Solving The Big Problems: Liquidity, Trust and a Changing Economy

good morning hi everyone good morning everyone so we so we we're going to do an exercise in self- moderation today we have no moderators so we're going to moderate ourselves so this is how we're going to start why don't you introduce yourself Henson that's great I'm always accused of not being able to exercise moderation so this will be a good test for me uh today so just by way of introduction I'm Hensen orer I'm founder and CEO of soda insure prior to this uh I was his first uh CEO and helped launch Vara uh the first Global regulator of virtual assets just down the road in Dubai um and I ran a crypto custodian that we had spun off from namura Securities called Kayu for two years when it went operational in 2020 bua I will jump in good morning everyone thanks for joining us uh my name is Bushra darza I'm currently managing director at Galaxy trading um I manage what we call the principal trading business which in a nutshell means managing the balance sheet of a publicly traded business uh I have been in the space of um trading and investing for quite some time my whole career actually started my career at Goldman Sachs where I traded the US rates options book in New York uh great fund basically trade in a lot of der iives and very excited what's happening our space currently as more derivatives are coming on board uh well thanks to adgm for having us uh my name is Tim Grant um I'm the CEO of DSX Capital which I've realized now most people can't don't know how to pronounce that Anna it's deex Capital uh so we uh we're a billion dollar investment and operating company um we are very squarely in the digital asset space we have operating businesses we have a VC portfolio we allocate to funds and we also build new businesses and and one of the main reasons I'm here and you see core Prime is on the on my title as well I'm also CEO of core Prime which I'll talk about in a moment but is ultimately going to be a uh a Next Generation Prime broker for the space um so with that uh we're going to ask each other some questions um and uh I'm going to start with you Hensen and ask you to uh talk a little bit about insurance uh in general that's the space that you're in I guess the question on everybody's mind is what why Insurance why now what it what how's it relevant to this space why is it important great well um I can talk a little bit about the Genesis of the idea or the or the project um both at KOMU we started in 2018 but it took us until about 2020 um to get uh insurance which was suitable for our business and as a custodian clearly we needed uh loss of asset Insurance custodial Insurance um like crime and specic uh when we're holding other people's assets and then of course as operators uh we needed dno insurance and it was very difficult to get and we were one of the first to get a comprehensive package uh from a Syndicate in London um and then when we opened a Dubai entity it was actually difficult to get insurance there um as CEO of Vara and with our rules and regulations we required our lenses to get similar types of insurance um and there was very little capacity available and when there was capacity it was arguably prohibitively um expensive so um I thought somebody should start an insurance company um and in conversations actually with further Ventures here um in Abu Dhabi as well as uh webn out of London um they like you should start an insurance company and and and we'll back you so throughout this year we have been um very busily getting a license from the Bermuda monetary Authority uh an Innovative insurance license uh in order to provide um crime and specic dno as well as slashing and smart contract insurance and in fact we just got our operational license finalized um last Thursday so we're we're good to go um as we get the uh the final capital in place in Bermuda they have segregated account companies uh where you can underwrite different types of risk in different buckets that are uh bankruptcy from bankruptcy remote from each other so that you're you're not taking one R kind of risk of getting um claimed on on another uh we're utilizing that but also our sort of nuanced or novel approach is that we'll be underwriting in different types of uh currencies as well um so not only Fiat US dollar insurance for the dno because that's what people get sued in um but for Crime uh and specic policy we'll be able to underwrite in Bitcoin for custodians who are holding a lot of Bitcoin um and for slashing and smart contract Insurance protocol Insurance defi insurance will be able to underwrite the cryptocurrency or the token that that's uh denominated in uh so it's super exciting and of course for the evolution of the space uh and for more widescale adoption there needs to be the type of insurance products that give so much trust to the trafi system that currently doesn't exist in in the Defi and the digital asset space um so that's Soder uh bura um tell us what's going on with trading and liquidity um and what you've seen evolved since the uh ETFs were approved and then also how you see the landscape going forward with potentially a regulatory framework uh coming in with the new uh Administration um uh in the US well listen it's a very exciting time I looked at the title of our panel it says big problems and there was the liquidity word next to it and it resonated with me a lot I think it's a big opportunity in our