ETHMilan26 How UniCredit and BlockInvest are building EU tokenization infrastructure

Transcript

All right, thank you so much for this um insightful discussion. Next up, we have um Uni Credit and Block Invest. How Uni Credit and Block Invests are building EU tokenization infrastructure with Lorenzo Reacti, Block Invest CEO and co-founder. please. Luca Colombo, Uni Credit CEO Office, head of digital assets up and then Roberto Zukaro, Uni Credit group M&A and corporate development.

Looking forward for this discussion on such a strategic uh infrastructure for for Europe. Thank you. >> Thank you guys. Nice to be here again. Uh okay. Uh I mean this is a a nice moment for us at Block Invest. Uh I mean probably not everyone knows who Block Invest is and what we do. Just a brief summary. Uh we are a tokenization infrastructure. Uh we we launched the company I mean I mean when I was young actually and we managed almost all the I mean uh tokenization of securities in in Italian market starting from the the

first issuance of the uh casa deposit preced during the SCB trials. So um today we are here uh with uh two colleague and friends of of uni credit. So it's uh it's a nice moment for us because uh you're I mean we are uh describing how we moved to I mean being I mean a provider for the one of the biggest European banks uh to I mean got investment from them and also being uh a partner them. So today uh join our panel Roberto Zuko um and uh Luca Columbbo. So

I I'll I'll start with Roberto uh I mean Roberto the strategic investment lead group M&A office um which is actually in [clears throat] our board. So I mean I need to be careful of that. So um I mean we we are I mean [clears throat] it's not more 2022 anymore but still for a tier one bank is not so common to make a strategic investment like that. So all everyone is still in PC phase or >> uh what were like the trigger for I mean a group like like yours to to decide to make this investment any make your buy

consideration or thank you Loreno first of all it's a great pleasure to be here with you with as Lorenzo said with friends let's say more than let's say in an official panel no I mean um our approach [clears throat] in general terms to strategic investment is really very much industrial I would say meaning we do invest in company that we are then able to integrate into our business model value chain operation whatever so let's say we don't act like a PVC or pure P fund that only scout for not only but I would say they mainly scout for financial return but we used to combine this obviously financial return that obviously we expect from from Lorenzo block invest with a real industrial

synergy industrial fit. So basically when we assessed the opportunity to invest in block invest we identified some competing advantages that block invest block invest has. First of all, I would say they are a pure play uh in tokenization and they basically are able to tokenize a wide range of real world capital markets and financial financial assets and I would say they do it really fast really on time that is uh absolutely not uh not common from from also from our from our experience we will mention PC's at use case and our approach and strategy also with Luca on on all the on we are planning to to also

on the business side. Uh second I would say they have a very very deep knowledge of financial services and banks that as you know a very big animals complic complex animals lot of rules regulation processes and obviously >> I'm lucky I have a great team so someone is in room >> having someone that to navigate this it's a super competitive advantage. Uh third I would say also regulatory edge because as you said you starting few few years ago and you have really uh native platform built around EU frameworks Italian frameworks so regulation that is obviously uh very disruptive as usual you already manage that and also I would say a very good

institutional network because you have connection with the CB uh let's say bank of Italy con public stock exchange so this is also to another asset. Last but not least, I will mention obviously a very good tech stock. That is obviously one of the key uh variable that you evaluate when you assess strategic investments. So long story short, multiple reason why to invest, very strong strategic fit and I would say Lorenzo didn't pay me anything to to [laughter] to to do to to share this with you. But I mean this is the reality that we are experiencing.

>> I really appreciate that. Maybe no one will believe it, but we really appreciate that. Okay, let's move to Luca. Okay, Luca, uh you with your team did did something uh for me crazy. Okay, which is build something which is doesn't exist at least in in our market which is like uh it's called digital asset but it's like a decentralized we in the right place to say decentralized uh ecosystem that but manage the world I mean uh web three strategy of the bank so uh considering that you do I mean with the lab a lot of things not only securization or whatever but how you

think uh following what uh we just said blockst can act as a catalyst for I mean all the the use cases we are working on. >> Yeah. So uh hi everyone and thanks thanks Lorenzo. So uh you're right. I mean I think we did something that was maybe not crazy uh but for sure something that we were not thinking about or like we thought that was not possible up until one year ago uh because uh talking about this kind of topics in a bank uh that we are saying is complex is bureaucratic but it's also innovative. So there are also some positive things uh like uni credit is not something that easy. Uh we managed to do that. So uh as Lorenzo said uh now

