The Long Game Rebuilding Trust in Global Finance with Decentralized Infrastructure

Hello Abu Dhabi. This is Charles Hoskinson broadcasting unfortunately pre-recorded. I was actually in route to Abu Dhabi finance week and unfortunately I had an issue with the landing gear on my jet and we had to make an emergency landing in Boston, Massachusetts. Uh everybody's safe and sound. It was a little scary circling there for a bit trying to get that landing gear sorted out, but unfortunately I couldn't find a path to be able to make my keynote in time.

Uh, so my apologies to all of you and to the organizers, but it was really important to me that I had the opportunity to be able to speak to all of you because I have so much respect and admiration for the amazing accomplishments of Abu Dhabi in the last 10 years within not only the fintech market, but specifically the web 3 market. There have been very few jurisdictions that I've encountered that have been as welcoming, smart, and innovative as Abu Dhabi has been, especially uh with recent things like the DT Foundation laws at the uh ADGM uh as well as its desire to increase the quantity and quality of blockchain businesses in the economy. So today, I'd like to talk a little bit about where I think the future is going with the remaining minutes that I have. In particular, I'd like to talk a bit about how any jurisdiction can win the future if they so choose to embrace it. Over the next 25 years, what's going to happen is the markets are going to become not only global, but they're going to become unified.

At the moment when we take a look at regulated commerce, despite the fact that we can easily travel on a plane, sometimes successfully, sometimes not, uh, and we can easily call each other instantaneously over Facebook or WhatsApp, we still live in the 19th and 20th century with paperbased and semi-digital exchanges with antiquated regulations like broker dealers and KYC and AML that restricts commerce to a jurisdiction to a particular marketplace. Not only is this unnecessary, what it does mean is you create fragmented markets for global assets. And one of the reasons why cryptocurrencies have been so remarkably successful has been the fact that they can trade 24 hours a day, 7 days a week to everyone everywhere. They never shut down. They never turn off and they're ubiquitously accessible as fungeible assets traveling around.

So when we look to the future, especially in the next 10 years, what we see is the real world asset revolution where securitization of everything is going to occur and those securities will look like tokens. We already see this with stable coins which effectively are tokenized treasury bills uh or other low-risk assets. And already that market's nearly a trillion dollars and it's going to grow much faster. It's actually dollarizing a lot of the developing world. So why haven't we been able to trade real world assets especially in the cryptocurrency space?

Well, what we're missing is the ability to automate compliance and this is the opportunity for jurisdictions like Abu Dhabi, Dubai, Singapore, Switzerland and others that are able to move faster than the European Union and the United States. You see the thing is that all regulation, all compliance can be done algorithmically and it's a very simple public private partnership. Governments can tell the industry what they want in terms of tax policy, in terms of disclosure policy and litany of other concerns and private industry can write smart contracts to reflect that. Then the government can certify those smart contracts and then compliance becomes a library. Compliance becomes an API.

Compliance is like using chat GPT. You just send something to it and something comes out. And the magic then is that settlement is compliance. Now, if a jurisdiction does this, this means that that jurisdiction's laws become understandable and more importantly can be actioned upon by the cryptocurrency space. Now, we as an industry, we need emerging technologies to facilitate this.

It's not sufficient on public blockchain infrastructure like Bitcoin or Ethereum or Cardano alone to be able to bring in such a thing. You need rational privacy. You need selective disclosure. You need the ability to deal with both public and private information in the same state space. This is why we created technology like Midnight.

This is why technology like Alo exists. This is why technology like Espresso exists. And a whole new generation of privacy preserving and privacy-enhancing technologies that allow us to do that. But in the process of doing it, that means for the first time ever on a blockchain, we can actually trade securities natively and not requiring third parties, assuming a jurisdiction is willing to embrace algorithmic law. So what does the transaction of the future look like?

Well, if each jurisdiction starts moving into the algorithmic space, users will basically send transactions. They'll selectively disclose using zero knowledge proofs the geography they hail from and then they'll just route to the requisite smart contracts that regulate what they do. And if they're allowed to make that transaction, they reach the suitability guidelines. The funds settle. I, as the builder, don't have to care.

Either the funds settle or they don't. And if they do, I'm in full compliance. That means I don't have a compliance officer. I don't have a suspicious activity report. I'm just running a decentralized application that trades 24 hours a day, seven days a week.

What this will bring is untold efficiency and liquidity to global markets. And what this will bring is a revolution that will allow trillions of new dollars to enter into global trade. And most importantly, it removes so much unproductive and unnecessary bureaucracy from what we do. The reality is in a global marketplace, it's not possible to fully comply with every regulation. How can a company that has customers in 100 plus countries understand the nuances and the arcane nature of each country's laws?

They just simply don't. So, what a company will do is pick a winner. Maybe that's Germany. Maybe that's China. Maybe that's Japan or the United States.

But seldom is that Ethiopia. Seldom is that Saudi Arabia. Seldom is that the country of Georgia. The reality is that smaller nations or nations that don't have enough geopolitical pull often are left behind and they're told or mandated what the world order is going to be, especially through transnational bodies like the IMF. So in addition to this revolutionizing commerce and the revolution of rational privacy and selective disclosure massively enhancing the consumer experience, the other magical component of this industry is the fact that it's going to return sovereignty to smaller states, especially states that wish to maintain neutrality and trade with everyone because your laws will be equally respected with the laws of the United States, the European Union, China, and other large block actors.

I think this is probably the most powerful and least understood mechanism of where the blockchain industry can take us. It's important that nation states laws are respected. It's important that they have their sovereignty and that their rules matter because they spend so much time and effort writing them and enforcing them. And to me, it's a magical thing that we can create a system where every single person can be equal from the user to the nation state. There are many more things that rational privacy can bring and there are many more things that selective disclosure can bring.

Unified medical record systems, unified supply chain systems. The sky is really the limit because the reality is that business always has a private side. Many of you have always been asking when will the blockchain revolution come? we've been around for 10 plus years and every year they say this is going to be the year. Every year they say we've come up with something.

We've solved it. Despite the fact that blockchain as a whole is a multi- trillion dollar business, many of you have yet to feel its full impact upon your businesses and your finances. And the reason being is you cannot have a stool missing a leg. Doesn't have the integrity it needs. And that leg of privacy has always been missing.

No one wants a money system where every single thing you buy and do, you think and say, is recorded forever publicly for everyone everywhere to see and there's nothing you can do about it. We need to have systems that have escalating and selective disclosure. And we need to have systems that preserve and protect our privacy. Whether it be our HR records or our medical records or our financial transactions, we have a statutory and god-given right to freedom and to privacy. And what's magical about what Midnight and other privacy-enhancing technologies give is we think we figured out a way to make it work, not only for the individual, but for the nation state, especially a nation state that wants to return to having sovereignty over its people and its transactions.

So, I highly encourage you to go to Midnight's Discord. I highly encourage you to spend some time and learn a little bit more about privacy-enhancing technology. It really is the last mile in the revolution of cryptocurrency. It's the final generation and it's the one that's going to on board billions of people and it's the one that's going to unify all the markets. And I have every reason to believe that jurisdictions like Abu Dhabi with the ADGM leading uh will be a essential partner in this revolution as they begin to transform and globalize.

Thank you all so much for inviting me to speak and I'm sorry again I couldn't be there in person but I truly enjoy uh all the amazing things you've done and I'll see you next year. Cheers.