How Self-Custody & Centralized Crypto Infrastructure Can Co-Exist in Web3

Transcript

um thank you Thomas for this perfect introduction on this uh on this topic so yes I'm Jerome this president of the association also working for adnavour Missouri base Swiss engineering and cyber security company working mostly on Banking and fintech um so I will now uh yeah welcome all my all my panelists please please have a seat just skip this one for okay okay everybody here so so special excellent so now we have um 40 45

minutes until until lunch break almost full room today on this on this topic and um I yeah I want to start with uh with something Ilya I don't know if you remember a long time ago when I was quite new into crypto you give me uh a simple explanation of of the custody of crypto because it could be complicated uh to some bad for some people and I have these examples so this is my wallet and inside my wallet I have bills which could be seen as a self-custody so I hone the the assets but also after um all the the pressure to secure it if I if I lose it uh then of course I won't

be able to recover it and uh yeah this is clearly a custodial wallet uh where I don't directly own it I I rely on a third party here A Bank uh if I lose the car then they can re-emit the car so in the in the crypto world it's almost the same we have these two options from the start between the sales custody or or going via a custodial so let's let's Deep dive into this topic could be quite quite broad we have 45 minutes let's start with a with an intro uh maybe let's start from uh from this part uh Joaquin can you introduce yourself and tell us a bit more about uh about bitgo sure so first of all thank you for for having me here great conference

um so my name is Joaquin Sasser I run uh Bitcoin emea and Latin America bitco is one of the largest regulated custodians uh one of the largest wallet infrastructure platforms um we custody around 60 billion um um usds in crypto assets we process around 20 percent of Bitcoin transactions um Unchained daily so 20 of the of the entire on-chain Bitcoin volume um and we also have uh different Financial Services like a large settlement Network where you can settle crypto and Fiat inside a regulated end and uh secure environment

thank you Alina hi everyone my name is Irina pankowski I am head of partnership at all knows we're institutional and Retail staking provider obviously non-custodial we operate worldwide we have around 2.4 billion under management at the moment we operate almost 40 000 nodes on 71 protocols and we just keep on growing so I'm Richard astel I lead the Swiss market for fire blocks I'm also head of the financial institutions business across Emir so fireblocks we are a technology company we have about 1800 B2B clients or b2b2c clients in terms of some of them we provide them with a wallet infrastructure so it's a direct

custody platform each of one of our clients are custodians of their assets and then on top of that we have this asset settlement Network it kind of gets incorrectly compared to Swift for digital assets but essentially it allows the the transfer of digital assets without giving up a deposit address which has been one of the the quite limitations of scaling blockchain transactions and that particular piece has been on to secure over four trillion dollars of asset transferred over the past four years and we serve just about every single type of digital asset use cases so exchanges Brokers Banks as well those gaming companies and also consumer brand space as well

thanks Celia yeah thank you hello everyone I have here two heads so one hat I'm a board member of CVA together with Jerome and other board members and my second had I'm CEO of Hugh hodler and uh thank you Jerome for this reminder about this example wood wallet because this is exactly what we're trying to build with you hodler so basically we're building this kind of wallet where we are trying to combine custodial and non-custodial approach to secure your assets we're trying to combine clipped in field you can easily convert from one to another and we're also trying to combine uh trading and let's say payments so we are retail focused fintech company with multiple crypto defeat services and multiple ways how we can manage assets

custodial and non-custodial way thank you and uh last Zara cooking tour and also I have to ask you the question that all the journalists asking me since yesterday about this recent uh Ripple uh acquisition I don't know it's the right word but yeah that's the big news it happens two weeks ago so a few words on that to start it's it's the right word it's not a merger uh but it's quickly about myself so I'm Sarah I work for my taco I'm responsible for the Swiss market and the liechtensteiner market is a custody Tech provider so it's a technology company we are operating globally but we are located here in

