Custody, Wallets & Exchanges: Keeping Your Crypto Safe | European Blockchain Convention

foreign [Music] yep yep okay but okay good morning everyone thank you Victoria thank you so much you let us open the EBC today let me introduce the panelists we have Sarah AC is the founder of Ages trust one of the six qualified custodians in the U.S and also the only one with digital custodian licensed in Asia welcome and we have also Clarisse who is the co-founder of Defense so welcome ladies and let me start So lately we hit a lot of the phrase your kiss your crypto digital assets have been withdrawn from many centralized crypto exchanges because of not your case not your crypto obviously at the same time we have an uptake in online searches for self-custody and cold storage so my question is do you think we are heading into a world of your case your crypto my case my crypto and what does this mean for web 3 and the crypto World in terms of mass adoption Clarice do you want to start sure I can start so we're not going to demonstrate everyone everyone knows that um yes so absolutely 100 aligned with the sentence with the principles not your keys not your crypto to me you know we all started using decentralized custody because we wanted to remove trusted the need for trusted parties in the first place so it's not a matter of if it's a matter of how in my opinion when when Andrea ankenopoulos says your keys your Bitcoin not your keys not your Bitcoin he actually means physical ownership of the private Keys having your private key in your pocket right so if we take two seconds about you know thinking about the concept of ownership right in real life you do own headsets that do not fit in your pockets for instance you have a car right you own your car if someone stole your card you get to local authorities and you can claim your car back it's your property so it's been built over centuries of social contracts and so that's how ownership has evolved so I believe blockchain should be a way forward technology should bring us to an understanding of ownership that is a Way Forward not backward not a sort of a tribal way of understanding this is yours you need to own it and actually have it physically in your pocket right so the reason why for instance at defense we still think your key is your crypto but not actually physical ownership we believe in signing power and the reason why is because people have lost billions of you know dollars because they tried to manage their private key themselves right even the most sophisticated uh developers so I think earlier this year a guy named Luke Dasher is actually core Bitcoin developer he actually got his keys compromised so it's because Key Management is hard it is hard right it does take a lot to actually know how to secure your keys your crypto your keys sorry so today for instance when people say and and keep on saying you know it should be South custodial you should you should do it yourself what people do actually when they buy a hardware device the first thing they do is they back up their seat phrase in plain text on iCloud making it more vulnerable and making it a bit useless to be honest to actually buy a hardware to actually start with so there is technology there is for instance we use multibatty computation NPC is a great way to actually remove the single pointer failure and enable you to actually keep on going and keep on having that ownership of your crypto why because we can provide a recoverable cryptographical proof that the user actually sign a transaction and so as we are as we are you know going and and trying to reach Mass adoption we believe that we don't we won't achieve Mass adoption by all carry carrying a private key in your pocket so to conclude on on that point I believe we need to go this way right the question is how we do it and for instance envisioning decentralized custody which means that what matters is not only where your private key is ownership doesn't matter but how you access it making your identity the recoverable proof of your signing power I think this is the way forward and this is how we are going to create a ux because it's super important there's no security that is valuable sustainable if ux sex so a ux that enable people to actually be comfortable and sign transaction and stay in ownership or they have cryptos thank you what about you Sarah do you think that we're heading into a world of your crazy your kids your crypto my case my crypto and how does that impact customer Behavior are we sifting into decentralized exchanges yeah so it's really interesting because yesterday SEC put out a proposal essentially requiring asset managers like so-called institutional investors to uh to actually put the customers funds this one okay yeah two it's much better yeah so yeah it's like really busy last night and we were talking this morning because SEC put out a proposal basically requiring asset managers um institutions investors to put their customers funds in qualified custodians and to to that set with clear side was said it doesn't really impose additional restriction on individual investors so individual crypto asset holders can still own the cryptocurrencies and store on whatever devices but for institution investors now it becomes actually more clear and and with the regulations that they will actually have to use qualified custodians and specifically SEC also said the business model for crypto exchanges does not mean the qualified custodians so they're pushing a further regulations for investment funds essentially not being able to trade freely on vending platforms exchanges given a lot of the incidents that happened recently so what that really means that as a custodian which is very interesting about public Keys like especially in the U.S standard we we were required to demonstrate to our Regulators that custodians actually own private keys of customers funds we're also required to demonstrate that all customers funds are in segregated while it's right or answering wallets for for customers and on top of that all the other additional requirements by Insurance like well ensure reply low so London we have to prove to our Underwriters that will hold private keys and customers funds are also segregated so I think there's a lot of shift in the industries for institutional investors but obviously I think for crypto holders like we are I think it is like more flexibility to do that thank you Sarah I still think that the centralized exchanges have still a future and not because they have a better UI a ux compared to the decentralized ones but I think the key here is to get rid of Bad actors and why not save to smaller exchanges like bit markets that they don't have a hidden agenda speaking of Bad actors FTX FTX was a wrecking ball in 2022. some even claim that FTX triggered the collapse of the stable coin USD in May in any case The Fallout was really bad it was immense what is your opinion apart from the criminal investigation and who is guilty of what what is your opinion about the situation with FTX Ed what does this mean for the web 3 and the crypto space moving forward Sarah yeah so so I think it's ready to make prayer comments on how investors are getting more concerned because fds really kind of inflicted a severe concern of the safety of the Assets in crypto exchanges and I think The Regulators also came out and said you know if you put your assets in crypto exchanges I'm so afraid so there's so many crypto exchanges it depends on the crypto Exchange okay essentially if you go down to the bankruptcy route then the investors are putting in line uh in the bankruptcy court so it's harder to harder for investors or customers to retrieve funds in the bankruptcy because it's hard you