TradFi, What's Taking You So Long? | European Blockchain Convention

[Music] so hi everyone and uh very welcome from our side uh we're very happy to be here today and to contribute to this wonderful conference and uh this is Max he's our business development manager at VM Daton service and my name is Du and I'm the head of innovation Lab at the same company and yes today we want to talk about the current blockchain adoption in trefi and our title slightly let me see slightly indicates like what our opinion is going to be but we don't want to spoiler too much so before we get into the specifics let me just shortly introduce to you VM dat service and uh basically what we're doing so to start with is it's a very it's a very simplified illustration of our business model so basically what we do is we are the golden source when it comes to providing reliable Master data on traditional Securities uh data for example is uh issuance data corporate tax uh corporate actions data tax data and also reference data which is very important for our customers and we have customers such as Banks uh in general um financial institutions and also data vendors and platforms uh what is very interesting is we are so-called National numbering agency so we also so are known for providing the I the unique identifier for Securities in Germany but not only on uh for traditional Securities but also for so-called electronic Securities according to the electronic Securities act and uh we do this business for over 70 years right now we have technical interfaces to all our customers in a very specific data format and uh yeah actually yeah speaking of providing icense let me just stick to this piece of Regulation the so-called electronic Securities act for a second so um yeah it's very important if you want to issue a crypto or electronic stock or bond for example then you ultimately need an i a unique identifier for your security and without that you cannot perform the entry in the in the registry which is based on DLT according to the new act and um and as you can see right now here this is an example of uh of the fact that we are already in integral part when it comes to the adoption of uh yeah crypto Securities in Germany and let me see that and I want to stress out on the next slide that uh yeah we have some internal insights that we brought you won't find that on any public sources so in 2023 around 6.3 million new security were born or issued in Germany and we know that because we provided the corresponding icense for them and um what's very striking in this uh chart is that you see that the derivatives uh part is still a huge role in Germany when it comes to just watching the sole quantity or number of issuances and there's something like a a list online by the buffin where you can access the number of so-called uh yeah electronic or crypto security uh in Germany and if you compare the numbers of existing uh crypto Securities with the number of insurances in 2023 for example then you see that there's like a huge potential or huge gap when it comes to the adoption because only 0.05% of Securities are tokenized today which leaves a lot of potential for the future and uh yeah let me just uh leave it for now at here and we will come back to the numbers later and now I would like to hand over to Max yeah so I think what we what we saw get started is one half of trafi adoption which is right using blockchain to issue Securities and there's another interesting fact here there's 6.1 million derivatives issued in Germany every year none of the DT Securities so none of the tokenized Securities so far in Germany are derivatives at least not the ones on on public blockchains so it's kind of weird that this huge number the biggest chunk of actual issuances have not been there's not even like a POC on this yet so it's kind of weird that it's only bonds um there's one more thing also we need to talk about so this is a study by one of the sponsors of the conference bit pner they said 11% of German adults uh own crypto Securities right so that's about 7 million people which is a lot of people if you offer them if you're in exchange for example right but at the same time we know from other studies that almost none of them use traditional Banks none of the people buying crypto in Germany or most of them don't use traditional players they all use new kind of finex uh new Brokers crypto exchanges Etc so uh and I mean there's a simple reason for it there's like a thousand banks in Germany and less than 30 of them actually even offer crypto they're just getting started and this is I guess the big qu question on the one hand we have this huge amount of Securities insurances that have sometimes very complex processes behind them on the other hand we have a lot of people in Germany even ready to invest in crypto but no trafa institutions offering them a way in which there's it seems to be like a disconnect cuz there's clearly money to be made here which at the end of the day this is what all of these institutions are run by right they need a business case clearly there's money to be made what the hell is taking so long why why aren't we faster and that's kind of where I want to go into a bit of a bit back and forth with Duke and and tell you some stories of what we've heard uh in in the past couple of months talking to a number of Institutions doing these little interviews um um I mean I'll ask you the question first like what do you think is taking them so long or what have you seen so far actually um my favorite part I want to mention is uh is the regulation because uh if you ask me regulation is way too strict in Germany that we have right now or in Europe in general so uh I heard something on the uh other conference so it's something goes like the US innovates China like duplicates or replicates and the Europeans you know they regulate and I think it's quite striking