Luzan so the headquarter is in the Sun and well I mean yes we we are mainly focused on regulated institutions so this is our main target market and this is also how we build our solution so our features are very well Fit For What regulated larger institutions like Taiwan Banks need our clients are mostly Taiwan Banks or a lot of them and now well about the Ripple takeover um it was also quite a surprise for me to be honest but we are extremely excited we just saw that the Visions are very much aligned so the vision of metako and I believe also of Ripple is to make the global financial industry

and the Global Financial processes more efficient and more secure and I believe this is for this blockchains our distributed lectures are extremely capable and I think to reach this joint Vision this acquisition is quite powerful also of course we we don't really have any liquidity problems in the future that risk is solved for sure I mean it was never a problem but with smaller companies it's always a problem or it can be a problem and I think this is this is extremely exciting and I'm very happy to yeah to be at my taco at this time let's suppose yeah a 250 million uh deal of the

current with the current market situation for a Swiss based company and uh it's something uh very important for the community so we'll be happy to welcome repel your new colleague in the next crypto Valle uh conference next year yeah so we already talked about sponsoring the boat party okay I say I saved you one one so for next year so okay so let's start um so we will try to during this uh this panel to to talk a bit about the recent past the current situation and and and the hurdles we have to face and uh and the future recent past of course 2022 I don't have to remind you what happened this uh disaster what happened in our space the domino effect uh the crypto collapse Celsius block file FDX so I

remember in November last year just after FDX or December um I we organized an event at crypto Valley around self-custody because everybody was freaking out and say okay now we all have to go self-custody after what we uh experienced so yeah my first question is just uh simple can we still trust a centralized exchange today uh let's start with with you maybe uh um Can We Trust Banks so I think actually Crypt is not unique we should not just separate crypto and didn't and boil it in one single pot right because we we can speak about entire financial industry so we got this issue with Credit Suisse and it's really similar to cases what happened with FTX

so of course like maybe they're different they're different we know but they have a lot of similarities and it's all related to mismanagement of funds misuse of funds and doesn't matter we speak about crypto or we speak about or we speak about I know stocks Commodities whatever Securities right so similar nature and that's good that we have now all these discussions because technology allows us to fix these problems right and I believe we have here a lot of experts to discuss how exactly technology can help us to solve and avoid this kind of cases in the future like Celsius like FX and like even greater Swiss um and uh maybe reach out after the this this drama last year did you did you

feel an uh absurge in terms of needs did you did you felt uh a change and and is it still lasting or it was just a fear and now we're back to normal I mean from the outset we've been a direct custody platform um so we've always felt that sort of self-custody was going to be the way to go um and at least on the you know on the institutional Market you know being able to custody assets your sales rather than relying on a third party of course it's got added you know a lot of benefits from centralizing counterparty risk on globally systemic banks for example we always see an interest I think also from what I understand from my peers as well is that you know they're seeing it that's a flight to Quality I think the um depending on which angle you're

looking at centralized exchanges from if you're a retail client it's different to an institution institution you're a fiduciary you're representing individuals at the back end there's always been you know barriers to entry for centralized exchanges you kind of think if the institution gets burned you know they should be able to afford it retail it's like you know it's a lot different what you don't want to see is retail getting run over and I think that's what likes of FTX have really highlighted so I think there's been definitely been a flight off exchange into self-custody Hardware wallets which of course introduces new risks on an individual securing a private key for example um so I think that will change over time and it will change at the exchange level I think the exchanges will become more adequately regulated because let's face it I'm in a client of many different

exchanges it's a great user experience what I don't want to do is get run over from Bad practice but I think if they shift their models on the retail side to become adequately regulated in in quality jurisdictions that will encourage clients to come back and potentially trust them as custodians as well on the institutional side it shifted for a long time I think you know since 2018 we've seen the volumes from institutions and real institutions not hedge funds who can take that risk we're seeing those they've been using all the OTC market regulated broker dealers who they can face so I think if the exchangers want to play in that space they're going to have to adopt new models not just regulation but also segregating their custody business you know from their their Marketplace because essentially they are Brokers

with a central limit order book and also and some are also operating hybrid custody so I think Thomas touched on that before and I think that that's definitely a trend that we're going to be you know we're going to continue to see and folks like bitco we've got copper and clearly they're building these types of solutions to support better Market infrastructure so you can protect the institutional side as well yeah thanks so I'm interested to get your your point of view for the bitco because you're on the both side down you propose self-custody you're very regulated custodian also right yes we we are the only uh company that actually has both worlds uh they're regulated um custody where we have a regulated entities in different jurisdictions the U.S Germany Switzerland we're opening in

in Dubai another one in Singapore um I'll touch on that in a second in terms of what is the difference or maybe we're going to touch um in our conversation around that and then we also offer the more software wallet infrastructure where if the client wants to do their own custody either if it's an exchange an asset manager uh whatever company or or institution we can offer that that service I think the main question we should ask and Thomas was totally right around Market structure right we're not inventing here the way always this is not rocket science this is so investors protection is already invented Market structure in traditional Finance

