Crypto tutional

foreign [Music] I'm the executive director for the Middle East Venture Capital Association and at our panel today we're going to be getting different perceptions from the different stakeholders within the crypto space uh gentlemen if I could ask you to just take a minute and introduce yourselves please sure good morning everyone I'm Marco masuko I'm a managing director at the first Abu Dhabi Bank the largest banking UAE and one of the leading banks in the Middle East where I run our financial institution sales business [Music] my interest in in this space is Duo on one end I see the potential of blockchain to become an integral part of the infrastructure underlying financial markets one day we're not clearly there yet but I can tell you that after 20 years in markets I certainly see the appeal of a technology that allows better transparency easier settlements better collateral management and therefore batteries management that's one side on the other end running a client business in this part of the world we cover most institutional investors family offices cios and certainly digital assets are on their map I've been for some time and there's a perspective I'd like to bring to the panel today hi I'm Brett tej Paul from coinbase by way of introduction I spent 10 years at JP Morgan and 17 years at Barclays before joining coinbase two and a half years ago I mentioned that because during these turbulent times I think it's important to have someone who understands what regulated financial services are about and what's good and what's not accepted I'm here to represent the institutional business together with Greg Tucson who runs product we're responsible for a business that represents 55 of all assets on platform and 70 of all the trading volume coinbase is probably best known for the fact that it's a its services retail but the institutional business is a is a small but growing part of that picture at coinbase we're publicly listed NASDAQ company we've got a 100 million verified users and what separates us from most others is that early in in our founding Brian Armstrong opted in to be regulated and so when I think about what we do well we do simple things well so the first of which is safeguarding assets um we operate at scale as a qualified custodian under U.S law two we give best execution and price Discovery without conflicts so we we don't have we have an absence of conflicts is probably the best way to say it and three uh we're transparent we're transparent with how we segregate assets we're transparent with our financials we just reported our Q3 results so you can have a look there but that's not really what separates us in the institutional business there's really the quality of who our clients are so I'm delighted to be on stage with with everyone here in particular BlackRock the world's largest asset manager who we announced a partnership with this summer also Partnerships with Google two more fun facts by my estimation the largest 100 hedge funds in the world about one out of four a quarter a quarter of them have activated in crypto of those that have activated all of them are on coinbase's platform so I'll end this by saying it's really about the quality of our institutional clients that separates us no matter if you're a big tech company a sovereign wealth fund a public corporate a private corporate a hedge fund a systematic Trader a crypto first firm you've chosen coinbase uh good afternoon everybody my name is Alexander Lipton I'm a global head of research and development at the Abu Dhabi investment Authority right here not far from this building um by way of my background I start I got a PhD in po mathematics and for a short period of time I worked in space exploration and then in term a nuclear fusion at MIT and places like that I was a professor at the University of Illinois and then eventually I switched to Investment Banking and became a Quant so I started at Bank of America I'm sorry I started the Bankers Trust and then moved around the food chain so to speak and ended up as a co-head of the global quantitative group at Bank of America after that I co-founded my own company which is called Sila and still going strong in Portland Oregon and in the end of 2021 I joined idea in this current capacity and I have a very very variety of interest but crypto space and more specifically distributed Ledger technology is one of the things which I'm very interested in I wrote a book about that and with some colleagues at the idea we are actively exploring how this technology can change the way things are done on the world stage so that that's why I'm here in this panel today thank you great and I'm Robbie mitchnick I won't even bother with my bio after Professor Lipton uh that's that's quite a career um I'm the head of digital assets at BlackRock uh most people know BlackRock is the world's largest asset manager but we are also the provider of the Aladdin investment management technology system which is used by the worlds many of the world's largest buy-side firms including uh of course BlackRock so I'm our head of digital assets that means our team focuses across the spectrum of this technology area and asset class everything from permission blockchain to tokenize financial assets to stable coins and of course crypto thank you Marco I just want to start with you from the perspective of Fab how do Mena institutions think about entering new asset classes and um is there importance for local presence great question um well the broadening of the range of assets inverse to look at is nothing new I'm dating myself a little here but it feels like yesterday that we're looking at how to add the commodities for instance to the picture and Brett would relate to that because it was running that business at Barclays when I was at Mary Lynch and the quiche at the time was how to get exposures for the investors without the associated issues with the custody of a real real asset which are topics that now we find ourselves again uh discussing discussing today uh in this Brave new digital space um so that that's not new when it comes to this part of the world and specifically you has done a tremendous job over the past a couple of years and really become becoming the place to be for anyone active in this uh in this space but I can tell you and I've been here for the last decade that investors have been looking at digital assets way before that a small anecdote I came into contact for the first time with with Bitcoin back in 2015 when a miner was pitching a prominent family office here in uh here in Abu Dhabi a great Insight uh that that's where I started learning um about blockchain I probably understood alphabet and even worse uh