now we have a digital asset app. It's a decentralized app. So perfectly in line with the blockchain vision. What does it mean that is decentralized? It means that we don't have like people that are working within like a specific side of the organization. So not just in digital, not just in business, not just in payments or whatsoever. We have found people within the organization that are working across all the various areas of the business and have an expertise a deep product expertise a deep compliance expertise a deep legal expertise in the traditional world and are building up a huge expertise also onchain with the onchain finance. So I believe this one is the I mean I believe it because we

did it but I think it's really like a distinctive factor that can up until now allowed us to move very very fast uh because uh we really found a lot of interest passion genuine passion within our people and uh the people are driving the innovation within the organization it's not that we are driving top down because I'm part of the C office it's not that us we are saying look we need to do it this one actually our job now in this in the digital asset is to calm people down because there are so many initiatives that are coming that now we need to select which are the initiatives that are really like valuable. uh what Block Indust can do and what Block Indust is doing in the digital assets hub many things they are like a real

partner at least for me uh when we selected them uh I mean first of all what I wanted to have are like not a technical provider because there are many technical provider in the in the in the space but we wanted to have someone that is capable to speak with the people within the bank. So we found like Loren and his team that are able to really like uh speak with the gold the various areas of the bank with areas that are traditional and maybe also skeptical about the new assets because I mean we are a bank. If we are not skeptical there is a problem. Uh because uh we are not a fintech. Uh we need to be skeptical in order to build up trust. If we do something our clients are going to trust us that that thing has been done

in the right way. It's not that we are issuing things just for the sake of a newspaper article or whatsoever. So it's really important to have a purple a person like in a team like the one of blockinvest that can really speak with with their people in the organization. Second element they're driving in a way also innovation. They're very innovative. They're also nerds that like in a bank is not so easy to to find and like they are pushing us also to to innovate. We are calming them down as well. So like they're pushing and we're saying look okay maybe we do it in six months or maybe in six years or maybe never. But yes this one is exactly the kind of relationship that uh that we are having and I think it's uh right now it's really it's really working.

>> Thank you. I mean this it's really important because uh when you do this kind of project with like a tier one financial institution usually you need to I mean start again all over again. So you do a bond then you want to make another project and you make to have a lot of uh I mean 30 to 40 meeting to to say okay this is the new process. I mean having a unique uh decentralized app it [clears throat] makes things uh faster but let's see I mean we have a lot of things to do. Uh coming back to you Roberto, uh how do you think that this partnership can uh keep the bank I mean ahead of the competitive pressure that I

mean the new regulatory regime like Mikar hopefully the new DT pilot regime coming and what like uh fintech but also new banks digital banks are doing. So >> yeah that that's a very >> European framework because now we need to be European right >> very crucial and the strategy points in the sense that currently banking landscape is increasing increasing challenging we have micro adwinds from one end we have regulatory increasingly complex we have obviously new technologies that you know much better than me AI blockchain that are really bringing innovation but disruption from one end to to to legacy system and incumbent banks on the other And on the

other end I would say you have a challenger banks and fintex they continue to grow. Now we're in the phase that also they are consolidating and I would say big techs continue to experiment because obviously they started we we know very well from China and US the the so famous ecosystem from Alibaba versus Apple versus Google and they continue to grow or experiment by themsel or partner with the with banks. Erh also we are in a big wave of consolidation through M&A in banking Italy Europe potentially globally so obviously arena is super super competitive and challenging from our side let's say and come know to to to this space I I I really do believe that our investment in block invest give us

some strategic advantages first give us a strategic control over a crucial infrastructure layer also having the opportunity to directly influence the strategy and the rob evolution of of the company being with you also now in the governance of block investor we will have the opportunity to let's say identify hopefully the right way to to to grow to grow together. Uh second it's it accelerate a lot our time to market because as usual uh for sure there are other colleagues from banks here we always face no make versus buy uh let's say uh decision to to phase in this case we choose no to go for uh for the buy and in theory know having something

already plug and play we can integrate and uh and move um and move faster. Um last but not least I would say it give us the opportunity be really ambitious to try to create a market standard in the sense that leveraging on block invest core core capability and strength our very extensive panuropean footprint in a scenario where Europe really needs European champions we see now also uh when launch startup startup start up and scale up strategy the new fund so it's really something moving finally on innovation In Europe, we have really the this great opportunity to to take and I mean we we should be ambitious.

I see. So no pressure guys. [clears throat] Let me let me come back to Luka because uh I mean it seems too easy and perfect but it's not. I mean it's like um so we we did something together recently uh together we organized mini bonds structured notes and what what the markets see is just like the news that is done but uh we we know that and we used to say tokenize an instrument I would say is easy but it's not easy it's doable but tokenize the process is the real challenge. So what does it mean for the bank, the clients and I mean for the internal stakeholders?

