Crypto in 2024: Where is the Opportunity? | European Blockchain Convention 9

[Music] hello welcome to the last panel before lunch uh even though the the title might be confusing we will not be providing any tokens price unfortunately but the instrument to face the 20124 um what I would like to say is our panelist are open to questions during the panel so feel free to raise the hand and uh please introduce yourself and your company yes sure so uh first all thanks for being here uh my name is Mark nin I'm the co-founder of vavo uh vavo is a regulated European exchange uh we are market leader in Western Europe and we are Keen to uh tell more about our business and the the trends we see in industry so what I saw to we power the new era of asset management I'm Stefan clauser co-founder and CEO um what we do is to give access to machine learning Ai and Quant optimization tools and data for the asset management industry um also providing that for crypto among other asset classes hi everyone my name is Gloria Hernandez I'm a a co-founder and a partner of firre which is a a low firm and consultancy firm focus on F cial regulation we advise Banks insurance companies brokerage asset managers and now crypto providers H getting license and adapting to a new a regulation and I see that H 2024 is going to be the year because many people came into the room hello everybody thanks for being here I'm Co Onawa I the K CEO of bami We're the crypto firm market leader here in Spain um in both the primary markets and secondary markets thank you thank you uh the first question goes to you mark considering the current state of the crypto industry what trends and indicators suggest the most promising opportunities in 2024 yeah sure so I think uh both 2022 and 2023 were quite uh bumpy years for the crypto space I think in 2022 uh a lot of trust was harmed in the crypto space 2023 in our view the trust was step by step regained I think for 24 we expect two major things I think for retail investors uh both in the U or mainly in the US and also in Europe we expect that uh ETFs are coming becoming big in the US we also expect that uh ETFs basket trackers and all kind of things will become big here in Europe uh the second Trend we expect is not on the indiv not in the individual part but on the institutional part so in our view uh the market will become regulated more and more which will also pave the way for institutions uh with our company we are heavily focused on on on b2c customers I know that Co is way more focused on B2B I think he can give even more background there thanks Mark yeah continuing on what Mark was saying more regulation in in Europe means it's Paving the way for institutions to come into the game so two years ago for example where the banks probably have Bitcoin on their balance sheet now there's conversation on finan traditional Financial entities and institutions offering crypto to the retail users so the B2B B2 b2c is going to be more and more exciting for the next year and that's thanks to clear regulation or at least clearer regulation uh how do you think stakeholders should prepare for this sorry how do you think stakeholders should prepare for this stakeholders um I think it goes back to when you look at an asset or a digital asset I think it goes back to informing ourselves and educating ourselves more on what what what this is all about right there's the underlying technology of blockchain and there's also the actual digital assets that we're speculating on investing in and and supporting so education's a big piece of this and and it's not as it's it's it's getting more and more sophisticated and so we have to catch up with the with with both the advances in the in the space and the and the regulation that comes with it yeah and well also I think it's key conversations between supervisors regulators and the private sector for example I think it was a couple of weeks ago esma sent a notification to Market participants a crypto exchange and also to H supervisors across Europe uh uh just saying hey get together and start adapting and H planning for MAA because it's true that MAA for as virtual asset service providers will enter into force in December 2024 and this is like one year ahead but you should start right now so you need to plan you need to do your Gap analysis and you need to talk H to the regulators and supervisors so in my view this dialogue is is key and it should start right now we've been talking a lot about Regulators Gloria indeed for you of the question given the past regulatory challenges how can we anticipate the regulatory shift in 2024 and how should exchanges and investors position themselves well I think that 2024 is a a key year in terms of Regulation because there's a lot of things going on in digital assets I think you have two um er two key regulations first one is MAA which was approved and finally published this summer and the second one is the pilot regime for financial instruments because you know that digital assets that are not financial instruments usually they fall H in MAA except NTFS that we will see what happen with them because they are outside of MAA but also they are a you know the European commission is thinking about issuing a specific regulation for these digital assets so but ER in 2024 what is going to happen first that all the part uh of MAA regarding issues of eony tokens and asset reference tokens stable cones will come into force in summer and for example this is key for the pilot regime and for the Securities part because in previous panels they were talking okay there's a lot of things on tokenized Securities but we need the cash part as well so these eony tokens and stable coins will enable transactions in the pilot regime and then as I already mention in uh at the end of the year is where a a crypto service service providers may start applying to get a European Union level license because the license that