space it's not a problem uh our space is very liquid so that's number one I think I've never been more excited about our space we've got a lot of validation a lot of institutional interest especially after the ETF launch uh let's start by just thinking about how a big asset manager would look at our space um the questions were trust liquidity Insurance all of these in their heads and I think so far uh the new Administration that we have on board we have treasury secretary that knows basically ex hedge fund manager knows the ins and outs and the plumbing of the financial system a new SEC basically commissioner that that has been pretty much pretty friendly with the defi ecosystem Uh Kevin warsh very well versed in the plumbing of the ecosystem that brings us back to liquidity and if you look at the most successful applications right now in blockchain and crypto number one has been Bitcoin the most widely adopted kind of application in the ecosystem has been Bitcoin thanks to the introduction of the ETF uh number two um I call it payments or more generally stable coins that's basically another real way to adoption in this ecosystem and with this new Administration coming on board we're going to have a lot of exciting things and they have a very short amount of time to execute on that so I've never been more excited basically about our space bring it it back to liquidity I think a lot of uh a lot of people look at crypto and it is a market that trades 247 so if you need liquidity and you're basically looking into I find it exhausting as a mother at watching this Market 247 we have teams distributed globally of course but this is not the traditional you know rates or FX or Equity Market even though FX Tre is a little bit longer but it's hard to follow a market that's been very volatile um however with the Bitcoin ETF coming on board I think more liquidity is coming on board which means potentially lesser volatility as we basically traffic in this new asset class that's one two another thing I just wanted to share a couple points a lot of um players in the space call Bitcoin Liquid Gold um if you look at correlations this year of Bitcoin with other risk assets such just the indices SNP NASDAQ and small caps Russell uh we traded anywhere between 35 to 40% correlation to these assets um so it has yet to prove itself as the liquid gold it is a 21 million coin in circulation that's basically by definition however Bitcoin has been and the space you know very coated to risk assets um with where we we are last I checked we have like 100 billion on bitcoin ETF gold ETF is closer to 240 so can we surpass that down the line absolutely uh this is something basically in the docks and the newest thing that we just got has been ETF options that changes the game so when you think liquidity um and people exposed to the asset class so no matter how you consider it is a a liquid gold specifically Bitcoin here because is that's 2 trillion out of the four trillion basically in the in the market so I'm just talking half of that Market at least and where the bigger players are positioned as we look at more options coming on board people can hedge people can speculate and that drives the volatility a little bit lower and it makes the assets a much more a much friendlier asset to to be and more liquid asset to be in as a bigger institutional player so to just sum it together I think we have an excellent setup for a great uh regulatory environment coming in the US after very difficult years um for basically serious players coming in and trying to make the place uh the space more institutionalized um the introduction of newer not AER classes but like derivatives coming into the space will give a lot of freedom for a lot of more sophisticated players is coming in to either hedge their exposures to speculate potentially in this space and do all variety of strategies that every basically hedge fund kind of like respectable I guess sizable hedge fund comes in and tries to play in and the last part I think with that more interest more interest coming in means potentially more Capital allocated to it which goes into a lot of these Builders innovators in this space there's the liquidity drives more liquidity into Venture and I'm excited about Venture right now because as people are playing in the liquid side of it they are driving more Capital into Venture where we have a lot of amazing Founders now coming in and iterating with this newer Innovation like I don't want to mention potentially AI agents uh coming in and the interaction intersection between Ai and blockchain where you're going to have lot of these let's say you have your AI shopping for you on Amazon you're going to need at some point some blockchains crypto rails basically incorporated into this whole AI story Incorporated in our ecosystem so I'm very excited about that and I would love to give it to Tim because we're talking liquidity I think we have to talk about credit and leverage again those are very important points that lot of us pay attention to as we're growing into this space thanks thanks Bush and I think you're right like if you if you think about what we're all talking about here the we're talking about Primitives we've got to this interesting inflection point where we've come so far but there are big pieces of infrastructure that are that remain to be put in place to allow for the the March towards the growth of the derivatives markets and that