Crypto Exchanges: Challenges and Opportunities Ahead - TOKEN2049 Singapore 2023

welcome welcome we're gonna have a lot of fun today uh thank you for your time I know everybody has a choice of where to be this afternoon thank you to be with us uh so we can talk about a very exciting topic of the challenges and opportunities in crypto exchanges by by the way Mr Andrew work with his Canadian jersey uh there's a lot of a lot of MCS you find in industry but this guy is absolutely incredible just fun fact about him is a proud Canadian he has two daughters and his daughters are named Victoria and Charlotte the two most extreme West and East cities in Canada that's a patriot my friends thank you very much Andrew guys thank you very much for being here with us all of us we're gonna have a lot of good time today uh talking about a lot of the big questions are coming in when it comes to crypto exchanges I cannot promise you're going to be able to cover it in the short minutes we have but I promise you it's going to be interesting exciting and most importantly insightful and let's do this with our Dream Team panel that we have today with Gracie Alicia of course Ben and of course Lennox as well of joining us from okx I'm going to jump right in right a big topic of conversation we have in the ecosystem right now is a topic of counterparty risk after FTX many of the exchanges have come up with proof of reserves providing transparency and the first question I want to ask to the four of you and I want to give everybody a chance to answer what is your view of what is best practice when it comes to an exchange providing transparency and what is your organization doing to provide Comfort to the market on this perspective maybe Linux I'll start from you and we come up we come down to the ladies here yeah cool thank you and by the way fun fact about Linux by the way if you don't know in his spare time he builds a gandam models robots so here we go talk about Talent there and okx and Linux the floor is yours yeah I'm kind of dirty yeah so uh uh counterparty really spent one at least one of the one of the major major priorities within the group is how to answer these questions or while we are operating in relatively unregulated environment and the next question is because as a financial institution you could get a license to kind of like indirectly solve the counterparty risk and we also think about how to tackle this problem through pure Technologies uh we don't want to well it's a part of the solution is always higher external auditor when a federal analysis occasional audits but we want to execute through pure Technologies and we will build a scalable solution around around that so obviously uh shall we immediately prepare a dedicated team that build a pro reserved product service name it's a name the idea is using cryptographical accounting procedures uh for for proving that within a certain time frame that you guys The Exchange we do have certain kind of token physically and audit and very verbal on chain but what we think what we really take it further is rare notes we increase more than blockchain Technologies but more but also zero knowledge proof to prove not just on the surface exchange but also the liability will change at the same time so so we execute that we publish our proof of reserve on monthly basis that's solution number one the other parts are obviously going to old school way right we get we're trying to attempt to get the license forwarding the licensing related custody rules in global scale that's at least two basic ingredients it becomes the bread and butter and become the basic basic fundamental part definitely could come back about the regulatory need on crypto exchanges before that I want to move it to Ben what is your view of the transparency exchanges should provide and before I let you the mic by the way one thing people may not know about banjo of course is the co-founder of a by bit in the weekend he does a lot of wake surfing and foil so if you don't find him at the office you'll find them at the beach uh surfing the waves Ben what's your view of what what the client should deserve on campus here we go yeah so uh for custodies I think quick simple words uh number one is approval reserves the uh The Exchange now all have monthly reserves you should check on that uh I think after falling off FTX there had been a variety of custody service available now for example we are connected to Copper if you're looking for a tech solution we're connected to also fire blocks if you're looking for centralized banking partner like zodia extended Charter Bank backed so all of that is is the option we offer for any institutions or Pro traders to use uh to trade on private but I want to remind everyone a lot of the custodies are smaller than the exchange so how do you trust the custody it's also another question yeah we'll get to that to that yeah Alicia I want to move it to you Alicia by the way again people know her as a managing director of kucoin in her spare time she's a massive into cooking so if you want some tips on that Alicia is your is your person Alicia what's your view on this yeah so after the whole FTX things I've talked I have to talk a lot with our team and our clients and it includes some retail users and also institution clients and I think I think it's all about trusts and um the whole blockchain things is designed to resolve the unresolved problems in the traditional Finance industry so I think in the end I think we we're going to put more and more our efforts our time to discover um if there's