Consumer Protection & Market Integrity - TOKEN2049 Singapore 2022

hi everyone thank you so much for joining us today we have a very exciting panel my name is Alyssa ostrov I'm the chief of staff at crypto compare we provide Market data and our UK registered Benchmark administrator um in the interest of time we've got a lot to get through on a very important topic consumer protection and Market Integrity I'd like to invite each of our panelists to briefly introduce themselves their firms and what they do with respect to digital assets uh thanks Alyssa my name is Bobby zagata I'm the CEO for the Americas for bitstamp and also uh Global Chief commercial officer really excited to be here uh prior to bitstamp I was at uh another cryptocurrency exchange for three years as Chief commercial officer and before that CME Group uh a large derivatives Marketplace on the traditional Finance side of things oh hi I'm the chief Intec officer at the Mas which is a central bank and regulator here hi my name is Deepak Khanna I look after wealth and trading for revolute in Singapore so what does revenue do in simple terms we are making a financial super app at a global scale which means you don't have to have multiple apps one for FX one for remittance one for cryptocurrency uh specifically in Singapore we went live with cryptocurrency services in August this year which means you can buy and sell them on our platform thank you so much well I'd like to kick off by defining this topic in a bit more detail consumer protection is obviously a bit of a catch-all term particularly as it pertains to digital assets so when we talk about consumer protection in crypto what exactly are we trying to protect consumers from thank you okay well uh as a regulator I think uh you know those people in a out there one thing they are completely not aware is is somebody protecting their the dreams being then sold there I think that's a huge huge risk for us because we don't know the people who are interacting there do understand what consumer protection means and uh uh well and I think that the challenge for retail investors especially uh has been last few months or a year now that when the market went all the way around there's a huge huge huge and request and and emails and I get so many messages that this company has done something this kind of Promise something do something about it I think the consumer awareness is a big challenge for us now I think we go to repeatedly and uh let the market know this asset class is not suitable for retail investors because they just don't understand they're just betting on you look at you go around this whole Booth look at what the advertisement says none of them have have do talk about the risk then never talk about risk that there's a risk in investing in this asset class which is the sad part to this whole industry because what the future holds for the industry is something we all think going to change a lot in a positive way but the market uh influences are not in the same direction so our first Focus has been definitely uh increased the consumer access to this asset class from a friction perspective we have put a lot of restrictions around advertisements you have put a lot of restrictions around uh around uh the the the process by which they can access this asset class same time from a broader regulatory standpoint we are looking at five areas of risk first we are looking at is this asset class will facilitate money laundering or terrorism financing that's the first regulation which all of the crypto license player have to deal with the second one is around because it is a digital asset there's a there's a huge exposure to cyber risk and hacks last week we had 160 million dollar hack on the on a D5 Pro on a smart contract still that's uh that's going on and all of this asset class getting stored in different contracts are exposed to those risks the third element oh see the third element uh of risk is around what I call as written expanding the friction with the investors here we want to deliberately introduce friction because that forces invested to think twice before they invest in the asset class the fourth one uh uh where we are looking at uh the market stability the lunar Terra crash it really really got many Regulators to look at last systemic collapse of people accessing such platform and can and there's a need to look at those algorithms behind the stable coin the the asset which backs this stable coins whether a Fiat or non-fat what's the right way to regulate them lastly I think as the market if Market survives and continue to expand uh there'll be larger Financial stability related risk we are going to look at I think that's broadly where consumer protection in some form and shape will come but I think what people will feel more and more is that there's more friction to access this asset class thank you so much you touched on a lot of great points which I'd like to Deep dive into as we continue I guess first I'd ask Deepak Bobby from the industry standpoint do you have any views on what the end goal of consumer protection might look like I'll jump in uh thanks Alyssa yeah I mean uh as as sop mentioned you know when people participate they should have some reasonable assurance that you know they're dealing with something that has a level of trust and integrity to it but there are a lot of challenges so in many parts of the world uh the the first challenge is the regulations are not clear and I have to commend sap and the Mas for being a leading voice in this region with with kind of more certainty and Clarity than for instance in the U.S where where I'm domiciled where we have a lot of uncertainty and a lot of kind of competing regulatory agendas so that's the first