DeFi Self-Regulation / Jan Klesla, Joachim Schwerin, Thomas Nägele

Transcript

foreign hey guys I'm Mackenzie I'm a tech reporter at CNBC thrilled to be with you so impressed that you're here this early um we're gonna actually start off with Joaquin from the European commission he's in Florence he has a 10-minute presentation to kind of set up the topic so I'm going to leave it to him to begin and then we'll open it up to a panel to have a discussion on self-policing uh in the world of defy so thank you so much and Joaquin please kick us off thanks so much and thanks very much for having me here I hope that you can see me I can hear you and I can see if I can't see the room I have seen your absolutely exciting program yesterday and today

and therefore I'm very happy to join you in Florence where we have a big conference on blockchain for the internal Market the European Union [Music] [Music] and I don't know what you know about him but he's a very important connection between the ancient times and the medieval times on the one hand side and

very modern interpretations and if there's perhaps one thing uh remark it is that you can be as nice as good as you want but the word outside is As Nice And as good because there are dark Forces not always very positive ones so develop a little bit on that my function and that is responsible for the digital transformation of the European communication for a very long time Europe

the whole crypto function as you know has a long history behind it but basically emerged during the financial crisis and this was the moment of the biggest exposure risks resources and decentralized automatic Solutions are a very important of solving the problems and the centralized systems and I'm talking from a public policy perspective not only to have some nice words to you but we in Europe have

demonstrated the bank rescues um in various matters we have been working from the very beginning to understand to learn what are the opportunities and by the applications at the highest political level from the president of the European communication declared that the blockchain is Technologies for Europe

and this includes and we are not only truckloading in the field of Finance we have as you know very well just launched the Mika regulation which is in our opinion a very liberal regulation especially if you look at how we treat utility totals and also in terms of what we expect for example we exclude people we exclude those we exclude the real economy applications and this is not because but because we think that the opportunities by far outweigh the risk so if you take a risk-based approach

there's no need to right now regulated to work with the Innovative Developers and in the real economy we're also not going to be talking because we are already building that's five years yes blockchain infrastructures for example to detect counterfeit so this involves the following server from the source with the digital twins called the exchange of information and the data is in my blockchain this will be operations in the next few years we are already

testing it it can be one example management now this was a nice part the less Nice Part perhaps is that we have some homework to do let me look at traffic now being here at the moment when you are a car driver in Germany and you see the potential is coming up

what you do is you jump on the break what they do with all your respect to my Italian friends when they're driving a car and they're seeing a potential risk they blow the horn so that people can hear you but they don't always use it now there might be better ways to see it but if I take the analogy to the technology we know that down quite to the contrary it is and I'm an economic historian if pastors path of innovation that I have ever seen in history and that is exemplified by more seven years after the emergency department

so it's not always a good idea to jump on the brake and it's not always but it's also not sufficient there are many other possibilities and if you check out your program especially today you have fantastic next presentations but I can guarantee you that in the political space especially in Brussels no one understands what you're talking about we already had the problem with me not transfer of funds and the other regulations that from more than 700 members of the European Parliament there's exactly one processor that have a fairly good idea of what we

are talking about if I look at what you have your program today there is no one who understands that and that is a big problem because all of these people might vote yeah when you have a new European Parliament and we have a new European commission with a new 500 plan and perhaps that they might come up with a regulations on D5 right and then regular regulate it's not for you as a developer

but for Citizens for small Enterprises of what is the change into your life and what we were doing because this is the only language that politicians understand and care about so I'm very happy that we have this idea this morning I'm extremely happy that we have this event in Prague but only this one but also everything that is going around here and I would see this as an invitation to have a very open and constructive discussion and we want to support you we think that you are very very important but you have to help us develop a story line and convince the politicians that indeed you can have a meaningful regulations thank you Joaquin for that very

comprehensive and helpful introduction to the topic that we're dealing with today you know you mentioned that the work on legislation thus far has excluded Define Dells and I wonder if we almost just start the panel with that because there is this misunderstanding that the world of C5 and defy are the same thing I think that mainstream uh media's understanding of the space often conflates the two and we are with Mika this comprehensive framework that was just released um that was just approved will actually go into action in the next 12 to 18 months is squarely focused on the intermediaries at C5 space so Tomas I almost wonder if you can kind of set us up with this understanding of what has what what do we have hard and fast rules about in the C5 Space versus D5 let's just let's just set up that and then go