new technology that you make this happen or it's just another okay we'll come back about trust thank you very much yeah last one I want to make sure we agree to you I get a chance to answer this again one thing about Gracie she's the MD at a bit yet but also she recently did a reality TV show on crypto called killer whales apparently will come out soon so we look forward to seeing you there at Gracie but your view on the transparency that actually exchanges clients should have very similar to other exchanges so we do have Reserve that Lennox mentioned we also have the custodial service and we'll pretty much choose the same ones which are the bigger ones copper Cobalt Etc and one thing we have I'm not sure if all other exchanges have or not but I'm aware that many may not is what we call Big get protection fund so this is a 300 million fund that we set aside only denominated in BTC usdt and USD see so it works more like an insurance fund that we have for our users if they have any counterparty risk so I think that tackles your question over well because what as far as I'm aware of this is the second largest protection fund among all the exchanges the the biggest one might be might be binance safu safu they have like one billion protection fund but RS is the second largest so you mentioned binance I think we have to discuss that I know it's ironic we're in the okay X stage but maybe I'll start with you Linux on this one obviously binance now has anywhere from 60 75 percent of volumes depending how you look at it if tomorrow something happens to binance what do you think the impact can be on the ecosystem everyone doubles we're done was it sorry was it I mean everyone's volume doubles everybody that's a joke no I I think I still think binance is also a very important industry participant so our I think if the industry is sufficiently big for more players and sufficient is scalable to even more players so uh I I would ER I would I would I would think that sir the finance if anything happens they're definitely going to be helpful to the industry as a whole especially post FTX what do you think of this man I mean we pray to God nothing happens to finance otherwise who's going to be there to take all the Heat [Laughter] and you guys have the States you want to be the number one so go ahead and we're pretty happy being the second and the third who's going to be there to take the heat good one at you on that side but actually you know for our audience as well you know uh what is the post we had obviously I mean crazy Year from token 24 now last year there's obviously especially with the FTX collapse right what is the red flags if you had to give let's say piece of advice to the audience right maybe I'll listen I'll start with you on this like what is the one red flag the audience should look out for to avoid the next FTX sorry we'll go for Grace yeah Alicia yeah for me [Music] um so I've been work with our company for four years and um so I trade um cryptocurrency as well so when I see if there's any like High return that incredibly like higher returns and okay please do your own research okay be careful crazy advertising returns that's obviously a good one especially coming from somebody with a marketing background like yours makes a lot of sense Alicia what you review on that that's Alicia yeah sorry Christy sorry I'm sorry Gracie what did you be on that all right um I would say leverage so the issue with FTX in my opinion is not FTX is actually mainly Elemental research yeah because they had they commingled and then they had too much leverage that the investment firm has been doing so when you see high leverage in a firm not just in crypto right whenever look at the Chinese real estate industry all these companies when they have a too high leverage that's usually a reflect to me yeah so the red flag so high leverage unexpected returns Ben what do you think sorry what is the one red flag the audience should look out for uh look nobody expected FTX yeah I mean it's very hard to catch so spray your eggs guys just don't put on a wine exchange spread them you know maybe a little bit more and buy a bit that's it you know but uh you know that's my advice foreign flag would be uh I think you need to take the new look down the details um enormous return consistently normally return with package as risk-free it's got to be one big reflect where now they have proof of Reserve if no reflect another thing is in the API level whether or not the cell trade prevention as a part of the function another effect if no reflect and rather knocks the company would have a voluntary disclosure of their compliance program Staffing policy transparency program if there's no or they don't want to do it I'll reflect or whether or not they have a plan to to proceed any major regulatory license in global jurisdiction if no and not reflect so I mean what's your view I mean you mentioned regulatory licensing many times yeah what is review Linux on this do you believe that regulatory licensing is actually genuinely going to help make the industry more secure because I mean we can argue that FTX was licensed or registered with over 50 different Regulators many of them were registrations to be fair not licenses but do you think really it makes the industry more secure uh from from having exchanges are licensed in your experience many of the license previously is pretty light touch but current what we're currently seeing that also the regulatory license also evolve and develop become much more comprehensive and specifically to The Exchange operations