The Convergence of Money: Building the Infrastructure Between Traditional and On-Chain Finance EBC12

Hello everyone and thank you for joining us today for what I hope will be a very interesting informal conversation. I am very pleased to welcome Savina Liu, Managing Director of KuCoin U, and Mattia Calboza, Head of Crypto Visa Europe. I am the Director of Regulatory Affairs at the Digital Assets Association DANA. And it's a great honor for me to moderate this conversation with both of you. I think we're going to talk about something very interesting that's becoming increasingly visible in the financial markets, namely the convergence between traditional finance and on-chain finance and on-chain finance.

When I think about this topic and remember events or conferences a few years ago, I didn't see such active participation, but now the situation has changed for the better. So it's great that we're discussing this. Perhaps I would like to start with you, given that you spent 14 years at the London Stock Exchange Group before moving into the digital asset ecosystem. So, you, like no one else, can tell us where you see the biggest differences between traditional financial market infrastructure and the infrastructure being built on-chain, and where they are starting to look more and more similar? I think they are becoming more and more similar.

Perhaps not by choice, but if these two areas are to merge, then for traditional finance we have already seen the potential of blockchain, and I think many here believe that this is what the future of the financial market will look like. It will be based on blockchain. So, as an infrastructure, I think financial players are already convinced of this today. Of course, whether they trade cryptocurrency or invest in it depends on the specifics of the TradFi players themselves. So, I think they're already moving towards understanding this technology, and certainly with AI being a major trend right now, everyone is exploring these possibilities.

And I think that in the near future, just like many years ago when we still had paper stocks, we went through dematerialization, the transition of financial infrastructure to the internet, and that's where we are today. So there is no difference. Very soon we will move into the world of blockchain. So, it's more of TradFi moving towards the digital asset space, whereas the so- called centralized or decentralized exchanges, that is, us, are more on the crypto industry side. They realize that despite the very active market over the past 10 years and the fact that Bitcoin has become an investment asset, the market capitalization and transaction volume in digital assets are still significantly smaller than traditional finance.

This is not a large enough market in terms of revenue to significantly influence the investment decisions of many large banks and institutions, so we really need to look at profitability over a 5-10 year perspective. So, from that perspective , in order for the digital asset world to become more recognized, of course, taking into account the regulation of MiCA, they are starting this path— starting this path— getting regulated getting regulated , learning how MiCA works, and starting to really target institutional players. This morning I participated in a panel discussion on tokenization, and of course everyone understands that tokenization is just the first step. Steps two , three, four and the entire surrounding market infrastructure, including secondary trading, clearing, settlement, custody, as well as regulatory maturity and real investor demand, are important. So, when all these elements become available to digital asset players, and anyone who wants to be regulated goes down this path, they will start to act in line with the mindset of traditional finance market participants.

Again , you can see that the custody discussion is already underway in the digital asset space. Discussions on liquidity are also already underway, but many questions remain regarding settlement finality, stablecoins, and interoperability between different networks. And this is truly necessary for the world of digital assets to become more acceptable and implemented by traditional finance. So I see this convergence happening. But, of course, what will the final product be?

We do n't know yet. These will be a very interesting 5-10 years. And I think each side will learn from each other. And I think we often say, you know, TradFi is centralized finance and DeFi is decentralized, and decentralization is better somehow. Actually no, I think there is a reason why TradFi has all these market features.

And I think that's something we should think about in the context of new blockchain technologies. Are these features still needed, or can they actually be improved? So, this is the interesting work that is starting now, that we are working on, particularly with the people in this room. Yes. Um, when we talk about the convergence of traditional finance and on-chain finance, I believe it is a two-way movement, where both TradFi and crypto- both TradFi and crypto- native players are entering each other's territory.

So I would like to explore this shift from the perspective of a TradFi player and, in particular, the payment infrastructure that stands between these two worlds. Mattia, I would like to hear from your perspective how the role of global payment networks is evolving as stablecoins, tokenized assets, and blockchain-based payments become more established? Very interesting, very interesting question. If we take a step back and look at how things have evolved in the last few years, we have seen crypto-native players enter the traditional payments market, and that is exactly what Visa has done by allowing some of these customers to use what we call a crypto card. But the most difficult work is still done by these providers, because despite the fact that we call it crypto cards, and despite the fact that the consumer may have the impression that he is spending his crypto money, on the backend everything works through traditional rails.

So when we do what we call settlement, which is when a fintech bank has to send money to Visa to complete a transaction, it still happens on fiat rails. This also brings us to another interesting point: as a payment infrastructure, we have made and implemented many innovations. So, when you buy coffee today, you swipe your card, get confirmation, and pick up the coffee, but the acquirer at that bank or restaurant won't get the money until tomorrow, or the system doesn't work on weekends. So, despite a large number of innovations, the basic infrastructure of money movement remains quite outdated. It is based on technology that has hardly changed in the last 30-40 years.

And so, yes, we've seen crypto and, let's say, blockchain players wanting to enter the more traditional finance market. And then we saw regulation saw regulation , which brought a lot of clarity. And then we saw stablecoins saw stablecoins , which were probably the last missing piece of infrastructure, because we didn't see merchants wanting to be paid in bitcoin. What is the value of getting money in something that can fluctuate significantly? And the evolution that we're seeing now as a payment infrastructure is that we want to offer some of our customers the ability to transfer money on this new network and on these new rails.

