“Traditional finance failed repeatedly in compliance, time to explore alternatives” | RadioFinance

“Traditional finance failed repeatedly in compliance, time to explore alternatives”

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Crypto experts and decentralised finance (DeFi) practitioners shared their perspectives on how crypto banks and integrated DeFi services will impact traditional finance and shape the future of the industry.

Eric Barbier of Triple A, a cryptocurrency payment provider; John Patrick Mullin of Mantra DAO and SOMA.finance, integrated DeFi platforms; and Marcel Robert Harmann of DeFi Suisse and Thorwallet DEX, offered glimpses of emerging DeFi business models and use cases while addressing key challenges in adoption, regulation, and interoperability.

Barbier stressed the importance of regulation for crypto and DeFi services, such as payments, to be more widely trusted, adopted and used. As the industry seeks greater adoption, especially by institutional players, regulation will drive DeFi and traditional finance to converge.

Mullin stated that DeFi and its underlying technologies and ecosystems are still in the initial phases of development and will take time to mature and become mainstream. He gave examples of vertically integrated services that will provide alternatives to traditional finance, and deliver greater innovation, security and efficiency.

Harmann argued that regulation has not always led to better compliance. Despite heavy investments into anti-money laundering (AML) and combating financing of terrorism (CFT) compliance, traditional finance has failed repeatedly. It is time to explore alternatives. With regard to the perceived risk of digital assets, he suggested greater focus on effective consumer education instead of a blanket prohibition.

The experts agreed that DeFi innovation offers prospects for further product diversification, investment opportunities, and financial inclusion, especially in areas where traditional finance has failed. They pointed out the need for relevant regulation for DeFi to grow. It will require policy makers to recognise the potential of the underlying technologies and ecosystems being created and that interoperability and talent acquisition will also impact its development.

The following key points were discussed:


Here is the full transcript:

Foo Boon Ping (FBP): Good afternoon to Asia and good morning to the audience joining us from Europe and welcome to Radio Finance, the digital broadcast platform of the Asian Banker. Much has been said about the potential of cryptocurrency and this digital, decentralized finance or DeFi to disrupt traditional or centralized finance. But today we'll discuss a slightly different angle to this, how decentralized crypto platforms are wanting to become banks themselves.

How will the advent of crypto banks shape decentralized finance and we're very happy to have a group of crypto experts and decentralized finance practitioners from this very interesting part of the financial landscape in Asia, as well as Europe and all the crypto capital of the world, Singapore, Hong Kong and Zug, the cryptocurrency capital of Switzerland, to discuss and debate the impact on financial services and how they will shape the industry going forward. How players are taking different approaches and seeking to seize these new opportunities and address the emerging challenges.

We would like our audience who have joined us via Zoom, Facebook or LinkedIn to be part of this conversation as well. Just type in your questions and comments in the comment section of the different platforms. And those will be relayed to me and I will, in turn, post them to our guests.

Let me introduce them now. They come from a very varied background in the crypto world, from crypto payments provider to digital assets service providers. We're very happy to have with us this afternoon please. Eric Barbier founder and CEO of Triple A, a cryptocurrency payments solutions for businesses licensed by the Monetary Authority of Singapore. We have John Patrick Mullin co-founder of Mantra Dao, a decentralized finance platform and also co- founder of SOMA.finance, a US regulated decentralized exchange (DEX). And we have Marcel Robert Harmann, founder and CEO of DeFi Suisse AG and THORwallet DEX, and also a board member of the Crypto Valley Association in Switzerland.

 Welcome, gentlemen, and thank you for being part of our panel of experts. I look forward to an intriguing and insightful discussion on a topic that I am sure is on the top of mind of many of our audience in terms of the actual practical knowledge and experience, this being such a new area, and understanding how everything all comes together, crypto banking and decentralized finance.

Crypto bank, is it a contradiction in term? Is it an oxymoron? Decentralized finance is designed to remove intermediaries and yet decentralized and crypto players want to be banks themselves. So, it is a very interesting proposition. DeFi comprises financial products and services built on a distributed ledger or blockchain-based infrastructure. It challenges the age- old paradigm of centralized financial system as we know them. It rejects the role of the middlemen, as we've discussed, and wants to effectively eliminate them, focusing on peer-to-peer network and state to truly democratize finance while enabling speed, security, lower costs and bringing forth unique opportunities, and offers immutable transaction transparency, open source and faster transaction.

