Crypto Banking Around the Globe

Transcript

right I think you can more or less uh hear me thank you so much for being uh so patient we are a little bit late but we're in Geneva after all so it's not so so Swiss um and we do have quite an international uh panel that I really have the pleasure here to be able to moderate uh today uh I'm really grateful to the crypto valy Association for putting this event on uh in Geneva Geneva often gets uh forgotten in The Wider Swiss crypto Valley area so it's really great to have the first one uh here it's also quite a special uh conference for me as it's been four years since I'm affiliated with the crypto Valley Association no longer actually an executive role but moving to a non-executive role actually uh now very shortly so it's a really cool uh time to be alive and also to be part of

the C Valley Association so I think without further Ado um we'll start off today just by giving a quick intro to everyone here and then I have some really uh cool and hopefully Fire Starting conversations uh to light up the panel with so maybe we uh kick start quickly just quick intro Juka about yourself and uh yeah yeah sure so uh John LCA Sant legal specialist of the Innovation area in basella I believe hi everyone my name is Elo I'm the head of compliance of baki company which is a really small Bank uh um which is a family Bank uh almost 100 years old this year and it was the first bank who

obtained the Casp um like I in France so we are changing everything and we are putting Innovation uh in front of strategy for the next year yeah hi my name is Ricard martinz I'm the general manager of Bon digital assets which is the crypto arm of Bison Bank bison Bank in Portugal was the first in Portugal to receive the virtual asset service provider license and it's still the only the only one uh today in in in Portugal and and it's uh uh not so old but also a very traditional Investment Bank not retail bank with more than uh 30 years of experience in in in Investment

Bank hi everyone my name is gam shatan I'm head of sales at SG Forge uh Forge is a fully owned subsidiary of society General group that was funded in 2018 and is like fully dedicated to to digital assets uh I actually joined just last week and before that I was uh for three years as head of institutional sales at coinbase for international fantastic well it's a pleasure to have you all uh here um and I think one of the first questions here that's probably on everyone's mind is kind of what is the sentiment with regards to crypto at at the banks and maybe LOD I give you the uh the par first uh and that you can say a little bit because when we were in our prep call you gave some interesting statistics about in France the amount of

people that have an active crypto wallet with regards to how many people have an active Structured Products wallet I think it was I mean do you want to give a littleit of um I think the statistic is from the French Market Authority and actually in France we have 9 million um crypto wallet user and we have only 8 million of Investment Portfolio um customer and friends so that's that's that being said uh we see in France we have more uh crypto user than standard uh investment users and it's the main issue and it's the main point for for the banks that we

have already we already have customer who ask uh crypto services from Bank yeah and and maybe tell us a little bit more about that side of the the the risk culture you're telling us and that the banks even though that statistic is quite mind-blowing right there's more people that have active wallets than I have active Structured Products accounts I mean why why is this kind of yeah is there s of risk culture the compliance side what is the problem is it the AML side why why aren't banks in in front starting to offer this um I think most of of French banks right now have wonderful uh Innovation team but uh most of them do not propose crypto services

at all why I think it's link U most we we we talk all day long about the regulation framework and I'm the head of compliance so u i I think the the main issue the main Li limitation for French bank is all the the risk they need to manage this new risk they need to to manage they need to um educate uh their their team compliance team legal team operational team and it's a huge step in term of culture they need to change the risk culture uh in Bak we have a managing partner um he who has a PHD in at uh is a huge crypto fan he was a minor and in start

in 2011 so I think the you know the culture Changed by the top for most bank then the Innovation team need to to convince the board that the crypto is the next generation of of of services well thank you so much for being here so the hardest to get compliance folk either in the room or on stage so thank you so much uh for doing that I maybe are we put it to yourself Ricardo because we're discussing a bit about the Portuguese ecosystem related to Banks and you had a feeling that the kind of crypto side related to Banks was like you felt this feeling of being shut out maybe you can talk a little bit more to us yeah I mean I mean um the the bank is is again it's an investment Bank f is

