Macroeconomic Drivers of Crypto Assets. Fireside Chat | ETHSofia

[Music] hi everybody um it's very nice to be here um welcome Meena as well thank you uh we're going to talk about uh macro factors including regulation and uh geopolitical events regarding uh crypto assets and how they're interconnected in a way for the next 30 minutes we also will have some time for questions so if you're up for asking anything about those topics you could scan the QR code over there and uh you can add a question or two and also you can upvote the other questions and we're going to answer like the top few of them uh it's veryy so I encourage you to to use that app as well um Elena I was curious to ask you because we've never met and I know you have a lot of um experience regarding um finance and regulation yeah but what do you think is the biggest U microeconomic driver for crypto assets right now at the moment and looking forward into the next U 6 to 12 months thanks plest and very nice to meet you all I'm very excited to be here in Sophia um having this fire Ty chat um this is a great question right and I had a view on this and I also asked around a few people I know from very diverse backgrounds in crypto to see whether or not my view which is very influenced by my background was actually um about right or whether or not I was very biased and it turns out that actually my view I think mirrors at least the majority of the responses I got back um so I think there were two macroeconomic drivers that we can talk about in the next 12 months the first of course is the change in the interest rate environment which I think you and I can cover a bit later on which I'm not an expert on at all but blest can talk about I think much more convincingly than me but the but the big elephant in the room that everyone talked about is the US election and the implications that this will have for the US regulatory framework for crypto um the regulatory I guess kind of um us regulatory position at Federal level in the crypto market and therefore for the industry as a whole that is the number one topic people are worried about um and um that is obviously happening very soon um I think it's the beginning of November um and you know the I mean we can actually do you want to I I just spent actually a month in New York I came back from New York literally two days ago in fact I'm still jet lagged from the flight um so we could actually cover a little bit um what I saw there and and and and what people have been saying if that's of interest that will be quite interesting yeah so um I mean I I again I met a lot of people in New York I went to a lot of places um I also visited the Bitcoin Pub Pub Key um which uh it turns out Donald Trump actually visited two weeks before me um in a clear sign that he's very Pro crypto so I think everybody is aware of the fact that Trump is uh publicly Pro crypto um he has said he's going to set up a Bitcoin fund he has said he's going to fire um the chairman well the head of the secd Gary gendler um and he has also actually just launched his own token about three days ago um so he is really playing to um to the crypto Market he's really he's really playing to crypto voiders to get some support and that's been a very very big Topic in election year in the US in fact it's been a topic which has dwarfed a lot of other topics which surprised people um the reason I think this is interesting for us and for crypto is because when you look at the the kind of a new technology like this which has a kind of financial side and a financial angle one of the biggest things that it can impact its growth is an uncertain regulatory environment right that impacts growth it impacts institutional adoption it makes it actually very difficult to stand up and run a business if you don't really know what the rules are right I'm saying something that people know and so the mood in the US um as a result of what's been going in there the last few years has not been the most positive right I went to consensus in the middle of the year um bloves and I were talking about people not the positive I think the mood in the US is changing because both political candidates both Trump and Camala have had to sort of come out with a slightly proc crypto stance right Trump is definitely proc crypto based on what he said you know people think if he is elected that he's going to um come up with a new regulatory regime for crypto he's going to he's going to sanction it he's going to sponsor it and the the crypto Market will fly right that's that's sort of one one option Camala no one really knows what she actually thinks she has made a few statements about digital assets but to my mind when you say digital assets that that means anything right that can mean like private permission blockchain that's run by a bank so we don't quite know where she's going to end up but the consensus from the policy people in the US um that I've spoken to is that no matter who wins there will be some crypto legislation it's not going to be this year right it will be next year and it will probably start with stable coins um because that is the the mo the first and the most obvious thing to regulate it's not going to be a cbdc it will be some type of stable coin legislation um and how quickly the crypto framework ramps up from there and what happens I think really actually depends on who wins so it's a very long answer BL best but that's so you you think that despite who wins there will be more regulatory Clarity in the next year yes yes that's the short answer yeah either way it's uh it's good for for the business and the industry overall y it is yeah what could be the worst case scenario let's say Kamala who is less Pro crypto or we we don't really know exactly her stance and the administration