Institutional Engagement in Abu Dhabi's Digital Market

[Music] welcome everybody thank you for coming to our panel thank you for Maya for that lovely shout out I don't know why I'm the one and only we have also once and only here um but I'm absolutely thrilled to be moderating this panel with you today so my name is Gabrielle en zurlo I am a financial regulator here at 80gm welcome this is the third day I'm trying to Hype myself up and my also trying to Hype up jez and Muhammad Muhammad you were telling me you were about to fall asleep you know five minutes ago are you awake I'm awake I'm ready you're ready are you sure yes okay great so my guests first of all to my left I have JZ M heeden from laser digital who very recently I say recently but about six months ago got their license here in adgm with the fsra and of course Mah MD from fur Adventures that also recent also got their license a while back now it is an absolute pleasure to be with two fasar regulated firms because it does mean that I can ask all sorts of difficult questions and they absolutely have to answer right apologies it's okay you don't have to suck up too much I will ask my guests to first introduce themselves and then we'll delve into a little bit about what they see in Abu Dhabi and what they see in the digital AET ecosystem here and how they're building it up Jess do you want to go forward first tell us a little bit about yourself yeah sure um for us uh the decision was quite uh straightforward obviously coming to Abu Dhabi why we think uh it's significant uh for a number of reasons obviously starting with very flexible and robust regulat framework we are almost a hybrid entity both we do digital assets as traditional assets so for hybrid entity it's always very tricky just to uh you know uh uh get into it and get get on with our you know obviously objectives while a regulator which is probably uh fairly well um uh understands the the hybrid nature of the SATA class as well as a uh entity which can operate in that was quite relevant for us when we decided on AB can you explain a little bit to the audience a little bit what you mean by so what exactly is your core business model at Laser digital absolutely I think so laser itself is a a crypto native firm born out of a very large traditional firm out of Japan called Lura uh they are the large shareholder uh fully own subser of that the entity itself specializers in uh digital assets and actually traditional ass if need so which is why what I meant by so what are we there we're there to solve in effect the the bridge the gap between the traditional uh Financial firms and digital assd entity so for us we we are actually providing service a lot of Crypt native entities as a I would say a regulated entity while also we are holding hands traditional entities coming into digital asset ecosystem you know KN hows and basically providing them you know different types of advice and liquidity and so forth so laser itself actually has number of verticals um starting with actually we provide deep liquidity to institutions and qualified investors uh Market making Services Asset Management Services treasury managing for particularly for foundations and so forth uh both uh you know traditional as well as digital asset entities uh and then of course Asset Management Services uh finally also venture to two institutional investors and qualified investors so that's the speciality of laser for us why Abu Dhabi from there on was fairly straightforward because not too many Regulators Pro give us uh Clarity around obviously what we can do and where we can operate uh beyond that also number of other advantages location uh obviously proximity to institutional Capital um access to also Talent uh which is actually not straightforward particularly when you get into this industry uh and also obviously whether we like it or not Abu Dhabi is a thriving uh Tech Hub when it comes to Ai blockchain and so forth so that's actually for us a natural uh place to be yeah nice that's good to hear Muhammad please um tell us a little bit about further Ventures you have a very special business model you're also very active we had the further Ventures the summit recently on Monday there's also the embedded Finance Summit that's happening now so you you are very much embedded yourself here in but tell us a bit more yeah so um I mean further Ventures um we got regulated by the fs in September 2022 um and just a little bit about our thesis because it's very much involved around uh what we do today we wanted to focus on building um digital asset infrastructure so we wanted to make sure that we built a layer of infrastructure where we would be able to service institutions financial institutions Enterprise and in 20 22 there was a huge gap in regulatory Clarity globally um so when we wanted to build an edge as an investment firm we felt that there was a regulatory Arbitrage opportunity to take advantage of what adgm had in terms of clarity in Rule books uh and we felt like this was the opportunity for us to really carve uh an edge being an investor in that space um today you know we uh have some of the first regulated infrastructure plays uh in the country uh We've managed to take advantage of that with stakeholders uh globally and we've done that with digital assets but also uh with fintech startups um the benefit uh we've had with our stakeholders is that you know our startups uh as a counterparty uh uh uh uh uh business uh people get very very comfortable dealing with our portfolio companies simply because of the regulated status that they are they have within adgm a little bit about our operating model um in 2022 again we felt that there was an opportunity to venture build um and what that meant to us is two things it meant that um we would build conviction internally as a team as opposed to getting founder Le ideas where we would fund them passively um and it also meant that we would have an opportunity to really do concentrated bets from an investment perspective into the builds that we wanted to back uh which meant that we weren't going to bootstrap but instead really leaning and investing