is already invented we don't think that everything that has been invented in traditional Finance is the evil okay there's some things that that have worked to protect to protect investors didn't work with Madoff because literally they didn't check their custodian number right this is ultimately the last check that the SEC had to do and they didn't do it so um in that regard I think we should ask ourselves two main questions um one of them is what happens if something goes wrong and the worst thing that can happen in the world we understand and we know is bankruptcies or internal Bad actors right so if we ask ourselves what happens in that case and how we can

resolve it it's really about are your assets on your your clients assets when you're a typical broker or an exchange part of your balance sheet and is the entire thing going down your client's assets included or are those assets separated actually protected and audited 24 7 in order to for someone to be able to give it out and then we can get into questions like okay what is the process to give that out if there's some if there's a bankruptcy in the case of ftx's derivatives platform Ledger X they were forced to use a qualified custodian in the U.S which was bitco what happened with the assets of Ledger X's users

they're all there no one lost a penny what happened with the others we don't know by the way we're trying to resolve the problem too in addition to mount gogs etc etc um so ultimately um I think that's the main question we should ask ourselves it's not so regulation is not all the same it's not figured out everywhere not even here in Switzerland like because there is another jurisprudence there's not a history of bankruptcy um in a regulated environment of regulated digital asset custody and bankruptcy so for now for example it's very difficult to get top tier legal firms to get legal opinions about what will happen and all all this stuff but

we'll get there it's part of the you know it's part of of of evolving the the industry um so yeah I think I think that just to rub it up that question about what happens if something really goes bad and again that really goes by it's mostly a bankruptcy or a bad actor like SPF um is the main question we all need to address right regardless you do Tech provision and you leave your client to decide where they want to be regulator or not or if you give really sub custody regulated services okay maybe I'll add another question to you on the regulation because of course it's always a big Topic in crypto um do they do this uh regulation really

protect the customer and is there any regulation that are better than some other uh in which country are you regulated right that's a good question so um in the case of bitco we are Regulators a qualified custodian which is a U.S Centric concept by the way but we've tend to use it um kind of everywhere so we're regulated in New York and in South Dakota so both of those regulations um and entering to your question are you know were clients more protected and are regulations the same well no okay saying the word regulated it's not like okay I covered 360 degrees and everything is fine if I'm regulated well no this is the reality right the U.S regulation

state by state defers the OCC opened a process to give digital asset qualified custody licenses they let Anchorage enter and then they change the president and close the entire application process and now they don't want to regulate Anchorage so um this is also like a poetic thing going on here um and then in our case we are regulated in here in Switzerland through through vqfs or we're leader organization um and uh in Germany through through Baffin so um quickly answering to your query I know it's not a super exciting cons uh concept regulation and and client

protection but it's important um for example in the case of the German regulation if you look at it there is actually fiduciary responsibility of the custodian that basically means that if there's a bankruptcy of the custodian or of the broker in the middle that is facing their retail clients there's actually a process already established so the regulator can come in take over put a person in charge like um there's been in with with FTX in in the US and make sure that the clients receive their assets in less time in a you know established process not all regulations others in

Switzerland doesn't have that in the case of New York State and South Dakota they do in the UAE only adgm does that so those are like small bits and pieces which are important to take into account um so in my opinion right now Germany and Baffin are the most stringent ones and the most protective ones does that mean that they favor business well it's a balance right it's a balance so yeah neural regulation is the same um yeah in my opinion some states in the US have done it right given the fiduciary responsibility Germany is doing it right other jurisdictions in Europe but for example Micah doesn't establish this around custody it just establishes regulation around

segregation of assets but not about what happens is there's a bankruptcy and what is a process right so that's why we're talking about Mica 2.0 already okay so then thank you for the for that don't spend too much time on regulation let's switch to staking Arena you are staking expert here tell us what what different uh the the choice of custody solution is for when when your clients go into staking is is it really possible to do self-custody for for stacking what's the trend you you're seeing seeing and and also the difference between just holding crypto and stacking crypto in terms of good custody lots of questions there yeah

pick the one you want let's start with that all nodes is a non-custodial platform and all that specifically works with retail clients and institutional clients so what that means is if you're a retail Staker like yourself and you have a hot wallet or a cold wallet you can stake we all notes and that means again the private Keys stay with you and you can choose as well if you want to stake with all nodes or a steak with someone else you choose your provider second thing is institutional clients so with institutional clients we work with asset managers VCS hedge funds and they custody with custodians um and then in that situation again the private Keys they're managed in different ways when it comes to self-custody you also have the option to homestake that's a bit of a different