>> Yeah. Well for uh the clients uh we have made this uh uh P because right now we are still talking about PC unfortunately but our goal is to not talk anymore about PC but scale the initiatives. So what we have realized is that there are benefits. Ah what a what a a discovery. I mean everybody knew that there were benefits with the blockchain but actually we realized that the benefits are tangible. So clients can save time, can save cost, can save intermediaries. All great not really because like the PC that we have done how was it settled yet with physical cash. So not digital money but real cash. So what do we miss? I mean we need we miss still a uh stable

coin or like an onchain payments. We are part actually we founded the Kalis uh I think here in the room there is also the CEO of Kivalis. >> Yeah maybe is here. >> Yeah. Uh so no pressure also an email but now we need really the the Kalis stable coin in order to really like have all the benefits uh that the tokenization and the blockchain can can bring. So for the clients the benefits are clear. Uh what is really important for us is that the clients should not even perceive that there is a blockchain behind it. They shouldn't care. I mean for them it's like I just get a new product or not a new product actually an existing product on a new technology it's faster it's cheaper it's seamless it works perfect I don't know whether it's a blockchain or like another

technology for the bank is a little bit different uh for the bank doing this kind of things is not so easy there are many challenges you have to completely change the processes you have to completely rewrite all your uh internal compliance rules uh your legal rules risk screws whatever. So I can tell you that the challenges are real. They are there. But we are here in order to solve these challenges. I mean we are not scared. So actually I love challenges because if there were no challenges to be honest like everybody can be a winner in this space because you can go you can use AI and say look can you tokenize these bonds or mini bonds or whatever and sell it to the market. Yes I can do it. One second done. Reality is that

like doing it really is much more difficult. So uh it's a process. Uh it's something that is going to take time. We are working on it. We're working with Block Invest. We're working with other partners. So it's really something that is going to build up. I would like to say one thing that I forgot before Block Invest it's true that we have invested in them. It's true that we are a partner but Block Invest is not unique credit. I mean so Block Invest our goal is to leave Block Invest as independent as possible because Block Invest needs to cooperate and to work with as many players as possible because otherwise we will never be able to build up an infrastructure and build up a market.

Sometimes I hear about competition. How do you compete? I mean come on guys, there is no competition in this market right now. There is no market. That's the reality. So we need to build up the market. So the more Block Invest works with all the other players, the better it is. We are here in order to support them in order to build up something together where the the title is building up the European infrastructure. That's exactly what we want to do. But they are independent. I mean the and I can tell you luckily they are independent because I can tell you that if they were within uni credit Lorenza first of all wouldn't have so much hairs and uh it would have been much more difficult and they would have lost all their innovation capabilities because a bank of course is a complex animal. So they need to be

independent and completely like enjoy their their uh their journey. >> Thanks for say that. >> Yeah. >> Great. Uh so let me say with you. So let's I mean we both uh what's this partnership I mean will look like if there would be for you since I know you are very ambitious. I'm not say you you just you said I'm a dreamer. I say I mean okay dreamer but you're really ambitious and concrete. uh what this partnership will look like in 24 months if there will be a success. >> I mean in 24 months I think uh it's a bit difficult because we need to understand exactly how the market is is going to evolve and how fast it's going to be. But in 24 months like so a short time medium short time frame I think uh

we are not anymore talking about PC we're talking about something that is scalable. So starting from a PC but something that now became scalable uh and the clients really start to perceive and ask us to do that kind of to use that platform and to use that uh technology. So this one is going to be our first success. If you look as you said I'm ambitious I don't want to look at 24 months. Let's assume that we look at five 10 15 years. So what is going to be success for me in five 10 15 years and here I'm going to be kicked out of this room not having any more these conferences. Why? Because we won't we maybe we don't need them anymore because

the blockchain technology is so used everybody is so aware of the blockchain technology that we don't need to talk about it. It's like having a conference right now on web 2.0 on internet. >> I mean what are we talking about? We know there is a technology and it works in 15 years maybe we don't have this conference or maybe we have this conference but with a different spin and so the blockchain is working is scalable it's used like in many business rails within a bank or like not only banks that will be really the the success block indust is going to be super huge we would have made a lot of money uh Loren is going to go with a yacht whatever so that's a success uh success

for me in the long term. >> Finger crossed. And and for you, I mean just similar question but on a different perspective on the on the investment side. What would be a success uh for you in give me more time? 36 months. >> 3 [clears throat] 36 months being ambitious. We really expect block invest to be a unicorn with at least 100 million bid. No to to amish. No jokes apart. I really think I I link the success on any investment we do. We on two things on pure financial perspective obviously we really expect that no 24 months it's it's a short medium horizon 36 more more probably coherent we really expect invest consolidating financials

