting that you talk about that Anarchist I think that um what what I've enjoyed at Standard Charter and I see this at other firms too but what I've enjoyed is it feels like there's different people being parachuted into the organization and there is a good network of people across different parts of the business who have a depth of understanding of finance and Banking and how it works who understand digital assets and fintech and um who have kind of a creative spirit that can address challenges in different parts of the business but I still think like for every institution there's a push and people and what you know if you can if you can shift with enough anarchists was the word I think you used yep if you can shift with enough of that enough creativity you can move forward but there is always a risk like if people leaving and if losing that kind of effort within a large organization which kind of then puts a handbrake on that so I think the more effective you are at building that Network retaining that Network and fostering that and you know any senior leader in any financial institution needs to identify who those people are and create space for them to succeed um in line with you know all of the requirements I don't think the and I'm going to use your name again anarchist I don't think that's at odds with being a regulated institution with managing risk effectively I think you can create really effectively um interesting exciting and effective Financial products and services within a regulated um entity I think you have to leverage Tech effectively I think you have to be efficient and I think you have to be ruthless in prioritizing what needs to be done and more importantly what needs to not be done yeah look it was obviously a quick 15 minutes and I appreciate you being so candid around the challenges that we're seeing and thanks again for joining us thank you so much for having me foreign