Consequently or otherwise, that industry has boomed, there's a lot of media and industry hype, the total value of crypto assets locked in DeFi rose by 240% or reached almost $140 billion so far in 2022. This includes financial products such as staking lending, borrowing liquidity pools along with emerging products, such as non-fungible tokens (NFTs), among others. But for all intents, purposes and promises, DeFi has a long road ahead and many challenges to overcome. It needs to address compliance and security issues that range from regulatory uncertainty, increasing cyberhacks and potential financial crime, technology, complexity, scalability and interoperability issues. 54% of DeFi applications are currently based on Ethereum.  

There are limitations on number of transactions and the cost of transaction itself. And it can be complex to use.  With that in mind, we will cover some of this complex, reimagining a world with crypto banks, the rise of DeFi apps and crypto banking. How does it impact the fractional reserve banking system that has financed the global economy in the last 300 plus years? Evolution of blockchain disruption in payments lending business model addressing interoperability and achieving greater scale. DeFi ecosystem is riddled with infrastructure mishaps, regulatory uncertainty, how do we prevent related risks? And finally, how electronic know your customer (eKYC) can build trust and transparency with customers to lower the risk of financial pie and anti-money laundering (AML) concerns in crypto banking.

In this interactive panel discussion, we'll discuss and capture the perspective of our esteemed guests. And I want to start by focusing on our first topic, reimagining a world with crypto banks and the rise of DeFi and crypto banking. And I want to start by asking each one of our guests to start with the introduction of themselves, their company, what they do in the crypto space, and then also get thoughts on this whole topic of crypto banks, DeFi and crypto currency adoption has exceptional growth in the last couple of years.

What are some of the key factors that fueled this role, where you see the biggest opportunity for DeFi to disrupt and transform the current financial services model effectively. And of course, the question is, why do we need crypto banks? We'll start with John.

John Patrick Mullin (JM): Thanks very much. Glad to be here. A little about my background, I actually came from traditional finance (tradFi). Like I mentioned, some of the other panelists as well may have had previous careers in tradFi.  But then pretty early into Bitcoin, back in 2013. And then was kind of researching blockchain and cryptocurrency applications at the bank that I was working at, in 2016. Before I kind of went full time into the crypto space, and worked in a number of different facets, from exchange, to fundraising, and venture capital (VC) to running Dao and a DeFi platform and doing a bunch of different other things.

At present, I'm working on two main things. One of them is Mantra Dao which is the product I was introduced under. Mantra Dao is one of the earlier DeFi projects, we launched in August of 2020. So, it's like right there was something called DeFi summer. We were quite early in that sense. And since then, you've seen this kind of really big surge in all different types of web3 applications from DeFi, NTFs, etc. So what Mantra Dao is essentially a vertically-integrated, DeFi ecosystem. And that means that we have a bunch of different layers of the business. And that starts at a foundational layer of basically running validator and node infrastructure for various projects, as well as for kind of proof-of-stake blockchain networks.

On the flip side, we have something that I think is more relevant tothe question that you just asked about regulation and cryptocurrency banks and things like this. And that project is called SOMA.finance. SOMA.finance is essentially a joint venture between Mantra Dao which is its project and just talked about, and the US broker dealer based out of New York called Tritaurian Capital. So essentially, what SOMA.finance is trying to do is take all these different kinds of Defi applications and DeFi primitives that have been built over on the Mantra Dao side or in any other place around the DeFi space, and utilizing Tritaurian’s brokerage licenses. So, the Financial Industry Regulatory Authority (FINRA) and Securities and Exchange Commission (SEC) brokerage licenses, and creating an anti-money laundering (AML) and know your customer (KYC) and securities compliant platform.  We were honestly just taking DeFi primitives such as peer-to-peer transactions via automated market (AMM).

I think Robert, or Marcel is also doing that. I’m very interested to hear more about their projects. And we're also doing kind of issuance platforms for capital raising, as well as a lending and yield product. So essentially, the way that we do it is create this walled garden. And you have to KYC and AML to kind of get part of this ecosystem. But once you're in, we actually know and can permission on the smart contract level, who can interact with what products and whatnot. And this also allows us to one tap into US retail compliantly, which is a very obviously huge market, and to also allow institutional players to come in that may have concerns about anti-money laundering, compliance policies within their own organization.