So we're not going to decide or tell them what to do, but we're meeting their demand. And if you think about it, our current forecast volume for so-called stablecoin payments, that is, the ability for customers to make payments in stablecoins, is expected to be 20 billion this year. So, this is starting to become a pretty significant number. And the thing is, we see, like you, a lot of banks launching their own stablecoins, right? There is the Kiva consortium, there is Revolut, which has made a lot of noise in the last couple of months, several banks in France.

And the question is , why are they building it? If you ask them, you will get different answers depending on who you talk to. And I think it really depends on the use cases and the problems you're trying to solve trying to solve . Some of them have a pretty clear vision of this as a protective mechanism for deposits. Some of them will tell you that they want to use it for calculations, say, internal treasury or investments.

And some might say they also see value in payments, where Visa acts as a payment infrastructure and payment provider. So our vision is to provide these capabilities to solve real problems, like being able to transfer money every day, instead of waiting for bank closing times or weekends. Because if you acquire today, you still get money on Monday for Friday, Saturday, and Sunday. So you're still losing a lot of liquidity. And these are exactly the problems we try to solve as Visa.

Yes. So, we look at this from the perspective of a traditional payment infrastructure integrating into the on-chain economy. But if you look at it from another angle, Sabino, I think KuCoin is also a great example of such an evolution. The parent company of KuCoin is a centralized exchange centralized exchange . Could you explain what KuCoin's vision is for the European market?

And, in particular, are payment services part of this vision? Yes, that's a very valid question. I think we've all come to a point where we wonder where we want to be in the next 10 years. This applies not only to my organization, but also to many so-called Web 3.0 and digital applications and platforms.

Where will they go in the next 10 years, right? Our journey began with a centralized exchange in Asia, but late last year we received our MiCA license and are preparing to launch operations in Europe. This will occur within the framework of MiCA's regulation as a digital asset broker. But in the future, we definitely want to obtain MiFID obtain MiFID , EMI, and other licenses necessary for working with financial instruments and payments. I believe this is an evolution that many players like us are heading towards.

So to your question So to your question , are payments part of this journey part of this journey — absolutely, yes. I think everyone here probably came from traditional finance and understands that day-to-day payments are a basic function of the job. But in reality, in the cryptosphere, the deposit and withdrawal mechanisms are still not the easiest for people when it comes to digital assets and their transition to fiat. This is still not the easiest task. Therefore, I see great demand from customers and huge potential for innovation in this area innovation in this area .

This is where KuCoin definitely wants to be. Regarding payment services, of course, Mathias mentioned crypto cards, and we have worked with Visa in this direction before. So, we have some developments, and when the time is right , we will launch them in Europe. And it really allows people who are already into digital assets to, you know, buy coffee or travel easily using their card. Just attach it, and the seller will receive fiat currency.

He won't even know that the original source was actually a cryptoasset or stablecoin. So this actually connects the crypto world and users with the usual everyday environment. This is really very exciting and it will certainly contribute to the wider adoption of digital assets. It will also help integration between traditional financial players and DeFi representatives. Thank you.

Yes, I think you both mentioned payments, and that's quite interesting because it makes the convergence between TradFi and on-chain finance very clear, because payments are one of the most basic financial transactions that people do every day. So Matthias, I would like to pass the floor to you. I think crypto cards are becoming a very interesting use case here. What trends do you see in the implementation of crypto cards? We see that crypto cards have been on the market for quite some time.

I would say that there is probably no crypto exchange that has not issued or is considering issuing a crypto card. I would say that the trend we are seeing right now is what you could call cards tied to stablecoins. You've probably seen recent ads from Western Union, Remitly, MoneyGram. Many of these money transfer services see value in allowing customers to store stablecoins, and if that's the case, why not link a card to them ? Some global payroll companies recently stated, “ recently stated, “ We want to allow freelancers to get paid in stablecoins.

” So, once you do that, why not add a card to that as well ? I am leading by the fact that there ? I am leading by the fact that there are certain use cases where integrating stablecoins solves a real need and brings benefits. And if that's the case, why not add the ability to spend these funds that customers can now hold around the world? So, I would say that this is a key trend that we will see going forward.

Thank you very much. Since we're running out of time, I'd like to ask you both a question: What do you see yourself doing in five years? What part of the financial infrastructure do you think will undergo the biggest changes in five years as a result of this convergence? For me, one example that I always give is: we were all in this room sending emails today, and none of us thought about a " thought about a " cross-border" letter or a "cross-border" message. You simply send a message and someone on the other end receives it.

Meanwhile, money is still limited to cross-border, domestic or international payments. Just as the internet has increased efficiency—now it's not a letter that takes seven days to travel around the world, but instant communication. The potential of blockchain will change how we perceive or understand the movement of global money. So I think this will be a significant change in the next few years. I think there will be a lot of trust from the public, as well as financial players, in the world of digital assets in the coming years.

And I think the industry is becoming more and more mature and more embedded in people's everyday lives. I think we will get a lot more users. And the issue of trust, of course, will not go away . That is, there are still people who have questions and doubts, but I believe that people will increasingly accept crypto as a part of their lives. Yes, thank you both very much.

I think the main conclusion of our conversation is that traditional finance and on-chain finance do not replace, but complement each other, forming an ecosystem that is more efficient and accessible to users. Thank you for your opinion, and thank you to everyone who listened to us. Thank you. Thank you. Perfectly.