Fireside Chat: David Mercer of LMAX Group - TOKEN2049 Singapore 2023

hi David hi David are we here launching David coin I think we are I think we should well there's 10,000 people here 10,000 people at token 2049 Singapore uh this is the biggest and probably most important digital asset conference anywhere in the world and the energy is palpable um you know I've got say that last panel was or sorry talk was a little bit depressing talking about regulation um I've got to ask you David uh you know that suit looks very Mighty tailored to me are you actually from traditional Finance yep that's where I spent 35 years of my life In traditional finance and only seven in crypto so elmax group operates five exchanges uh most of them are in traditional assets in foreign exchange and the latest one we launched was elmax digital it's now 6 years old and we like to think we are the largest institutional crypto exchange out there that's a very big deal and you know six years in crypto may as well be 60 years in any other industry we've learned a lot of lessons here this is your second I'm going to call it bare Market yeah so a sincere question for an organization that has a huge a huge player in the FX space with offices in many countries around the world from Tokyo to New York and everything in between why are you still in crypto sincerely sincerely because it's the future right so in a way we're fortunate we launched in 2018 right in to the bare market so we withstood that but not withstanding that it was still the fastest growing exchange we ever built so the reality is today crypto is small but don't let it worry you it's going to replace it's going to be fundamental to the whole of traditional Capital markets going forward there are $200 trillion of assets on management today the total value of crypto is $1 trillion so it's half a per of the whole Market the reality is that whole Market will be powered by blockchain you will have more frictionless access to all assets and you're going to have true democratization of uh of trading worldwide within the next decade so it's not really what happens in 2023 it's what the world is going to be in 2030 well so let's talk about some the kind of things maybe blocking it again you come from Wall Street you come from the city so to speak right um regulation is a very big deal there sure why should this audience here in Singapore care about Regulators in the UK United States and some of these other places with established Financial Centers so look if all you care about is the assets you trade today the value of Bitcoin the value of ethereum today next week next month you don't need to care but if you want to access every asset on the planet you need that weight of capital that comes from traditional Finance you need the biggest asset managers in the world entering the space why they drive innovation in product they drive liquidity and guess what they drive the price down so why why does liquidity matter because I mean I would think that these very large players they can come in and Drive billions and billions of dollars of daily volume they certainly do in FX again something that you're a huge player in and the volumes there are stratospheric yeah so look um efficient markets are liquid markets that's why foreign exchange is the most liquid Market in the world we trade $30 billion of Foreign Exchange a day and to be clear a day a day to be clear the cost of trading that is I can't even explain to it's a 40th of a basis point at the moment people are still charging 10 20s 30s basis points to trade crypto in some cases 1% so that liquidity creates more especially to the retail Market you're seeing literally 100 you know too expensive I mean you can be you can be right on your crypto calls and wrong just by your cost of trading right so you can lose all your gains just through the cost of trading so that's okay this is a nent market but institutionalization of a market drives efficiency drives liquidity drives pricing down when you and I entered the market David we were still paying to trade equities now you now you trade them for free yeah right but you want to buy the tokenized version today you're probably paying 30 to 50 basis points that's too expensive this is why we need that weight of money and it's okay you can still be self- custodial you don't have to I believe totally in the future the original white paper that says we want to be decentralized we want to be anonymous we want to be trustless and so it's not incompatible absolutely not with tradition fin absolutely not in fact you know that's one of the things we're building out at elmax now look we're centralized so you can all um you can all hate me if you like but we provide decentralized access to centralized exchanges decentralized access to the deepest liquidity the most efficient markets in the world if you want to be your own bank you can be your own bank not your keys not your coins that's fine with us but some people don't want to be their own bank yeah Pension funds can't exactly do that can they they cannot today but maybe will in future in fact I think that's part of the democratization the problem they have is the inefficiency in their collateral and it's the same for a retail as well if you think about it how are you utilizing your your Capital today some of it's in your house some of it's in your