I think that's kind of an interesting kind of segue into your question about crypto banking. We're almost creating somewhat of a crypto bank of sorts. We're not necessarily calling ourselves like that, but we have kind of used the term trying to create the Goldman Sachs of the metaverse. So, there is that angle of compliant issuance capital raising, then obviously, you have a trading platform, secondary market trading flat platform, so you can actually take assets that are compliantly issued. And then you can have them traded. And you can have a secondary market for it. That’s connecting both retail and institutional players, which I think is one of the big primitives and promisesof DeFi is to be able to connect these institutions with retail.

FBP: And you are US regulated, so under the US securities law?

JM: That's correct.  So, we are basically highly regulated, I would say. Because of the way that the Financial Industry Regulatory Authority (FINRA) sees, operating organizations underneath it's purview, even though that it's only 50%, SOMA.finance, the company. It's only a 50% partner of Tritaurian capital, which is the broker dealer, it actually just sees it as one and the same.

FBP: I know you're already serving financial markets.

JM: The Mantra Dao side has been operating for several years now. SOMA.finance, we actually just raised a seed round, which is led by Animoca Brands and Griffin Gaming Partners. And we're about to close what we are calling the liquidity round, which is also being co-led by Animoca and Griffin. So really excited about that. So far to date we have raised a little bit over $20 million. And that's all been done the summer token sale, which is being issued as a compliance security in the United States under Regulation D, Regulation S and Regulation CF offering exemption.

FBP: Thank you, John. Next, we'll hear from Eric, operator, Triple A payment platform, a crypto payment platform for businesses. And he's a veteran in tech companies as well. He's also founded another payment company called TransferTo, which is kind of rebranded.

Eric Barbier (EB): Veteran means I'm older, that's what you're saying. You're right, I've been in the fintech space for over 10 years now. And you know, I started Triple A to essentially help businesses get paid conveniently, with crypto so that they don't have to touch crypto. We're targeting the traditional 99% of the businesses around the world who are not able to manage crypto. And so, we're able to end on all their all their crypto payments.

We've been licensed by Monetary Authority of Singapore (MAS), by the Central Bank of Singapore. As a payment institution, we’re licensed for crypto as well as merchant acquiring and money transfer. And come to your question in terms of what is the biggest opportunity, what is the biggest area of disruption in my opinion, when it comes to crypto and DeFi, I believe it's going to have a huge impact is on the $300 trillion  cross-border payments. As we know, current cross- border payments like Society for Worldwide Interbank Financial Telecommunication (SWIFT) to some extent, tends to be a bit old and slow and not so efficient.

I believe that's where crypto will have a huge impact, whether it's consumer to business payments, like a consumer in New Zealand, purchasing from the marketplace in Singapore, or it can be business- to- business payments.

For instance, an accounting company in Dubai with clients in Norway and they want to pay in crypto. For business to individuals, think of a business in Hong Kong having a freelancer developer in Indonesia who prefers to receive crypto rather than the local currency.

FBP: Great. The next question is you are in the payment space. Are you looking to go beyond payments? Payments itself is an interesting application for crypto payment business itself. It's very razor thin margin. As an alternative, you're competing with a lot of established payment methods. And in terms of profitability today, payments companies are not making money from payments itself. It is through other value-added services, embedded finance and so on. Is expansion of service naturally providing beyond payment services, a cost of growth apart from development thing?

Eric Barbier (EB): I tend to disagree. Payments companies are very profitable. If you look at the credit card payment gateways, if you look at the end, if you look at stripe those are generating very high profits. And even though the margin you can make on the payment is very thin, the volumes in the entertainment industry which have to be processed are just amazingly big. As a startup founder, I did couple of startups, I believe that you need to be laser-focused on what you're trying to execute. And until you move to something else once the base has been completely covered. So for now, we're completely focusing on payments whether it’s business to customers (B2C), customers to businesses (C2B), or businesses to individuals.

FBP: Great. Thank you. And we'll also get Marcel's perspective on this. Your experience in Europe in terms of the potential for a crypto banking platform, and in Europe some of the regulation is still being developed. Markets in Crypto-Assets (MiCA) for crypto assets? And does that kind of facilitate the setting up of such players. 