in these businesses where we would take care of the regulatory Capital where we'd make sure we would fund the balance sheet in order for us to be able to you know carve a position with stakeholders and counterparties uh with us so it was a bit of an interesting approach towards portfolio allocation as a venture investor that's interesting uh about the Venture building part particularly because it's very resource intensive so before being a regulator I was also doing Venture Capital but investing you know small ticket sizes and let me tell you I was doing a bit of spray and prey I'm not going to lie you know when you do small small tickets what are you going to do but you're putting in an enormous amount of time resources in order to build ideas and actually get them you know like a baby almost you know get them out so when you actually come up with these ideas it's because you see gaps in the ecosystem and not just the ecosystem in Abu Dhabi right can you tell us a little bit about that process of seeing so part of conviction is the process of us talking with our Regulators um so you know within adgm you you know what was interesting for us compared to other Regulators is that we were able to talk to people that had native knowledge on what we were doing which typically is difficult uh in the space of digital assets so we were fortunate enough to do that same thing with fintech so our ideation process starts with talking to The Regulators sharing with them what we want to do and figuring out the hybrid approach because typically with an Innovative approach Regulators need to catch up and understand what we're looking to do uh that was extremely helpful and beneficial for us especially when you know our licensing process can take up to 14 or 16 months and that is not necessarily exclusive to adjm most Regulators globally will take that much time to actually issue a trade license for you to be able to operate whatever that business is so that was something that we really appreciated um the second thing is you know the spray and prey model works from a return profile but also a different approach would be Venture building where we concentrated capital and you you're right besides Capital takes a lot of partner time because um you know you know uh myself and faol were co- managing Partners in the fund I've seen you Lobby on behalf of your firms yes yeah so we we actually end up being operators as well which is um it's a lot of work and time and you know I've learned that from jez as well jez I've seen you you yourself coming in sometimes and pitching on behalf of the startups given your your background so that's the reality is that the uh the sponsors the investors they themselves have to become operators and toggling between a fund manager and an operator is two very different personas yeah CH do you want to add on that no no absolutely I mean obviously uh you know um mammed touched upon very important points I mean very similar sort of experience I've gone through with him we worked with them uh we've I've actually pitched to him some ideas uh we be co-incubated projects so it's a thriving ecosystem here uh for sure the regulatory Clarity has paved the way for us when we first came in um it was quite clear you know more we spoke to the regulator here they understood the uh the pain points in the ecosystem and they provided more I would say solution as opposed to kind of uh giving more problems uh and Clarity meant that we could actually build something sustainable long term so for sure um you know obviously access to people like you know F the F The Venture and and also backed by you know you know proactive government uh as well helps a lot I see J stay with me for this next question now you are backed by the most institutional of institutional of traditional I guess players like there is nonetheless a reputation how how does that I guess very institutional Focus uh feed into the business models that you're working on yeah so uh very at all you can yeah very true I mean when we originally Pro I mean when we incubated laser itself about two and a half years ago a lot of Institutions try to incubate and come up you know set up a digital asset practice very difficult because they always worried about contamination risk to their main entity uh so one of the thes is we when we incubate we said let's segregate it uh you know put a defined amount of capital and then allow it's almost like a sandb but it's a commercial entity it's not it's not a you know a cost center uh you know and areas where we can dominate but one thing our board very early on understood was crypto ecosystem is actually 5% institution 95% retail so you need to provide solution to that ecosystem hold their hands because if you're going in if you're going with a thesis that it is fully institutional we're waiting for institutions come through it will take time so people need to be patient very similar to obviously a lot of the Venture investing as incubation going on actually that's Paving a way for institutions come through over the last two years we have seen it I mean this year we've seen so many institutions here and and and also large crypto entities are becoming institutions so when I talk to even our board at times is like they forget to at times understand here institutions are born almost a weekly basis it's true multibillion entities it's it's true and it's done over conversations and of course it it takes time for The Regulators to get comfortable the practices and all that but they are coming it's true yeah they are so I I think we are trying to address to that market and make sure they do things properly and you know there's governance and all that so there's a lot of learning uh going through but uh obviously we still early stage so I didn't send you guys this question um but I'm going to ask it anyway so you know anyone who wants to take it take it um like it like mentioned crypto digital ass and such is very much 95% retail right uh and that institutional adoption is coming slowly but surely and obviously it brings a lot of depth to the market right but when you are building out firms do you