grow sustainably business growth and again I really the point that we are saying a lot on becoming really the go to startup fintech for tokenized the go-to player for tokeniz in Italy because again to create a market standard we all the banks to use in Italy potentially beyond no again leverage on on our also on our support block invest really as a standard and looking again a bit internally to the industrial fit I really think that if we are able to maximize business opportunity leverage on on the on your technology infrastructure that also would be a great success >> thank you uh if we have time I would like to revert to things and I would

like I mean ask if you have something to ask to directly because now I mean you just put some >> start. No, I have a question like before because we have discussed everything looks amazing, looks great. The reality I can tell you that is a little bit more difficult. The challenges are are real. Uh so also they I want to manage expectation like 24 months is a good period of time but we need to be realistic. So the challenges are real. What I would like to ask to you Lorenzo is how is dealing with a complex organization like Uni Credit like which are the challenges that you're facing and also the good thing because it's maybe there are challenges but they're also like uh like good things. Be

careful. >> Okay. I mean there there are challenges for sure is not easy because uh uh usually what happen when when you talk with the manager with I goal and really ambitious it seems you can go fast but then then you we go down and you talk with like people that work on the operation side or people that they discover that they need to change I mean that the way they work uh that we we don't need more a CSD that you need probably more a middle office so something It's uh it's uh it's really complex but the only way to do that it's I mean something strange to say from my side is forget about the technology and

work on the processes. So usually the way we manage it is and to manage expectation is okay we need to I mean forget about the slide forget about the demos write down on paper uh the processes I mean what is right now and what we look like after we apply to organization also because um there are things that you discover during the journey for example I mean there are no market hour okay for for a bank is strange you you don't need more a market hour why why you need to calculate for a tokenized coupon the interest in days when you can do in second uh these are just example but uh help you understand what what's the real complexity and I

mean balancing the the pros and cons and also because um at the end of the story if you even if you tokenize things and you bring an upgrade anyway you need to manage the we call it legacy trap because there are some legacy system that needs to be I mean updated or I mean linked to what happened on chain. So yeah but thanks for ask this was not prepared actually but uh yeah this this is the reality so it takes time. So uh think about it that uh because probably we we don't see too much that this is not application business and it never been it's not even a product because we

are bringing on chain something which is already exist. Okay. uh here it's an infrastructure business and I mean uh historically the infrastructure shift on an L shape okay so if you're not ready to to that to take that L you pay a lot of money to be ready for that so that's why it takes a lot of time >> for you I mean u the question in the sense that what is your ambition for block invest and what are the key milestone strategy but also to execute in the next two three years.

>> Okay. Uh there I mean two two types let's say. One is from the uh operational point is u increase the number of use cases that we can handle. So now we we we started recently to work also on the uh nonItalian use cases like the shine that is picura German product for example. uh we are working on other uh particular uh models that enable to tokenize things and to design new financial stuff that now I mean doesn't exist at least are not digital. Okay. Um on on the on the company side we we

don't think that even if we get a good market share in in Italy would be enough uh because uh there would be I mean a lot of players. So the the the the the thing is I mean trying to be a European standard. We will never be alone but we want to cooperate with other uh company like us to I mean co-design a standard because at the end of the story if you want I mean really scale this technology as Luca was saying being in that position in 10 15 years we need to use the blockchain for real. Okay, not like I mean stuff that are seems like a blockchain but they're not. Otherwise an Oracle database is much better and faster. So we need to to write together

the standard and particularly one of our ambition is also to link uh I mean block invest like is office of of market infrastructure. So this market will scale when the I mean market infrastructure I'm talking about the huge stock exchanges will be I mean in our ecosystem this is the only way the market will scale and will happen what what Luka just said so let's do it yeah and we used to say I mean we want to do that uh it takes time so to be be honest the only things to do that is one block at a time so uh Thanks for your attention.

>> Wait, wait. One block at a time, but we need to we need to start moving fast also. And I'm saying it here. I'm not saying it in the bank because otherwise I'm going to be quoted. But uh no, but really uh I mean in this audience, I think it's important if we don't build up the infrastructure as we were saying before and Lorenzo was saying before, somebody else is going to build up. And it's not that it's somebody else that is not block invest not uni credited, not who cares. like the issue is if it's somebody that is not really in Europe. So really let's not lose again this opportunity because it's really important that we maintain the sovereignty of Europe and in the digital asset space is important that we start moving now. It's already late but we really need to start moving now. That's

also why I was saying that they are independent. They are they need to be used by as many players as possible. We need to collaborate all together in order to build up this because otherwise we're going to lose the the train. cooperation and collaboration. Thank you. Thank you guys.