from there thanks Mackenzie yeah so first of all um as Joachim said it is a journey and if you start regulation in that space you you really have to educate yourself first and this dialogue actually uh Joachim invited you to start with with Regulators is a crucial one and if you don't have like the the understanding and the knowledge as a regulator what this really is the problem is you might end up with really a wrong approach to regulation and we have that experience in Liechtenstein I was a member of the work group of the Legion government to to uh to to come up with regulation in Liechtenstein which we have enforced since 2020 and it's a it's a very comprehensive one

um but we also asked us the question we said okay what is really different when you use that technology and we identified and it took us a lot of time to understand what is really different and and so that's why we defined a new thing which we call trustworthy Technologies and our approach I don't want to talk too much about that but um actually this brings us to your question um you have to understand that this technology as a regulator you have to understand that this technology is capable of addressing risks which we normally address with regulating intermediaries right so if because the demand of consumers did not change you want to buy an asset you want to actually sell an asset you want to find a counterparty to keep the example

simple but the thing is if you organize that in a very traditional way you do that by an intermediary right and intermediary they because they have this information they they have this access to the essential systems they could they could do a lot of bad things with that right and so you come up with regulation and say look I mean we have to regulate you as an intermediary you have to be fit and proper you have to follow all of these rules we will send you Auditors every year we will be able to reports and there there so that that's how we regulate the space so with this new technology you have the same solution you find a counterparty you actually interact with each other without intermediaries based on the technology and if the technology works well

there's no need for regulation but to understand that and that is the challenge that takes time and not and if we are really truly true to ourselves whatever we call defy right there is true defy there is trulify in my understanding there is C5 there is true defy and there's a lot in the middle which is a little bit of C5 a little bit of D Phi and that there Comes The Challenge because we Market ourselves as an industry and say look this is truly D5 we don't need regulation and then we say yeah you know to give you the example of of a text yeah but the other book is actually very centralized or we have liquidity pools

which are no wait wait we are not 100 sure about that so that that is the problem right so we came up with uh with the with the understanding and said look there is a momentum and and a room where you need to regulate a central custodian right if you custody tokens for someone else that's that's nothing different from from the traditional world but if we do it differently if you allow for self-custody yeah we we might not need regulation and there there is the challenge right that there is the challenge that we need to to have this dialogue with the regulator that they understand the difference and we have to be true to ourselves as well just don't use a marketing term and tell tell everybody it's defy it's not we have to

find a common understanding what D5 really is what is to Define where do we need to regulate and we're not and yeah I want to talk to you more on this point just you know we're backstage we're having a conversation about a lot of the breaches that we saw in 2021 and Jan was making the point that a lot of people confuse the fact that these are more centralized intermediaries so maybe that Gray Zone are on the C5 side of things rather than Define I wonder if you can kind of talk about some of the nuances there yeah thank you Mackenzie this is exactly uh how are yakim pointed out uh the fact that uh the Mika doesn't apply on on D5 that doesn't mean at all that there are no rules from The Regulators perspective it's exactly it can be a let's say quite

terrible sum uh they need to decide what is D5 what is not but just look at it from the perspective of your partners of your clients of the normal people to say so they need some uh they need some comfort zone they need to know that we are you know applying some ground rules like antimony laundering and I'm not talking about Banks I'm talking about the usual guys you know like usual companies you want to work with you want to serve you know with D5 because this industry is not just to serve itself uh this industry is going for a mass adoption and to be in Mass adoption uh mode you need some uh

to provide what three lawyers uh call usually the legal certainty but it's not just for the regulators and the McKenzie mentioned these breaches yeah no one uh distinguish and no one can actually from let's say the general public distant language between the centralized uh centralized let's say Bad actors and decentralized Bad actors we need to earn the trust from the public basically from the clients they are going to pay the money and they are going to to trust us with the money that's it and and the walking I want you to chime in as well but uh Tomas I'm going to go to you first

