CVA Podcast: Boris Bohrer-Bilowitzki, Copper

Transcript

[Music] hello hello this is your host straz ahmed ready to go for another bite-sized episode of the crypto valley association podcast a special thank you to cyberbank for supporting this initiative as they pursue their mission to redefine finance for the new economy now let's discover together the growing trends of this fast-moving space and try to shed some light on the mysteries it contains today we're joined by boris bora beliwitzky partner and chief revenue officer of copper the institutional gateway to digital asset investing providing everything you need to prosper in a rapidly evolving market so let's dive straight in and uncover the hidden

world of blockchain infrastructure hello boris how are you doing today hi great intro loving it wonderful wonderful well the best best is up next and and i think you can maybe give us a little bit of an insight of where you first kind of started on this blockchain journey uh obviously yeah absolutely i mean look it basically started for me only 2017. i was not one of those uh you know blockchain crypto evangelists i bought my first bitcoin in 2010. quite honestly because i kind of grew up in the in the traditional financial sector it was i didn't i didn't believe in it properly right so i was like this can't be this can't be real it must be a scam

and at that time i was working at an asset management firm in mayfair and we had a load of clients that started calling us it was like you know 17 when everything spiked and well yeah very happy with the fixed income and equity exposure but can we do you do anything on the crypto side that we can mix into the portfolio are you sure you want to do this and at that point then yeah decided to it was actually thursday decided to kind of lock myself away it took me over the weekend because i started reading reading satoshi's white paper at first i didn't understand the word he was saying i had to read it like three times and then in many ways you know if you work in traditional finance and you know how everything's kind of plucked together you know t plus two t plus

three settlements and all that kind of stuff it suddenly clicked and um yeah at the same time a friend of mine who i knew dmitry was the ceo called me and said like look i've got this idea do you want to come and do this with us and i was like yeah come on let's do it so this is literally how the journey started and very close thereafter i bought my first it was actually an erc it was an ico that i invested in which actually done okay and yeah and that's how the journey basically started more like from the out of out of necessity in order to build something not necessarily being purely excited about the about about the technology at that point

the excitement came later on incredible and i mean build something you did to what topper is today i mean we hear about what you're doing everywhere i mean please maybe tell us more about kind of how that the foundation of copper was created and how it built up to what it is today it's too incredible absolutely so yeah like i said i mean we started the company january 18 and at that time we wanted to solve one big problem which was custody um quite frankly custody has been solved a hundred times over since there are all sorts of different approaches that people can take you know show me secret sharing you can have hsms sitting in some bunker somewhere or like zappo did it in switzerland with like with dogs and guns and guards and in and around the

mountain but we wanted to kind of build custody on the premise of segregation of assets which was important to us and at the same time increasing speed so when i mean speed i mean withdrawals because if you have a volatile asset class 24 to 48 hour retrieval times or withdrawal times is not good enough you want to access your funds quickly if you have to so um we built that we released that mid-18 in the meantime as sure some of the listeners also remember the market completely crashed which was in many ways good to see because it flushed out all this ico dirt for a better word yeah it was it was a massive cleaning exercise and what we saw then was some more traditional guys coming into the

space and those were mainly from the effects and commodity side and those guys came with a different set of problems uh because there was a prime broker in the space and they said look we've got investors lp's that are asking us questions of like you know what's the strategy doing what what what numbers do you print but which which are all answerable but then it came down to the fact of like okay so if i give you my money is there any chance that you can screw me over and run away with it and since the industry was built on the premise that exchanges are also acting as custodians which is in our opinion a really really really really really stupid idea but i'm gonna come to that build a product called the walled garden and the world garden really put us on the map at that time because with

custody alone we were like competing with bitco and you know like those guys but the walled garden was an absolute game changer where you basically hook up your exchange accounts you have a treasury management functionality where funds can travel freely within that ecosystem and in and out of custody but they cannot leave because it's jointly controlled between the client and the custodian ies and that really put us on the map for funds and then shortly after some market makers started using us for their treasury management functionalities and they basically came with a different problem that needed solving which was the settlement layer on the otc side so we built a settlement engine that allows you to you know settle your trades the otc trade securely because we had a lot