focused on on high netw worth individuals and also corporates but it's also a bank that acts in very intern Al so uh uh we have clients for more than 110 jurisdictions but going into Portugal you know Portugal is seen and it is a tech Hub in in Europe and is and is regarded quite positively regarding crypto but when it comes to banking if you know the ecosystem um we we've got a lot of startups working in crypto that uh cannot have a bank account open in in in other bank so that that is you know not so different from the the the whole Panorama in in in in Europe uh and and to go to to to this point I think um it

it is definitely a a u there is a gap sort of say in terms of also knowledge of the space in terms of the banks and maybe uh that is why we have here standing not tier one Banks and or tier one bank or tier two bank uh because in my view it's easier to uh uh have a bank such as ourselves having me and my team um to do this education Journey also within the bank from all perspectives not not just compliance it's also on on on the on the risk perspective on the accounting perspective Etc and so and it and it's a process right it's a process uh but definitely there is still some

shutdown of of uh upfront uh on on on companies and and and we're a lot about not doing that right so it's not so much about being crypto friendly I I like to say not so fency word that it's crypto fair so what what we uh very openly discuss with with whatever comes to whoever comes to to our door is um listen we we you're going to to be kyc as you would be kyc in in traditional Finance not more not not less uh of course that there is a a a risk assessment and and levels that that of course crypto always is a high risk client but it's not higher risk than

other higher risk client in in in traditional finance and I think that's a lot about that is you know honestly looking into these new business models from new crypto startups and understanding them deeply uh and and and conveying uh day after day uh this knowledge into the DNA of of the bank which is a Traditional Bank doing doing the their J no thank you thank you for that and before we we we move on to G here I just want to piggy back of what you said that was that POS positive kind of news and and you were very positive in the call that we had I mean maybe you can tell us a little bit about some of the positive news with regards to like sentiment I mean we spoke about some of the risk mitigation side I mean you spoke about Mika uh you spoke also about

like the rise of tokenization do you want to give a few words on the positive side of things yeah yeah I'm I'm I'm like to be an optimistic guy so I I think that m is bringing a lot of positiveness to towards Europe and towards Europe for for the world I mean there is nothing similar to to this to m in in at least at the scale uh in any other jurisdiction so I I truly feel feel that you know Europe has the chance to lead in a positive way in in crypto and in banking and throughout the day I've seen these these amazing you know colleagues of this industry talking about uh where are we at where why don't we do uh more I I think it's gradual but I think it's it's happening and I and I

and I believe that Ma will be definitely a plus for for us us and and it's helping uh this shutting down that we still feel and and these fear so um yeah my my my perspective is a little bit of positivity it's always good um and I mean uh G for myself I mean f has been at the Forefront when it comes to applications or let's say fintech banking applications of blockchain Technology do you want to talk to us a little bit about some of the ones that uh uh you know of that are happening internally I know you joined just recently um so we won't ask too many like uh details but maybe you can tell us a little bit about some of the ones that are going on and that you're excited about yes thanks uh really excited about it and actually like how I

want to respond to that is like a few reasons why I decided to join Forge uh the first one is because Forge is one of the leaders in Securities oranization uh and I believe tokenization of security such as bonds like Structured Products uh even cash uh is like a place where there's going to be exponen exponen exponential growth uh few numbers I can I can share uh I was looking at the the statistics last year uh there were 13 issuances for a total of $720 million of Securities um the uh number year to date has been like nine insurances but we're already very close to 1 billion so I think we're like almost going to be like a 10x uh gross

like this year um this is something that I've seen when I was at conbase like from 2021 to 2022 we 10x like the the the trading and mostly most almost the revenues as well at the same time uh I think like on the tokenization side uh what is going to happen to Banks is going to be something very similar um the products that we have at Forge uh I mentioned like starts with tokenization of simple products although the insurances are complex uh but bonds uh one of the best project that was tokenized last year was a green Bond issued by sojen uh for its own purpose 50 million of insurance that were bought by uh AXA investment management uh and generally other types of