thing that we have to get right is we've got to get the rules clear because companies like bitstamp revolute others we just want to do it right we just want to you know make it safe and assured for all types of customers but when the rules aren't clear it's it can be a challenge and then the other challenge I'll throw out is is just the pace of innovation as you all know in this space you know pound for pound there's more innovation happening than any other area of technology or the world so it's a tough challenge I think for Regulators to you know jump on board that speeding train and and match their rule making or their lawmaking uh in the case of of um you know law making bodies to that pace of change yeah I think some great points here uh from my perspective which is reviewed being a crypto service provider I can break it up into three or four parts when it comes to customer safeguards or protection the first one is the entity a client is dealing with to Avail crypto Services uh is it regulated is it licensed and if it is there are chances that the risk management framework has certain minimum standards the technology it is from fraud anti-million ordering as opinion was saying that a certain minimum standards from a regulatory perspective and those are very important because in many countries crypto services are not even regulated and people may be dealing with unregulated parties there one example I can give is uh like in review we don't put all the tokens on our platform we do risk for them of course this doesn't take away the due diligence End customer has to put in but that's some integration that we can bring in the second is the token itself and the disclosures the token can bring in the Terra case showed us that in terms of disclosure in terms of the underlying uh preserves those need to be worked upon and that means the regulatory support on that the third area I would say is the market Integrity uh are there rules from protecting from Market abuse or manipulation lastly I think is the customer himself or herself their behavior their knowledge crypto is a risky volatile asset class it may not be suitable for everyone and how does a client get the knowledge if they want to get into this space thank you so much so I I want to zoom in to this point about sort of how regulation has evolved um bit stamp has been running I think since 2011 the longest running crypto exchange um and you guys started at a at a period where there was literally no regulation um so I was wondering Bobby if you could comment on how you've evolved as the regulatory Clarity within the industry has evolved sure sure thanks so um yeah we have been at this for a long time now uh founded in 2011 but thankfully uh this is a DNA level issue for bitstamp we've always been wanting to be on the Forefront of this topic and it's not just because we love working with Regulators it's because we're we're genuinely interested in in Broad adoption of this important technology and in order for that to happen it requires Common Sense regulation so you know I think a lot of our peers in the space drag their feet complain or avoid regulation I would say to them they're not serious about bringing this technology appropriately to the world and to society so at bitstamp we've evolved by having that as as our core value I guess and then secondly and more directly we've had to invest heavily in it right so today at bit stamp over a third of our employees either directly or indirectly are focused on Regulatory Compliance in the many jurisdictions that we operate in it's a major investment so another outcome we're interested in is a Level Playing Field right which doesn't exactly exist today you know I was looking at the diet it's a future belongs to the Fearless that exactly what we are worried about that exactly what it's very about because consumers go there and look at that that tagline and it's a serious is a serious issue for us because we've got to ensure there are the certain discipline where you need to provide in this space so that consumers are not misled to build that I'm going to invest because I'm fearless well that's uh that's a very very wrong way to look at things just just to respond to that uh sometimes and this is I think the problem in the industry back to the and I was speaking there in the milkins before that the that the the origin of Bitcoin was to solve web payment transfer problem I can bet if you go around this room very few people understand why Bitcoin was created but they're not betting on that particular use case they're betting on something else so for us we got to give bring back the purpose of this coins purpose of this asset class because this tokenization of assets I have something be built under under their own construct a real asset now if we are going in that new Direction and the future is web 3.0 where the ownership of the asset is represented on a piece of token Let It Be but we're going to ensure that the people who participate in this in this market do understand that there's a real asset Behind These tokens and the currencies which will be used to trade this asset also has to have some reliability uh to me there are this four asset class in the currency side privately should currencies stable coins Central Bank you should this two currencies and uh is evolving now Commercial Bank used to digital currency if all we require a new form of money to buy this new asset class or new as ownership of the asset class then I think that's the market that's where the market should go and that there's nothing wrong in that what we don't want that people should forget the very existence of the token and have this kind of tagline so from the Mis perspective how do you find that happy