that she would bring but what could be the worst case scenario if if she's the winner and what could happen I think you know the the US they they know the crypto is growing as a market they they know that it needs some some regulation right but you know regulating it Federal level is always hard in the US because of the way their system works right their legal system works you've got to you've got to actually convince essentially two separate Houses of Parliament to to to to actually pass legislation crypto seems to be quite a bipartisan topic right it's everyone agrees that some regulatory framework is needed the Democrats and the Republicans I think agree on this the worst case scenario is that you just have more of the same blug WS because everyone agrees you need to do something but going from oh we need to do something to like oh here's legislation we're going to pass we're going to stand up this regulatory regime that actually takes a fair bit of time and it takes people to agree to the same thing so worst case scenario no matter who wins right is that in the next year everything just like keeps going and people just keep talking about legislation there's some crypto legislation in front of Congress now actually hasn't really gone anywhere you just get more of the same um and that the um you know the the US regulator which which you know thinks it's the main regulator for crypto the SEC just keeps uh you know regulating by enforcement as you call it just keeps you know suing these ex changes suing the suing the projects kind of going after them so you just have another year of we're not really sure what's going to happen that's the worst case scenario and it's possible that this will happen but I think the more likely option is that you'll see some improvement in the next 12 months MH another question that pops into my mind is uh everybody seems to be very excited about a trump win but what could be a negative surprise if he wins regarding regulation or or anything regarding crypto is there anything in your mind well we don't it's it's that's also a very good question right because he sort of he's done the kind of typical marketing thing where he's sort of out there like buying burgers with Bitcoin and launched his own token and it's like I really believe in defi it's very obvious that he doesn't really deeply understand crypto no you know crypto is a really complex market right and the devil in crypto regulation is in the detail right people can say all sorts of stuff about oh I want to I want to you know promote Innovation I want the tech you know I want the technology to like fly I want to like support this but then they tend to hand responsibility because as a president does um for kind of writing the crypto rules to people who write them and responsibility to the the federal agencies that will have to actually over see crypto so I mean I I think the worst case scenario of trump wins is that it just he just doesn't do anything very quickly right that he leaves the status quo because he delegates to people to do something about crypto and then it just kind of sits there in this you know sphere of like current situation where we're not sure like how it's regulated and is is it a commodity or a security which regulatory agency actually has has jurisdiction over it so if he leaves these questions unanswered for another year and a half that to me is the worst case scenario okay MH um just to add my opinion on on this topic is that uh in terms of Market expectations the elections are they're having a lot of um um uncertainty um and people are waiting for the the clouds to go away in a way and and um um for crypto to take its path forward like it's um it's it's been for the past few years and um as you said once the election is cleared away as um um as a as a problem um things will get on their normal um on the normal path to to adoption because it's not it's not about um politics that much and the killer apps of crypto are developing despite unfavorable regulation in the recent years yeah and and those um in my mind are uh stable coins um store of value and gambling and those are independent of uh of course they could be diminished in a way by unfavorable regulation but uh still um there is a lot um a lot of room for them to grow do you because you say B it's interesting that stable coins are developing despite an unfavorable regulatory environment right which in the US is for sure that's that's the case but what about outside the US because the thing that has happened obviously in Europe is we have MAA which is the markets and crypto assets regulation was past middle of this year it it regulates stable coins it regulates them quite um seriously but that's that doesn't seem to have like halted adoption in fact it's the opposite because they're now regulated you know maybe the market has more trust in them like what what's your view on that um I expect there is both sides uh of this situation for smaller businesses it's going to be much more difficult because of um overhead expenses will will rise dramatically um and not just expenses but like time wasted for bureaucracy will increase significantly I think people underestimate how much that will affect uh innovation in in small businesses in crypto on the other hand uh larger exchanges and over all um bigger financial institutions including banks will be more they will feel more secure to enter into into the space so they wouldn't be as hostile to to crypto businesses that are already regulated I mean it would be already legal to close down accounts if you're um a licensed entity uh so so that's better in a way that means better um banking more stable Banking and also more clarity for bigger institutions to to join in so that's definitely better in in the long