Securities that are tokenized are Structured Products uh and certificates of deposits uh sojen being one of the leaders in terms of uh Structured Products issurance uh on the Investment Bank side and we're trying with Forge to to take advantage of this leverage the S Forces and and try to just like distribute token Str product in the like entire ecosystem one layer that is very important for all this when you do stuff on chain is to have a settlement layer and this is why Forge decided to launch uh a stable coin that's a stable coin that is issued on on ethereum obviously it has to be on on on a public blockchain uh and is the only bank that has been doing this so far wow um the

the second reason our our join is I think the the mindset is changing you are talking about Innovation Labs uh I think we're in Banks now like we we move from Innovation Labs into like this is like a business unit uh and I have p&l objectives I think the the message that Forge sent to the World by hiring me was really like now we have ahead of sales and really want like to show that we have a pnl and I have objectives to generate revenues uh this year and and these are like high objectives uh and finally the last one is SG Forge is one of the only ones uh or at least they're a leader in terms of like using public blockchains uh a lot of the competitors have been doing this on private

blockchains like we like R3 B uh daml um but uh sjan has been deciding to do stuff like first and foremost uh on public blockchain which is ethereum uh we're looking at other blockchains as well uh and potentially uh being able to meet like other banks on on some of the the more like permission networks uh but still TBD yeah fantastic I mean that's quite mind-blowing to me when I first heard it that you mentioned that banks are moving from permission system to permissionless I mean it seems bit of noxy more and sometimes I mean Jen you you commented on that as well in the core can you give us some more perspective there as you were telling us that there were some uh projects some tokenization projects as well that you see internally moving more

permissionless as well can you give maybe the audience a little bit more context there yeah sure so let me first say something that basella is a familyowned bank so I'm trying to connect what LOD said 140 years of of history bankel as well and I'm not giving this information just to promote the bank but simply because when there's a family name in the bank there certain considerations that need to be taken care of first of all reputation so you just cannot only be compliant most of the times we say well we are compliant we cannot only be compliant we have to take care of that name that is the first thing that is said when when we jumped in so one of the things that I believe scare the most banks is that permission less so we have regulatory upcoming will

be applicable at the end of the year MAA something for the Sable coins will be applicable now but still there are some regulatory gaps and that regulatory gaps are the ones that actually do not fill the permissionless part so that's decentralized that the decent decentralized Finance is at the moment still not covered by for example AML obligations so how can we actually navigate an open ecosystem decentralized without having clearly the possibility to fully manage all the risks so in order to do so uh we by the way just finished a six months testing period of an issuance of an e- money

token directly supervised by banad Italia uh and uh I already shared with gam that I have the CH I had the chance to read their white paper which I found very interesting and we more or less have the same conclusions so navigating a permissionless systems means at least for now for banks until those gaps are covered that you need to enhance risk framework enhancing risk framework means that you have to create some limits and so that's what we are at the moment talking about white listing for example plus there are many many aspects that from a legal perspective need to be covered and at the moment even though m is a very good piece of legislation are

not covered so permissionless is an ideal thing that we're trying to understand how to navigate but in full compliance and with trying also to avoid any kind of uh uh uh reputation risks well fantastic thank you so much and I mean we we also discussed one of the core uh use cases or values of a bank as well because we're like okay it's moving to pist are people going to just sell custody and the likes you mentioned that uh being a bank the custody side is really the the home of whatever you tokenize do you want to give a little bit of context to the audience here about what you meant by that and kind of like the the purpose you see kind of Bank selling having in the future with regards to kind of being the custody provider The Trusted custody provider of some of these tokenized assets yeah sure

so uh what happens most of the times is that there is a distribution of a custody Solution by someone else basella obviously has a technology provider but we're trying to enhance custody as much as we can fully internally whatever is the business strategy of a bank or whoever wants to navigate the web free uh ecosystem well the first thing you need to have is a custody and a strong custody solution comes with strong risk Frameworks so that's exactly where at least we had a lot to struggle in building up completely internally this kind of risk framewor and where I believe that actually the the people