risk Capital coming into the space which is going to be that virtuous circle that lifts the entire space up and and one of those Primitives is also credit provisioning and it's kind of the plumbing in the system that we take for granted in traditional financial markets but if you look at the the crypto space and it's important to recognize and I think everything we've seen this week and and and have seeing everybody here today this is an Institutional space you know we're not talking about crypto hedge funds we're talking about the biggest players in the space the biggest hedge funds the biggest asset managers who who want to trade this and the ETF was the starting gun look at look at Black Rock like the biggest asset manager in the world is openly talking about Bitcoin on the regular but in order for us to get to that next level we're going to need credit provisioning which doesn't exist so the traditional markets really are fueled by Prime brokerage so few the largest uh hedge funds in the world uh leverage they get their leverage from Prime Brokers those Prime Brokers are big Banks they're funded by bank balance sheets they have access to the FED window they have access to bond markets now look over into the crypto space and and the digital asset space we've got some great players hidden Road Falcon X Matrix Port ltp but they don't have the same ability to fund off a bank balance sheet and so what we have and I think you will feel it as as an active participant in the market and and it's extraordinary you talk to anyone who's actively trading they'll tell you they can't get leverage they can't borrow enough dollars to go and and get that leverage in the market and to be just so you all know you know usually you're talking about 2 to five sometimes 10x leverage on the assets you have so I used to work a hedge fund called UBS o Conor we had 6 billion of capital but we were trading 24 billion really because we got that leverage from our from our Prime Brokers that's the lifeblood of capital markets that's the liquidity which allows us to go and build these new marketplaces and allows more participants to come in again that virtuous circle so how do you solve that well interestingly the parallel with what you're doing Hensen is uh there's another Market that actually had to solve this problem the reinsurance market can't fund itself self through bank balance sheet so they've now over decades they've accessed risk capital from Sovereign wealth funds Pension funds insurance companies credit hedge funds by creating these segregated account structures and it's a Well trodden path so that's actually the approach that we're going to take and we think we have to take because the the new risk Capital that will provide that leverage for the system can't come from our own system can't come from our own ecosystem we can't keep staking and reaking and restating that's not going to work we need net new billions of risk Capital to come in and that risk Capital will come in when those allocators see a framework that they're familiar with that that feels like and again this notion of trust that's that's got Decades of of tried and tested uh experience in in what happens when things go bad what happens uh if if things go you know bust and and what happens in bankruptcy how do we make sure that we don't see a lot of the stuff that went on a few years ago in 2022 when we had our crash like that can't happen again we need to have a bit more robust so we are building a prime broker we're actually intending over the next year on being uh regulated by adgm and we'll also have an outpost in Bermuda and our goal and by the way the demand side of the equation is is very very clear I I literally haven't even opened our business yet we have literally hundreds of millions of orders for leverage that tells you that the demand is there now we need to go and build a mouse trap that will really entice those those that net new risk dollar allocator to come in from outside of our space and again that's a primitive that we need and there's there's there's others too so I noticed that we've got one minute left so I'm going to do a very quick throw it over to Henson and maybe we can all give our 20 seconds last last call before we go yeah I would just say uh when things go wrong and as we go to trustless we go onto blockchain we go to smart contracts there still are scenarios where things could go wrong so where I see the insurance landscape evolving is potentially for protocol or Dow or defi insurance so that if something goes wrong there's a pool of assets there mutualized or um captive that gives people the confidence that if something goes wrong their deposits are going to be safe um so Deposit Insurance for a borrowing uh protocol uh makes all the sense the world and that can be self-funded and uh self-propagating so that's where I see the landscape going forward well as this as a CEO of a of a company that needs Insurance let's talk right now I got to get some insurance Brer the last word to you Brer I would just say pay attention the market is moving and the space is moving very very fast uh I don't think people can afford not paying attention we were having this joke with my boss who anecdotally was his college roommate and he always tells people if you're not long you're short so you don't have to be long just pay attention I think that's my my biggest message to everyone wonderful thank you everybody thank you