you mentioned that Liechtenstein has had this very unique approach and has kind of gone beyond what we've seen out of Brussels and and has has attempted to navigate and regulate around the world of defy can you talk a little bit more about what you guys have been working on yeah sure I mean uh we started 2016 and we created this vision of the token economy and uh we said it's way more than regulating intermediaries so we we identified actually we we came from the the belief that uh we will we will live in a tokenized world where we will have more and more assets uh tokenized we will see more and more of this technology being used in our daily transactions and the way how our economy works so we also came up with a civil law framework for tokenization of assets

to create this legal certainty if you transfer a token also to represented right is transferred uh how identity is is dealt with so we have a very very comprehensive and Broad approach to regulation but with the true with the understanding that if something is is like doesn't need to be regulated like as I said truly the defy applications there is no regulation right so it's a very broad approach and you see now that a lot of um countries jurisdictions and also like International standard setting boards are thinking about not only regulating the the intermediaries and the supervisory part but to try to find

solution for this digital twins uh they they come up with like some some standard rules how you can approach these issues um so I I think and and that is actually something in in that area it's it's true as everywhere we should learn from each other right because we had we had challenges uh uh we we also now have a lot of experience in in comparison with this acting Force since 2020 and and we can share the Lessons Learned right and and we do that right so um it's actually also an invitation to uh for everybody to have a look at what what we did in latency and to learn from it because not everything is perfect we are already working on version two uh to to address some of the challenges we had you know

what Kim you said during your presentation that a lot of people in Brussels don't know what they're talking about and I I wonder as you kind of look Beyond Mika so you know perhaps going Beyond legislation around the intermediaries to that Gray Zone that we've been talking about between C5 and defy where there are these Hybrid models like what what how are you guiding your thinking in terms of next steps what what comes next out of Brussels um in terms of dealing with regulation around these Hybrid models that kind of go into that Gray Zone between open because

but of course and then there is a complex political process involving the European Parliament but also 27 Governors we have also three more governments including that uh so you can imagine they cannot of course understand this is why it is so much more important to continue the dialogue to learn from each other but also Drive extremely deep into the technology on the one hand side but on the other hand side

perspective and that for me is the next step at this moment do not have enough for the next five years perspective this being said is continue and you need to have a horizontal for example it is a historical local community

a Cooperative that you put into the beautiful space and the blockchain enables the scaling that has never been possible before this is the huge potential but for that you need to develop rules on how to govern Collective spaces also in terms of responsibility it is the collective tasks if the collective does something that's your own discretion you become part of the opportunities but also part of the risk and initial under normal circumstances if something goes wrong this requires a much much more assertive

but also careful approach towards jointly declining what are the limits what are the benefits and how can we embed regulation into our activities to be more transparent not to be controlled from outside worlds and wants to be hindered by centralized systems but to be much more clearer in your Communication in your transparencies on what you can deliver and what what if you can do that that will already helped so I think what we need in the next step to answer your question is to go much deeper and questions of law but also anthropology also the physical questions to develop a horizontal approach through

the centralization at a certain moment will come from and for those that pretended are in the device space to understand that even if you are very very well centralized a smart contract whatever that this is at the start is always a centralized approach but that you have to let loose at a certain moment in time and have very clear good rules in order to have the things if we can manage that we are in a very good position in the next regulation it comes we have some arguments so that is the opportunity I have actually one thing to give you a concrete example uh we all know that nothing really started fully

decentralized from day one like nothing so it's a process right and uh now if if we if we think about to give you the example of a layer one if you start in our layer one and uh I I can share that experience um you start somewhere and then you come up with a fully with an idea that it's gonna be fully decentralized and if even if you convince the regulator that they buy into that that it takes time and it's a process right uh there might be questions like but how do you do code updates right and who has the master key to do that so there are a lot of questions and that is what you are him said it's it's we have to dig really deeper and deeper into the technology

and I mean I I used to code software for about 10 years before I became a lawyer and and for me that is an obvious thing right I want to understand everything before I actually analyze something uh but imagine on the other side of the equation you have a regulator maybe hopefully they are they are they are legally trained in most cases but you find rarely um Regulators which actually can live in both worlds or which have a tech team they actually can talk to and that is also an invitation to the coders to talk to the to the legal professionals and I give you another and another reason why we should learn from each other because I live in both worlds in in law we also try to come up with rules which don't