Bitcoin at the time was 400 and I did not necessarily follow up on uh on the inter but that I only have myself to blame for that um but that tells you that institutional investors in the parts of the world that have been looking at this for for quite some time uh fast forward to today uh what we notice is uh a change in how they look at the asset class is not anymore a foreign object um from which uncorrelated exceptional returns are are expected is now seen using a definition that is not mine but uh that I sort of embrace as a liquid venture capital is uh leaving a Bitcoin aside but the other projects seem to be seems to share many features of venture capital such as you know the lack for many of cash flows which leads to more difficult uh the challenges of evaluation there are Ultra long duration assets that therefore are affected as we have seen by the changes in the interest rate environment we're going uh where we're going through uh but they're liquid and their pros and cons with it uh obviously the ease of uh uh investing and exiting as appreciate of course it also brought probably more uh more volatility so I find that the investors we talked to have this now clearly mapped where disaster class could sit probably next to uh Tech growth equity and Venture Capital um and highly correlated as a as uh as we've seen um also we noticed that there is a better understanding of the various ways to possibly approach this space intake exposure not just to release the tokens but also through private Equity or through some of the non-directional strategies that obviously in this markets have done uh very well and um because that's the that's what we're seeing you're asking me about a local presence well I think um certainly it's uh it's relevant to be to be here and uh given the platform that has been made available uh to all the business active in this space I would say it's a shame not to be uh here so we are great ambassador of this place both in terms of uh doing business but also from a personal life perspective I I couldn't agree with you more uh Brett can you tell us the importance of institutional sure so let me start big picture with the fact that Brian founded coinbase with the mission of bringing economic freedom to the world it's important because it binds the whole firm together our near-term goal is to create a billion users in crypto we're we're on our way internationally this is a really important region we've seen crypto adoption Trends in Mina surpassing those of of Elsewhere I think coinbase said president is heavily indexed to the U.S market and is looking to expand I think internationally I'll never forget actually the opening of this session where his Excellency invited us to the capital of capital I mean what what a way to open a conference and so when I think about the importance of of finding helping Capital find its way into crypto what better place than than here to focus on when I think about a broad-based crypto adoption includes not just retail participation but to include the broader participation of institutions of all types so whether it be Challenger Banks payment platforms micropayments peer-to-peer the whole crypto native set but also Asset Management pension endowment Sovereign Sovereign wealth funds Etc all of whom by the way are active on our platform so when I think about um the accomplishing the mission which is really what we're here to do is the combination of retail scaling plus institutional Capital being deployed in this space what I'm excited about is that when I first joined coinbase there seemed to be institutional interest was really fixated on onboarding to the platform and being able to deploy capital in a speculative fashion to try and earn the rate of return so there's quite a lot of people who just wanted to buy Bitcoin or read what's happened in the past year to 18 months and as evidenced by some of the um some of the things you saw on the entrance on the way in is the exploration of use cases Beyond just putting Capital At Risk to earn a return so I would reference the the use of stablecoin in particular and so there's a whole um swath of use cases Beyond speculative risk you know and capital risk that are driving institutional exploration so if I were to think about why some of the largest asset managers in the world and Banks and traditional participants are thinking about their crypto strategy it's because they believe in the transformative power the disruptive power of crypto to financial services so that's how I sort of encapsulate institutions the importance the mission critical importance of institutional Capital finding its way into the space and you talked about the growth in Mina Brett where do you see the majority of growth coming from over the next five years well growth internationally is is important for coinbase do you specific to Mina I'm saying you had referred to mina but where do you see the majority of growth or what part of the world do you see the majority of growth coming in the next five years um I feel like the U.S is a core Market it's going to continue to build but what's interesting is most of the corporations of the institutions again Sovereign Sovereign wealth asset managers pensions of all types corporates of all type everyone's a multinational corporation right and and so yes we'll have targeted deployments of retail operations elsewhere but in a similar way to financial services they're a core Operating Center centers include including here and so with institutional adoption I think we'll you'll have um just massive growth my guess is this region is poised to be actually a leader in the space on adoption as evidence for what I've seen it what's different about what I see here is there's a lot of geographies countries that are giving a little bit of like hey we want to you know be there too what I sense in my few days here is that there there's a lot this is an execution focused place where there's real blockchain cases being being put to use here with with real intent and with urgency and so I would put this region I think at the at the top of my expectation for adoption fantastic thank you Alex um you represent one of the largest Sovereign wealth funds in the world can you tell us how Sovereign wealth funds are going to be incorporating digital assets into their investment pieces thank you Yasmin for this very interesting question I want to make clear that I don't want to represent any of the views as attributable to ideas so it would be more like my own thinking about how as Sovereign has to address the issues associated with blockchain technology distributed ledgers cryptos and things like that so from my perspective there are several areas where there's