The Missing Pieces for Institutional Adoption | Azeem Khan - Miden

All right, thank you so much everybody for being here with us. So far we learned so far how moving stable coins does not have to suck. We saw how the across swap API helps you to do that and if you're trying out what the across experience is like just head over to app.across.2.

Next up we'll be learning on how and what institutional pieces are missing for stable coins to gain adoption. And for that we have Azim right here who's the co-founder of Maiden. Azim over to you. All the best.

Thank you very much man. So I'm going to talk a little bit today about what are the missing pieces for institutional adoption to actually take place. Uh we've been talking about how it's going to happen in crypto now for quite some time. Uh there's a lot of excitement around it and I've actually been paying more attention to what's it going to take for us to actually get to the place that that happens. So quick thing about me, not to go through it, but I've been crypto for a very long time.

Uh consult with UNICEF, uh contribute with Forbes, write with CoinDesk. I've done a bunch of things in this space. Uh more recently, it's been completely focused on Maiden though. What is Miden? Uh we're a nextgen zero knowledge blockchain focused on compliant privacy.

Uh we did a a round last year with A16Z, 1KX, and hack. Uh the idea is basically moving away from this binary of completely transparent blockchains or completely private ones. The completely private ones scare governments understandably and the completely transparent ones are going to create a dystopia if taken to their logical end points. Uh in the past year, this is just a couple of them. I couldn't honestly get more logos on, but I've had conversations with people from every one of the large banks, uh, with the regulators, with credit card processors, and a little bit of everybody where even though they're excited about crypto, it's been trying to understand what is it that's going on internally that's actually pausing them, stopping them, or making them not really move forward on what we need to do to get all this adoption take place that we've been talking about for so long.

Why do we actually need institutional adoption? And that's the other thing I actually get this question a lot mostly from people on the retail or regular side of things. Uh institutional capital is going to provide scale credibility and mainstream adoption. Uh we saw last week or two weeks ago Black Rockck decided to buy some unis swap tokens and all of a sudden people realized that there might be a huge thing coming with DeFi and a lot of the institutions that are there. uh what we've seen in terms of lessons from TRDFI if you think back to 2024 when the bull market sort of started was when Black Rockck decided to start their Bitcoin ETF, right?

And what we're seeing right now is we get a lot of announcements about what's taking place uh with any of these companies, but most of them end up being really pilot projects. It's never anything that goes into full deployment. They're trying to understand what it is that it looks like to do things on chain, but they're not actually really putting this into full deployment. And so from the institutional perspective, there's sort of three things that I saw the way that they look at it. One is the risk, compliance, and predictability.

Uh liquidity, interoperability, and emo and operational uh clarity. And then finally, the one that I'd say has been one of the really difficult ones, but we're getting closer there is regulatory clarity. and why I believe from these conversations that I think adoption curve has stalled. Even though we see so many of these announcements, again, when you really dig into them, they're not much more than just really fun announcements. And so, real adoption is lagging.

These pilots aren't going into production. And there's a big difference between the headlines and what is the reality in the boardrooms behind closed doors. If I was to break them up into four actual obstacles in terms of what are the issues taking place, I would say the first is technical, the second is regulatory and compliance, third is operational and governance and then the fourth is cultural and organizational. And so a little bit about them uh it's basically one of the biggest gaps that we've seen and of course this is what we're working on very closely with Maiden is how do you provide compliant privacy? the idea that these large institutions are going to come on chain and put absolutely all of their balances and the credit and lending that they're doing and everything like that on public blockchains for anyone to be able to view is simply not happening.

It's one of the biggest barriers that I've actually seen in conversations. It doesn't help that from a regulatory standpoint, privacy is a very dangerous one for them, but compliant privacy is one of the most key missing ingredients. And we're seeing some of those things start to play out in a better way more recently with stable coins starting to come on in a compliant and private way. Uh interoperability is massively difficult. The fragmented chains and liquidity across all of them.

Uh right before this across was talking about this as well in terms of all the liquidity fragmentation we've been seeing and the difficulties that brings. Settlement delays. Uh banks need to be able to know that things are going to be settled in real time in the ways that they need. And as much as crypto provides that in a way, it's simply not where when it comes down to how things work across custodians and such, which brings me to my next point, uh there's not enough redundancy in custody providers according to these banks. They need more of them.

Uh risk tooling gaps, they they can't actually understand what is the risk associated with many of the things that we're looking at. And then liquidity depth, I mean, we see this is one of the most broadly done things. If if these banks actually wanted to come on chain and deploy the kind of capital that they're accustomed to deploying when it comes to actually trying to get the profits that they want, they would completely change the prices that are available in the markets. And it's something that they've been trying to understand very deeply is how do they deploy meaningful amounts of capital without meaningfully manipulating the markets essentially. This is moving too quickly.

Sorry about this. What is going on? Okay. Uh regulatory uncertainty. Uh I think the SEC was just having a conversation somewhere close by here not understanding what goes on with really having all of this tied in.