need court cases anymore so the idea was to have a a very precise rule set a law where everything is played a hundred percent clear so if you do something that's the result I think for the coders that sound familiar right that didn't help that didn't work out well right yes it's getting better but we still need courts and I think we all agree and that is actually something we pre-discussed a little bit yes we do have some challenges with code which we cannot change right so that there are results which we which we want to avoid there are flaws there are there are challenges right so um but but this is the same this is exactly the same law like policy

makers come up with rules which are not completely Auto executable right so you need enforcements and and things but it's not really that different so I think if we and that invitation let's start to work together more intensive we do work together since years but let's incentivize that because it's needed more than ever because if we don't do that now we will end up having really bad regulation because everybody now we start to regulate somewhere the C5 space the next thing is we need to regulate nfts we need to regulate D5 we need to regulate everything right and if if we don't do that if we don't start that dialogue and tell them what our industry

is capable of doing where we can actually add value where we can solve problems and you ask him please correct me if I'm wrong but I heard between the lines that you said the solution for for C5 is not regulation it's D5 please correct me if I'm wrong but at at least that is what I believe long term but that's a long journey right that takes time and it's not um that it's we do the kill switch tomorrow and then we will have another solution it's a process and within the process coming back to the original topic self regulation might be a very good solution let me just uh disagree with you tomorrow one thing this is not an invitation this is this is you know the only thing

the industry can do because uh the next step is not on the side of the Regulators the next step is on the side of the industry uh well just uh if you'll probably remember uh 2019 and all the heated discussions about Libra uh the Facebook felt stablecoin right so I remember especially one hearing uh New York's Office of the security Exchange Commission uh and actually they were clueless they will help us and uh you know like little bit of rate so should we be surprised by what is happening now in the U.S no absolutely not is it like you know the good approach to Industry of course of course

not but we need to listen to to the guys on the other side we need to listen to to your him he's actually not on the other side but uh then you know for in Europe uh well that was much more sensible approach uh we got Mika um and I heard from all the guys like you know big exchanges like oh we don't care like two years ago no we are going to Bahamas that that's fine and like half a year ago everyone came in and said Hey listen we need to do something about it but guys the Mika was uh actually done uh almost a year ago exactly on the 30th of June at 23 35 uh just before the

midnight it was the text was done so uh now and uh I know Mackenzie asked us before what what are the lessons to be learned well the first lesson is to listen to the guys like to The Regulators second uh we should not definitely wait uh for them to move the next step and third it's our it's our time to to do the next step and what can we do well we should send the standards the industrial standards we should say okay this is the industry standard we don't need a regulator for that we can say okay this is the standard of transparency this is the standard of the

government lens of the Dao and yes let's talk about it to defy uh why not we can do that so everyone can be can can be sure that if any any NAD file application and a D5 vertical uh is actually following the standard that's fine if not yeah there's probably a right flag that's the there's the there's the minimum we can do as an industry then The Regulators will see hey these guys are doing something they really want to be legit they really want to to do something and the the partners either financial institutions or you know uh traditional Industries can say hey this is this is something there is

something going on they these guys are legit they are they are playing by the rules that's that's an important thing to play by the rules but we are in the position to set the rules so that's basically that's basically the main message for me today we are here to set the rules for the D5 we don't have to wait for anyone in the US in the EU anywhere else and I'm a simple guy um so if if I would sit in the audience I would say yeah but I don't know you are him in person like personally I don't have his email address if uh it's it's it's very simple it's a non-profit associate the logo is what was there before uh where Yan is a board member where Barra is in the executive team and

where I'm also in the boredom and I'm I have the honor to chair the board it's a non-profit Association talk to us and uh we are actually creating that dialogue to regulate this that's stop of of marketing of inappa you know Jan you mentioned what we're seeing in the U.S right now and this in particular has been uh quite a Charged week with the SEC coming out with suits against both binance and coinbase a lot of people feel as though this regulation by enforcement approach that we've seen in the U.S in the last few years is the exact opposite to what you should be doing and dealing with this base a lot of people have pointed to uh Mika in particular as an example Progressive ways to proactively work with practitioners Joaquin mentioned the fact

