Crypto at the Crossroads: Where Next? | European Blockchain Convention

foreign [Music] well uh good afternoon everyone thank you for for joining us for this afternoon for this uh penultimate panel um I think we've spent the last couple of days hearing some great talks and presentations so I'm expecting this to be no different uh I would really excited to introduce our fantastic panel here of hartmouth Danita and Eva maybe we can kick off with intros guys uh maybe start at the other end actually thank you hi everyone my name is Eva Lawrence I am the head of Amir for figment figment is the complete staking provider for institutions so we help large institutions like VCS hedge funds exchanges custodians Implement a staking strategy and that's uh non-custodial protocol staking I come from a traditional Finance background I was at Morgan Stanley for eight and a half years in the Securities lending trading space and then I've been in the crypto space now for four and a half five years which is I guess a few in the in in this world absolutely um hi everyone my name is Danita I'm part of the BD team at bullish bullish is an Institutional regulated crypto exchange um what's what really sets it apart is the Blended Market structure what we've basically done is taken a traditi all the traditional exchange elements and combine them with some of the most exciting innovation in defy namely automated market makers we launched the exchange in November 2021 and we've traded over 150 billion cents so it's been a stellar start my background is also traditional Finance I also also used to work at Morgan Stanley but even I did not know each other unfortunately back then I used to cover equities so I I must say that covering Indian and Chinese equities trades pretty similarly to crypto so it's been a smooth transition you've settled in easily thank you for having me here I'm the business developer for zooter Bank Suter Bank provides a banking platform for fintechs and crypto tax in the core we provide a banking infrastructure for crypto business models and as addition we also provide our license as some kind of umbrella for crypto business models and yes we be um are active in the in the space since 2016. I'm with Suter Banks since 10 years but I'm not a banker at originally I'm uh I come from the marketing technology marketing space cool thanks guys so crypto at the crossroads where next kind of a big question for the last session and we don't actually have a huge amount of time so we're going to do like a real quick fire uh debate here um I don't know about you guys but it's been really cool being here I was here last year uh I'm told that attendance is double from last year a lot of interesting people and companies here what we see here seems to be the opposite of the mainstream narrative in the media Etc and certainly at BCB we see we're busier than ever helping people with their payments and their FX so it's kind of like this where are we really and what's going to happen this year um but I feel like we can't start looking ahead until we just take a check on last year so what do we think the lessons that we've learned are from last year and do we think that we as an industry have really taken those on board and maybe didn't start with you yeah sure there are actually so many lessons but I'd focus on the ones that I think are the most important from our perspective as an exchange I'd say the first lesson is that kyc and due diligence are your friends they're not your enemies um as an industry right now we there's massive issues of trust so we need to bring that trust back into crypto things like controlling and verifying your source of funds understanding the business models of your clients and what they're planning to do with their accounts are just Basics the second lesson I would say is that you need you you should verify and not trust even if you deal with big clients and and big names that does not mean that you don't have to undergo sound controls for example we do compliance screening on all the coins that come in and out of our wallets we as an institution get that independently audited by Deloitte so just the basics really of traditional finance that we could be bringing into crypto and the third probably largest lesson is that fraud is fraud no matter the asset class um so you fraud controls in institutions are essential um and it doesn't mean that because we've had fraudulent behavior in crypto that needs to define the asset class fraud is fraud everywhere exactly and I think that a lot of the issues that have been brought up are not necessarily Chris but crypto specific right they are failings with internal management of companies that you know need to be addressed properly but also exist outside of crypto another key issue and a lesson that we've learned from it is is around segregation of assets and separation of control I think that's what a lot of companies should be focusing on and again that's not necessarily just crypto companies that should be focusing on that these should be values underpinning most companies you shouldn't be co-mingling assets you know you shouldn't be the liquidity provider hedge fund exchange and auditor for your for the same company you need to make sure that the focus is on that segregation and separation yeah uh Hartman interested in your Viewpoint given yeah you're coming from you know the banking space But sutor as a bank has been you know operating in the crypto space for a little while uh how does it look from your perspective looking back and then thinking about how regulation is coming in this year uh and you know further Downstream I think in general it's not so different um from what you already said meaning you have to do a