so uh getting a license meaning that or they're not just are girlfriends or regulate the entry like kyc or EML they actually regulate the the in-depth operation of exchanges uh the X the customer segregation with exchangers also bring fans and risk management Across The Exchange operation that prevent a lot of problem that F takes a like yeah and to be fair I think a lot of the regulatory regimes right now are and Regulators as well are way more sophisticated and more knowledgeable than they were frankly two three years ago as well um what do you guys think of this like you guys agree on the regulatory angle is crypto regulations making the centralized exchanges more secure I I do agree and I think compliance and regulation is a huge Trend in our industry especially for us to go mainstream and if you are talking about the FTX case look at the ftx.jp Japan and ftx.us entities like that because it's fully regulated all those users are well covered so to your point I think yes regulator and regulation compliance is very important in our Nursery so on that point as well now guys obviously a lot of you guys have applied for licenses around the world you're expanding around the world despite actually some of the market conditions we're going in when you look for the year ahead let's say the two three years ahead What markets or regions are you focused on where you believe there's you know from regulatory licensing to client demand you believe is a big priority in a big demand really start from Ben and we'll turn it around then I'll start from you I'll give I'll give everybody a chance to answer this question yeah so before I answer the question I I want to explain a bit our view on Regulators right mostly you see two extremes one is kind of looking at crypto as a scam and they're there to protect the users or Ordinary People from the scam and the others you have on the other spectrum is more like seeing it as the opportunity yeah because at the end of the day uh Regulators are competing with each other they are trying to attract talents so you see the likes of Hong Kong and UAE you know being more aggressive and taking advantage and attract the sector right I think Singapore is also one of them being proactive yeah so so in that sense as innovator ourselves we follow whoever is trying to lead and trying to uh you know not seeing us as a scam basically and this is why you see everyone pretty much exited Canada because the rules were simply so strict that they're trying to kill the industry I so for us we are headquartered now in UAE we think there's a good opportunity is there we're also participating in Hong Kong so we're following whoever is trying to take lead and seeing it as opportunity yeah Lennox would you agree with Ben we I think our our choice of location we think about their licensing should be able to service or passport their service are in a regional basis so uh in APAC we focus on the licensing in Hong Kong and Singapore are and also in UAE area we focus on Dubai Bahamas license as well that extendable global scale but in reality we actually have around 16 uh jurisdiction that's currently applying or have the proceeds of applying 16 or 16. there's a lot okay so uh So eventually okx in we're going to be regulated in the men's jurisdiction locally uh so but but our priorities always focus on whether or not we pick the spot we rather not this particular license is have that capability to expand their regular standard in at least on a regional basis amazing Alicia from a coupon perspective what a region you guys seen growth and are focusing on [Music] blockchain Ed so I think we are not gonna like specific focus on any country or region we are focused focused on some area in the industry like um like there's a pretty hot trendy project names um friend Tech so like we could we could focus on like specific area like um social media or sports or music like friend Tech they could they could integrate like maybe over maybe about a billion um trading pair to share their liquidity yeah and um I think I think that's cool so for now we don't have any specific country or region we focused on but we we do like looking at some new cool stuff yeah interesting and Gracie from your side so we do in terms of regions we are looking into specifically for growth and expansion right now East Asia southeast Asia Latin America and Europe especially like Europe has Mika and many regulation Frameworks that is quite matured and uh comprehensive and also like two days ago I also launched something called bigot Empower X fund so this is a specific fund investing in three things number one is regional exchanges by the way the fund is 100 million USD that we set aside we can definitely look at bigger ticket size if it makes sense but Regional exchanges media outlets and data analysis firms because the later two in Europe in it helps Mass adoption and help empowers the industry that's why we call it Empower X fund so Regional exchanges and all these collaborations among different geographies we think that's indeed one of our strategic placements so I mean all this is great but what do you guys think will be the Catalyst to get these new customers in I mean even the last following the recent news that we've had on the gbtc news on the grayscale news that there hasn't been that much retail intense bump in trading activity and others uh start with you Ben I mean what do you think will be the Catalyst for us to have more activity in a real bull market yeah I think a lot of people talk about layer tools a lot about talk a lot of people