that are more advantaged are Casp so crypto asset service providers I work with bit Panda which is a very compliant company has a very strong knowledge and we tried and we're trying to bring this knowledge inside the banks because Banks don't have this kind of knowledge at the moment so having a strong custody is the first step in to be able to talk about tokenization in one year in six months in two days whenever it comes and be fully uh be fully aware of all the risks that sometimes not even crypto asset service providers have analyzed and that comes from the I believe the huge experience that a bank has so we able to see inside a fully uh really a crypto service and notice something that maybe

others did not fantastic does anyone paness want to comment on that kind of custody trust side core reason for like having a bank taking care of your digital assets and the likes does do any of you have any different deferring opinions with regards to what Jan LCA said with regards to custody or any kind of inhouse solutions do you work inhouse do you go ous like how how do you operate that kind of maybe a few um in term of custody for the digital assets uh we work with Taurus so a swis company but uh we try to uh personalize all the system and I think it's really important and we have we had a lot of discussion with the French regulator um because

customer protection uh is the main issue of the the regulator right now uh IML was the main issue two years ago and now it's a customer protection and we discussed a lot about the custody uh process we put in place uh we discuss about the best execution so they try to uh use the standard process for invest investment and now they uh they apply this process for digital assets so I think yes custody is for us it's um it's a the objective it it to propose is to propose some personal personalized services for clients and one of the main

thing is or current clients uh want to open a wallet with us why because uh if you want to buy uh crypto assets um some people are not comfortable to manage personally their wallets uh it's it can be complicated and they want to have a um we say the confience in France they want to work with bank simply and we have we currently it's a starting point starting point of the bu run so we receive a lot of requests from from Prospect uh and I think uh in the in the next year or this year we will receive we will see um opportunistic behavior

from clients because the leading newspaper in France and I think it's the same everywhere uh crypto is a new golden assets for the year to come and um we have a lot of request to manage wet for clients fantastic um great I mean maybe I can add a bit on on the custody side and I can take has so I was at conbase before conbase like as you may know like in the ETFs in the US 80% of these ETFs are using conbase as a as a custodian I think there are two things like there is the technology aspect and operational aspect and there is the licensing aspect uh obviously in Europe you have two leaders of Technology

Solutions that are tus and metaco and I think are taking like all the market with with most of the banks and and Banks typically want to be in control of all the operation they also want to be in control of the hsms that they typically want to have on Prem um so the solution that conas offers is more difficult to apply here and they're not licensed as well in in in Europe as the moment as a as a custodian makes it more difficult but the the technology aspect I haven't been into details of like what metaco and tus offer so I believe it's it's great because it's been accepted by some of the largest banks on the planet um but the the keys are managed differently that's just what I might say like there

are different solutions in the end like you you choose what you you feel comfortable with but what is important is you need a solution that is going to work with the regulatory environment you live in yeah and and maybe yeah please please no just just to add some color and not repeating on what was said which I I totally agree I think it's you know it's the pillar of of of uh of uh of the banking services in in this space but I I I would like just to complement that you know um we are currently at a stage where because the banking environment you know was so shutting down let's say the the the industry for for so many years that you still uh uh feel you know

um almost the two extremes and and this is one of the mission statements that we have is to try to I I think that banks are in the best position to unite these two extremes like the no cor coiners sort of say and the more D Jens on on the other side because there are risks on both sides there are also risks on just doing all your self- custody by yourself as as there are there is risks on holding you know uh just bill notes below your your mat or in a a vault in your home right and so this is exactly the space where Banks can can fill in and will actually help to drive the mass adoption and and it's already happening right with the atfs everything that has mentioned so just to say that you know

custody has its risks where whether it's uh you know choosing someone to do the custody for you or several which is something that we are praise prais a lot for to be you know to always think about diversifying your risks and and do proper risk management that applies also to to self yeah fantastic and and maybe to to bounce off whatam said with regards to kind of your strategy depends on the regulatory environment that you're in um it is kind of let's say crypto banking around the globe we have a heavy representation let's say of Europe uh here um maybe we can give some further context as well as to your opinions around uh banking coming out of let's say the us but also let's say we're all gathered here in Switzerland