that he does work with top innovators in the space so that they're making informed decisions in the way that they build out these guard rails and I I guess you know one thing that I think about I have a couple questions out of this like one how do you not stifle Innovation as you create rules around it whether that's from the policy maker side uh you know the the legal nuances self-regulation it seems like this very delicate balance between creating sound guard rails and then not letting Innovation Prosper I guess so how do you navigate that me I think that because we have that experience when we imagine Lincolnton is a very small country and we had some blockchain actually companies already there in 2016 we had icos and and uh so we we started to think about regulation and that was one

of the questions if we start as one of the first ones like nobody will come back to our country anymore right like everybody would say like why should I do that in Lincolnshire uh Switzerland is next door or auster's next door there's not regulated why should I go there but um actually what you do is when you create and that's our actual experience is if you come up with a sensible approach and a balanced approach yes it might be more challenging for them it might take more it's costly but then on the other hand like what if you are financed by an investor right they think about risks and legal risks are always something they care about right and if you can tell them look this is the rule set if we follow these rules they're fine with it and I think it's these are

the two different approaches completely different approaches I think where you come up with a rule set and this is not possible everywhere I remember that Joachim also said it's uh sometimes we're just too slow right it's it it's it's it's challenging um on the other hand this gives you this legal certainty we need and we saw that a lot of these companies actually welcomed that regulation if they if it is sensible if you listen to the industry if you if you regulate it properly and if it's not too much of a burden to do that if you scrutinize them yet that's different right and that's good I think on the other hand what you said is actually more of the like you

can also think of the Silicon Valley approach just do it and ask for forgiveness later um the question is what are the consequences right if you are then out of business because of that then I think the consequences are just too high if you pay for litigation and maybe are fine right um yeah that might be different but uh I I truly believe that the approach that if you are a central intermediary even if you have a balanced approach and combination with the self-regulation approach where the industry comes up with standards is the way forward and we will evolve throughout the process but it takes time and the last thing I'm gonna say is it is a filter function if you have a sensible regulation the guys

who don't want to comply with the rules they do it somewhere else and I want to hear from both other panelists just one quick aside you mentioned Switzerland um I also think of the UK I've been speaking to a lot of crypto firms that say that yes while there are stringent rules in these jurisdictions they're just so hungry for clarity and it's okay if it's if it's stricter they just want to know what the ground rules are going into it but Jan that was exactly my point and before we ask you ask him how to do that because he's actually actually the only one here uh you know in the position dude to say uh well the the answer is to keep it simple and clear when I moved to the U.S uh with a with a fintech startup we applied for the license just a simple you know

starting one there are five and you know it McKenzie but there are five Regulators guys and you need to get a license in 51 states I'm not kidding uh so that's a nightmare you are going to pay to lawyers like a lot of money so so just keep it simple you need I I can't even remember the names of all the five Regulators so you know just you have a one single point of entry and ever actual as a regulator you can if you have a law for that you can ask for anything but it should be simple it should be clear and actually it should be like fair to use this to use this word it's it's it's quite vague but it

should be fair and then everyone can play by the rules but the case rule is basically the one that should apply allow me one sentence and don't get us wrong we don't think that this approach or that approach from any other jurisdictions is bad or or whatever I think we should lead by a good example and we should actually come up with a solution which is sensible in the hope that others will follow that right um and in Brussels we we talk about the Brussels effect or we call it the Brussels effect we which we had with gdpr um I think if Mika would have such an effect because it is a very well thought through regulation um it it it it understands the difference between Securities and crypto assets it excludes D5 as said so I I

think that that's actually something we should we should work on that it's used by others and joaquim any other comments you wanted to add on this at the right moment

but regulations there are enough possibilities and I think that this marriage the attention first before we will move to the full-fledged regulation because regulations will always be something different from what you put in in this this and this is [Music] [Music]

if there is a politically to only come in with the relationship there's no other way and this is happening right now so why we will only want to know concretely of course you know before I open up this conversation to audience questions something that I've been thinking about and something that we were also discussing ahead of this chat is the fact that the risks with AML and kyc standards is that it's not easily solved

with tech now people have been working on digital identities and other ways to kind of solve for this problem but how do what happens in that space especially as you start to think about D5 opening up and becoming more mainstream bringing in institutional players what does that look like in practice well actually the email is the big thing for everyone but we need to know well three things first you can't escape you can try you cannot Escape in the end there will be at least someone uh you know who will be will be responsible for the AML second thing um actually with the with the Russian invasion to Ukraine