we have today in Europe are local license I mean if you're licens in Germany or in France that's fine for France and Germany but you cannot Branch or passport this license so the key date for a service pro crypto service providers is December where in theory a supervisor will open you know like the window to start submitting the application for the MAA license but for this you need previously to think what are the services you're going to provide because it's not that straightforward for example just H buy and selling um Bitcoin you can do it having an exchange which is a sort of service or you can do it by your own account or you can go to liquidity provider so you need to to to prepare before submitting this application uh passing more on the technological side um Stefan are there any upcoming technological advancements that exchanges and investor should be closely monitoring yeah I think uh we what we currently see is the The Perfect Storm of uh many things coming together for the crypto market so uh while regulation kicks in we we see a lot of new players entering the market um so but there is different levels of sophistication of uh services that you provide uh most players might at the beginning just offer buying selling of of different uh crypto assets but there is also uh an asset management industry that really needs a a new level of sophistication in the in the crypto space because many people that are holding and trading especially the ones that are trading crypto they lose money let's face it um and that's not good right people want to see their Investments Thrive and for that we need a new level of sophistication and now we have the technology to do that so um with having now big cloud providers that give you access to to computing power and and and to to data and to to save your uh your data and at the same time we have the machine learning the AI tools and the Quant tools to calculate risks to forecast even forecast titles risks Etc and to put that in a portfolio context so that you can take some of the of the volatility out of your invest ments and you can make sure that you always kind of at the speed of the market with what's happening out there and I think that's going to help greatly um to also get more acceptance for this Market because many are still holding back saying oh this is super gambling volatile whatever sing I don't want to do this but it's more about making this Market more sophistication uh sophisticated and there technology play plays a big role anyone else want to jump in yeah or I fully recognize that I think the crypto space is uh still in the early stage uh still in an early stage from from both a service perspective but also a regulation perspective so I can recognize uh what both my co- panel uh uh are saying I think from a trading space uh most s are still focused on on on buying and selling or trading assets I think over time that will become more sophisticated first with ETFs basus trackers and other things which are coming up which is more passive investing I think over time as Stefan just mentioned you might see even more active strategies where people are using underlying technology to become active Traders uh I think that's on the trading side I think on the regulatory side uh the crypto space was unregulated back in 2018 2019 it step by steps became regulated in a light version in 2020 uh and I think in the coming one two years under Mar it will become heavily regulated I think as an exchange that means that we as as a company need to heavily invest in that to to meet the new requirements uh we see that as a good thing we think that it helps to mature the business and also helps to adopt this industry and bring the industry further uh and as as Gloria just mentioned it also gives advantages that you can easier easier do crossb services and that you have the possibility to offer potential other services like real world assets and all kind of things and I think that's step by step where the market will go to um so we see it as an as a development of the sector which takes time yeah and institutional adoption you know I think this is this is key I liked a lot in the previous panel cot from s there mentioned that we have to change the engine of the plane flying and I don't know I don't remember how many fets you know but but it's true institutional they they still have their legacy so they are they are trying this new technology but you know the the plane keeps on flying you know and so for me institutional adoption is is key this both in the Securities part and institutional are very much into it for example inre we're working in several um applications for the pilot regime uh and we see institutional players in the Securities part you know betting uh and and like being in the front positions and on the crypto part for me in in the case of Spain is going to be key when I who is going to be the first bank that is going to be offering a crypto H to clients you know because we we do have a experience but in Switzerland with the two largest Spanish Banks you know but not in Spain so for me this will make and also we will have like alliance with you know native providers offering this B2B Toc so for me this this will be a key moment I don't know yeah know I think you've said and implied everything we're we're going to be we're going to at least bit to me is going to have a very play an important role here both on tokenized Securities as as you know very well we're in the pilot regime for for this and then also of course as a crypto service provider and and for utility tokens right so it's very important to also separate tokenizing in the primary markets when you're tokenizing an asset and why you're doing so and then and the complications and benefits that having those in a having all of those assets on a SE secondary market so it's going to be very very interesting because it it doesn't it automatically become