Marcel Harmann (MH): Right. It's a pleasure to be here. Maybe a quick introduction. First, my name is Marcel. I'm the founder and CEO of THORwallet DEX, decentralized cross chain exchange, that recently won the Startup World Cup in Dubai.

Our vision is to offer all financial services a person needs but based on DeFi technology, which means it's permissionless, fair and transparent. And all the creative characteristics you actually mentioned before as well. Our main product is a mobile wallet on iOS and Android with the integrated cross chain decentralized exchange (DEX), where you can swap native unwrapped token which is kind of industry's first and also earn interest rates on them.

Soon, we will also launch a web app for a neat ecosystem experience, as well as lending and borrowing services. Everything based on DeFi originally. I have a background in banking and finance from the University of Zurich. I also started a PhD in IT. Currently, I'm also course director at the University of Applied Sciences, Lucerne, one of the founding members of the Crypto Valley.

There I direct further education courses. They're called Certificate of Advanced Studies in crypto finance and cryptocurrencies and another one in blockchain. They're like deep dive courses. For three to four months over, they really get to know the set topics. I'm also co-founder of The Tech Institute DLT Education Consortium, which is an online examination platform for digital asset specialists, backed by leading universities around the world.

And I'm also a board member of the Crypto Valley Association, the biggest crypto-related Association here in Switzerland and also one of the biggest one all around the world with the mission to foster the ecosystem here in Switzerland. Between education, the regulation, the startups, the existing companies, and so on.

FBP: Where do you see the biggest opportunity for DeFi to disrupt? And this whole proposition of crypto banks trying to breach the fiat and the cryptocurrency world?

MH: Yes, there are actually some good attempts. I can speak of the Crypto Valley. There are actually two crypto banks here, I think, actually worldwide. They're the two first banks who got an official licence from the financial regulator, and they're solely focused on crypto finance assets and with the machine to bridge their fiat or traditional world with the new crypto world and I think they do a fantastic job and they need to grow the whole space.

FBP: Okay, this whole crypto-based transaction is shifting the industry towards decentralized framework. What in your opinion are some of the most compelling use cases where in DeFi as a crypto banking or significant future potential for the main thing is mainstream adoption and why. Today, crypto adoption is kind of focused around crypto assets, for investors, or maybe high net worth investors or investors who are familiar with cryptocurrency and their families to move them more towards maybe business institutions, and therefore that a lot of infrastructure needs to be built to make them more trusted by an institution in a custodian services, and so on, and so forth. Tell us in in your opinion, what are the most compelling use cases for crypto bank?

MH: I think a few things you already mentioned. So, crypto banks, to what I've seen so far, at the beginning, they were focusing on institutional clients, because that's where the big money is.  So, if you convince the clients, he will come with a big pocket. Now, this is shifting also to mainstream adoption. So basically, in your normal bank account, I would say, you also have the possibility. In Switzerland you see your cryptocurrencies in your native banking app listed there.

This, obviously in the background, needs a lot of technology changes, IT management, changes for the banks to be able to run that, such as custody solutions, you mentioned. The processes are slightly different. The compliance, the processes are actually similar. You need to do compliance as well, just the use cases are a little bit different. In the end, I would say, crypto banks can pretty much offer to all clients, services. And they're not so much different. It's just that the services are basically for cryptocurrencies. And this can also be direct investments in cryptocurrencies. It could be breaching with track futures certificates. Basically, wrap the crypto assets, and then they're traded on traditional exchanges. It could be that you tap into lending and borrowing in the DeFi space, but through the crypto bank, for example. So, you get exposure. There are different kinds of use cases, and they're there in handy moment.

FBP: Okay, great. Thank you, Marcel.  John, I’d like to come back to you on that. Where do you see that use cases for now? Could go back for your experience for consumer finance.

JM: Sure.  At least from our perspective, we're taking a little bit more of a retail approach at the beginning. Maybe a little bit different than kind of the Saber, Signum model, where they went institutional first, and then retail. Sind of the way that we're developing our strategies is definitely retail. First, we think of one of our unique advantages is the fact that we can issue tokens that are compliant, and you can directly distribute and sell them to US retail investors.