term but um at the same time there will be problems for example uh tether which is obviously the biggest cryptocurrency they decided not to go for uh uh being regulated in Europe so that's going to disrupt some of the liquidity in the exchanges um and and there is also a lot more things that haven't really surfaced yet because Mika is not in action we're going to see maybe starting early next year and mid next year uh to see the effects um how the users will be affected in a way and there will be more kyc there will be more less privacy there will be um there will be more documentation and bureaucracy even compared to what it is now uh the AML regulation is also worse with with M it's it's um adding more layers uh on on a system that's already overburdening both the business and the users so yeah it's a it's a complex situation hopefully it's going to be for better long long term but um we'll see we'll see maybe end of 25 we'll have some some initial possibilities to evaluate if that was a good thing or not H I agree with you on all of this l i mean I you know I worked in a bank for a long time and lots of different departments as a lawyer and I stood up really big regulatory change projects and you know you can't underestimate how difficult and expensive it is to comply with regulation right Financial Service like proper financial services regulation and you know there is an argument that if you overrate regulate the industry it will die um and it won't it won't maybe die in the completely but it'll it it'll it'll slow the pace of innovation which has been the great thing about crypto right um and I coming from like a long time in a bank where like doing Innovation was nothing like working in crypto right it took so long and it wasn't that Innovative I don't really want that to happen but I think you're right that there is a risk here and you have to kind of wait and see how it pans out a lot will be depend on how it's actually implemented I think um do you I mean going on to kind of other macroeconomic factors I know we kind of talked a bit before but what what do you think is something else that's actually very well I'm generally quite interested in the price action and how the the whole cycle is evolving um that's our job in a way to follow that um we are walking a very thin line between keeping the economy from uh falling down into a recession and on the other hand keeping infl low and uh and I'm talking specifically for the US um most other places in the developed World inflation is already um is already quite low but at the same time economic growth is not that strong yeah um at the in the US inflation is on the higher end it's still above Target that's um that's normal for for the FED to um to be easy in a way with the monetary policy however um the economic growth is also above Trend still M which is quite good uh it's above 3% the projection of um the US economy growth is uh more than 3% for Q3 and if it's stays that for long um and no inflation coming Rising above let's say 0.3 monthly core PC um that's going to be the Goldilocks situ situation where where crypto could potentially unfold into a a more speculative cycle that I believe a lot of people are waiting for but um there is there's a good chance that this doesn't happen or or that it's slowed down by either of those two worsening and um it could also depend on the on the outcome of the elections um so so this is this is a very very narrow road that we're walking on and um we'll see um probably within the next um 6 months it's going to be clear which way we're going in a way interesting it's in line with I think what I've been hearing and we can't really predict it at the moment and you're right I think the I think I think the outcome of the US election is going to have quite an impacted shortterm on the market actually depending on what happens yeah probably so I mean the overspending in terms of fiscal uh policy will probably continue under both administrations yeah regarding interest rates there is some speculation that Republicans will be more hawkish and um overall with the with the monetary policy and they'll be more concerned about inflation whereas a democratic uh government will be more willing to spend and stimulate and um um and ease monetary policy um so that's also quite important for for the next um for the next year or so but over the very long term nothing really changes because the the trajectory is clear of um there is significant fiscal dominance where the markets will be influenced by by politics and the propensity of of the governments to spend a lot more than usual and um the the central banks will be really in between the Hard Rock and U the hard place in the Rock by trying to um find a clear way between inflation and and the recession which is a very difficult thing to do and um but apart from the US there is just so much going on in the world and I'm shifting a little bit here to um a few other topics let me see how much time I've got left got about 10 minutes um we've got natural crypto adoption that's happening in places like um High inflation countries like Argentina like turkey turkey is so closed I mean a lot of you probably have seen how much they're using uh stable coins over there m places like War zones like Ukraine or or the Middle East or Iran or Russia um it seems like stable coins are really really useful over there and that's not going to that's probably going to increase in terms of usefulness over time no matter what happens with the elections uh at the same time we've got small but very good examples of uh forward-looking countries like El Salvador who are adopting crypto and trying to get an edge uh with this kind of policies um it overall usefulness will continue to to to climb and and with the uncertainty