because of crypto all of this becomes a global thing it's not just a Spanish thing anymore right so you can tokenize if you're able to invest in an emerging market for example through a tokenized security over there it's it it's a win-win for both sides right because an Emerging Market company with the tokenized security can get access to more sophisticated Capital markets like the e and then vice versa we can participate in the growth in these in these comp companies across our borders and that's thanks to the technology of crypto blended with EU regulation and local regulation and elsewhere so because of crypto the gate the the because of the because of crypto the the rules and the game becomes much more Global and much more excited and and abundant for for a lot of Stak holders so I think it's a space to really watch apart you know aside from just speculating on the price of utility tokens um staying with you co how are Innovation like defi nft layer 2 shaping the opportunities in the crypto space I think it's I think it's shaping it in a way where the Innovation is becoming much more faster so I had this conversation with Mark this morning for example where layer 2 is now allow more building and faster building and faster transactions compared to say 3 years ago where the ethereum was kind of a a stopper or a blocker for these types of Innovations and then on the on the security side for example Regulators have been very clear that Bitcoin is not a security so more and more we're seeing tokenized Securities on the Bitcoin blockchain or the or the layer two of the Bitcoin blockchain because it's very clear that tokenizing security on the Bitcoin blockchain is completely regulatorily safe so institution can pour money in there but it's it's also if you look at what's happening there it's it's almost like you can you can imagine what it will be like when say evm or or these other layer twos or layer ones apart from Bitcoin are are deemed not a security so it's it's defi allows cross efficient cross border and and transfer of value very easily eily and and efficiently layer tws allow speed and if you mix that with a blend of regulations from the different regions then it's going to propel Innovation unlike we have unlike you know we've never seen before I think yeah well in terms of uh regulation ER defi is not regulated in in MAA well some players some D5 players might be regulator if if if there's someone that you find responsible that in many cases many companies that they adverti well companies many Nets networks that advertise themselves as being completely decentralized they're not that decentralized there there's someone that is earning money because of what's going on in this in this platform so this kind of defi will fall into maika and the rest you know they are studying how to how to regulate it which is not H very very easy the same with nfts the nfts are booming you know that there's so many case uses with nfts and here we have to be careful because in the United State there's been some rulings that nfts that have become Securities the SEC has considered them Securities and also this line between Securities and other crypto Assets in theory is clear but not always CU many times when the case use you you you you stress it a little you may fall into the Securities area so you know the the problem is innovation it goes so fast this technology enables you do so many things that well you always have to look at the limits because you can start with an ntf and end with a with a security in in that context I also find it very interesting to see what's going to happen in the decentralized exchange space because uh look today we we usually have very clear rules on how what can be done and how it can be done and even in the financial instrument space right there is some some differences between the countries in Switzerland we have this actively managed certificate which gives us a little bit of freedom to uh to try out new things but that doesn't exist in many other countries and and then you're going to have decentralized exchange and there you could in principle offer any other kind of innovative Financial instrument or tool um and how how is this going to play out right and uh what's going to be there and who is going to use it and why and then and I think there we also going to see some movement coming up pretty soon yeah or fully agree I think that uh D5 platforms can be the most efficient platforms it's still not user friendly and still not regulated but from a tech perspective it will be most efficient uh and given that uh it will it will definitely have a huge use case in the future um so we need to see how that will develop uh secondly on Layer Two I think Layer Two brought a lot of advantages as Co just mentioned that at least ensure that ethereum blockchain became way more way more uh uh uh useable it became way more uh Advanced uh and I think all those Trends are underlying growing and we'll ensure that the space becomes bigger over time um which areas within crypto are witnessing the most significant in flows and what implication does this have this have for the future of the industry who wants to go with this are you mainly referring to where investors are investing in or mainly uh retail customers the reto customers I think what we see in general is that a lot of reto customers are uh heavily investing in spot instruments so we see that retail customers are in general investing in spot instruments and in real Bitcoins uh we also expect that it will keep going uh why because it's the most convenient way to access the crypto Market uh I think on the other side we see that institutional players are more and more interested in options uh perpetuals and more sophisticated instruments um so we see a clear split between retail investors and institutional investors so but to be honest that Al also sometimes just due to regulation again right because