Building Institutional-grade Infrastructure to Meet the Needs of Institutional and Retail Investors

[Music] all right uh good afternoon um and thank you for the introduction how would you define institutional grade infrastructure in the context of digital assets and blockchain what about security and Trust compliance and regulation Innovation and product development and if we look ahead where do you see the greatest potential for institutional involvement in blockchain and digital assets over the next 5 years Welcome to our panel um on building institutional grid infrastructure for both institutional and Retail investors in case you believe you are the in the wrong room I recommend you to stay because those topics are fascinating to to us my name is Bernard Nikolai I lecture Finance at University at solve Brussels School in Brussels and also in Paris at par do and conservator National Des I also invest in startup in preed stage as a business Angel uh together uh uh uh with friends and I find personally uh fch and sustainable Finance as a fascinating but we are not here to talk about myself we are here to uh to talk about digital infrastructure um let me introduce briefly or two expert panelist Ste Stefan lots and Hans Jurgen G berer and of course you will just add if uh if what I'm saying is not enough uh Stefan let's let's start with you uh uh you serve as the group CEO of bitmex you have over 20 years of experience in traditional Finance Capital markets and crypto markets gained at Dutch bur and P PWC but you are committed to advancing the crypto industry and this is why you are here and bitmex is the leading crypto derivatives exchange providing professionals um uh a professional crypto Traders with a platform you are going to talk about all right Hans Jurgen welcome hurgen G backer you are the CEO and co-founder of Trevor do I pronounce it currently based in Austria and stepan based in Singapore by the way um Trevor provide a holistic platform for financial institutions to operate with digital assets such as digital Securities and cryptocurrencies and you are graduate of the University of grat in Austria right and and you come from frankurt if I remember correctly from your CV well orig well originally yes yes but I live in Singapore for quite a while all right so let's start with a more general question and a definition how would you define um institutional grade infrastructure in the context of digital assets and blockchain Stefan if I can start with you it's pretty easy institutional great infrastructure is infrastructure that it used that is used by professional investors meaning investors that do that for a living not like me personally investing into some to coins tokens whatever to gain something but people who trade regularly so for bitmax for example those represent high frequency Traders asset managers Market market makers um the likes of those and and and proprietary shops but they trade really like institutional great meaning they trade crypto as any other of those categories trade in traditional markets on Deutsche burer euron next CME urx you name it right so this is institutional great meaning those customers are happy to use your infrastructure and are able to do so to make money with that yeah from from my side institutional infrastructure for us so we are a uh infrastructure provider just for banks for their uh back office business and what we see is first of all it has to be fully compliant of course it has to work it has to uh fulfill all institutional needs so as mentioned compliance it has to also be connect uh it has to be a connectability to the Legacy system to have in place and also so every Bank itself has their own different processes how they do things and it has just to fit within their places and they are used to already institutional gr infrastructure from the traditional Finance field and especially for the digital asset field it should also cover the same needs from their side and from our perspective the most important but for the whole digital asset field is that it brings Improvement somewhere and digital asset will bring Improvement somewhere and we are on the way to prove this actually uh all right thank you very much for those definitions uh building on the needs of the customers are you're talking about for sure security and trust is something that is particularly important so maybe anuran could you elaborate further and then Stefan yeah yeah sure so uh security and Trust in the in the whole banking infrastructure so or industry as everyone knows is is the most important thing so from an infrastructure perspective so you have to ensure that it works all the time so you have to have several levels of of Securities on an infrastructure side you have to ensure if something happen somewhere that your system is still up because as a order management system provider if for some point of time you have a failure and the banks itself cannot trade anymore this is actually the worst case which which can happen and um with digital assets in in in common with the institutional great infrastructure uh we and the whole Branch as total is currently on a way to also fulfill this professional way which is needed so that also big Banks can come on digital assets with digital Securities or with with cryptocurrencies for example and and we are also working closely together with with trading venues yeah so also this venues are really expanding over time and also gain more profession professionality over time and what we also see and we do not have in digital asset field yet for digital security is maybe a different story but every crypto exchange or liquidity provider or whatsoever works completely different and this is actually our job to to bring it on one technical level uh all right Stefan more specifically bitmax so your company you've never lost any funds to hacking right so could you share more about the maybe the design philosophy or the security features something or we are looking for practical knowledge insight and so on but we you can start generally yeah because this is a very important topic so first of all I want to reiterate on what my fellow panelists just said this is all true where I will be a little bit more pointy is we have been in the space for very long like 10 years so basically if if crypto was like banking we would be the rth child of this industry like a dinosaur in a way um because crypto is only there like for now 20 let's say 12 years 14 years depending on how you count the thing that we do is actually or that we did at our Founders did is embracing this technology the technology was specifically invented designed and built blockchain technology to be secure that's the thing