have to be is it possible to go from a retail Focus over institutional or do you have to be institutional from the get-go institutional focused is is it possible or anyone who wants to answer can I'm I'm Happ happy to quick because I I face with this issue every day okay uh obviously when we set out our thesis we are only we are only servicing institutional uh uh institutional in um institutions as well as qualified investors so we don't touch retail ourselves however a lot of retail platform require institutional liquidity right so we are the backbone for a lot of these retail platforms so for sure we don't touch retail in our model is not retail that's the Mandate I've got from the board however you know for the asset class to kind of graduate uate from where they kind of n asset class to proper institutional asset class you require institutions backing them up so for us a lot of us we feed liquidity to to retail platforms although we don't touch retail ourselves the first instance gradually of course large institution like Pension funds to like so when obviously black rocks come through very I mean it's a very clear data point right in 10 months black so ETF is larger than I don't know 20 year old uh uh gold ETF mhm how quickly when it comes to the point of inflection it just goes into so now it's actually a boardroom conversation most of the institutions how do we actually Expos to digital assets what portion of it is our investment process and all that so yeah for sure our audience is ultimately retail but the reality if we don't touch retail we are kind of I would say intermediary right but gradually that's actually graduating I would say to large institutions please yeah um I you know and one one of the things we so um the question depends on who you ask so if you're going to talk to the product person yeah um the architecture the technology architecture will differentiate if you're going to build something for retail versus Enterprise um if you talk to the underwriting team the team that actually analyzes and makes a decision based on Commercial viability the economics of retail versus um Enterprise is very very different from a regulatory perspective um it's a lot easier to regulate a business if it's Enterprise versus retail just the burden particularly with kyc just as that is true I can vouch for that yes yes so uh so that's you know sometimes we can be a little bit more selfish and saying you know what we don't want to um we don't want to deal with that but you know the reflection of the valuations on retail is very much reflected because it's difficult it's a difficult hurdle uh to jump but you know to jez's point a lot of uh our thinking internally is how do we tap into existing distribution so you know we uh as investors want to build something Innovative and then tap into the existing distribution channels of Telos Banks institutions that do have the burden of managing retail and that makes our life a lot easier and we can give examples uh about that yeah sure examples give give us some examples I'll go after you Jess yeah you yeah I mean see it Taps onto the same issue right so if you large liquidity providers let's say lar larger Banks today they are starting to even US Banks some of them are starting to provide liquidity of digital asset uh retail customer can go to the platform wealth management platform click and trade it's still minimal though still minimal but they actually it's happening at a significant Pace some of the oldest uh uh firms like fidelities of the world you can do it so when they do it typical liquidity at the backbone we provide so they do the kyc on boarding they existing client based it's much easier to uh Mohamad SP once you have already a kyc pull of clientele we become the backbone for liquidity so the back end of the engine tends to be a platform like ours yeah we one of the use cases we like to think of use cases um um today is um how fused it's a portfolio company that we have is powering the trading platform for we bank so today when you open up uh your weo uh bank account and you have a current account you're able to transfer into your trading uh account and you're able to trade crypto and uh uh you're able to settle back into your current account seamlessly so uh that plumbing is actually powered by a business that we built which is called fuse um one other example Le and this is something that we did recently I don't know if Clarice was here I saw her in the back but we um you know we're back in Clarice because she's innovating a lot in the wallet management space so a lot of these institutions need digital wallet infrastructure it's a very different type of architecture than the current wallet infrastructure for financial technology and no matter what the use case is whether it's trading or whether it's remittance or holding any digital asset whether it's a loyalty or an nft whatever it may be um you need wall infrastructure and dfns is doing that with highly regarded institutions so we also look very much at how to improve the interfacing and the experience institutions have to adopt these use cases yeah so very nice I I guess my next question is going to be trying to kind of relocalize it a little bit so obviously we are here in Abu Dhabi and you know you guys have set up here and I would for a reason um do you sorry do you then how do you see um this Market as an adaptable Market also for your firms right because obviously you guys are in a way fund man you're fund managers you're authorized as such you're Venture Builders you are big in your own name right but you are working with Sly smaller startups that are building up and would you say that this is a good place for them to grow or do they also have to kind of you know tap into more Global streams I can start initially for sure we for us it's it's a great uh region I mean almost very beneficial region start of that because it gives a lot of clarity on many fronts which is I touched upon one of the biggest issue we faced as well when we started up The Entity when we started in some of the European jurisdictions access to Talent as well which is here we around