of the geopolitical events over the world having a mobile part of your network it's increasingly important because you can you you don't rely on the banking system you don't rely on on Customs on regulation on anything and just having a portion of your assets in in Bitcoin specifically could turn out to be a very good decision for a lot of people and I think a lot of people including um people in the older Generations that have a lot of money accumulated they're already awakened to that um that idea and it's it's going to grow even more in the next um 5 10 years when um geopolitical tensions are unfolding because it seems like uh the worst is not behind us unfortunately in that regard no matter if that's Middle East or or us China relationships or overall overall yeah overall de globalization and and um distrust in the system but that's that's also uh the the only way a new Global Currency could could um emerge if if it's a if the system was stable and there was no disagreement um probably nobody would allow it to happen but now we have a reason to to choose an an independent alternative that that the crypto represents in a way um yeah what's your take on on this whole situation including geopolitics and and the usefulness of of crypto overall I mean look I I I agree with everything you've said actually buest my my background was I'm actually Bulgarian um although I left when I was a child I lived in Zimbabwe till I was 15 which obviously Zimbabwe now was um in a different place to where it was um and then I went to the other side of the world and lived in New Zealand which is a pretty first world country but you know especially living for a long time in a developing country which I did um in Africa like it you know PE people don't trust the government there right um and actually I was in South Africa recently and to my great surprise although we know that crypto has quite widespread adoption in South Africa um you would be surprised at the people who hold crypto you know people who work in restaurants people who are not super techsavvy they all hold crypto and they they will hold a mixture of I would say Bitcoin CU I sort of asked around ethereum and some stable coins so you know as as people become more techsavvy and as and I think as the kind of let's just let's just call it the user interface and the custody the way the ways you can kind of hold crypto become more safe more easily accessible I think that will I think that will drive some pretty serious adoption actually especially in these um Emerging Markets because you know if you people are already going through the trouble of actually holding it in a self- custodial wallet when it wasn't that easy to do it I think if you make it even slightly easier and the more stable coins are out there the more people will actually um will actually hold this I don't yeah I mean I the thing that I wander in the back of my mind on this right is stable coins I think if you if you let them be will be there'll be huge adoption not just by people also by institutions if I'm a company with like different branches and different countries do I want to use the banking system and do all the FX you know pay all the fees to like you know to basically send money from from A to B to my Branch or subsidiary or would I rather use a staple coin I mean I think the answer is pretty simple so you'll see quite a lot of institution institutional adoption in the space too the one open question I have is how is that going to tally with um governments of certain countries who may not want to completely you know who might not want to even partially give up control of effectively the money supply and you know what because that that that that's the question you get into with um with adoption of crypto in that way and that's that's the difficult question you don't know how that's going to pan out don't know if got any views on that actually blackest because I've been thinking a lot about it but let me let me continue cuz we we're running out of time I I saw in your resume if I'm not mistaken that you spent a lot some of your um time in in New Zealand is that true uh what is the the overall attitude in that part of the world New Zealand and Australia towards crypto in general um you can brief us on that so it's it's a good question I haven't lived in New Zealand for ages I lived in London for 16 years so I haven't I haven't actually been there fulltime recently I I think um but there is an Australian in audience here somewhere too um I think the a look the attitude is um is overall positive people do use it there is there is adoption um it's being regulated there but I think I I think if you're talking about kind of holding stable coins and holding Bitcoin as a hedge the thing that you have in Australia and New Zealand is that people trust the government right you have a you have stable currencies like people people trust the government there so I don't think that you will see necessarily the same type of adoption in the same way that you would in like um you know somewhere like turkey right where there's like huge inflation and so people are just looking for an immediate like like not a hedge but like you know something safe to put their money into you don't you won't have that pattern of adoption in Australia and New Zealand because because they're more like the UK or the us or sort of you know countries in the EU like here with where you sort of trust the government and you've got a you've got an exchange rate that's relatively settled that's that's sort of my view personal view okay um so we've got a few questions from the audience and U I'll Cho just the first one or two uh the first one is Ivan from ire how are current War conflicts influencing crypto how about a possible China timean conflict