what often has been totally misunderstood is that it comes with requirements it works to I mean I have the experience in the tradire space it resonates what you say with me but the issue is not that it's unsecure not at all it becomes unsecure because people use it that don't know how to use it so for example to give you an example that we never lost the coin is due to the fact that we have quite bespoke procedures in the back end but they built natively on blockchain technology it's delineating between hot wallets and cold wallets for example it's about the sign of procedures but you need to understand how blockchain works if you try if I if we would try to build a process that I was used to in trfi and put it on top of blockchain Technology that's a nightmare it becomes so unsecure not because it's unsecure from a technological standpoint but from a procedural standpoint so if you lose your keys done you're done if you don't delineate between or let's say or allocate between hot wallets and cold wallets in the right way you're done basically if if you don't instill a level of understanding of the technology and the necessities of the procedures into your stuff you're done right so if if one person holds all the keys you're done so we have multi sick for example which is like old already but we use a multi- signature infrastructure which is so much delineated that no one in The Firm can initiate any transfer just because they want to even if we would be we don't want that to happen but if if we would be let's say um forced to do something if I would be forced to do something and sign off on a transaction nothing would happen another three people need to need to sign off on that and they are not in one room with me they are not even on one continent right and we have procedures around that and it works because blockchain technology gives you exactly this capability but if you try to combine this with something that is coming from a different angle it doesn't work operationally and I think that's where people like you come into you try to combine that basically and make it compatible right I mean we wouldn't be compatible in our backend infrastructure I mean we are compatible for our customers with their back offices but if we would run like our customers business it wouldn't work and if our customers would run like we do it wouldn't work either for them and that's where service providers like you come into the play right I mean we believe ourselves as being really crypto native and that's why we're proud of that that doesn't mean it can never happen we shouldn't fall into this fallacy it's not like because it didn't happen it will never happen happen and we work on that day in and day out I mean our chief information security officer who does much more than just information security is basically one of the most important persons in our company for this yeah uh uh very good thank you that's for security and Trust so let's move to compliance and regulation unless you you would like to add something something more may maybe maybe just one comment because that's true to us as a as an organization the topic of the panel is like this because that was what crypto was built for originally or what what it was thought of giving actually to individuals the ability to tap into infrastructure that's equally secure and equally usable right so we speak on many panels about is crypto now going to institutional world is crypto something for retailers it is something for all I mean the tagline originally was be your own bank I come from Banking and I'm passionate about Banking and I always told the crypto guys really like hey that's a strong tagline but if you want to be your own bank you need to know something it's not something that you can do like playing a game on an app or so right at the same time the technology allows you to be your own bank and bringing that together that's for me the Holy Grail where I went to this industry and I really enjoy being here yeah and with that let's go to compliance uh but it's very much linked H because that's also key in traditional Finance so it should be in a in decentralized finance as well okay what about compliance and regulation how do how do you ensure your platforms meet compliance standards globally especially with the evolving regulatory environment your platforms or the clients you help of course depending on your structure uh hurgen would you like to start sure so so first of all we from Europe we are actually quite good at doing regulations which we like a lot because it brings certainty in market and and actually a guideline for for the banks uh and right now we are at the point and also coming with with MAA and and also D is coming in beginning of next year so that we have a standard so that they have the regulatory boundaries to start finally with with the things to kick it off so now they can do it this regulatory points um we see it not as an innovation uh um limit or it I mean it is kind of a way if you didn't start uh point in time you cannot make a new startup when when there's so much regulation already in the crypto space because you could not start to kick it off if you're longer in the space it's it's quite good yeah because somehow it keeps competitors out but this is actually killing Innovation at the end of the day so uh coming from Europe we have really high standards but we have the same or or the basics of the regulation is the same in this field is is quite good that is kind of harmonized uh between the different European countries from our perspective we are not uh Financial licensed but we support our customers with with how this certain things so with MAA different points just just let's mention uh best price execution so this points how we cover this how can this actually work and if you go from Europe to to a your restriction where it is not that high standard it is it isn't a problem at all so actually we have an advantage in our home market for every European player with this Regulatory Field also later on for exporting so this is at least our point of view on this all right you for us it's again in a boring way agreeing in one way but then having a different lens on that um one should ask oneself what is compliance if you thought there it becomes rather easy you could Define like compliance adhering to all standards regulations that are out there and frankly I allow myself to say this it's impossible to do that it's impossible for any bank to do that because it's ever changing new stuff's coming out you get some you you you you do some stuff not correctly according to the words but what compliance ultimately is about and there you can do very good stuff is is if you