whether you know it's a blessings we are around almost three access of three billion you know people around if you look around right and they are fairly tech savvy as well uh which which is highly beneficial and also a number of other things government's help and tax benefits number of other things favors access to talent for me it's very critical Talent when you have a startup the lack of talent and all you have kind of way too I would say um uh the hybrid working harder when you when you start up an entity and then the fact that you have pure you know Clarity from regulator particularly transparency I mean CL ity around regulatory you know framework is extremely important because as a startup you don't want to take too many risk on that right uh whether you decide to do completely unregulated or you decide at a certain stage you want to graduate into regulat framework so either you start with stand boox and all that and then the other issue is I think the the vision I would say is kind of you have a global vision with kind of local relevance I what I would say it's very easy access to different region Global markets from here where that you know one good thing about obviously I think real you know strength of adgm as FSR is actually it's a global power Excellence regulator right you can compare with Singapore Hong Kong or UK it's there and and Regulatory kind of I would say not passporting but you you know most of the Regulators globally including Japan they recognized as a you know a very credible regulator well we also do say that if you manage to get a license here you can probably do the applications other places as well that's right so so for me yeah yeah so number of I mean obviously jointly incubated efforts as well we felt that it was a good jurisdiction to to incubate and start up some of these ideas and get going so yeah anything to comment on your side on your firms because I mean you definitely do doing it anyway yeah he's going to do it anyway I mean but you definitely I do know that you definitely come to us with your firms every now and again and you're like you need to regulate this please help us so we I mean it's been um you know so Launchpad here Capital here and then export um it's something that we you know we constantly look at um so yes the addressable Market here especially on retail but I think on the institutional side one might argue that it might be meaningful very very meaningful here on the retail side maybe it's important to actually be able to export and you see that with businesses that are direct to Consumer businesses as well right um so yeah yeah the same points I 100% agree with jez uh huge weight to Talent you know it is the most important thing and it's also something that we're fortunate because it's not a difficult cell to get people to come move here with their family and I I don't want to you know spend too much time but like you know when we recruit for talent you know people come with their families they are able to live in abudhabi they're able to go take their find good schools uh they're comfortable um you know these are things that are not related to business or investing but matter a lot right I mean ultimately you have to take the life cycle of moving here is very easy simple um people are comfortable and that's the most important thing for sure it was a great selling point for us a year ago now it's actually gone because many of them are saying they're moving as well really yeah yeah yeah yeah well I mean that I think that goes into my final question um as we wrap this up is ultimately we've seen institutional adoptions and in an incredible amount institution actually moved to ABAB in the last few years um I've been coming in and the out of the region since 2017 and it was not it was coming it was coming but it was I felt more like Capital was coming um and then going back and then coming and a little bit like what I was doing I guess back in the day and now we're seeing a real commitment of you know setting up and putting institutional processes institutional wealth institutional you know capital and well all of that Al together here do you what do you think is missing that could you know just help accelerate that even more it's not an easy question I mean we think about it all the time right because we want to make this an attractive jurisdiction I I wouldn't say missing uh I don't think anything is missing but you know there's always you know it's it's the opportunity to keep the pace that we've had here from a regulatory Advantage moving on forward so we've we've definitely had that advantage over the last three four years in in our space in digital assets and fch you know I think your role and your job is how do you continuously push you want us to stand our toes yes yeah yeah that I would say that because people now are looking up to us here and catching up so what's the next move well you know and I mean I'm not I don't want to hug our last last minute but you know a lot of people on panels across have been asking the question with you know the whole us changes happening what does that mean for us and just like we welcome we welcome we welcome it it's you know the pie will only get bigger and we will stay on our toes and we will keep you know doing what needs to be done no um no I think very clear Point absolutely that that's because the the Gap will tighten which is good because ultimately us has largest amount of capital institutional Capital you need that particularly the areas we are talking about building infrastructure building Venture you need the us to come through which is why we've seen in black rocks bidd itself how quickly it's it's transformed the entire space so I I think it's not a bad thing others coming catching up but I agree to your point keeping up with the pace now will be will be the you know good challenge well in that case thank you gentlemen um thank you for your insights uh pressure is on you pressure on pressure well pressure is on us but I think I think we're we're holding it up fairly well um Jaz Muhammad thank you so much I hope you guys enjoyed this session thank you [Music]