Obviously, that's a very powerful thing. Particularly given the fact that American retail investors have honestly never been able to, or at least not for a very long time, legally participate in any primary issuances of tokens, generally, would be called an initial coin offer (ICO). That’s a very interesting thing. And one of the things that we think is pretty cool is some of the different verticals that we can kind of get into with these token issuances.

Some of the things that we're kind of, we're really kind of hyped about or excited about would be, you know, kind of getting into sports, fan engagement tokens for brands, music, this type of thing. And one of the kinds of things when, again, we're doing this all as compliant securities in the United States.

I'm trying to, like steer the conversation away from calling them STOs or security token offerings, which is kind of like an ICO under a securities offering. I had a bit of a maybe a little bit of a bad taste or kind of a bad feeling just because in the 2018-2019 days of crypto that was kind of like build this next big thing.

And it never really lived up to the hype. And part of that was because there was no retail participation. And I think another part of it was, everyone was just trying to tokenize buildings, which, for a lot of retail crypto investors just isn't that cool. But when you start getting into things that are fundamentally close and near and dear to someone's heart, such as, hey, this is my favorite football club, or this is my favorite musician.

And perhaps the token actually has some real value in it rather than just faux governance. But actually, you can build in a royalty stream or some sort of revenue, or dividend payment into the token itself. That's how you can actually have real value accrual. So that's one thing that we're pretty excited about.

FBP: And you’re targeting American investors there. But the American regulation on crypto is still kind of being developed in terms of defining what crypto assets actually are. That will go deeper as we as we go forward. I’d like to also get Eric’s perspective on this co-existence of DeFi and current centralized finance application. What does it mean for financial services? How does it turn up? And the whole idea of crypto bank being set up as in bank, as we discussed earlier, fractional reserve banking system itself? What implication for these regulated players being having to comply with capital liquidity requirements, capital charges, regular banks, Basel 3, and so on.

EB: That's a lot of question. On the co-existence as you know, where we're headquartered in Singapore and Singapore stance is if you want to do crypto, you have to be licensed, you have to be a financial institution (FI). So, by definition, you can be doing crypto without being an FI. So that's how that's the approach of Singapore. And from what we were saying from overdeveloped market, that's really the big trend. Even the purely DeFi project and so on. The MAS thinks those projects also have to be under the supervision of the bank. So that's why I believe that the two areas will continue to create these.

Central banks should not issue central bank digital currencies (CBDC).

On your question of whether you know, the fractional banking system will continue to exist and so on. There's been a lot of speculation around central bank digital currencies (CBDC). And I don't think central banks should issue digital currency. Because I believe the private market is actually the most efficient to handle that today, you already have Tether (USDT), which has press USD Coin (USDC), which is growing very fast. You have people who've been looking at USDT, which is a different approach to stable coins in particular. And I believe that today, the whole system is well designed, you don't need more government intervention. The only thing which is needed is regulation, but not intervention.

FBP: That’s a very interesting perspective, you're regulated on the MAS and MAS is also one of the proponents working with Bank of International Settlements (BIS) on using cryptocurrency or at least underlying technology for cross border-payments. Project Ubin, banks and DBS, JP Morgan, Partior to explore the use of the technology. In your opinion, digital currency itself, whether the use of retail or wholesale purposes will be useful, the technology, not as a currency.

EB: They can still be currency, but I believe that those currencies want to be issued by private entity like Circle with USD Coin (USDC). And potentially others, instead of being issued by the central bank. The central banks will continue to issue the currency that they will give to banks, and then the banks are going to give it to the rest of the world. And I think you'll have a concept which is perfectly fitted to cope with digital currency. In particular for stable coins.

On your point is, it's true that MAS likes very much of crypto for payments, they are not a big fan of crypto for retail investors, you know with banks. They banned all advertisement for retail investors to buy crypto, which I think is kind of a good idea because it was kind of getting easier to buy Bitcoin. So I believe it was, I think MAS was right to kind of stop it. You don't want to have the taxi drivers in Singapore to put all their money into such a speculative asset.

FBP: Maybe the number of crypto exchange platforms, Binance, for example, is trying to get a licence to operate as such it and it wasn't successful. That kind of gives an idea of where regulation Singapore is as far as crypto as an asset. Now the evolution of blockchain disruption in payments and lending, borrowing business model addressing interoperability and achieving greater scale so.