provide a legitimate service that's that's a big requirement especially in the digital asset space but if you have a legitimate business case and service you provide you want to have legitimate customers using your product you don't want to Spur like terrorist financing money laundering and all of that stuff you want to have for us we are an exchange we want to have an Market that works with Integrity that includes Market supervision right and and enforcement action but I don't we follow all the global roots and we are basically goldplated I just one level back what I want to what I want to say is it was at our heart already and even in the times where there's questionable press coverage out there about my company you just need me to take my the word not not none of this was really true that's the interesting thing I did my own diligence before I joined the firm and you can do this even yourself so it was already at the heart of the company because this company bitmax was founded out of the experiences with Mount gox that was one of the first really big well fraud cases out there it was like when you look back even bigger than FTX these days in comparison and Founders wanted to build something that this can never happen again on their platform so number one number two we have been the first cryptocurrency exchange out there who had a 100% verified user base we finished that end of 2020 where there was no regulation about that where it wasn't even really clear whether crypto will fall under this and we even not operating operating or operated at that time out of the jurisdictions and questions right so we stopped uh early on after the liquidity was there we don't have a market maker acting against our clients so we are I would say the most neutral most professional exchange but still we accept individuals to trade on our platform so I'm a little bit like proon I'm Pro compliance in terms of what it wants to achieve but I'm sometimes not against compliance but I think we overdo it in a way because it tries to solve a problem that needs to be solved elsewise because it tries to solve the problem of illegit actors in the space which isn't actually for compliance this is for law enforcement agencies and they need to know how it works so I'm completely for everything I said it's like of course kyc anti-money laundering Market supervision enforcement right reporting of course but then we need to adapt it again to how digital assets work in the way and it makes stuff easier and it's again the same if we just try to copy paste what I know from the banking space then it gets more complicated actually then easier and we all want to have legitimate markets we all want to have legitimate players in in the space so I'm Pro we are pro but we are sometimes like okay can we have a serious discussion about that please all right thank you very much and let's build also on what you said and it's linked with the history of your company as well it's Innovation because Innovation is there so how do you balance the need for Innovation to to to to to design a great value proposition and also the need for a certain stability particularly as far as institutional investors are concerned let's start with uh with you again please um difficult really really difficult I mean at bitmax we are more on the side of if if you draw this let's say Spectrum I don't think they are really antipodes but if if we try this we are more on the Innovation side historically and we come back to that or came back to that just recently in the last year and it is as you say the difficulty is working on what customers really need and you need to understand what you do so the question is always what is your business case what is the service you provide where do you want to be better than everyone else you might not be but you can get there where is it if you know that really really well all the other sides like compliance structure oversight you can deal with because you know what you work against it becomes difficult if players don't know what they actually do so my my my question to new entrance is always what do you really want to do and why do customers need it if they can answer the question let's say in a couple of sentences it doesn't need to be one but let's say in 2 minutes I'm like you will solve everything else if they don't know you will see you have a problem with compliance with structure oversight and all of that stuff too it's for me as easy as that and that we should never forget because sometimes in the tradire space that has been forgotten they not it's not there's no conspiracy it's no bad will it's just by adding adding adding people forget why they're here in the first place so on this point I totally agree with you uh from company point of view you should always focus on your core business and if innovation comes there or it makes really sense for you then go for it and uh otherwise yeah what what we also did at the beginning uh we see okay this is a good opportunity okay now now we switch to that one focus on that what you can really good and what it brings the main value to the customers which at the end of the day bring money which as the next step lets you live as a company and further innovate so so focus on this uh but also be open-minded in your field if things are coming up yeah which can somehow tackle you or on the other hand side which makes totally sense yeah what we always do is we check on the market okay for us it makes sense for a few others does it make sense but is somewhere out there who is who is willing to put a coin yeah in in it because also then also others see this Innovation see efficiency or or whatever it brings with it and and this is how we we actually approach it from a from a um five six-year-old company we cannot do things just because we think they are cool we also double check it within the market and also to your question how to come from an Innovative product to to a product which can be fully used is is perfectly in in in terms of functionality compliance Etc the product just can be fully compliant and perfect functionality when it's out there when it's when it's already used yeah this is still the truth yeah so so that's why it makes sense to rely on companies which have a product running which is life but new Innovations brings also always risks with it I mean that that's how it works at the end of the day uh and maybe this is also the reason why it takes sometimes for for banks to to start new Innovations also multiple points why why it take some time but yeah my point of innovation to final product all right um uh before um closing with um uh uh insights relating to the Future Let's Talk briefly about operational efficiency