Not just, you know, whether or not a token is a security, but how do you classify them? What are the tax rules for them? How are you supposed to report this? Uh, auditing reporting standards are not done in a way that makes sense compared to how the banks do them. There's definitely not enough insurance.

Uh, there's a massive insurance shortage. Tax complexity. If you're sending money across borders and it crosses through multiple, where are the tax implications of being able to do something like that? And a large one's honestly reputational risk. You know, despite the fact that a lot of great things have been going on, you sit down with them and they still point to the fact that something like FTX was widely acknowledged as very legit and amazing and working with the biggest celebrities and all of these names and then it ended up being a massive meltdown and causing a peer PR nightmare for so many of these firms that they still really really really need to take their time when it comes to figuring out what it is that they're looking to do in this space.

uh operational and governance barriers. Uh massive counterparty risk. This is something that I've didn't really think about as much when I chat with them, but uh for them to understand that everyone that they're working with is not going to basically like end up falling and dying the next day. Uh operational risk with no really like industry-wide standards for things. governance.

Uh, as many of you may know, most of things that go on in crypto governance is governance theater. And for them to have a really solid understanding of what it is, how governance works when it's not top down in the way that things typically work has been one of the things I've heard a lot. Uh, economic incentives, uh, they feel massively speculative, which they often are. They're really short-term incentives that are being provided and it's not something that puts them in a position where they feel confident that they can deploy capital and keep that capital deployed for a long period of time and not feel like they need to constantly be checking all of their wallets. Cultural and organizational honestly was also one of the massive ones that I ended up seeing.

So, as much as they'll tell you that crypto is an exciting thing, uh, one of the things I heard very much so from each of the banks was that there's a a really big quarterly earnings pressure. When you think about the balances that they have available in crypto versus fiat at the end of the day, every quarter when it comes time to do those earnings reports, they need to make sure that they're going to prioritize the thing that's actually making them money and make their stocks continue to go up. And that's just at the moment, not crypto. uh there's a huge talent shortage and they're not actually sure how to solve for that talent gap either when some of the best developers in our ecosystem are pseudonmous accounts that you know are like pickles and monkeys online and they have no idea how you're supposed to hire for those kinds of things. It's one of the things that they're unsure and then it's you know the talent themselves also doesn't necessarily want to be working in DeFi.

I mean, uh, they want to be working in define, not at large banks where there's just it's much more boring. You have to go into office. You have to wear a suit. Uh, riskaverse culture as a whole, you know, these are companies that are dinosaurs that have been doing the same thing for a very long time, making a lot of money doing it. And for them, risk mitigation at the end of the day ends up being one of the most important things.

So they're not necessarily interested in what could be really nice potential upside when the downside risk is so large. H goes into the reputational conservatism like none of them want to be in headlines for any of the things that they're doing. And so the time that it takes them to want to figure out if they're even if the deals are even worth doing is massive. And then uh large internal knowledge gaps. We're seeing it change.

You know, Morgan Stanley just hired a digital of asset head of digital assets only a couple weeks back. But what often happens is that senior leadership who would actually be able to make the decisions on whether or not things can move forward, those people are very far removed from the advocates internally who are the crypto people and even if there are crypto advocates internally, they're not the ones who can actually make the decisive move on being able to to move things forward. uh just like a quick map that I did when I looked at the internal and external barriers, technical and non-technical in terms of trying to be able to make some of these things move forward. Uh industry is making progress. uh privacy tech is moving forward, regulations are moving forward and there are pilots that are happening and things things are getting better but they're not at the place where I think everyone thinks that it's going to be another 6 months before there's going to be you know institutional mass adoption and that's just not the case yet.

uh what it's going to take to cross this chasm. I think that we need more collaborations between regulators, builders, and institutions. A focus on trust, compliance, and usability. And then one of the things that I think is very difficult for our industry is a long-term vision over short-term hype. Really thinking through what are actual business models that are going to work over time.

Uh and yeah, thank you very much. We have about a minute and a half if anyone has any questions. about how we do privacy. So on Miden uh essentially when you want to generate a transaction you use your local device. We do client side proving.

So your mobile phone or your computer will end up doing the computation needed and you'll generate a zk proof and then you send the zk proof to the network. So essentially you're not sending any of that information to the network to have transparent on it. there's just a ZK proof there that's being verified that the things that you're saying are true and then your state of like let's say you move $10 happens but all of that sensitive data remains local on your device I can't hear you To be really honest with you, I think that the the non-technical parts of things are much more difficult to solve than the technical ones. So often the rooms that I'm in and foreseeing the deals that get closed, they're looking for being able to understand that doing a deal with so and so person like they trust you enough not to have it let them get fired at some point for making the wrong decision. And most of the people that are making the decisions also don't really understand the software to begin with.

So it's been way more understanding that it's not about selling them better tech and it's been more about how do you give proof points that this is going to actually work in the long run and not get someone fired.

All right, thank you everyone.