proper due diligence uh due diligence concern your partners so talking you you trade on your uh in your name uh as broker um what we see in the in the realization space I think um we are moving from a More Country um focused regulation to a European wide um um regulation some some of the regulation it makes the things um more difficult some more easier we have seen the Mika um we have the new IML directive both are European wide we have said here as a new DLT pilot region which is not only is it's not um Innovation or uh you know a regulations that makes these things more difficult but more more easier to build new business models uh on on blockchain based so we are optimistic that's the new regulation or the regulation which is ahead make make you Europe Europe um towards motor unified Market up to now we have a more fragmented regulated landscape and now we are going to a more unified regulated landscape which is very very good for for Europe I think and for the business as well yeah and then maybe uh Eva and danitsa from from like where you guys are in the space how are you seeing regulation play out um I mean even there's been things in the U.S around staking recently and then what do you think that means for for your space um going forward yeah so I think that you know the more clarity we get the better and so the SEC kind of passing you know providing guidance is is helpful in a way um but you have to obviously look at the facts and that's very unique in that one instance to retail staking um and again maybe a lack of separation but I think in here in Europe you know we have the advantage that we are moving towards Clarity and I feel that that Europe is in a position of strength because of that um I know that working with companies here in in the region you know that is something that their legal teams and their risks teams are focusing on and they feel more comfortable with that they they have that some form of clarity here in Europe and I hope that we continue with that momentum I think that we you know we need to lead with that and then also from a UK perspective hopefully um hopefully we managed to to not uh stay behind there as well with the financial markets bill yeah I fully agree even from the conversations that I've had that this conference you can clearly see that the tide has shifted and Europe's leading the way in regulation interestingly just in terms of the companies that are relocating to Europe in terms of the volumes there's there's that there's definitely a huge momentum from our perspective we were built and designed to be a regulated institution so we we welcome that we welcome more clarity the one thing I would add though um given the recent events in the US and what we're seeing it's really important to regulate Innovation but it's also important to innovate regulation rather than just ring fencing a growing industry that it would be great if the regulator could start understanding the business models and work with the companies um to protect everyone versus what we're currently seeing unfortunately great um one of the things I guess I don't know I particularly struggle with I don't know I'm sure others do it's like we look at the news we see what sort of is in the mainstream media and trying to sort of distill fact from you know the high pool they like just stuff swirling around um what do we think about Market Health right now and you know are there any things that particularly stand out in terms of what we're doing or what you guys are seeing maybe we can start with the health question we need an answer and but what does it look like from a exchange perspective yeah sure so I think a leading indicator for sentiment is um stable coin balances at very centralized exchanges and unfortunately after um the SEC gave the world's noticed the paxus we've been seeing massive withdrawals so in terms of sentiment I would say it's rather bearish because it's an indicator of the Readiness of capital to be deployed in the space then in terms of volumes we're seeing a very different picture we as an exchange are seeing record volumes from what I hear from other markets participants as well but at least I suppose what's good is that the interest in in the industry continues and remains very very high I think perhaps I kind of had to be um we track also our training volume and this December was the lowest month um in two years I think but uh already in general we see a rebound a strong rebound of um of trading volume and I think looking on the um price um development I'm very optimistic that we will see perhaps the same trading volume as we saw it in the first half of the last year in the second half of this year I think also the markets in in almost a a state of anticipation um there are lots of people working on great projects building behind the scenes um and we've also got the the Shanghai upgrade approaching and I feel like a lot of institutions in particular are are waiting in anticipation to see um when that goes ahead what the execute looks like um and then are very interested to see how that impacts youth adoption across the market for for the remainder of the year cool another any particular things that leap out one of the things we see at BCB I mean similar sort of thing January was a you know really busy month for us a lot of companies uh wanting help from us from their you know payment services um we get to see a lot of cool companies and interesting projects um anything that stands out for you guys that or the things that you're working on uh perhaps uh Hartman start with you on that yes per episode one short explanation before we um we have a similar deal flow as a venture capital fund meaning we we get a requests from startups to