as well which is a core which is also at the core of your value proposition so um hurgen maybe with Trevor um what are your insights and your clients's insights relating to that okay so operational uh efficiency is is for us actually a key point so also banks that can start with manual processes to some some K kickoff projects make some trials make some MVPs or whatever you call it you can do it fully uh fully manual and it also makes sense because they can figure out how would we like to do some process how how shall we structure things does it actually make sense at the end of today or or was it just someone who told uh the board this is this is nice to have um the eff efficiency and and automatization of this whole process in the digital asset field will be key at the end of the day and this is what I mentioned at beginning currently in the digital asset field which is covering cryptocurrencies but this Market is is already good evolved but for digital Securities in the next year I really hope that there is coming the proof the digital security makes way more sense to do it on a classical way and this just can be done with efficiency but also the same is true for banks at the end of the day it also had has to bring them value somehow and just with MVPs these are r&t parts for them so they're just burning money on this so we have to bring it on the next level so that it is automatized and can be fully used in the mass adoption say yeah my my view on efficiency is generally that hasn't to do it's not specifically on digital assets either you want to be efficient or you need to be efficient what does it mean sometimes efficiency is a must have if you are inefficient you will be taken out of Market full stop so you will evolve just out of the will to survive an efficient model that's usually in true for the industrial space that's how competition works right this is why we have competition or we want to have competition to Spur that and ultimately if you're then efficient because you need to that will be good for your customers I think the digital asset space is a little bit still different it will come to that at some point in time but it's more it was founded again I always come back to why is there it was invented in a way to because they wanted to be efficient there were some people saying hey we can do that better how do you do that actually okay let's use blockchain technology it has some inherent inefficiencies right because the validation is not something that is straightforward but overall as system it's more efficient and it's again like if you keep that in mind and you proliferate that in your organization efficiency will come out of its own but it requires constant discussion and alignment of people that are involved in your projects if people don't understand it and don't and are not on the same page it won't work so I always ask myself when we do some new projects or new products or changes is that something that we need to do or that we want to do when we need to do it you drive it in a different way than if you want to do it if you want to do it you need to Spur even collaboration you need to make sure that people have the ability to line with each other and we are all on the same page voluntarily going into the same direction whereas if I need to I don't don't need that much of alignment it's rather like I give an order and people need to execute right um all right uh we could talk hours so looking ahead now how do you see generally the evolution of institutional involvement in the in the digital asset ecosystem and in particular some insight about its impact on infrastructure and on the value proposition you provide to your um clients and we will end with this so we've got three four minutes three minutes left to uh to cover this so I think um couple of things but short number one if I look at the intersection of digital assets and trfy we will see more digital assets and especially more in the light of digital Securities uh not so much crypto assets but it will take some time because the current players have difficulties adapting to the new infrastructure and we can argue I think it was in one of the panels before that why do they do it it's a matter of priorities and the market isn't big enough at the same time I believe that not so much in Europe not so much in Singapore as a Home Market not so much in the US we will see more of crypto evolving because two-thirds of the world population do not have access to the tradire system and and then we don't need to think that they will go into that so they will use the better alternative for them right which is crypto and web 3 and this is what I believe I think 2025 five will be interesting because we will see that we will see another layer of adoption and we will see more tradire players trying to get a foothold in in this space yeah but for the long term and then it's your game yeah thanks so so what we think so you're right on a global level yeah with with crypto is is actually almost everyone with with internet access at the end of the day has has access to crypto somehow uh totally makes sense from our vision I would say for let's say let's stay on Europe because we have quite quite some good adoption from the banking uh field but we really think everything what is now working within the crypto field should also be uh available with all the advantages in the digital security field so we're really pushing we as an infrastructure company as far as we can because then the banks has to kick it off and we strongly believe that Banks has a huge place still in in the future so so uh we do not think that be your own bank is the next thing in the next 5 years so we will see digital Securities evolving way more we will see this or hope that a lot of this financial classical industry will become digital So based on the blockchain because it brings efficiency with security reasons with uh uh speed and also with cost efficiency at the end of the day and I really hope that we are pushing this forward and that we are not talking anymore for for for just let's say with Bond oh is it a a blockchain based Bond or is it a classic Bond because nobody cares nowadays what system is now used yeah how does our payment really work which technology are we using and and now we we are making laws which says crypto registra and end of the day it is a reg is decentralized register so I really hope that we move on what brings advantages to the community or to the people and we should focus on this and I think that will bring the next few years all right thank you very much um hurgen G backer Trevor and Stefan lots bitm a round of applause for our expert thank you very much thank you thank you