there are different instruments available um what we see for example that there is a big interest of retail investors uh in in our product which are portfolios of crypto uh coins and tokens that are optimized with machine learning and Quant tools and and we often have problems offering that to to retail customers because with this AMC instrument that I just mentioned we can only offer it to to professional or qualified investors um and then what we need to do next level is an ETP um or a fund that we can uh kind of optimize with with our tools and there the hurdles are a bit higher to to set this up but it's it's not that people would not be interested in that it's more like uh okay they don't have access right and this is also something where we will we will or we're convinced we see a lot of movements uh coming up uh because we also offer through our platform that we can actually launch investment products for our customers uh and there we see a lot of them asking for etps now and saying I want to offer this retail uh can you make this happen well H in terms of Regulation H again well inre we don't work with retail clients directly so I don't have you know the sense of the market but the sense of the market that we have is the companies they they ask us okay how should I provide this service for retail clients and we see there's lot of uh questions on spot how how to get this for example this mic license but also on derivative most of our clients that they are exchanges offering H Bitcoin ethereum and spot crypto they are also interested in knowing what they need to do to offer derivative Futures and so on also H we have we we've seen interest in asset managers erh in offering H to retail clients ER investment funds with an underlying ER with exposure to to crypto so I think that it's it's very broad the the the interest of of retail clients and and what it is really very interesting is that for example in one H well what what is very interesting in regulatory terms is that MAA has not a definition of retail clients which for me it's it's amazing because in theory it's a regulation to protect clients and I I always say is that MAA is very similar to miit it's like the miit of uh crypto assets you know well uh m miit is all about how to protect a retail investor and for me it's amazing that Mika has not a definition of what it is a retail investor but with a with with this with this uh you know protection in um in in mind ER it's going to be key a transparency h of firms providing H crypto H crypto Service as well no I think they summed up everything yeah fully agree retail there's inflow institutional there's inflow direct or indirect it's uh there's definitely in there's definitely High interest um which regions or country are emerging as Hotspots for crypto growth and why maybe Stefan we were discussing that before um I'm I'm obviously biased but I think uh Switzerland is a good place to be if you're in crypto there is some some regulatory stability around the topic even though there is also new new things coming up obviously and we're we're we're in the middle of Europe so we're also affected by anything that the EU does obviously um so but still we also even have access to the regulator directly they're inviting us to have an exchange on the business models that we have to see how can they really uh cons uh regulate the market in a way so that they're not killing uh new young businesses uh in that space and that that's really important for us right we're Al we're doing not just crypto we're doing this also in other markets and we're doing AI which is another topic that is potentially being being uh more regulated going forward um so this this is super super key for us at the same time uh we have access to the to the AA zurk uh which we're also spin-off from and uh that uh there's just an amazing amount of talent out there that we that we can work with yeah I think Switzerland you did very well and actually there's a lot of Spanish players whether you know doing experiments there or working with it providers based there Spain is also a great jurisdiction not only because of the sun which is true everyone can see it know in in Barcelona but also because we have an instrument very interesting instrument that you can use cross border that is that we have a regulatory sandbox this mean means that you can test in an environmental you know Place uh for example crypto Solutions even before MAA comes into place and this testing then can continue you know even uh when when you exit the sandbox and you start you know providing a a services with the new M license ma license next year and this instrument for me me makes Spain a very attractive jurisdiction especially because you can use it crossb so also think about Spain I'll just um depends so the question was where are the hot spots of crypto in the world right so it depends who or what you're referring to so if you're into gaming then probably Asia would be a hot spot web 3 gaming is huge there there's develop both access to Talent developers and actual gamers if you're thinking of building something in fin in the financial area and using crypto then I think Europe is great EU Spain is amazing for that also because it's very yeah we have MAA but then we also have our own local sandbox if you're doing if you're if you're building something else that's using blockchain rails but it's not necessarily crypto native I think you know other areas like Switzerland or Dubai is great also so it really depends on on the area and if you're in Latin America of course then movement of money and head and and and stable coins are are are a safe haven to the volatility that's happening with a fiat currency right so crypto is a global thing it's not a MAA thing it's not a European thing it depends on the use case and how it can bring value to the to the to the user so if you're building or using or in operating with crypto