uh what will the long-term impact be on this so we touched a little bit on on war conflicts but but not much do you want to comment on that or I should take it I'm going to make one comment then I think you say because you're more the expert but I actually I was actually Googling that this morning um and there is a study that came out after the Russia Ukraine conflict started that said actually when the conflict started crypto adoption dropped but then it grew after the conflict started so the the sort of I don't think the effect is as clear as like oh there is a conflict people who stop using crypto it might actually it might actually increase adoption depending on what the conflict the conflict is and who's affected so but I think I'm quite interested in your view on that blackest actually because I know you've done a lot of thinking about well well well I think in the very short term that will be negative for the price because in order for crypto to grow even Bitcoin it's still a risky asset and it's important for people to to be willing to take more risk so additional geopolitical conflict and ESP conflict between China Taiwan and the US in a way um it will be very devastating for risk assets for for the very short term um so um however in the in the longer term in the medium and longer term such conflicts are predisposition for a higher usage um of both store of value mobile network in a way and also stable coins for payments and transac actions and crossb transfers of of money so and overall this will increase the the distrust in in the system and it will divide the world more which is definitely not good um for us as Citizens but also this is the exactly the situation that crypto was built for where you don't trust the other parties and you actually need to choose a um independent technological solution for for whatever you want to do and and of course China Taiwan is a very serious conflict so that's going to impact a lot of that's probably a certain recession and maybe High inflation almost guaranteed if if such a thing happens because of the semiconductor market and the supply chains that are going to be disrupted after that so uh that's a it's going to be a big problem so we take last question and there will be a break afterwards so we've got a few okay here is one um do you think that the money printer will ever stop and if no does it really matter who is the president I love this question do I think the money printer will stop I I will do announ then I think we need your view on it to PL I don't think in the short term it looks like it's going to stop right um uh so so I think I think no in the short term it doesn't look like the money printer is going to stop but but you gave a a much more elaborate answer on that earlier um doesn't matter who's the president so actually in the US the president mainly has influence over foreign policy constitutionally they can't actually do that much domestically but they do have they do have influence obviously um just just aside from that sort of legal question um I think I think the if we're talking about the US president the who the US president is and what policy they have will dictate how how friendly the us is going to be towards crypto and crypto adoption so it will have an impact on the market regardless of the whether or not they print more money or who prints more money there'll be maybe maybe there'll be a little bit of rebalancing but I think given how unfriendly the crypto regulatory framework has been to crypto in the US having the right president will make a big difference there um so that's that's my answer black you have probably slightly different m is quite simple unfortunately we are in a stage where populism is governing most of the decisions and not just basically in many many places in the world especially the developed world and um populism has the major tool for delivering its promises is printing more money and taking more debt and monetizing that debt um so U also the buildup of um of government debt is so high that servicing the interest rate will already be a big burden for for the Western governments and um that is really uh the train that cannot be stopped we will have ly Alden tomorrow afternoon who will talk more about that and um unfortunately we're in that situation that um it's it's almost inevitable that's why the long-term success of of of crypto in some form becoming a major major um uh Reserve asset in the world is is almost certain it's a matter of um I don't know how how many years that's really difficult to predict but it's um in my mind it's certain that it's going to happen just a matter of time and when you say crypto that do you mean you mean primarily Bitcoin at the moment right because Bitcoin is kind of the highest chance of achieving that it has its own problems in terms of scaling and some privacy issues um but it has the highest Network effect the highest um um the biggest history the the probably the biggest security um so it has the highest chance how exactly it's going to unfold it's probably going to be a few networks out there probably not not just one so I think that will unfold in a good way uh in a more clear way in the next 5 years because we've already tried every scaling uh possible way and um it will become obvious that um um what works in in the next uh 5 years I think yeah so um I just want to make a very quick last announcement and I think we can wrap wrap it up uh me and my business partner dier V who is here in the audience we're looking for a third partner to help us with the investment strategy so if any body is interested in that come talk to us um after the panel and Elena thank you very much it's been a pleasure and um yeah let's hope for better times thank you plest [Music] I'm going I'm going