I want to get Marcel in to get your view and first to react to Eric's point about digital assets as risky investments for investors alike. But also this question of decentralized finances has not really been stress tested by law or widespread use. Currently over 50% of the apps are based on Ethereum. But there are also limitations on the speed, scalability and accessibility. What is your opinion, are the most critical medium for future scalability? All of them for this application? Marcel, your thoughts?

MH: Sure. Let me quickly answer the first question regarding consumer protection. Maybe I have a little bit of a controversial view on that. Because I think the best consumer protection actually is education. Like the money spent on compliance, in my belief should rather be spent invested in better education. It should be the government's duty to have a good education system so that every citizen can make sound financial decision and protect himself if it is a fraud or not.

And it's actually very simple. Instead of teaching that language like Latin that you will never use in life, just teach finance, tech and entrepreneurship, teach how to make sound financial decisions in life. It is way much more useful than the old, in my opinion, dysfunctional financial system kind of has shown that the current way of protection, anti-money laundering solutions, they're not working like there is money, there's still war, obviously, everywhere.

Weapons are still bought and sold immediately. Drug lords still ship a lot of drugs. And so, in my belief, new creative ideas to circumvent such rules were always found in the past. So why would you want to bring over like an old, dysfunctioning process that is proven to be not working for like 20 years into brand new system? For me, that's kind of insane. So, things like a paradigm shift is happening in the financial industry with DeFi, you also need to find new processes that adopt to this new paradigm. And from my perspective, that's, that's like pure education.

FBP: So, you think anti-money laundering and all counterterrorism financing, that is managed by the financial system is not working, there's a better way to solve it.

MH: Yes, I truly believe that education goes solve a lot of things, at least for communities, consumer protection, so people understand themselves who can make financial sound decisions themselves. That the anti-money or the AML compliance rules that costs millions and millions and billions of dollars to banks have proven. You know, there were loopholes all the way around, and it's just chasing to try to fix the loopholes. It was not working. So, we need our ways. And I believe that education is one of the things but surely, there needs to be some guidelines and rules, but just the extent that we've seen so far, I don't think it's actually working. Okay, you had another question regarding…

FBP: I have another question about decentralized finance, being stress tested, though, there hasn't been widespread use because of the limitation that we know of. What is the key factor for future scalability of off the technology?

Interoperability has become critical, but companies and users will take time to adopt. 

MH: For me, a smart contract platform is like an operating system such as Windows or Mac OS, or Linux, but it runs decentralized and unstoppable. Currently, Ethereum takes the biggest share of DeFi activity but there are other ecosystems like Polkadot, Luna, Avalanche and they're gaining momentum. And interoperability is a key factor. Like nowadays, you can print the file from your device to any printer. Some years ago, you needed to have a dedicated Apple printer to print from an Apple device. And interoperability wasn't given there.

And the same is happening today in the blockchain. So, the end user wants to swap native tokens across different ecosystems without actually feeling that they just crossed over to another ecosystem. And this is being worked on. One example is Torchain, which is kind of a liquidity layer and cross chain infrastructure, which allows to interact with various connected layer one chains. And I believe they play a big role going forward. But in the end, the ingredient needed is just time to work on the technology. And that's all. It's not impossible to build. It just takes time. And said before, like most of the things are up and running. And the adoption rate we see is actually faster than we saw during the internet adoption phase.

FBP: Okay, it is made for the masses, right? The whole motto is to democratize assets so everyone has a part of it. And these are genuine concerns for, as you mentioned, the novice investors with all these concerns about cyber hacking, phishing, and even the simple idea of losing a crypto wallet, economic losing valuable assets and all kinds of money. So, the other way is to address them through technology, but you need standards, you need regulation, you need a regulator to step in for consumer protection, then this whole DeFi dream can never be fully fulfilled, because it's part of regulation and keeping everyone safe.

Balance of regulations is necessary to avoid suffocating DeFi.