stock portfolio some of it's in crypto you have to fund all those much better you have it in one place and depending what's moving that day that given day whether it be 3:00 a.m. on a Sunday you can allocate your own Capital to it it's the same for a pension fund it's the the same for a bank today they spend most of the day moving their Capital around and actually being really inefficient about it so they know with 24/7 markets with efficient fungible Capital has to be the future correct they can trade 50% more okay so let's talk a little bit about institutional Capital markets meets crypto and of course three letters come to mind ETF yep so are we going to see a US spot ETF anytime soon 100% yes I totally expect that to be approved in the next six months okay I'll come back to this stage and I will eat my hat if that's not the case okay guys we heard it here please record that put it on the internet so we can come back to it okay so let's say it does happen what does that mean for me a person with crypto in my my wallet or someone who works maybe at a crypto company so two things one if you're long today you're right stay long because look it's supply and demand very simply a bullish CEO over here folks very simply look if uh you know one of the issuers of the ETF or one of the applicants is the biggest asset manager in the world they control1 trillion that's 11 times the total value of crypto right if they allocate just 5% of their assets or their customers want to allocate 5% of their assets to crypto which does not sound unreasonable absolutely is not unreasonable and again I I'll make a prediction there within 3 years 5% of all uh asset managers money managed by asset managers will be allocated right now they're not putting anything in there it's essentially impossible if I'm a wealth manager I can't advise this in most places they just cannot because look they have to deal they're heavily regulated they have to deal and they should be by the way cuz they manage your money they manage our money right so they simply cannot access it ETFs are the easiest way to access all products globally today so all of a sudden that1 trillion that managed by asset managers will be able to be allocated to crypto today it's zero so suddenly why does that matter to you you happen to understand wallets understand the markets you can trade for yourself not everyone can so they're going to want to access it via their asset managers via the ETF but the flip side of that is so suddenly you have 7 billion people able to trade Bitcoin legitimately that's a good thing yeah so right now they technically can but they can't functionally correct if you don't know how to use a Chrome extension metamask how are you going to start you know essentially load up to a DEX correct so and it's fine the two can exist so you have people who just say look I don't understand wallets right I don't understand how to settle I actually don't understand the spot Market I don't understand how to store it I'm going to buy the ETF guess what you do you do and we see this in equities right I mean most people aren't actually day trading equities they're buying it into some sort of fun yeah so this functionally should work it will work okay I mean look it's it's going to be the there's two pumps going to happen in in crypto the first one is shortterm that's the ETF you're going to see a a minor bump pump of the crypto Market but the biggest thing is Bitcoin and ethereum are proof of concept for the coming tokenization of all assets when that happens I don't know how many zer you want to add to your crypto portfolio but it's just a reality that you will have been first because when you buy a tokenized Apple share when you buy a tokenized US Treasury the Forerunner for that will have been Bitcoin and then ethereum and it likely is going to run on some sort of permissionless rail a layer one for example yeah just because permissionless technology seems to win so let me ask you this when do you think you're going to start seeing more real world assets that are tokenized do you think think this is something that's going to happen the next year 2 years 5 years 10 years it's happening right so but the moment they're proof of concept so what you see in the institutions is you know some of the largest banks are already doing things for balance sheet efficiency and they're trading tokenized assets between themselves they are innovating products and they understand like the famous JPM coin for example correct right and in fact what is a JP Morgan coin what is Onyx well it's just efficient collateral the same as USD see the same as Bitcoin except not everyone accepts Bitcoin more people might accept a JP Morgan coin right which is good cuz then all of a sudden crypto pervades traditional assets your bank your broker will accept that as credit against your whole portfolio not just crypto so look I'm agnostic to which stable coin wins which collateral wins if it was a uh decentralized crypto dollar that's okay if it's a JP Morgan coin that's okay if it's Bitcoin that's also okay but what all this really means is we go back to where we started which is we have less friction in the market and fully accessible Capital markets for everyone so what is elmax doing to prepare for this these eventualities what I heard here I don't use the PW but two different mechanisms