well the word has changed and everyone is very very cautious about about the AML for instance right now uh in Germany and I'm not criticizing German in here just to be clear but it is easier to be arms Trader and to send the money because if you are if you're playing by the rules and you have all your documents right you can do that and it's legal and now it's needed you know to defend the grain but uh it's almost impossible to have an account uh you know if you're a crypto Trader uh you have to you have to go to really like uh very much details to to be to be

combined with AML I still think and you mentioned the the self-identity uh and uh you actually imagine the episode the European blockchain service project I've been working on a little bit for last couple of years and now there's a huge struggle uh between you know the centralized Solutions in Europe or the identity you probably heard about the digital wallet and uh and the base let's say the solution is based on blockchain I personally believe that the one based on blockchain even though it's a little bit centralized now that should Prevail because it can help us because we can use we can interpret with these

ledgers and we can use the identity if it stays in just a centralized Solutions that will be quite quite hard and actually anyone who tried to get a driver's license here in this country knows what I'm saying what I'm talking about are there any I mean I have more questions I could go with but are there any audience questions uh that you want to anyone want to chime in I can hand you my microphone if so okay uh yeah please foreign first of all thank you so much for the super interesting panel uh I'm gonna try to paraphrase a question that uh came up in a discussion during the build up to this uh to this event when we started

with the orgasm organizational work uh last year and uh it actually ties a little bit to the term that uh you've you've actually brought up uh uh during the during the discussion which is uh the true D5 so first of all I would like you to elaborate a little bit on the definition there because I think even the the industry players are not that much aligned on what that actually like really means and it kind of ties into the second part of the question which would be there are some people in the industry uh uh who Express the opinion during the during the build up the debates that the true D5 actually doesn't need to worry about regulation whatsoever because it's Unstoppable technically on the on the technology

level etc etc uh kind of like dark web is in a way so I guess so I would like you to elaborate on the definition and how you then relate to uh regulation of through defy I I can I can start here um as I said before when we started to think about regulation uh we we started with the understanding that there's a technology which allows to do things differently um but then all of these questions start what is really a decentralized uh protocol is it like where do you start and where do you end is it like with I know

um a specific amount of nodes and the specific contents of algorithm um and what is the difference of a Excel sheet I upload to a cloud which is then stored on on several instances right um so there is first of all a lot of research done like from an academic perspective what is really truly decentralized from I can I can talk about what is happening in in South Korea they're doing a lot of good work here but for sure in Europe we are we are working on that as well I think that's there is a lot of um research done in that area and I think that is also extremely necessary because that comes back to that question

right if you uh talk to a regulator and tell them uh with through D5 we don't need regulation I mean you you tell them you cannot regulate because it's Unstoppable um I I just remember one thing there was this discussion uh that the the travel rule um should also be applicable when you send a transaction from one wallet to the other wallet um and then like the question was yeah but how do you implement that right I mean very simple we implemented in code and someone is providing that code so go to that software company right so yes um don't underestimate the power of

enforcement uh I'm not saying that it's good but don't underestimate that um so I think the the approach there is I would not say it's Unstoppable and that's why you cannot do anything about it I would say it's Unstoppable and therefore we do we do not have to do anything about it because it works like it should IT addresses the risks it it's protecting consumers it's not possible that the founder of that project is is getting 10 of all of the the transaction fees or whatever right so I think that should be the argument and that is really the core of the core of the core of the discussion and that is actually what we should work on right these

researchers are working on there is academic research but also the uh the work which is done at several associations but I think the industry has to be honest we have to be honest and not like label something differently I said that already quite a lot of times but I think for me that is the core question and as you said there are like you can define a specific like it it's not it's not easy to Define that what is really decentralized and what is not um but they're like we all have some ideas unfortunately these are two different things on the

one hand side it's extremely important to have the movement contrary to other Technologies this is nothing that you can prevent and prohibit with this is good and we must show the negatives that we can continue and Go on regardless of to join

if theoretical terms or we can go there the easiest way for cooperation and I think the nature of decentralization is is productive