and um I give you an example so if if we as we dat service want to engage or other companies want to engage in this uh kind of crypto business or offer services then sometimes or it depends on what you want to do you need a license and in order to apply for the license it it takes many months or even like one to two or even three years to to probably get the license and then to start earning money in best case so it's quite a lot of uh I would say uncertainty when it comes to the so you know seeing it from a business perspective so just try to come up with a business case you know and project some numbers that you want to to have as revenues in the future it could be quite challenging and quite tough so I believe it's a it's a huge thing and just one last sentence sorry Max is uh just take a look at the DLT pilot regime for instance I'm not against regulation don't get me wrong I just say we have the DT pilot regime and we have lots of uh uh yeah we have lots of ideas doing with that uh but so far I haven't seen any pilot yet you know receiving the license uh which is quite tough to be honest I think I mean regulation is a double-edged thing I would say that it's often less so the regulation it's more the regulator that's a problem like for example in Germany it's Baffin um for I don't know when did crypto custody that that first license come out a couple years ago there's only a handful of people that have been approved there's license applications that have been lying at Baffin for years by traditional financial institutions not some kind of new startup this is like a real trafi player with fiduciary duty everything set up they know custody for some reason they haven't gotten the license the same is happening with the electronic Securities register where everybody's just operating on these kind of um preemptive licenses but uh the actual licensing is taking really long and the the reason why it's taking so long is also another reason why tradire is taking so long it's Talent I don't know if if there's like any Engineers devs crypto blockchain devs sitting here I'm willing to bet that most of you don't work for a traditional bank or don't want to work for a traditional bank so they're really really really really struggling to find talent and not only the banks not only the traditional institutions but also The Regulators finding people that really understand Tech that want to work for them because the incentive isn't there like yeah there's a salary it's probably not high enough they they haven't quite understood how expensive good developers are in the space and like you don't get a token you don't get Equity you're just working for a bank so your upside if you know what you're doing is a lot higher if you stay in the D5 space I totally agree but I want to to go also go to another Direction so what I'm or what we're missing right now is uh something like the standardization so right now for me it's like very wild wild west when it comes to crypto and I give you very practical example so if you if I want to invest in a stock I know Deutsche Bank or M bank for example Tesla I need to fully rely on the data that is you know Illustrated to me for instance like the market cap the number of stocks and so on and all these kind of yeah metadata or Master data is very important to yeah to have like reliable sources to provide these kind of data and uh this is the same right now if you go on coin gecko for instance and you take a look at the binance coin then you will get a specific number for instance for for the market cap and if you go I don't know on coin market cap I'm very very sure if you do it right now you have totally different numbers and this discrepencies is very important to to have a look at and also to find a solution in the future I don't know in terms of harmonized data or you know over various sources for example and uh yeah maybe hand back one to you like according to the isens and identifiers can you elaborate a little bit on that yeah I mean for those that that don't really understand why an is is so important I think in the panel that Stefan had so so Anna the association of national numbering agencies they mention it but basically if you're a traditional financial institutions you're trying to trade an asset you have counterparties you have an exchange you have a custodian Etc all of these people that you deal with they all literally communicate only in isense it's just a sequence of letters and numbers right that has been standardized and that's what they use they don't use the name of the security that's what they use and if something doesn't have an i in it does not exist in their systems they quite literally can't use it they can't deal with it so it's very important that we have crypto isense which we have now um and trafi is spoiled in the sense that they're used they are very used to master data metadata reference data just being the same and being reliable and they don't really have to think about it and they have all of these centralized institutions they're all best buddies and everything works they don't want to do their own research right they don't want to struggle with kind of misclicking losing money whatever so I think that's uh also a big point and another one is um cost cost and benefit especially when we pivot away from crypto assets and towards traditional Securities like I know I I think you were part of this conversation too that we had where we found out that you know there are some banks in Germany they've done some studies and they found out that if they were to shift the issuance of their Securities to blockchain to DT they would potentially have cost savings probably in the 5 to 10 million area I think something like that pretty straightforward sounds pretty good probably is that's not enough they've got other places that they need to fix where they will save even more money if