medium between promoting Innovation within this asset class but also ensuring that the regulatory protections are in place to make sure that growth happens in a safe and regulated way we have we continue to put public experiments in this space we have just announced like a project guardian we're looking at how to build a safe and sound protocols for the defy side we have put some of our three years back we put we put project ubin which talks about the Central Bank digital currencies we're also looking at use cases by which you can ask tokenize real economy assets with nothing wrong in that we are going to push our resources our support to the market where there's a real Innovation and and there's and I think that Trend will continue will continue to believe that that there's a real need for Market infrastructure beat exchanges or Billet wallet players or custody Services because these are essential Market infrastructure in a way they will also come back to Market Integrity because if you have an exchange which lists this token with the proper disclose and high standard of listing it helps the market to be much more trusted if you have a very trusted custody Services it helps people to believe that this tokens are protected so having this trusted Market infrastructure would be also second layer of protection for from our perspective as we support this second this new token based economy so I think this is how this uh indicators which comes from Regulators through projects through regulatory directives and through public consultation you will see some more public consultation coming from Mas which is looking out to the industry to tell us how you want to be regulated and what are the key issues you are dealing with so then a bit of this partnership which will help us to move forward thank you for that as as we've touched on there are a lot of of recent events that really touch on consumer protection issues the collapse of three areas Capital uh tornado cash sanctions I'd like to talk a little bit about what happened with Terra Luna uh and how we think we could approach stable coins obviously leading Regulators are saying that they're really requiring more urgent regulation than perhaps other areas and I was wondering if any of the panelists had any comments there yeah uh I mean if you look at the stable coins uh in my mind it forms about 15 to 20 of the overall cryptocurrency market capitalization and that's a significant chunk per se uh and they have a great use case in terms of remittance low cost quick remittance Solutions can come in from there so definitely there is a call for regulation there being in the form of the reserve requirements uh be it in the form of let's say the disclosures uh beat in the form of the spectrum that we see from Terra on one side and probably usdc on the other side how do we sort of have a more synchronized across different countries and of course Ms is leading out of the space there uh so most of in terms of Regulation but also sanitization because blockchain is decentralized and borderless and it has to be across multiple countries whatever regulation comes in yeah I totally agree the only thing I would add is um you know stable coins play such a unique role as a deep Ox point and they create so much efficiency or they reduce frictions in a lot of a lot of places they've now become you know just a huge market cap kind of part of the ecosystem and for that reason alone you need to have some Assurance behind it some regulation so that people don't have to add another layer of risk on top of the risk that they're trying to get at to be begin with I think the the crisis did help us to look at this more closely of the three uh of the out of the four uh digital currencies I'm going to ignore the privately should currency for now between stablecoin central bank issue digital currency and bank-backed digital currencies definitely stablecoin has something meaningful to play provided the underlying assets which they're they're backed improves the governance process there I think there'll be a better focus on governance around those asset class uh the underlying assets uh I I know a lot of this large stable coin are now doing almost daily disclosure of the uh the the assets they are holding uh I know it is they're doing once in a two weeks now I'm not checked it but I think they're doing once every day now just so that to show that how how they're backed one to one I think that's and also the the institutions which are going to customize these assets are also part of the critical play on the stablecoin side so you will see more stringent uh governance around the underlying assets of the stable coins uh is there going to a play for algorithm bus back to civil coin I think is still extremely risky and uh I think the further governance questions around those algorithmic-backed several coin but simple easy to understand well explained uh good disclosure best table coin to have a real use case a real need to be operating this Market especially for low value transfers uh their their atomic their bearded assets they can move money between countries easily of course they will be subjected to mon laundering terrorism financing checks and all those regulations but they have some real stuff as against a privately should Bitcoin or a or or a cryptocurrencies stable coins seem to have a path to succeed on a long run so I think one of the obvious challenges of consumer protection is differentiating between different types of consumers we obviously have very sophisticated retail investors we have those that are just entering digital asset markets and we have institutional investors I was wondering if you could touch on some recent comments that the Mis has made about