or I should say or vehicles for price and volume increase in the future the first one you mentioned is ETF approval the second one is more and more real world asset tokenization so what is elmax doing to prepare for both of these eventualities so the first bit is education right so we we have about 200 Brokers as customers all of the world's largest banks so it's education of the power of so you're doing this today and these are Brokers from real institutions I've been doing it for 5 years so we have Brokers now used to be if I go back 2018 they sent me dollars they traded stock in indices they traded currencies they traded gold and oil on Leverage now they're saying we don't have dollars why cuz our customers are trading a lot of crypto can we send you Bitcoin the answer is yes wow so we make that fungible so we're able to straddle The Divide between traditional Finance um and crypto but more importantly uh at elmax today when we launched elmax digital we launched five products Bitcoin ethereum um Bitcoin cash Litecoin and xrp now we're able to list andore all erc20 tokens that's the starting point and then salana and then we're going to move into all all the other chains why because I don't know which chain they're going to choose it's a bit like I never know if Gold's going up or oil is going up or what you want to trade tomorrow so we need to be prepared for everything and all of those assets we're talking about May list on one on one chain or rather um so that's what we're preparing cuz we we prepare as if true decentralization true self- custodial access starts tomorrow not in 5 years not in 10 years we must be ready otherwise like every other incumbent in trafi we will lose our space we don't want to be Blockbusters we want to be Netflix so it turns out what I'm hearing here is that Tri fight is not the enemy some of them seem to be adapting to The Times They all are because listen uh Mr Diamond said it himself they you know if they don't adapt to what's going to Happ the mortal enemy of crypto supposedly not at all though right they have the I think I think that bank has the biggest digital assets um division in the world the buzzword and I think this is okay by the way the buzzword in Banks today is blockchain not crypto but you all know you all know crypto is based on the blockchain to have an efficient blockchain of anything you need to have something of value you can move along those blockchains so they are preparing because they know it's inevitable right the tokenization the digitization of capital markets is inevitable it's as inevitable as uh as the internet was 20 years ago so okay we've got an ETF coming up we got real world tokenization uh and I imagine you're also spending time educating people on that today sure I mean that's that's what we do in our lives right we're constantly educating and we're constantly evolving because this is people say it's fast moving but actually you know what bitcoin's kind of old it's been around for 15 years right so we've got to get moving if you're a true evangelist you've got to you've got to try and find a way to be pragmatic to educate traditional Finance otherwise we're always going to be a small asset class I've just said I've made the case this asset class can be every asset class but we must spend time to find a way to integrate with traditional finance and part of that is just education when we educate the market when everyone understands the market the way you do the way the the audience does then it's going to be good for everyone let's talk about global expansion it is a very big world out there we're sitting here in Singapore um but of course you guys have offices in London New York Tokyo Etc where's next rail Max we're Global today so we have customers in 120 countries that's the beauty of my learning curve right what we learned at elmax we operate in foreign exchange it's a 245 not 2 47 market and it trades globally euro dollar is the most fungible product in the world and it trades in Oakland it trades in taipe it trades in London and New York obviously so whenever you launch any product today you have to think Global it's not about languages because ultimately if you're talking about an Apple stock or you're talking about a US dollar or if you're talking about Bitcoin there's no that is the language the only language you need to understand so when you launch product today you don't need to think about China CH and India um or the United Kingdom or the United States you must think globally so what we will do as a as a tradire regulated organization is follow where the best regulatory Frameworks are that's what we've done historically that's what we will continue to do but our customers will be Global well speaking of your customers they all have one question something that they're thinking about right here at this conference they're thinking at the end of 2023 at the end of 2024 let's talk about 24 what's the Bitcoin price got to be I've got to ask you David you've been man of making big bold predictions what's your prediction I'd be very surprised if in the next 18 months Bitcoin doesn't trade through 100,000 100,000 us yeah okay folks post that on the internet as well and let's check back here a year from today David thank you so much for joining us it's been a pleasure it's been fun thanks Davis got it cheers all the best