JM: I think too much regulation is not a good thing. You need thoughtful regulation. Yes, just the right amount. And that's honestly a fine line, it's very tricky. It's not an easy thing to get right. There's ebbs and flows of positive direction. And then there's some, you take some steps back, and you know, it happens. But I think one thing that, I think has been pretty interesting, at least in the United States, there was a kind of an idea to potentially tax proof of stake transactions. So anytime you're earning a staking reward via a kind of a staking pool or something like that, you could essentially be taxed, it can be a taxable event. And that would obviously, I mean, that would legitimately kill a significant number of DeFi and crypto businesses in the United States. I mean, it would have been horrible.

And, honestly, I think one good thing about having a lot of one very smart people, but now very wealthy people in the crypto space, be able to kind of step up and then kind of almost form a grassroots kind of movement of sorts, to actually have thoughtful lobbying put in place to say, Hey, this is really, really bad for the United States crypto ecosystem, we need to change this.

And in the end of the day, it didn't pass. So, they ended up removing it. And it was it was like the first the first time I've seen where, like, just the general crypto community really stepped up and was able to actually like, impact, legitimate change at really the highest level in the United States, kind of judicial and regulatory system. That was a pretty, pretty interesting thing.

FBP: There must be a meeting of the community objective, and the regulators are kind of coming together. Regulators across most countries are watching the crypto space, make responses.  Regulators in Singapore, in Hong Kong reason that are really into it. Europe as a region is developing crypto regulation, the US to the federal government is also looking at the know how to regulate this. I want to get Eric into the conversation. There’s still a lot of regulatory uncertainty by still evolving posing challenges for global DeFi crypto assets. And in some areas in a smart way, like crypto for payments. How can companies work together with regulators and apply that middle ground to balance innovation with regulation?

EB: The money we were seeing as being fairly efficient. That's what we do in Singapore with a different association, the Singapore FinTech Association, as well as the blockchain association. We have regular closed-door meetings with the regulators, to explain the views of the industry and so on, and we're already able to have a proper discussion. So, I guess that's probably the best way to engage with a regulator so that they can understand the how the DeFi space works, and to educate them, and so that they understand what is a real threat versus what is not. And I think the most efficient model is to work through the industry association, so that we have a unified voice when talking to the regulators

FBP: And then the regulators that but there are two main concerns one is, of course, consumer protection, right, which we have discussed, like, how to keep consumers money safe, right. And the other is also financial system stability, right? How the role of regulated players has risks that is in terms of building up in the system, by this alternative, as if they are not regulated.

And in the case of default and so on and for forth. So, I think internal consumer was discussed already. The other way around financial stability, especially with fluctuation of crypto asset pricing that cause instability, right. Collateralization factor here, where your crypto assets and some of the challenges that some of the business model may have, in terms of this concerned about financial system stability, wanted to get maybe, you know, maybe short comments from Eric, and then, John.

Volatility is inevitable but can be controlled.

EB: Yes, that's part of a lot of things we're doing at Triple A, is really solving the volatility problem. So, say you're buying a pair of shoes for $100. What will happen is during the checkout process is that we will lock the rate. And so, no matter what is the volatility of the cryptocurrency, the merchant will get exactly $100 on their bank account for next day. So, there are ways to handle volatility, and I think we will see more and more innovation in the space.

FBP: I think we have covered a lot the topics already and I will come round to wrapping up and I want to give everyone an opportunity to wrap up on again on this topic of crypto banks like so, crypto finance play, and how will the shape DeFi asset industry. Let's start with Marcel and Eric then John, again.

DeFi has just started, and the industry expects to attract more talents.

MH: I really think that that DeFi is currently being billed as like a parallel financial system next to the traditional banking system, it's still young and not so mature, we need a lot of work to be done a lot of energy to put in. But it's growing fast. And it's a super interesting place to be in. Personally, I believe it will grow on par with, even become the financial system. The main hope is it achieves, that is because of the advantages that you can do peer-to-peer transactions without middlemen involved, very efficient. You can exchange them on decentralized exchanges very fast, cheap and reliable.

You can earn your tokens, you can put your tokens at work, you can earn interest rates, you can provide liquidity, you can lend them to someone, there are even more sophisticated users you have yield strategies or derivatives. There really are a lot of financial services being built on DeFi, but with the main difference that it runs on blockchains, which is transparent, and open, fair, and permissionless. So, everyone can shine, there is no one to be excluded, you only need to have an internet connection, and a mobile phone or a laptop. Surely, user experience etc. needs to be improved. But once this is done, this is super powerful for humanity as a whole.


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