cannot it's like the way crypto exchange is currently uh do business it's harder to prove the assets are segregated um so I think FDA is really kind of uh spurred that change in the industry um and then I think it also pushed Regulators to take more tightened stance in this industry um I think centralized exchanges were born because it's hard to actually interact with blockchain and that's pretty much why centralized exchange is uh really you know got developed over the past decade I think there's technological answer to rebuild this trust right I agree with you doesn't mean that centralized exchanges need to disappear thank you and I'm still on business but the first point is actually segregated of of you know segregation of funds I think this is very very important so developing segregated wallet infrastructure is the only way to guarantee that if you go bankrupt to your users money are not at risk right and it goes by knowing what technology used so I'm gonna be a bit technical on you at so early in the morning that's my that's our background that defense so so basically for instance so most of exchanges operate on what we call Omnibus infrastructure problem is that only business infrastructure is that you pull users money we advise that defense to operate with segregated toilet infrastructure but be careful a lot of time people will tell you hey you have an addresses if you have an address this doesn't mean you have a private public here attached to these addresses most of the technological service provider out there will use a technology that we call HD wallet that enables you to actually derive addresses from one single private public key pair what it means concretely is that if you act one private key then all your users money are hacked so demanding as a user that your exchange wallets use segregated wallets is super important that's the first point second point is the accountability of offline signing so when you actually sign a transaction on binance on coinbase who tells you that D actually transaction you've entered is the one that went on chain there's no accountability between the moment you press your your transaction in the moment that the transaction is unseen so we are also working to make sure that technology like MPC as ours are accountable as multistic that the metadata of the transaction that started from one point till it goes on chain is actually verifiable in a privacy preserving way this is super important technology can solve this issue with this type of solution we would have seen a lot of things that went wrong in the management of FTI the third point is either you choose to comply and being actually you know regulatory clean compliance so be transparent make sure that for instance you use that also you're proactive because regulation is catching up so you show you demonstrate for instance proof of reserves things like that or if you don't comply then you leave the power of signing you leave your user in charge of their private key meaning you are a non-custodial exchange which is think is something that you can also achieve so there's different ways I think technology is here to serve exchanges to actually rebuild this trust and to make sure that they operate in a transfer of UA thank you so much both they say that one week is a long time in crypto and indeed what happened last week is an example of that with the SEC declaring that staking is violating the Securities Law and busd is an unregistered security how do you think this will impact the digital asset space and what does this mean for us in terms of its leadership position in financial markets and Technology so for ages we were actually so we built our own technology and PC based specifically for ontrend transactions including staking liquid staking so and um and day five so we support one of the first whether the first to support like because taking a lot so I think when the news came out it was really a surprise to a lot of the industry players including us but it also highlights the differentiation of how technology infrastructure company normally does on-trained transactions so essentially allowing providing the user interface and allowing the customers within the custody to directly interact with staking node providers or staking validators instead of crypto exchanges where they pull customers found together and create different type of yield earned products that being defined as Securities in the US by SEC so I think what the industry is really leading to is I think we I think it's going back to the fundamentals of function technology is the transparency the trend activity um on Trend Wally and direct interactions versus you know adding on um whether that's a lending platform or crypto exchanges were essentially having pulled the rewards forsakings together and essentially creating more like investment products to retail investors or investors so I think after the incident a lot of the industries players us come out and really kind of educate the market and the community in terms of what is actually a better way to do and leveraging the technology which we were supposed to to do more instead of doing more more trading creating more programs that attract people into the industry but essentially didn't have the risk management as well as the infrastructure built to sustain and really kind of to create like a better a better solutions for for this industry as well as us for overall Financial systems so I think it's uh it started to see companies that are really taking a lot more practice as well as efforts into differentiating themselves for providing the institutional type of infrastructure Solutions really kind of stand out and it also require more compliance and more more programs internally or externally by the Auditors to kind of differentiate how everyone does things so I think it it will I think it the shortened impact is obviously big because a lot of the people are still trying to comprehend the new regulation Treasures but I think in the mid run it will really kind of set a new standard for this industry to really be sustainable and then grow yeah I'm quite a line here because it's true that we see that the institutional U.S market is a bit paralyzed these days I mean they need stable regulatory environment to operate and and you know recent successive announcements are are a bit difficult to manage right where where is the final regulation going where is the SEC going what does it mean for for institutional players how they're going to position themselves at the end of the day it it's a bit normal right when when you are putting yourself once again as a trusted party it's normal that you complied with regulation and regulation is adjusting to the to the recent events I think the good news is that we see D5 quite you know uh you know reborn by those uh by this uh uh uncertainty environment right we at defense we see more and more actually decentralized application coming to us saying I don't want to touch my user phones I just want to build the bridges Bridge build a product that enables my users to directly interact with other users so they can actually you know exchange trades web etc etc so we see a lot of innovation on on this on this front and this is why I'm not too worried about the United States because even though regulation is is being a bit difficult these days they have quite a bit of resources to to innovate and we see a lot of TV Act of activity on the on the device side thank you so much I'm aligned with both of you I would say as a conclusion that we don't need more punishments we need regulations that are tailored to the crypto space and we need regulations that we don't that they don't hint their Innovation thank you foreign [Applause]