of funds of course that needed their subscription redemption activity done otc and we built that settlement engine with all which ultimately powered the latest addition to the product offering apart from staking capabilities defy and so on but the biggest puzzle piece definitely is clear loop which we haven't released last year in may i think it was which is basically the ability for you to hold your assets in segregated custody and all you do is ping tradable balances to the venue but the assets are not moving so they they stay put within your third-party custodian you can trade on the exchange just like you would do normally anyway and once you trade it either spot or derivatives so when you realize your p l on the spot side instantaneously the exchange sends a

settlement instruction to us and the balance settles within so also the exchanges hold balances with us and that's basically where the settlement happens so we are basically a settlement and clearing agent if you want to call it that way whereas allowing you know solving two key problems on the one side the ability for you to mitigate counterparty risk because those exchanges as you know you know many of them are either situated and or regulated on the island of barbuda and that's not necessarily helpful for the compliance departments so yeah and at the same time it just increases capital efficiency because you can move your assets from one venue to the other milliseconds because it happens off-chain so yes that is solving a key key problem which has yeah propelled us to where we

are today so from like four five people sitting in a cool flattened shortage we're now scratching around 200 people with offices in london headquartered in london uh singapore and the us and in new jersey and new york wow so when you set off to to build you really you really did build i mean uh yeah that's incredible and uh and actually just most recently winning best digital asset custodian at the crypto am awards so you really not only built but successfully built what you have today with of course you're your colleagues yeah one of the one of the many that we kindly picked up over the course of the last couple of years i mean look if you ask me one thing it's it's over the course of the last three years

there is a lot of innovation that was missing in this space about as much as you could innovate and a lot of players had it all on a like on a silver plate they they could have done so more but but what it basically was is like about as innovative as it got was that you have like a screen in order to kind of push buttons if you want to do your x your otc execution that's how far it got what we have done is we really we really took the hard battle we went down to the root level figured out what the problem is and tried to solve it and one thing's important right the industry digital assets crypto blockchain whatever you want to call it has been built in the early days by tech people i mean we have a very good mix

here without the tech people it wouldn't work but tech people don't understand finance and finance people don't understand tech normally so what we have done very good in terms of like bridging that gap has ultimately resulted in us building those products which are actually solving an actual problem and that it's very nice to be recognized for that not necessarily via awards but you know with the hundreds of clients about 400 clients that we currently have and the numbers growing steadily each month and yeah on the other side of course a new new group of people coming into the space such as the traditional firms you know we have a whole enterprise offering in order to allow banks to either offer custody to offer to enable their prime brokerage desks

any sort of prime work that they do and yeah so very nice to be recognized by that not necessarily by an award but yes i i see exactly what you mean and we will touch a little bit on the enterprise side uh shortly i just want to go back to clear loop as very very interesting i mean would you like to give us further detail i don't know if you would like to but like on how that actually works i mean does the exchange kind of see you guys as an escrow and they trust that the user has that many kind of let's say bitcoins in their wallets and then is able to kind of loan those out to can you give a little bit of logistics how that works or a little more detail absolutely i mean look the way that it works is very simple so we are an

npc-enabled custodian which stands for multi-party computation in a nutshell what that means is that there is no private key that ever is created centrally when you create a wallet which is very important because that imposes a lot of risks but that is a complete different rabbit hole that we can go down under where we need much longer than we potentially have in this episode now the way that clear loop is built is built on the premise that exchanges acting as custodians which if you are coming from the traditional world you know the equivalent would be that you need to set up an account on a new york stock exchange you need to send money there up front and then you can buy your apple shares that's just not how it works right so basically what what what what clear loop is is the ability for you to hold