large institutional holders of assets should be thinking so one is definitely a central bank digital currencies and as a substitute for those stable coins that's one area where I'm personally extremely excited it also makes sense for smaller countries to make sure that they are really mustering the this technology because otherwise there is a real danger that the old currencies would be superseded by digitized version of much larger currency this is particularly acute here in this area because we have ginormous neighbors to the East India and China and China in particular is a very energetic not to say aggressive by way of developing its own digital Yuan and in conjunction with the belt and Road initiative it can actually result in Yuan kind of flooding the entire part of the world so which might or might not be desirable so that is a very big issue the other even bigger issue in many respects is tokenization of a liquid assets in my mind a sovereign wealth fund by its very nature should be more interested in the liquid assets because everybody can access liquid assets by definition and then tokenization of those assets can actually bring in much needed liquidity and participation of the population as a whole in this type of activities and finally of course you know this mastering of this Technologies can also bring massive benefits as far as an organization itself is concerned the way it conducts trading the way it conducts its own operations and things like that I haven't said that I started to think lately that perhaps this blockchain technology in the form of unpermission public blockchain has not lived to its promise in a very specific way not by way of kind of breaking up and things like that the layer 1 protocols like Bitcoin have not been breached despite of course gazillion of Trials it's more like there is no decentralized access to to decentralized protocols and that is a really really serious issue so I can see two possibilities in this regard either really proliferation of decentralized Finance in the form of automated Market making facilities or else design of a much simpler blockchains like binance blockchain for example without endorsing or uh disparaging it just by saying that it's a much simpler protocol with very few validation nodes and things like that and that is probably what is needed to actually see Central Bank digital currencies especially cross-border applications which is very very important for this part of the world given how many expats live here and send the money to um you know any anywhere from the Philippines to India to Bangladesh and other places like that so that's where I see the real bang for the buck so in other words uh Central Bank digital currency tokenization and real application for the financial services I would personally also very much like to see uh physical banknotes transformed into a hybrid physical slash digital banknotes I can figure out how to do it one way from physical to digital I'm still struggling a little bit for with digital to physical so that can this that's a subject of an interesting research to be done and has not been done yet finally to finish I would say that application of nfts especially hybrid nfts to tracking supply chain to tracking illiquid Investments and things of that nature also seem to be very very promising so to finish my statement I would say we need a simple layer one protocol which is accessible in a decentralized fashion and cheap enough to maintain Central Bank digital currency and transaction in the tune of at least a hundred thousand a second so here I would stop I think there's promises are big delivery remains to be seen thank you I don't think there's a better person to run that research than you [Applause] taking a hit this past year can you tell us if his downturns affected the institutional demand for your clients well I think um you know BlackRock takes a long-term view of these things um you know we're focused on the long-term disruptive potential here that's why you know we weren't rushing in in 2017 in the in the third crypto cycle we weren't trying to be a first mover I think that's true for a lot of our clients as well um they're taking a Long View and a measured approach what I do think you're starting to see is some reconsideration of questions like just how many crypto assets need to exist in the first place how many have real economic usefulness how many uh different types of you know projects and protocols and and companies and what's the the breadth of Adventures that investors are willing to participate in in this space which has brought the thinking back to what I think is going to be a little bit narrower Focus for a lot of Institutions going forward I mean there's a lot of Institutions continue to Grapple with the question of things like you know how they might allocate you know to Bitcoin in particular I think that continues here but what's often underestimated on that front is outside of hedge funds institutions of all other Stripes whether they be asset managers or Banks or sovereigns endowments Pension funds have very different needs in terms of access to crypto than hedge funds do hedge funds of course being the the early adopters in the institutional space and so that means solving things like the fact it's a 24 7 365 Market that settles in real time and absent a bespoke solution actually requires pre-funding connecting to fragmented liquidity venues is a real challenge navigating how custody Works between hot wallets and cold wallets and getting familiar with a a novel ecosystem of providers all those things are real hurdles in many cases they've caused institutions to divert their capital and attention away from direct exposure which is infeasible to some alternative exposure Vehicles whether they be you know direct corporates or what else sometimes with bad outcomes but what we're starting to see is slowly but surely those frictions breaking down so if you think about the the two you know things that that BlackRock did over the summer that got a lot of press attention but one was Aladdin support a decision to support crypto and Aladdin by integrating with coinbase to make it basically just like any other asset class in Aladdin um and the second being our Bitcoin uh exposure vehicle which is again just meant to solve those frictions associated with access by being able to provide a turnkey uh efficient exposure structure so that demand is it continues to be the Genesis of what we do in this space it's fantastic thank you you all made some interesting points and I'm excited to see what unfolds in this space in the next few months thank you to the audience for taking your time and everybody have a wonderful day thank you