they fix it it's just the the priority list is very different they have very old it infrastructure it's all of these old leaky pipes I I don't want to paint too gloomy a picture but it's it's kind of what it is and they need to stop in stop the bleeding first or fix other areas first before they can even think about building this new thing if they wanted to work with the rest of their infrastructure so sometimes it's very difficult um for them to get the resources they need to work on something when there's just something much much more pressing going on somewhere else in their infrastructure yeah totally agree but you know we don't want to to end this on a on a negative note uh definitely not I think uh we we do see that we are engaged in many working groups in Germany and you know there are also like many good examples of you know financial institutions you know uh operating already in defi or offering Services uh like Cy and many more talking so it's a good thing I think it's very good that you know now in 2024 we don't it's my opinion we don't have to to tell like what DLT is anymore and what Bitcoin is and I think education wise we are on a very good level and many companies already are still or already in the application process when it comes to offering Services you know according to mik and other regulations so it's a very good thing that we are doing what I hope for the future and maybe you also have some points on that is uh I think we need like a someone who's going like the big steps like doing the you know like a brave move and you know just going forward and start with derivatives business you so tokenizing that coming up with big volumes and I think if someone will make this move then many will follow and more will will come and uh yeah I'm hoping that we will have that but what's your opinion on that yeah no I think it it's it's a big follower culture and it it it does take both people to move forward or the risk of not not doing it the risk of not doing crypto the risk of not offering these Services needs to be so high that if you don't enter it you're just going to lose and that's what that's kind of what needs to happen so at the end of the day I think it's still it's a Grassroots movement it's coming up from the bottom and if if the risk becomes too high for them the opportunity to lose out uh is is is too big they'll move fairly quickly all of a sudden I think they they have like all of these institutions they have other gears they can kick into it's just they you know it hasn't kicked in yet and also we're very impatient let's be honest like we're very impatient these are really old houses imagine you have an old Villa it's 100 years old you need to renovate the whole thing put in new pipes right get a new electricity set up want want to put solar panels on the roof Etc and then on the other side there's someone saying oh I just built like a completely new house I'm way faster than you yeah of course cuz you don't have Legacy stuff to deal with we have very little time left I do want to ask give one question to the audience if you want I mean we're happy to talk uh any anecdote or if you have any specific questions you can shoot it to us and we'll give you the best possible reply now's your chance there's a timer there's 18 seconds left this is your chance to ask us a question yes there's a raise hand I'll come oh yes thank you hi so basically my question is in your ideal word how would things go you know because you have this experience from the traditional finance and then we're coming in into new Finance uh what what would how would those two words emerge and yeah my name is Marina from euci right we've met before do you want to start or should I you can start I think in my opinion actually it's a good question so I think uh if you see it like as a picture I feel like we are everyone is like working on his own puzzle piece of puzzle and I think we need to to see that analyze it from a very holistic view so uh in the example of electronic Securities according to the ACT we know that the process so it's uh it's not ideal because it's not automated it's very uh yeah you have like some some issues where you do that manually so it's not uh you know like conceptualized like fully end to end like in a perfect way so many companies they focus you know on on trying to do something as a PC which is very fine and very good but often you rely on just workarounds so I believe this will not help so as a saying it ca like Innovation creates you know uh or innovation creates inefficiencies so this is actually something that we don't want to see so just take your time think it holistically and on board all the partners that you need or you require in order to have like a very good process end to end yeah I would add one thing start talking very often with the people at these tradire institutions that are trying to get something done like at least for my experience in Germany there's people running around at all of these banks that have their little project and they're they're fighting the same fight cuz they're also fighting against different priorities different resources and they know very well what the problems are so if we just as a crypto industry can start talking to these people more and more more intensively and build up more trust in the sense that they really will tell us about where the actual hiccup is in the process then I think we can just fix it and make it a lot easier for them and and give a little bit more of a uh White Glove service that is if we want TR fight to enter the space I mean I'm sure there's some people that will also argue that that's actually not what we want at all and the longer they stay out the better also okay okay I think the time is over so thank you very much for your attention and you know we're very happy to have a discussions later on if you like thanks so much thanks