um kind of the Swiss perspective European perspective uh us perspective I mean y as you mentioned you're coming from uh like coin Bas America for maybe there's like implications there um what do you believe is like the the regulatory environment today kind of globally what are your perspectives around how the different regulatory environments are going to be playing uh against or with each other and the like so we have clients that have multiple bank accounts in different jurisdictions uh how how is that going to play forward I mean maybe May General want to give some some col so uh honestly I believe uh uh I want to be very positive because I believe that things will be going better and better and there will be a lot of U so these regulatory gaps need only not to be filled from a European

perspective they need to be filled from an international perspective so authorities need to talk each other transfer of funds for example is one of those cases we have a lot of problems when it comes to different jurisdictions talking to each other different regulations talking to each other so um I I honestly believe it's only a matter of time it will be pretty automatic and and things will will be leveraging all all around the world what happens to be is that uh at the moment I believe Europe is very forward from a regulatory perspective you the European legislature has demonstrated honestly uh very illuminated and and having brought some pieces of legislation that are difficult that difficult also to be put in place

means how ambitious it is and I hope that all the other Regulators will be exactly as ambitious as the European ones our F fellow panelists as hopeful um or any bumps in the road I think hopeful for Europe like Mika arriving so 30th of June for stable coins end of the year for other other assets digital assets uh is going to be very POS positive harmonization within Europe uh a very clear framework as well and The Herder as you say is not going to be easy to clear uh so it's going to let some players uh like behind and then they're not going to be able to to clear all that and I think it's going to be good for those who who remain uh Asia Pacific uh Singapore in particular Hong Kong uh I've been very friendly with uh

uh with crypto tokenization particular someone talked about masas project guardian and there were others uh lots of banks have been involved including the big Americans um the US is is a bit more complicated I think what is happening right now in particular with the SEC is going to make that Innovation is not going to come from from the US at least on on public blockchains for the US from my perspective I think we need to wait for the election and but for sure um the we receive in France several uh delegation from us Administration uh they want wanted to check uh and to discuss about the um French lons process and Mika and I think

it's really interesting if the um us us Administration want to uh just have more information about the European regulation for me they are preparing something because a lot of big us actor uh actually relocated in Europe oh okay crazy it's true yeah we we have Circle in France yes yeah which is really great I I I agree I think uh again I've already mentioned I'm positive about

that I think that uh when you look into this globally you know hopefully and and this is what will will will come out of it is you know you you'll have on one side the the the US where you know there there is no specific law regulation around this industry whatsoever so it's you know you need to fit it in on on the existing Securities Law and it's a a shocking contrast to what we'll have with Mika where it clearly states what's what's a stable coin uh what what is what fits within mik and what fits within miid which is also an important aspect and and of course there will be a lot of discussions around that some mistakes will be made but we need to start somewhere and and that's already a big difference and even from the public

perspective which is something that still at least for me personally is is is an important thing to to feel is you know if you go outside if you talk to a regular person on the street they still think is that regulated at all they they they don't even know that it's regulated you know for instance in in in Portugal very recently there was you know you know an interview coming on on live on you know on on the on the uh you know peak of the audience hours sort of say and and saying that the it was an unregulated uh industry which is not entirely correct but you know putting that aside once you have M definitely

you can no longer say that it's not regulated and just that fact alone is very very important fantastic thank you and before we then move to to the audience's question I'm sure there's many of uh one last one I mean I've been told that there's quite a few uh of your colleagues from various other banks that are maybe less crypto-friendly as you are all here today that are very maybe I wouldn't say go as far as say anti- crypto but have been closing various uh local bank accounts for crypto affiliation etc etc um maybe we can provide the audience of not naming any names of those various Banks some so maybe some words of wisdom as to why you venture down this path and why they

should maybe uh uh follow it as well or maybe reconsider their their ways of being so so anti and and move to that neutral space of that that that Switzerland kind of holds so dear to its heart so maybe yes some words of wisdom to those Banks and kind of the the the why you're doing it uh as well so uh I I believe the the best thing that ever can be said about DLT from a legal compliance AML perspective whatever we take is we're talking about a public ledger so everything is public it there's full traceability the problem is on the opposite what could happen if we enhance too much these these these features the risk is uh to actually create a sort of Big Brother that

