Fireside Chat: Peter Smith - TOKEN2049 London 2022

hello everyone uh thank you for joining us uh at 10 o'clock on a Thursday when there are tube strikes Galore um really appreciate you turning up and I'm here to chat with Peter Smith from blockchain.com um I'm sure you you all recognize as one of the sort of really big crypto companies Peter how are you doing you know I'm uh I'm doing pretty well obviously it's a pretty volatile week in the crypto Market um but uh you know not a not a directly bad week for us um so that's nice I think you know we're dealing with a lot of sort of very Dynamic market conditions and a fair amount of you know anticipation of contagion across the space so there's a whole operational element that goes into that but you know we have a great team and I haven't had to be that involved in it uh I think most of my workload this week has been being on the phone with reporters investors uh and so on and so forth and so you know that's that's taken some time but otherwise it's been a pretty standard week and in terms of the crypto contagion I'd I'd be curious to get your thoughts on how far does that kind of extend um when the three arrows Capital collapse happened you know I know blockchain.com had some exposure to that in terms of the the loans that you had out the three arrows Capital do you have any exposure to the situation happening around FTX at the moment yeah so um we're fortunate that we have you know old-fashioned stuff like audit and risk committees and uh were regulated by three different regulatory bodies around the world and so we have pretty defined wrist limits um and so we're capable of absorbing you know whatever hits the market I think the challenge you know for US Post sort of the last contagion was do we want to you know do we want to be in the lending sector at this moment in time and the answer for us on that was no uh so fortunately for us you know we didn't have any exposure on a credit basis to anyone impacted by this Almeida or counterparties that dealt with Almeda or FTX and so it's not a very stressful time for us I think that you know the challenge for the whole Space when you think about Contagion is that FTX was a an Alameda where extremely active investors in the space and so it's everything from little things like you know uh that trading counter bargue do you have you know another OTC provider structured desk how much money did they have deposited on FTX right does that impact their cash stability position and then it's sort of secondary impacts that I think will take a long time to work their way through the system you know like you've read about a lot of rounds at FTX or Almeda Ventures led into different companies I think something the market doesn't totally understand is that a lot of times those rounds were trenched out so if there was like a 300 million dollar investment you know it would be 50 or 100 today and then options to do another 200 in the future and so the market reads that as you know this project or company raised 300 million that might have only been 50 to 100 right so there's going to be some of that stuff that's going to take time to flow through the sector as well um and I think generally it's going to take you know probably two weeks maybe three weeks for anything really bad to float to the service and then it's probably going to take you know three to six months for the stuff I just described in the second bucket to kind of work its way up to the top of the uh the Water and how deep does the downturn go and how sort of far does the impact spread you know it doesn't seem like it's impacted the sort of wider financial markets and wider economy yet but is there a point where we do get to that being a possibility yeah so you know I've I've been doing crypto for a very long time and I've been here for a lot of exchange collapses um the most scary of course is Mount gox um who here had an account on Mel Cox raise your hand wow see we're getting really down to the bottom now and uh they had 87 percent of all trading volume in the world and 25 plus of all the Bitcoin in existence at the time and that was really bad you know on the flip side FTX was a relatively small venue they weren't a number one in any category and they had you know lifetime 5 million account registrations which is you know a slow quarter for a blockchain.com or a coinbase and then from an active user's perspective they had a couple hundred thousand active users and so I actually think that the customer impact of FTX will be order of magnitude similar to Celsius which had more customers but arguably smaller retail customers I do think that FTX had a very large public like image um I think that's partly because journalists love them investors loved them but I'm not sure that they there's any sort of fundamental Market structure impact that FDX is going to you know the bankruptcy is going to have on the market itself um so I I'm not kind of expecting that this you know nukes the market or fundamentally changes the market structure the reality there is like you know there's two kings of crypto you know one is in the East and his name's CZ and the other one's in the West and his name's Ryan and that was true six months ago and it's very true today and in this Game of Thrones of crypto leaders vying for different sort of parts of the business I mean certainly right now it looks like some of these valuations that are coming down and you know there's a chance of sort of You Know M A opportunities and and land grabs in in certain parts of the world um what are you looking for at the moment when it comes to blockchain.com are you thinking that this is a time to sort of start looking for Acquisitions and and could you be the king of crypto in Europe I uh I don't want to be the king of anything um you know for me crypto and working on it for this long was about a really simple thing which was human economic freedom I wanted to build products that let people directly interact with crypto hold their crypto on chain and really increase human economic freedom in the world and you know we've been able to do that um there's millions of people using the product to do exactly that right now which is really cool and I think for us in this market we're not very M A focused we are very heads down getting ready for the next cycle so scaling and improving our systems refining our products adding support for more assets and more networks natively so that you can use on-chain Finance across more networks in our app and that's really the important mission for us I think that you know having watched a lot of these Cycles come and go I'm also very aware that the darkest part of the night is usually before the dawn and the crypto Gods always demand a great sacrifice uh before you can move on and uh you know very I'm very fortunate and happy that I've never been the great sacrifice but that's partly because I think we run a very boring business like