your assets in that segregated custody right that'd be bitcoin we i think are the custodian is offering or servicing the most layer one protocols out there i think it's around 400 currencies that we currently have and what you basically are doing is you hold that in that segregated custody account and all you do is basically delegate a balance so the way that it works it's nothing else than a nothing else than an api call so the exchange of course during the integration that they do when they come on board with us ftx is the next one to join and bitstamp and many others what it basically does is the exchanges have the abilities to see how much funds are being locked and held by a client in a segregated account on copper at third-party custody

and all that then happens is that that balance whatever i want to trade so i'm a fund that wants to trade now i don't know i want to put a margin down on dairy bit for example and i'm delegating 100 btc to that exchange that is now locked on the exchanges side meaning that in case that you hooked up in a position or whatever it is you won't be able to withdraw your assets on copper because only the the custodian is the exchange is able to unlock this balance back either when you settle your p l or you or you you know you didn't enter the trade in the first place and you want to ramp it on somewhere else so it literally is just an api call where the balance then becomes available but instead of it's sitting in custody in you know god knows where you know

different exchanges are you know will be okay expired somewhere in china somewhere and on some exotic islands it's not sitting there it's just sitting at third-party custody so that's that's literally how it works the only reason of why we get exchanges on is because we built the infrastructure from the outset in order to support a product like this so it comes down to access several layers of security and ultimately access like i said you know approvals etc etc but it's extremely smooth meaning that you can ramp balances on from one venue to the other in milli seconds and you do all that off chain so that means one side like i said it mitigates the counterparty risk that you normally carry with the exchange because you

don't have to pre-fund it and they are in full control of the balance but second of all the capital efficiency for the client is going through the roof because you don't need to hold that capital on the exchanges you see if i trade derivatives in a volatile asset class like this i always have a certain buffer of you know if i trade btc options for example i would hold a certain buffer of security capital there in case that the market is too volatile and i'm getting close to getting liquidated so that's what i just have to hold that because it would take too long if i would draw it from coinbase in order to move it over to let's say derivative right that will take 15 20 minutes if it is ethereum it might cost you a thousand bucks and it will take you a

day but so so this is what this is what clear loop solves and the reception for the product is yeah i mean absolutely incredible and we are the only ones on the planet that have it so that literally is another big plus definitely and you mentioned security many times i mean it's helping uh security which of course is very important to the traditional world and you mentioned a little bit before enterprise right and this enabling i would say in the traditional side of banks being able to to access the space further i mean how how do you see that that side developing further with regards to some of the things that you're offering to enable banks to enter this world absolutely look i mean you

mentioned one thing earlier security security is number one at copper always has been always will be we talk about cryptographic assets the next wave of like you know tokenized securities where the banks of course are getting interested in reason being you know with capital requirements you know everything from bazel two to base or three and you know sometimes relatively liquid assets sitting on the balance sheet by tokenization you can take him off by the cheap which is extremely exciting of course so this is where where kind of banks come in but that's not actually entirely true tokenization is something for the future right what it is right now it is bitcoin and ethereum that's what it is right now and when it comes to that if you are you know

a 30 40 year old seasoned banker and you're running and you're running uh um you know you're running ubs or credit swiss you feel you feel quite intimidated by that space because it's it's it's it is it is it is adjacent to so many risks and a lack of understanding at least at that point so what we are doing on that front is everything that we have built and battle proofed over the course of the last four years we basically enabled to be boxed up and to be put for example on premise um in the bank's colors and flags and whatever they want for their clients like literally without them having to build anything because also without you know stepping on anybody's toes it would

take about 15 committees and half a year just to change the color of a button in a bank so the speed at which they can so the speed at which they can actually bring something out to the market will be relatively prohibited right so and they're more like on the on the on the region of buy and buy and partner not necessarily built and that's literally how we how we position ourselves now apart from the big sas business that we have where we service you know the crypto funds market makers payment processes neo banks and so on we now go into this enterprise piece which is extremely complex because it's not just holding bitcoin and ethereum with you know the bank's colors and flags on it it is very much in and around the fact of like how does this plug into