restricting retail access to crypto and and what those types of restrictions might look like well I I'll I will disagree with you there's nothing called sophisticated customer when it comes to this space nobody really gets it the only people are speculating a few future value so whether it is a is a normal little customer or a highly specialized who understand risky investment I think I I don't think segmentation has really taken place in this market it is still complex even the best player don't understand is Market well so I think I at this point I would not be uh segmenting them we should talk about more foundational construct around regulation disclosure transparency uh Financial even even crypto literacy I know a couple of CEOs were were projecting that they should increase the amount of it people should have awareness around this asset class so once you get that right I think uh we should be able to see a far more stable consumer participation in the market we have not outrighting Banning this piece because as I said we need a new form of money to transact in web 3.0 that is a requirement because we must provide for that and that new form of money is it going to be a private issued currency or is going to be some other is something system and Market will filter out but we want to ensure that people should not divorce the projects from the coins moment they do it they go into the speculation and nobody will know what's happened what's happening to the projects so focusing on literacy focusing on consumer awareness irrespective of the segment of customer will be our Focus going forward and it is going to be more and more stringent as you look forward because if the market doesn't uh thankfully Market itself is self-correcting but I'm sure if the industry participant don't take their own responsibility to fix this you will see more Regulators coming and increasing the consumer access to this asset class in terms of adding more friction so I would strongly urge the industry to also Step Up by their own Merit to bring more discipline to the market Deepak or Bobby would you like to comment on how you differentiate between retail or institutional investors on your platforms I think let's let's go with the fact that it's a homogeneous target audience right now uh but I want to touch upon the financial literacy that soprendous spoke about uh and I'm glad you did that uh we are in the business of making world-class Financial products and services and we feel that literacy is very important there I'll give an example that reviewed has 20 million individual customers on its mobile app at this point of time globally and by talking to many of them we realized that there is a need for Education when it comes to cryptocurrency and blockchain and this is one-on-one stuff uh at the back of it we created short courses which is on the app and these courses are you know like I said short they got videos quizzes within the very first month of launch we had one million customers who went through these courses within the very first month so that shows the level of Interest the client have to educate themselves uh of course this is just a foundation step there has to be many more things to sort of protect on that front yeah just to just to add to that it's it's interesting you know on the one hand we we segment very very finely because different types of customers have different needs that we're trying to meet um however they're all equal in terms of having to pass verification and kyc and AML tests before regardless of whether an institution they're sophisticated they're brand new to this space they all have to play by the rules they all have to go through our pretty rigorous verifications and again we're operating 150 or so countries so we've we've we've become very good at it and um and that's the Cornerstone I think for making sure that the people that get in have have a an honorable purpose and a real objective Deepak you touched on an important point in the role of Education um and and how education ties in to really ensuring that consumers can make educated investment decisions um I was wondering if if soap or or Bobby like to comment on what roles you take to empower customers or investors to to make sound decisions as they're approaching digital assets Cheryl jump in so so um so firstly this is one of my favorite topics you know we recently did a a pretty extensive survey called the crypto pulse survey 30 000 respondents globally institutions and individuals and we asked a lot of questions about trust and about how people um from different walks of life View cryptocurrencies and approach cryptocurrencies in general we learned a great many things but just a couple that are relevant um you know one is that in general the more people purport to know about cryptocurrency the more they trust it self-reported via this survey and that's not true of many Technologies you know if you think about social media or AI or other things that's it's usually the inverse um and then secondly we learned that a great many people are interested in participating but they don't know where to start about 44 of respondents globally so they would like to participate they don't know where to start early so there's a there's a significant knowledge Gap that we have to cross such as with programs like Deepak mentioned and on bitstamp we've just launched a learn center with exactly that objective in mind you know it's designed to provide information that meets you where you are in your crypto Journey whether you're just curious or whether you're a sophisticated participant trying to keep up with market trends and the and the trick is not just to serve up information there's a ton of information out there but to