and fruitful discussions thank you for joining us but Jan I'd also love to hear from you on this first thank you and enjoy Florence it will be quite a heated discussion and he did whether that I guess uh so uh as a lawyer I should say as the definition is the first thing to do uh maybe I can surprise you I don't care about the definition the because they're always will be the rules that are already the rules uh even defy uh has to let's say uh apply for instance McKenzie mentioned the mlkyc

the only question is uh how to enforce it and who is responsible so uh I would say that this approach I'm sorry to say so about this approach and I heard it from a lot of friends working on D5 applications and protocols actually this is the wrong one and I can tell you why because you are shifting the burden to the little guy you know you are shifting a burden to to anyone you know uh transacting somehow with the D5 so you mentioned darknet uh yes you the police or anyone else cannot cannot you know uh really really uh get into the darkness and then but they can for instance track the packages

so if we don't want the D5 to become something illegal something in uh in a in a gray Zone something like a financial Black Market uh well we should to really uh get back to what you are him said to what what Thomas said actually uh and to start to start playing biode rules and as I said before let's set the rules first you know we have an opportunity to do that so that's it yeah oh yeah and as you come up one final question I had I in terms of this idea of self-regulation and the working groups that you hold to kind of come up with a with some of those internal policies what's been the most divisive or contentious issue that

comes up like where do you guys disagree internally definition yeah and no one knows really what the device now but uh no what what uh doing Society yeah the definition but then uh the risks because first you need to define the risks to know what the measures should be and actually if if you start the list what risks can any defy application or protocol pose to normal people basically in their assets etc etc yeah that's a long list yeah and this discussion with one please please

um so after the GFC all the regulations that came in centralized banking a lot so the bis the FED SDC all these different banking regulators centralized at a ton the only entities with enough lawyers to handle it were the massive Banks so globally we saw a ton of centralization of banking consumers had less choices um now you've got the Americans enforcing sec's you know like the how we test the traditional Securities legislation is being applied to anyone who wants to sell crypto to Americans the UK just came out a couple days ago with new um guidance on marketing crypto to British citizens the EU has Micah to me this is very

obviously going to centralize crypto into entities that only have the the lawyer capacity or the capacity to deal with all these different um legal requirements so how can you say you know about setting the rules or creating a Playbook how can you say that companies need to fall in line with this while also expecting to do anything other than stifle Innovation it's very clear that new projects are not going to be able to start up and comply with EU UK USA Canadian Australian um expectations of legality thank you Tomas mentioned the the gdpi effect

so uh what is the opportunity here is so well basically Mika will be a global standard in some way so we hope that we can let's say write this wave and with Mika Going Global we can go Global with Market standards that's that's a let's say the positive positive side and let me tell you one thing um there's also one another reason why we can believe this uh Define a fintech or Finance industry is the only one that was able to basically and the startups from fintech were able to to go to the US not the other way around you know we

can we can remember Evolution at n26 you know going to the US there are no U.S fintechs actually coming to to the Europe so an a very second Euro was invested like before the covet in VC cap when we see Investments versus invested in Europe in fintech so I believe that Define and the crypto industry is the next wave of fintech so for for the business and and political clarisons and policy reasons we believe that we can set the global standard from Europe here let me let me actually give you that question back because I think uh what we said is we don't think that ultimately free regulation is the solution right

that's not ultimately the solution the problem is there are only there are some areas where the technology is already there to address these risk properly but if we look at the vast majority of what we call our industry it is very centrally organized so it is a process and the answer to your question is a process takes time and we have steps and we are now in the step of uh it was the Wild Wild West we are now getting regulation but the ultimate goal we should collectively together work on is that we have globally an understanding that there is an area where we don't need regulation and we can use the technology and then

it should be actually easier for everybody to create this future but it is a process and we also have to be true to ourselves right we did not only have very good examples it's not like that we are collectively responsible for that but um we had we had challenges and and that is the story I I work on that since 20 like I started in 2011 I I work on that since 2016 day to day and I can tell you it is it is it is challenging and both sides have good arguments and we have to talk to each other to make a better future thank you so much to the panelists to the audience members for joining us and to the conference organizers for hosting

this discussion there's so much more to say on the topic but I think uh that was a good solid hour so thank you all thank you for hosting [Music] thank you