talk about the real world assets and all these things to be honest this is not a question you should also exchange we don't create a hype we build a road to get to the hype our job is to build infrastructure we are road builders Bridge Builders so our in traditional world when you want to go to places when you drive there you don't think about the road so that's the eventually I think that's what the job of the exchange you should be stay in the back uh but provide a seamless service but the moment this issue you step up and you fix your right uh but we get we help you to get to the place you want to go uh so whether it's layer two layer one we don't really care we just make sure we have the team whenever there's a hype we build it and faster I preferably than these guys so you know that's how we try to do it and cheaper yeah so his approach is faster and faster it will be the Catalyst to get people is it just you you build and you wait for the market to come because I would argue but in that case like why advertise why are we spending millions in Formula One and this and that if we're just building the infrastructure right but we'll come back to that I mean Lennox what do you think of that yeah I think exchange is getting getting a bit more evolved as a role to the industry so previously we are just a matching engine yeah we match products we match training then we take it further this design and financial problem derivative product matching engine professional margin this kind of stuff exchange related product oh that's why I'm thinking what we're thinking is uh we want to take it further even one step further to solve The Last Mile Challenge for the general population to access web 3. we have the capability to deal with different kind of blockchain different kind of on-chain solutions and we want to we want to combine and aggregate together and solve The Last Mile Challenge we want to make registration or integration with web3 similar as registered Gmail accounts that's difficult that's very difficult so I think on new case we spend most of our time right now is thinking about how to cut it even further to improve substantially on the user experience to access Route 3 and you don't need to worry about what kind of chain that you already interact with you don't need to worry about you don't need to worry about I pick too much gas fees for entering different kind of wallets and protocol and also if regulation come that's really roughly we have sufficient resources and kyc capability uh to control hey you this old address is already kyc or on or meeting certain standards is global compliance standards it's interesting you bring up the regulator each time as a lawyer I love the kind of stuff yeah but I just want to bring up I think from your point Gracie I mean um and correct me if I'm wrong you guys have a lot of marketing campaigns even with football stars I think Messi or I forgot really messy right I mean do you agree with but Ben is saying okay it's obviously Alexa's talking about the user experience right the UI and the ux that is okay we need to be ready you have a marketing background as well like what do you guys think is the approach is your positioning in such a market uh and how are you guys trying to attract customers um yeah so right now bull market very clear and in our opinion the crypto winter the bull market is actually the golden window for building so we want to fully position ourselves so that we can capture the growth at a bull market I actually very much agree with Ben that we are building roads but even as construction companies building roads you will look at the weather right you want to look at the weather look at the destination and decide how you want to build that road so back to your question about catalogs of the bull market I myself look at maybe mainly two things number one is the fat interest rate hike how do how when do they decide to decrease the interest rate that's when you know the bigger pool the swimming pool bigger swimming pool if we make this matter for of the traditional Finance Market the inflow of the money can go to the smaller pool which is our industry or you know some other Financial Industries so number one the the that's interest rate decrease and then number two the approval of BTC spot ETF yeah I personally look at news around this a lot because if we are looking at grade scale BTC that's about 20 billion of their asset under management and if the ETC sorry BT BTC spot ETF is approved by SEC then we are probably looking at 10 billion or 100 billion dollar of inflow from all those bigger financial institutions like pension fund Etc so this might drive the next round of bull market but that's my personal opinion no Financial advice here of course but I think that's some major events to look into I think everybody in the room is trying to be bullish with this whenever the spot Bitcoin ETF will be approved but you mentioned the weather right so obviously you're looking at the weather weather conditions there's obviously even at this event the number of human and layer ones layer twos but even D5 protocols that are here defy Innovation going on what do you think when you look at the crypto exchange of the future in five years what do you think will be the interaction between centralized exchanges and the D5 let's call the D5 ecosystem maybe Alicia I'll start with you on this one the interaction between D5 and centralized exchanges yeah I think sorry to my PR team but I think I think D5 cool because they've um they've achieved different ways that to achieve