completely watches whatever you do so um the Pelon anonymity all the kind of aspects that sometimes uh create some fears have honestly to be seen and understood fully in order to understand that this technology really helps and really enhances the power of every kind of institution to understand better who the client is what he is doing without trying to use that technology in a in an illicit and bad illicit way for the customers bad way for us because we're not supervisors We Are banks and we have to serve clients okay that's a great one um elod your words of wisdom I give you the statistic at the beginning so for for me it just we need to answer the the

or custom it simply we will have in a few few years maybe maybe we will have more customer uh who need uh crypto services and C standard customers so I think we need to uh Implement and to propose solution right now and not to wait because uh from my perspective we start for example receiving um Lombard loan request uh collateralized with with crypto yeah so it's something we need to work on because clearly it will be the the new customer of Tomorrow we we will have um we'll have a crypto wallet to

manage wow fantastic what I would say is start from from the basic so uh education you know uh invest in education as much as you can and try to start thinking about very simple use cases right one very obvious and what we see Banks doing is you know just offering the possibility to buy and sell that that's great uh but but even looking into onchain and and having you know interference or or or interacting with you know with with with permissionless ledgers uh uh think about that in many cases which we find it's it's uh very straightforward to find an individual that you know invested uh 10K

in I don't want to name any exchange but can be coin based and it's very easy to prove that he purchased that in that moment in time and and and and you can see the trial of him you know with drawing to his selfhosted wallet and then he's trying now to deposit and and cashing out and there is nothing absolutely nothing wrong with that and you can be fully sure that that that has no interaction with anything you know that is sanction or or anything so I'll start by the simple use case and grow from there fantastic keep it simple I would go with the picture actually uh which is the objective of blockchain the benefits is a way to reframe Capital markets redefine them like make this

more efficient remove intermediaries and run Seekers uh now the problem is like within your bank within your group like some of these intermediaries are going to be there so you're going to disrupt yourself in some ways but the thing is you will disrupt others and over the big picture is like the overall benefit for your group is going to be like better than then what you're going to lose on some on some of the the subsidiaries that that you have or some of business units um the other thing is like if you don't do it like someone else is going to come and disrupt you as easy as that so transparency customer centricity education and think of the big picture because if you don't somebody else will and maybe it won't be

these people on the panel but somebody else will so um thank you so much uh to our audience and thank you so much to our panelists let's give them a round of applause do we have five minutes for Q&A yeah yeah we can do okay um does anyone have any questions for our panelists we started a little bit late so we can get one or two questions in no burning questions yes want to write end so uh we talked about Switzerland we talked about the US uh what about the kind of

migration that you've seen heading towards Dubai ababi Saud what's theing on the market that's a great question uh the the the UAE like the Middle East in particular is is very uh attractive for for crypto and they're very friendly with crypto at the moment uh in particular the UAE uh you see Vara with with Dubai a lot of big HED funds out there a lot of exchanges byb tox and a few more ass setting like their headquarters there uh on the Abu Dhabi side um adgm is also very friendly and they have been building a framework

dedicated to to to crypto um so yeah you can expect to have like more people going there uh I was actually like about to go there with with scbas at some point and I managed to travel there a few times uh very Dynamic and very friendly with crypto in general J do you want to comment quickly sure so uh honestly I believe that's a very good point many people have been migrating there but uh let me see the the other side of uh um you can move there because you have business reasons because you can find friendly Regulators an environment that honestly enhances you and and and welcomes you but at the same time I do not believe that you

cannot take care of what is the European market and considering all the string stringent regulations that uh will enhance the reverse solicitation if you want to solicit European clients you need to have a you need you need to be in Europe so wherever you go that is something that you can definitely consider but you can not consider not having a base in Europe not knowing what is the regulation in Europe and not trying to targeting directly European customers from Europe so you have to be prepared for the European framework for first of all then whatever you want great fantastic and I guess we'll wrap it up with that thank you once again to our panelists give him a round of applause and we'll take now thank you so much