ultimately we just help people buy some crypto and do crypto stuff on chain and we do that in 200 countries for tens of millions of customers but we're not the bleeding edge of anything we are like a utility we are a market access utility and it's boring and that's kind of awesome and we're the same on the institutional side like we just we do boring stuff and so you know we're never the hottest company in the top of the cycle and we're sort of like always here for you in the bottom when things get dark and people despair and and sort of the one thing I would say to folks in the room is like you know if you haven't moved your money on chain it's a good time to do that like the whole not your keys not your crypto thing it's real you should directly have your crypto it's the whole point of crypto and as someone who runs a product where you can store your crypto with us or you can store your crypto with your own keys I still encourage people to store with their own keys because I think it's the number one way to be successful in crypto and it's the thing that makes crypto really unique if you just want to trade around risk assets there's other risk assets that you can trade in the world but if you really want to do crypto like hold your money and hold it with your own keys and speaking of markets obviously there's been a lot of volatility uh this week's events alone has kind of driven the price of Bitcoin and various other digital assets right right down um but where do you sort of see the market going from here is there a you know a time when the you know the ice Falls and the the sort of crypto winter the worst of it will eventually be over what's your horizon um going into kind of the new year and Beyond there's a lot of great traders in crypto and great investors in crypto I'm not one of them uh if I was I probably wouldn't be running a boring operating business so I don't know you know someday um I will say that you know when I when I got involved in crypto the price was a lot lower than it is today and it's gone down a lot lower than it is today and it's gone up a lot higher than it is today um but it's really a long Horizon space like you have to be really capable of tolerating the volatility and you have to really make sure that you're not oversized like you have to manage your risk and be very purposeful and very steady about how you invest in the crypto Market because it is extremely volatile and the companies are obviously exposed to that you know the fluctuations in in prices so when it comes to a business like blockchain.

com and and there was a report uh in Bloomberg that blockchain.com was seeking additional funding at a reduced valuation I think it was something like in the range of three billion to 4 billion can you confirm if those rumors are true are you seeking a Down Round at the moment uh no so I really don't know how journalism works but um it was kind of funny because uh we got the call from the reporter and they were like we hear you signed a Sherman sheet between three and four billion and I was like that sounds really cool um but I don't know about One my CFO doesn't know about One my board doesn't know about one so if whoever has this term she could send it my way that'd be like great um you know I didn't get it still waiting so you know I for me I think I'm a little less attached to you know sort of what is up what is down like I think if we raise Capital today it would for sure be at a lesser price than what we raised out in 2021 like let's let's be intellectually honest anything you invested in in 2021 except maybe uh art is down today like if the crypto market cap goes down by 80 all of the private companies are going to be worth a lot less money if meta goes down by 80 in a year because risk assets are off your private Tech startup is worth less money like this is just how the world works so yeah if we raise money today it would definitely be a Down Round because the entire world is down right and we are not an aberration to that Trend um but no we haven't we haven't raised any money lately so you know Whoever has that term sheet sent in my way yeah if you're out there then then please do uh uh send that towards Peter um Peter I want to just uh move on to kind of the the regulatory picture here because obviously after ftx's um is close to collapse May collapse soon um I mean what does what is the impact on the industry and kind of trust in the industry is now the time when Regulators will sort of you know clamp down really hard probably um I think that you know what you're what I hope you see Regulators do is get away from this distraction that you see in a lot of crypto setups where there's one regulated entity and then there's like another entity that's not regulated so you know one of the interesting things about the FTX Saga is you know FTX does have a regulated entity it's FTX us and that entity has been totally fine like you can still go withdraw from there today it's the offshore entity The unregulated Entity that is problematic and one of the most frustrating Parts in crypto and being a crypto entrepreneur is like if all your entities are regulated you can't do some of the spicy unregulated stuff right so as someone who has only regulated entities I'm hoping that we start to push into a framework where you know it's very clear what is and is not regulated and where customers appreciate that but we've seen this kind of happen again and again and again in you know two years from now we'll be back in the greed phase of the market and and we'll all be making the you know people same similar mistakes will be made history kind of Rhymes and repeats one thing before we run out of time is that actually you on the slide [Laughter] I believe so yeah really last time I checked it's a bit of an old photo but yeah yeah I think it's you're better with hair I'm glad you I'm glad you agree with my wife on that matter uh yeah just just before we do go I mean you know 20 seconds left uh I just wanted to ask you about the the UK regulatory picture because we've got a new government now obviously it's a turbulent time in terms of the kind of political situation here in the UK but what is your big ask from Rishi sunak ital when it comes to crypto um you know I think that Rishi sinach has historically been pretty engaged with the industry um and very smart on it uh and so I think that I'm hoping it becomes a priority for his government to sort of figure out how we're going to regulate crypto in the UK but also more importantly how we're going to build a really vibrant crypto industry here in the UK um and you know we would really look forward to and welcome that engagement and so I'm hoping that the UK government stays stable long enough to to let that happen I suppose we'll have to monitor that very closely and see exactly how that develops uh but Peter thank you very much for taking the time and thanks everyone for for watching thank you [Applause]