monster there it has it's pros and cons it has its own risks homestaking means that you are physically running your own nose and you're not using a validator like all nodes um like with homestaking there are different risks and obviously benefits well self-custody there's also different risks and benefits more responsibilities more education and I think that right now with the whole you know crisis and FTX it has pushed that education because people are asking questions if you're asking questions what are private Keys what are validator Keys what do they do what do they mean you know where are they stored and I think that more than ever we're starting to question how infrastructure Works no one ever asked

the infrastructure behind social media or data there no one really cared but now when it's you know about your assets people are really starting to care and starting to do their research I think it's a good thing and I think the trend that we are seeing right now is that obviously taking your assets off exchanges and making sure that you are managing your risks whether you're a retail client or an institution does that answer everything yeah good and um now someone in the sticking industry suggests me uh another question um so why so few of the centralized platform clients are sticking might be a question for for you Richard if you if you want to answer why so few of your clients uh are sticking because I don't

know if you know the percentage but it's still still low uh and and why I don't know the exact figure but I imagine it is quite low uh specifically to fire blocks I think there's probably two you know two main reasons one uh being that uh the majority of our early clients at least um are in the The Brokerage and the uh the market making side so generally they are moving assets around a lot which makes staking quite difficult if you're locking them and staking contracts I think the second reason is probably actually a platform restriction in that it's only in this year that we've we've produced a UI for staking through the five locks system because part of the five piece is that you're it's not just securing private Keys the custody is way

more than that as we've touched upon I think already but it's so you could put governance around you know the movement of funds or the commitment of funds so having that governance process built into the UI and into the policy you know I think that's probably been a bit where we we haven't covered it as much because our clients haven't necessarily been demanding it so much having said that I think over the past sort of two years or you know our highest growth in a client base has come from sort of the traditional regulated financial institutions Market where you know if you're a sat in Middle office not a chance in hell are you going to run a script to you know stake assets so you do need that UI support and that's of course been brought into the into the product roadmap and then delivered so

going through the motions of introducing assets to think about demand so if to you know being the you know the predominant uh asset request for for supporting so I think that is going to grow it's important as well particularly for new shoes if you're custodying assets on behalf of clients you know it's it's Asset Services essentially essentially say you know there are affordable deflationary if you don't so it is a fiduciary duty to actually be able to offer staking and certainly on the non-custodial side is where we are focused in terms of partner growth we're not going to do staking ourselves um but it needs to be non-custodial because it is too there's two risks you know you've got custody risk if it's a custodial staking platform and then you've also got the risk of the staking provider itself because you know any errors on the staking side if you're not

available to validate uh blocks you know are at risk of the loss of assets um and I think again platforms like all nodes uh and others out there are solving that issue on the non non-custodial staking side and that's all our interest is likewise for our clients as well all right so now let's um let's go more into into technology a bit um because when it comes to B2B custody I always feel there is kind of two religion there is the HSM uh which come from Hardware security module versus MPC multi-party Computing and um it seems these two religion just

can't talk to each other maybe it would be a question for us yeah they can okay how can I how can they talk to each other yes they can so I mean you're right um there are pros and cons for both Concepts so NPC is software based HSM is hardware-based hsms have been around for ages and I mean there are also algorithms NPC algorithms where you still use in HSN is that how you talk or how they talk to each other how they can talk to each other I think this is a very I mean it's super interesting to talk about how you store the keys and this is one piece of custody and I don't know it was I think a presentation yesterday from from one of the guys of

the of the custody team they said there are two three main blocks in custody so one of them is how you store the keys one of them is how you access the ledgers because you also need to have this um this connection to all the ledgers or to the ones that you want to support and then you have the governance framework and yes MPC HSM this is how you store the keys there you can debate their pros and cons as I said I think both Solutions are extremely secure I think the problem and this is also we are all talking about security and so on but in general it's all about trust and how do you establish trust so yes maybe retail clients or institutional clients look

deeper now into technology but still like the common trust is established through what is the opportunity and what is my neighbor doing so maybe also answering your first question about why or can we trust a centralized exchange I mean there was not really another option your bank wasn't offering it the trustworthy companies that you trust they were not offering it so there were decentralized exchanges offering it the new ones right so you did it because your neighbor did it and everyone did it so you did it too but you didn't really do the research and I think all those bad happenings in in the recent few months actually also a good sign because we need to learn it's a it's an Innovative industry and Innovative