um be where the actions at and the good thing about crypto these days it's not just like Bitcoin or ethereum anymore there's there's different Pockets now and so you can pick and choose where you want to be and what you want to do another question that is a bit of a key point of our conversation um sometimes crypto comes with a as a bad word if we want to say like that kind of approach from people do you think uh more financial institutions or Regulators are supposed to clean this name we rebranded to web 3 already I don't I don't think neither of those right it's really educating people about uh crypto and there is still a lot of um half wisdom or or like just wrong facts about crypto out there um and it's on on all of us to kind of to to change that and then also while the market gets more sophis iated um I think this this will correct to some extent automatically as well yeah I think it will happen over time um of course there are sometimes events in the crypto space which everybody wouldn't like to see there um that's only happening in the crypto space it's happening in the financial industry in the stock market whatever uh it's very unfortunate I think it's up to the the web3 space or crypto space to keep building keep growing uh and to make it work to make it to to to to show that that that this will become big over time and I think time will be key uh it's not up to The Regulators it's not up to the institutions it's up to the full space who need to keep building despite what's happening and together we make it big yeah well I think that in crypto there are two parts the one that has a bad name is the more the uh MAA decentralized tokens like h Bitcoin ethereum because they were born completely outside the financial sector and actually thinking that the financial sector was not working properly and they looked for another solution so of course you know traditional players well the philosophy behind it's I mean it goes against intermediary so I mean it makes sense that that you don't talk very well about this but on the contrary all the part ER related to um Securities H digitalization and organization of Securities I don't think that there's bad reputation on this or at least I see in the esma European Commission in Spain the Spanish Securities and Exchange Commission and all supervisors they are supporting uh the representation of financial instruments using DLT so they're pushing for this so I think what it worries more regulators and also Banks and the traditional ecosystems are these assets that they were born completely you know outside and well I but I don't know how how it also being honest many happened you know it's true there was no regulation but there was also uh you know a reason for absolutely any question from the audience uh I was wondering how you see the impact of the growing awareness for environmental sustainability from from people around Europe and the world and also the regulatory uh growth in that area affecting crypto and specifically Bitcoin obviously wants to grab it well yeah that's one of actually the the most important amendment to maika was introducing know in the debate this H part of sustainability and actually I think it was three weeks ago uh the ASAS published uh the a consultation specifying how you need to inform about ESG implication of um o of the uh different tokens you you trade or you give access to here again the concern is if Europe is going too far sorry I I I always talk about Europe because I'm a European union lawyer and Spanish lawyer so I cannot give an opinion on what's going on on the United States you know but I think in in in Europe the the the the solution is treated as any other industry you need to disclose what's the impact you know in terms of environmental social and governance and that's the solution that we choose in in the European Union and I think it it it will work well hopefully it will um there is already some products investment products uh in crypto out there that are CO2 neutral um and I think that's that's also a topic that is going to be more um important in the future um it's it's already possible to take this this into account and to optimize for for this uh for impact and sustainability uh it's it's look it's it's everywhere right at the moment still the the market is that you either buy spot or you buy futures or you buy an a product that is usually market cap weight it so it's mostly Bitcoin and a few others uh and this is not going to sustain right you need new products new ideas new investment forms uh in crypto so that this becomes a market like like the other asset classes as well thanks any other question thank you uh my first question is about uh for you personally as an investor would you invest your money in security tokens or in Bitcoin or cryptocurrencies and I have another question specifically for Co and Mark and it is uh are you expecting the Bitcoin halby in 2024 and why that much what was your first question first question was would would you invest your money in uh security tokens or in cryptocurrencies personally uh personally I uh uh would always recommend to uh deviate your your Investments uh meaning I would recommend to allocate part of your total assets which you have in cryptos um but only only a zpet uh so the crypto Market is quite volatile I think it's not recommended to put all your money money in one basket so I would always recommend to put part of your funds in cryptos part of your funds is stocks part of your funds even keep it keep it in Fiat funds uh I think that's the best way how you can develop your your wealth uh and I think if you put everything in one basket personally I think it becomes too risky um that's not because I don't believe in the sector in general but this this Market is volatile so I would always recommend to diversify it uh that's my take uh yeah I think my my it's similar to mine it's it's not Financial advice I think