compliance what does on chain analytics say kycaml the risk functions how does that plug in there reporting so this is what we build out and are currently in the in the process of yeah we're pretty far down the rabbit hole with quite a few big like tier one banks globally and tier two tier three like all the way down to smaller private banks so yeah very very exciting on that front because we stumped this out in january and already has the same traction so watch that space quite a lot of it definitely and i mean switzerland is home to to many banks and yeah i can definitely see the use case i'm originally from liechtenstein

like i grew up in that you know it's like cow trustee bank bank cow trustee trustee bank i know how it is i know how it works yeah absolutely it's an absolute target for us and we also have people in switzerland so we've got a zurich office as well so um yeah yeah it's definitely it's been a pleasure to welcome you actually within the crypto valley association not um no not too long ago i mean and maybe we can touch upon this area of i mean uh jurisdictions different places around the world whereby to to my best knowledge uh cooper is currently based in uh london and new jersey how do you see things from a macro perspective i mean being in london with

regards to everything that's happening brexit etc will london still you said the b word you said if anybody understands switzerland is pretty high up the european union had a lot of had a lot of benefits but i'm not going to go into that discussion in terms of like was this a good idea or not but what we see is that london remains the you know if money comes from anywhere into europe london still remains as number one i think closely followed by due to like you said earlier you know banks in switzerland you know in but it's different type of money right

because simply due to the nature of what can be offered but we don't see we don't see much troubles here right now in the uk because of it it's more of an internal thing because you know it's all about budgets so scotland is a little bit sad and then but uh in terms of the financial services industry london is london is ahead in many ways on the regulatory side so that's why we come back to the crypto piece right so on the on the on the end well not as far ahead as switzerland has to be said so you know the bqfs and sro standards that you have in in switzerland are helping of course quite a lot of people and and we and we're also in the in the process of going down that route but

what it ultimately comes down to is the fact of what will what's the future of financial services going to look like that's that's that's a big question if you ask me the point of the financial services industry operating on the way that it does right now which is inefficient to say the least especially anything that happens post rate is is is is a major problem that ultimately this industry that we're in is solving so if you ask me in terms of like yeah what do you think like bitcoin ethereum i don't care too much about those currencies quite frankly because we're currently talking about a two trillion dollar market the more interesting piece is what will the big institutions choose

in order to tokenize their assets on income equities whatever it is any sort of security and and and that's and that's and that's the interesting part now for that you need to have the infrastructure in place which us and also a couple of others have built at least to a certain extent and in terms of like the financial services sector i can tell you that there is big recognition that is coming i can only suggest that people are keeping an eye out for the financial times over the course of the next weekend or so um because there is yeah quite a few things coming out on our side to position ourselves to kind of ensure that not only the uk but also europe is a is a you know financial services hub going forward from an infrastructural

perspective that's what we're trying wonderful and thank you so much for that definitely check out the financial plans soon and and i mean you mentioned earlier on that you have offices in london new york singapore and a question related to actually your role which you haven't touched upon too much being the cro uh of copper i mean where do you see the most traction coming out of which where is where are you getting the most of your partners where is the most vibrant place on the planet for the moment for you guys yeah i'm i'm in the lucky position as the chief revenue to to kind of oversee all things sales and trading but hence i've got a pretty good idea in terms of like the pulse of where things are happening

there was i mean the us is the u.s right so there is always a buzz in and around that and and with us kind of coming to the scene to like you know the bitco's anchorages and to a certain extent you know fire blocks as well you kind of you you kind of see that we're eating a lot of people's lunch which they're not so happy about but that's not my problem now what it basically comes down to is that i see america still growing extremely fast in comparison to for example apac apac is extremely retail focused right so it's not so much institutional like crypto like hedge funds etc that is very much that that that's very europe and us centric

so in terms of the three regions since we started here in europe our european coverage we're definitely number one here in the us we're currently you know cleaning up the field from the back and aipac is a different is a different beast they seem to be a little bit later in the development at least on the institutional side but are far ahead on the in many ways far ahead on the retail side because it's just like a huge target market so for us for us currently the biggest uh revenue centers are europe and and america with apac and third okay thank you that's great context and unfortunately as we slowly uh get to the end of the episode here maybe you can give us some some insights on where you