to cooperate with us that we provide the banking infrastructure and our license and what I can see in our deal flow a shift from from trading business models to tokenize the tokenization business models meaning um a year before or two years before the request was more or less out of the trading space and now we um we get requests from companies that tokenize something that tokenize real estate tokenized Collectibles or also shares their equities and would like uh that we provide our banking infrastructure to to build secondary markets uh and so on because at the moment it's it's the biggest problem with the tokenization area at least for now to establish secondary markets I think this shift and I think this is uh for for me it's uh it makes me optimistic because I think these are more sustainable business models and then only the trading 100 of tokens that nobody knows what is the value behind this tokens from exciting is that the industry continues to build very robust and Innovative products so on the yield side since it's been largely debated late um currently investors in terms of volume have three ways to earn yield it's either lending staking and another tool that has been added to the toolkit something that we've been working on is automated market makers it's a way for people to deposit idle assets and earn income on them maybe even can elaborate a little bit more on staking but essentially I think the the biggest takeaway from last year was also the diversification is really important so with all these three um products you have various risks you know staking has protocol risk lending has counted by the risk amms have impermanent loss risk but in terms of diversification just provides various toolkits for investors to participate in in this trend yeah and obviously we've we've seen that on our side in terms of the non-custodial protocol staking where institutions are looking at delegating that proof of stake tokens for a return we've also in seen interest in liquid staking um from the from the perspective of eth and then also kind of the the data and Reporting around those functions as well cool and I think the things that you just you guys just touch on there personally for me are some of the most exciting things and we we talk about our industry you know building this new Financial system um you know we talk about moving from you know moving into this web three you know world that we're in now um the area that for me that that is really exciting still is defy um and you know with all the things that that encompasses what what do you think 2023 holds for D5 um given looking back what's happened and where do we think we're going in the future maybe either you could kick off on that one I think now everyone's got to the point where they've realized that there's not this D5 versus C5 concept that the two can work interchangeably and there is you know some form of a spectrum as it were in terms of defy so I think projects that are Bridging the Gap between the two worlds I think we'll see a growth of and you know web3 infrastructure in general is another area um and it's actually a shame that that Joe um from JP Morgan isn't here because they recently put out uh a report on staking um and how they expect to see the growth and ethereum so as I mentioned earlier I really see that for me is there is the area um with Mev flashbots and then institutional adoption uh in ethereum staking that I think we're gonna see take off and grow this year yeah I fully agree I think the convergence of D5 and C5 is going to continue to be a very strong theme this year we fully believe in that which is why we've basically we've tried to bridge the best of threadfy with the best of defy packaging for institutions rapid in kyc regulated um because still a lot of the from the perspective exchanges perspective a lot of the hard lifting still happens on centralized exchanges but in times of turbulence taxes do get a bit so yeah I think that's going to continue to be a very strong team for this year as well honestly we are not in the D5 space active right now so I'm perhaps I'm not the right expert to to do some forecasting or something like this but only my view I think we have um I see him as the platform not so for D5 but for decentralized um for this decentralized decent as apps meaning um we see that let's take um AI I think we don't want that Central players provides is a big AI models and then we have to think about what is the decentralized um alternative to a central AI model and then we are very quickly to a blockchain that can provide um decentralized I.T um this I know it's not D5 but this is my my view on uh where we could go with decentralization as the first point uh the second point is um defy it's after FTX I know you you don't want to to mention FDX yes but uh only because uh D5 after ftxd5 should be the alternative um for for crypto trading or for acceptance I think the FTX is not about C5 versus um D5 it's more uh a week regulated C5 versus not regulated D5 and we are in a core we are regulated um C5 and I think there is still a future for regulated um C5 which we would like to provide um third I think we will also see our first D5 projects within super Bank meaning we will get we will get requests to um to to enable D5 business models as well I think we have also some regulation for D5 and we are prepared to provide our license umbrella also for this kind of business models wonderful um so there's a big sign there saying time's up I think we could have kept talking for a while time's up for the panel time zone for the drinks absolutely yeah so uh thank you very much everyone for listening uh please a big hand for our panelists thank you thank you Chris [Applause]