the achieve some achieve some new solutions that we we haven't tried and even got failed in the centralized exchange industry like GMX they got like pretty good pretty good liquidity Solutions yeah and um I think for now for now we always want to to to do something cool right like divide the whole decentralized layer zero layer two layer one um like that's been said I think for now we can we can only build a a road to to help them to grow the whole industry like be stronger and um we are taking responsibility that to educate people that you are newly to get into the blockchain industry and then there are so many there are always so many options right maybe D5 maybe another um centralized Exchange yeah they're building the roads right so yeah so bed on your side like when how do you see defy as a competitor or it's you you're just another road for people on their journey to D5 oh they love D5 so but we get to the essence what does D5 offer and why do people want to get to D5 whether it's the money is the yield is the Innovation but our job is to make things simple uh I mean guys web3 D5 let's talk about ethereum staking I I tried myself I couldn't figure it out with metamask first of all metamask will scare half the people and then uh you get started to the metamask people in the room yeah I mean sorry any wallet right this type of seed it will scare people away and then it takes six seven steps to get there I mean come on but we are building a product for the amcos the grannies the the people who don't understand but want to get to the essence what is the essence is the yield okay let's make one button click bam you know so that's our job so we're not only the road the bridge we're also the the plane the the trains so to answer your question this is why we need advertising different airplanes need to advertise themselves and compete you know so we're not state-owned we're private companies yeah so to be ready for when the they want to come in press that one button we the brand recognition that's our mission makes things simple but it's you know you raise the issue of user experience that one button you mentioned this Linux before the user experience right I mean if you guys had to rate the crypto industry today right like how good are we doing on user experience because we always talk about the next billion users right but you give the example of the granny like my own mother for the last couple years doesn't understand what I do as a living and it for sure she's not going to be able to to trade any cryptocurrencies I'm sure you have a greater user experience but uh I mean how do you think is how do you guys think we are doing as an industry and frankly as a centralized player is to provide this user experience to the retail public yeah up to I think in five years time we don't have a clear cup between central exchangers and the central exchanges yeah Central exchanges are going to evolve and also there's a lot that we don't even have a clear cut definition or clear-cut line between Centric exchanges and regulated crypto platform or brokers so all three business models their difference are in different status the toilet service will be different but at the same time it will but probably they will be can be unified in one apps so we don't see that's a part of element that you're using going forward might be for example if you're if you're if you're buying Bitcoin with Singapore dollars you're actually trading with a Singapore regular entity on the end of mas but at the same time when you when you're doing if you're mistaking within the same Maps you're you're actually using a decentralized surface within the same map yeah obviously uh compliance right so so we don't we won't we won't see a clear confinement over the odsd channels and that's all that's one user experience is very important because we want to make the Raptor experiment look like web2 and there's a lot of Technology involved NPC Wallet account abstractions uh cross Bridges against less transaction between all all different changes that's all fundamental technical challenge that we need to solve interesting Grace I just want to bring it to you I mean where do you think we are on the user experience side also then um you mentioned before on the media side you guys are investing in content and advertising and stuff but what's your view of the importance of that especially when it comes to user experience and user interaction user interfaces maybe more in the user attraction right rather than user experience but one thing I want to highlight is that even if we are investing or buying some media companies the journalism Independence still stay so the business side of the company and the journalism side don't interfere with each other so we want to make sure they are still operating normally but in terms of the user experience rating I'll I'll rate our industry for 6.