believe the blockchain space as a whole is is heading oh my god how long did we have you take as long as he did well i mean look where is it heading what we're seeing right now is a you know there's a battle of layer one protocols like who is going to be the dominant one going forward will it be ethereum will it be solana will it be algorand but will it be you know one of those guys bitcoin as we see the market dominance coming down i i remember in 2017 bitcoin dominance was i think 86 of the global of the market yeah i don't know where we are right now like in the low 30s maybe wow so so the money is the money is moving moving more towards like

strategic strategic technology plays that will kind of dictate the future of this space now when i mean the future of this space i mean tokenized securities tokenizing of assets that that that is the next piece a lot of people think that d5 is going to be the one that is going to hit first i personally don't believe it because we didn't fully figure out cfa yet i i you know centralized finance in the crypto space so we should learn how to walk before we try to run d5 is smart contract based a smart contract-based infrastructure down the line is definitely happening but i think it's going to take much longer than a lot of people would would anticipate or would hope it to be with that of course it comes down to the

fact of who are the players that are going to come in again it comes down to like how big how big the space is currently it's a two trillion dollar market you see this is like one company listed in america so it's so it's not it's not that it's not sizable at all but what's happening right now is that the ammunition is being kind of you know everybody is kind of gathering the necessary information and the necessary infrastructure in order to get into this space and this is where we will see the big banks which automatically bring along you know everybody on the street you me because you know salaries or whatever else is being paid still to a bank right so they ultimately hold the money and they're doing things with it so this is where i see the next big wave coming

the very first one is like i said you will see you will see the batter being being being being decided on the on the which which infrastructure is going to be the one which which blockchain which technology is going to be the one that's going to power this and i see three in the running it's ethereum solano and algorand you ask me it's solana because i'm also personally invested and i absolutely love that chain but in my but in many ways the big question is what will the big guys do once they come in they already have started to be in as you know you know mainly buy and hold situations but what it what it comes down to now is the fact of like once we get into the point of like tokenizing fixed income contracts fixed income instruments

and some banks have already done it as you know you know santander and others they've already experimented around with this and i can tell you that you know the banks are extremely active right now so i see finally a big push of institutional clients into like the institutionalization of this space for three years we've been sitting around on panels and said institutions are coming the big boys are coming they haven't come absolutely not but now i think the the playing field is ready for them to us to a certain extent and that's what i see the biggest the biggest push happening over the course of the next one two three years and then thereafter we will see you know if d5 is actually what it what it what it promises to be but but for the time being it's

literally the big push of institutions into the space to make it viable and give it the stamp of approval that we can actually use the technology to make things better just like it was in the old days where people were standing around in the pits screaming at each other with papers in their hand and then somebody came along and said electronic trading is much more efficient less literature so those paradigm shifts have to happen and i believe that big paradigm shift is happening with traditional financial institutions coming into that space now wonderful wow inspiring thank you thank you so much for joining us today boris do you have any final words for our listeners maybe today look um final words there's always a big one right i i i personally

like one of the big things is if you listening to you know if if you start reading up on it because you know it maybe was on your radar for a certain time and you see the ticker now going on bloomberg and cnbc and you see the bitcoin price pro constantly the big one is like not to be scared of that of that infrastructure and more challenging like challenge challenge the providers that are currently are around in order to drive innovation that literally is that literally is the piece that i would ask from listeners and anybody out there right now which we have done a pretty good job at and we are endeavoring to continue doing so but yeah those are those are the big things and and the last thing you should do is kind of close yourself off to that this is not

happening this is very much happening and um that doesn't mean that in any shape or form you missed the boat yet absolutely not it's still in its infancy but it is happening and people better be ready for it be ready wonderful well thank you and if you enjoyed this conversation feel free to check out more on our website cryptovalley.swiss where we host plenty of events educational material and even provide information on how you can join our growing community thanks again boris for joining us absolute pleasure thank you my pleasure stay tuned stay safe and until next time from the crypto valley in switzerland bye [Music]