serve up information that you stand behind as a trusted provider and that is digestible it can't be has to be digestible bite-sized chunks that people can can can put to use you know uh other than the literacy program I forgot to mention there's one ecosystem which Singapore is focusing on is to build risk management capability starting from uh cyber security chain analysts those companies which looks at fraudulent uh transactions and also protecting a lot of this asset uh through a better custody services so I think there's a need to also build an external ecosystem which surrounds this industry from a consumer when I just saw that it says crypto Recovery Services which looks like uh you've got to call somebody if somebody something getting hacked uh so but these are the I don't know what they do there but these are the examples of how you build a larger ecosystem when I along with the literacies uh program so you know what to do during challenging time uh you've got to know this asset class very well I think people have to have to understand that you cannot separate a crypto from the crypto asset from the underlying purpose moment is separate that you are bound to speculative behavior and I think that's dangerous and I have got so many complaints doesn't matter what the background is once things go wrong they want people us to take action I think you've got to make a qualified decision of what when you indulge in this in this particular set so hopefully we get there with better awareness uh more proactive regulatory intervention in the space uh and sometimes friction is good A lot of people say why are you adding more friction of course it's good because it forces you to think twice before you get into some business so I hope this will help us to go forward in a much stronger way I mean if I can just add to that uh empowering can come by financial literacy and education empowering can come by some of the risk management tools and some of them we are also deploying but empowering can also come by breaking the barriers uh on our revolute platform if you want to trade in stocks or cryptocurrency the amount required is one dollar in some cases less than that that helps client to reduce any exposure they would normally would have had by making sure the barriers went real low so there could be many more things to empower a customer on that space and especially when moving money on this rails uh there are low value transfers which definitely this is a better better alternate uh to go through this and I think uh the let's not let's not destroy the value of this Market by by overhyping or over speculating and putting messages out there which is which will not serve the industry for long so I hope as I walk around today after this I hope to I'm going to take picture of those companies which are advertising this up not appropriately so I will see how many of them make the list yeah if I could just agree with with sap you know again bit stamp longest running cryptocurrency exchange we started in 2011. so we've seen Cycles but I I must confess in 2021 when I saw Super Bowl ads and you know such an incredible hype cycle going on it did not make me feel good as a as a you know crypto uh committed person um I I felt like the hype was was uh eclipsing the real story and I hope that this Market correction helps us kind of and even the conference organized like this one should also have some standard of who what do you what you're showing to your client here you cannot create just because you are doing a conference you cannot promote bad behavior foreign absolutely uh certainly seems that knowledge is power I'm kind of missing the live llamas that we had wandering around the last London took in 2049 but uh we just have a couple of minutes left here I'd like to ask each of our panelists briefly obviously the name of the conference is token 2049 I'd love to know what you guys think we'll be talking about this time next year and also in 2049 uh if you could keep your answers just to 30 seconds or less I mean hopefully all that we're speaking this year we don't have to speak again next year and we have progress further from that uh for 2049 icon Crystal case there uh but I'll say that any technology which has a paradigm shift may not seem very useful in the beginning that happens with the home Computing in the 70s it may look very risky like the internet of the 90s but look where they are today I hope that in 2049 blockchain digital assets as a bigger ecosystem we can talk about it in the same breath as home Computing and internet my my hope that from next year you will see less about currency more our assets more assets more uh token representing real economy assets should be the way forward I hope to see much of the the constraint of the design of the both does change next year with much more serious token player less speculation and in in 2049 well but took it to 2049 you'll be a winner uh of which digital currency going to finally win this battle of exchanging the new asset class and I hope that there'll be two or three good alternate for us which are less speculative real currencies uh yeah I think a year from now and maybe this is similar to what sap was saying it's it's use cases so you know I think we're talking about concrete use cases that add value to people's lives into society and and that's the driving force um and that's exciting that's happening by the way but not many people are talking about it yet so um and then and then in 2049 um you know perhaps a history lesson on something that was once referred to as fiat currency I I use the word new form of money I think we're just about out of time here but thank you so much to our phenomenal panelists thank you all for joining us today