5 6.5 on users yeah so you know more than 60 but the 3.5 I would say it we need to work harder um things like you know customer service when the customer service for example when you can reach the level of many traditional web to startups or bigger firms like Amazon so the other day my I want to return something and actually that I bought at Amazon Amazon and then it expired for uh it overdosed the you know three month return period by just call them I explained that I've been traveling around the world for conferences like this that I wasn't in where I live uh so can I still return it and they call me back they just so that's great experience that I had with them I wonder if one day in terms of our customer service we can provide that kind of satisfaction to all our users so 6.5 what grade would you give to the industry not not the exchange in particular our industry on centralized exchanges on a user experience to the industry I think he gave 6.5 what's your score user friendly for the central election I'm gonna get nine because whoa okay because I think all of us uh we got very strong uh customer service team that could always be there to support the users Ben what grade do you give to the industry uh seven seven what's the one thing to improve um well a lot of things uh but the one major one what grade do you give to the industry um XL 10 or the central experience five on web3 experience yeah five out of ten right about your experience interesting so guys we literally have a couple minutes left I'm gonna go my my best friend the Bell is here we're gonna do fire round of questions so I'm gonna ask quick questions and I want literally one or two Word answers and when you get to get the ball rolling on that you guys ready okay are you guys ready here we go we're in Singapore today Linux I'm starting with you what is your favorite thing about Singapore McCarron car ing car here we go Ben what's the question what's your favorite thing about Singapore we're in Singapore today are the food food here we go Alicia the view the view Gracie um it's my second Hometown I spent six years here in Singapore when I started my bachelor degree some backman freed gives you a phone call asking for your advice what's your one piece of advice to Mr SBF I'm starting from you don't go to the jail don't go to jail don't do things that will lead you to there Alicia what's your one piece of advice to SPF maybe go to a gym [Music] [Applause] Ben one piece of advice for Mr Sam Where's My Money where's my money Lennox yeah don't call me so uh what is the one thing that is keeping you up at night about the crypto industry what is the one thing that is scaring you or keeping you up at night about the crypto industry Linux there's still a lot of fishing and scamming projects friction scam yep backers lost Korean hackers North Korean hackers Lazarus group what's keeping you up at not in the industry yeah non-stopping business 24 hours Alicia crazy I'm sorry Gracie when can bitcoin price reach 10 um one minute here we go after SBF now CZ calls you and asks you for you one piece of advice on how to deal with all the fud on binance what's your one piece of advice to Mr CZ Gracie continue holds for continue holding the fourth what's DC call you if you don't pick up the phone yeah then what's your one you want advice to Chung Fang Zhao stay safe stay safe Linux work hard um this is another one uh Gary Gensler invites you for lunch what is the one thing you tell them over lunch Linux yeah what do you think about whether or not ethereum is staying but everyone go have no jurisdiction over me Alicia I'm gonna buy this buy this yeah buy the lunch here we go what's the one thing you tell Gary ganzer over lunch when is the next election for SEC chairman I'm going to starting with you one what is the one sports star movie star or singer you would love to have as a sponsor for your exchange Leo Messi Lionel Messi but you have it already I got too many answers though who's that I got too many answers yeah we haven't tried Ben who's the one sports star movie star you would love to have a sponsor of your uh of your Exchange Lambo Athletics black pink who's that brag pain Brad Pitt a lot of fans are there in the room um you have the chance for your new and you're launching a new crypto exchange you have the choice of one of these co-founders which one do you pick Elon Musk Mark Zuckerberg CZ or Kim Kardashian Lennox I'll pick him right Kim Kardashian yeah obviously I've been a problem here we go obviously Ben we didn't want to start the exchange he's after something else what is that you're fat too because I'm a marketing person I think like having a strategic and Technology guy is a very good you know I love it this one is controversial you can choice you can hold this one stable coin for the rest we can only hold one more stable coin that's it no others which one do you choose usdt usdc TUSD busd fdusd if you could only hold one stable coin which one do you hold starting from you also usdc only because they just bought me a breakfast this morning there you go paying breakfast pays off Alicia usdt because because they put so many efforts on support Bitcoin supporting Bitcoin okay interesting Ben usdc I will talk to Circle for the commission um Linux no usdc we don't need another stable corn yeah there we go and the last question guys to finish off our panel at token 4 unit token 2049 this year my traditional question I'm gonna start with you Linux Linux you can have lunch or dinner with one person Dead or Alive lunch or dinner with one person who Dead or Alive who do you have lunch or dinner with just to show you robot building uh uh the talent there Ben you can have lunch or dinner we will have it I'll probably still yellow Elon Musk Elon Musk yeah lunch or dinner with one person Alicia who you have lunch or dinner with you you're each watching YouTube and if you finish it off Gracie you could have lunch or dinner with one person to finish our panel I'd say Marie Maria Curie wow yeah because I want to ask her how do you beat those guys in this a very male dominated industry guys big enough Applause thank you very much for your time it was a pleasure being with you all began with us for our final thank you very much everybody honestly