we have our own personal personal preferences on what we invested and how we allocate it so but I um I share Mark's thesis of being as Diversified as possible also knowing exactly what you're investing in so security token what is like if don't put everything in one bucket a security token or you talking about stocks or a security token of real estate are you talk when you say cryptocurrency you're talking about Bitcoin or you talking about the the next dogcoin frog coin is you know it's so very different right so I think it's um don't put it in one bucket study which one is you know you feel more comfortable about I think for me at least and then your second question was about the Hing I think on the Hing for next year uh I think my personal view is that uh uh the crypto Market will get more traction during 2024 2025 um uh I think that will be for a few reasons so the first thing is let's say how is the financial industry doing so I think during the last three four years we saw interest rates increasing substantially I think recently interest rates stabilized and they might even go slightly down I think once interest rates stabiliz or go slightly down uh Fiat funds become less attractive and and people might become more open-minded to to to acquire more more uh uh uh uh speculative of high risk Investments like crypto assets so I think that's the first reason why I personally expect that the crypto assets will become more effective during last 24 25 I think on top of that you will of course have the whole thing uh due to which uh uh uh bit Bitcoin specific might become more rare um so that's my general view I'm not sure if it will become that big as it was during 2020 2021 I know that some other people here in their audience or maybe as a panel might have a different view I think personally that 2020 2021 was really a perfect storm where you had Co you had very low interest rates you had a lot of people having spare time so I'm not yet convinced if it will become a similar kind of hype as it was back in the days um um but that's my personal View and I'm already seeing having people other opinions so let's discuss that I think spare time is a good keyword here um look if you if you ask me personally probably my exposure to crypto is too high um if you would go after uh the normal recommendations um but spare time is a good keyword because I used to have a bit more time um before I founded my own company uh and I was kind of doing crypto trading myself so I already had time to look into what I think is a good token or coin or protocol and buy and sell and now I don't have this time anymore so so what I do now is uh I just put I sold all my crypto Holdings and put it in our in our um engine optimized product just because then I don't have to do anything anymore and I trust that thing that we're doing and and uh I can do it professionally but it's it's it to be on top of what happens on the market K is really time consuming so um I would I would be careful in in that space thanks are we done with the one minute H one more question anybody any final questions question one last one in the in the metaverse um what uh soccer BG is building and everything about it uh with really um viral reality uh which apple is starting to invest in that uh you think about this is opportunity for 2024 or not uh personally I think that will take longer and that's not because I don't think it's a good good you use case I think over time uh blockchain and cryptos will be used uh on a way broader scope than we currently can imagine so I personally believe that web three will become big that you will see all things you just mentioned but adoption takes time uh people already hope that it would become big in 2001 20121 2022 when the nfts became wi big when the board Apes became big uh but all those things take time uh so from my point of view I think it will be more a fiveyear horizon where let's say those kind of things will become big uh somewhere later in this later in 20 20 25 20 2030 um but that Things become big that's my feel quite certain I many of these things depend on integration right I think that's anyway one of the biggest drivers uh of uh the financial industry in the future if you have open apis and an open Eco system uh where you can integrate all different kinds of services and then you can even imagine you go to your um own metaverse environment where you feel like you would want to do some uh something on your crypto portfolio right now and you can do it directly there and then you have the broker that is uh or the exchange that is integrated you have the AI L layer on top that is integrated and you can do anything everywhere and I think this is this is going to be the the interesting part of of the future of financial services well I think that it will come but I think it will take longer than 2024 will'll see things happening this year but I think it's more on a five years time I would say I think it's going to indirectly actually make things faster because I met some people who worked on the Libra project of Facebook and even if the Libra project was a failure the people that worked into worked on it for those years have been building other things and have learned a lot from that development so big Tech tends to be very influential obviously and then when they put resources and and create new trends and the talent that they hire to then learn it's almost like RN research and development and so whether it fails or not that particular project it's going to Spur new new things within that realm so it's going to come faster than we think I think maybe not the metaverse of Mark Zuckerberg but something a lot more will come out of nowhere thanks a lot uh last remark please feel free to grab one of them or all of them in case you have questions additional questions or doubts and thanks a lot please an Applause for our panelists and enjoy your lunch thank you thanks