Innovation always goes with failure and this is how we learn and this is how the industry learns and I think it's not too late to adapt the good Concepts now it's it's not too late to adapt regulation and also regulation they have a very hard job I mean they want to put regulation in place about the risk that is not really sure what the risk actually is so I think um talking about again HSM MPC well yes this is for sure something that can give you trust but also I think the policy layer is the most is the most important one now because now you need to look at okay we have learnings from the industry the

regulator is learning the partners are learning a lot of um competence centers in your company are learning the compliance Center to risk Center and now we have a lot of rules you need to implement in your custody solution for that you need an extremely capable governance layer and a policy engine and this policy engine this governance layer needs to understand and include the context of everything that is going on around so informations from AML providers information from kyc providers and so on and so on so now it starts to build like this this process map around custody and I think this is much more important right now or should

be the most important topic right now to talk about then what is better NPC or HSM because in our solution our clients can select what they want they can take HSM or they can take HSM now from a provider like IBM they have like the highest security level or they can maybe move to another one the next year or they can move to NPC but but what we need to talk about are the processes okay thanks Elia I want to hear from you on that topic because you're not a software vendor you're not a solution provider you are a client and I know you you use both or you will use soon boss so can you tell us the advantage of maybe having both I think the key is in usability and then Simplicity of

actually user interfaces similar to like we spoke about um uh staking and how we can increase adoption of staking I think we should look into the market as a whole not just isolated crypto so we will get much more customers using real staking if we will look at interest rates provided from from traditional markets so why would Investments taking if you if you if you could get like five percent animal from treasury bonds or even more from S P 500 or whatever so the same with you're asking about NPC versus ihsm it doesn't matter so um what if something someone dies right when we need to use some inheritance

procedures similar to traditional traditional markets right so and it doesn't matter whether 10 PC or something else if someone cannot access funds just because someone lost keys or something really bad happened right so that's why I think the key is uh in the development of uh really easy to use interfaces easy to use ways to manage your funds and again we should look at the market as a whole and we should learn from traditional market so and yes we're trying to combine different different technologists who are trying to combine both sides like crypto and Fiat and speaking about Technologies behind yes we're like a

customer to many of custody providers like fire blocks or Ledger or some some others because we're trying to like aggregate everything at our back end and then provide our users with easy to use interfaces so and again my point is very simple as soon as it will be complicated for typical normal common regular person it will not be adopted so we should focus on the on this side on the front-end side yes just maybe a note to that I think this is a very good concept because we're building an an environment around the solution it cannot be just one solution I think this diversification of risk is extremely important and for example in our

solution we are also kind of like an orchestration layer to include all different kinds of if you want to like have NPC or hsms next to each other or hot and cold next to each other or even integrate different kinds of sub-custodians and orchestrate them side by side this should be technologically seen possible and that I will I believe this is it will be more and more crucial in the future yeah what we comment actually just you remember we had quick discussion and you said very important thing you said like many people uh even cannot take care of themselves right the people many people and everywhere would like to take I would like someone to take care of them

so that means that we should develop technology in a way to help them to take care of themselves right and if we'll have like a complicated things for again common uh humans it will not gonna fly right yeah exactly yeah I believe I mean this whole if we look at it at a higher level uh the whole I would say maybe I can call it blockchain Revolution it's about that when digital digitization kicked in 50 years ago and money became digital the power was so much allocated to Banks and big companies and I think now and also the title of this panel is can it coexist self-custody and

centralized custody I believe yes it has to be the way that it coexists because 50 years ago when we had physical assets we were also we could also choose do we want to store them in our house or do I want to hold my cash or do I want to store it with the bank or do I want to give it to one else to do custody I think this this availability of of being or this being able to choose is extremely important this is where we are heading and this is taking away the power from the big Banks and the the big the big companies of this world because it's also prone to failure if you just trust them and then

they're not trustworthy anymore what are you going to do then so this this selection should be there if I can add a very quick thing I think ultimately we'll so now there's this race between HSM and NPC and different versions We have TSS thresholds signing scheme which is like a combination of of those things ultimately this is a matter of time where everything will be standardized not in one solution but in four or five standards probably or three um the same way you know IPv6 one in the internet https has run in security browsing this will be converted to into standards audit firms which we already have and

yesterday we're talking in in the in the custody panel upstairs we'll be auditing three or four standards so this will be you know normalized at some point um but this is definitely a very exciting moment because we're actually proving those Technologies and and seeing which one is gonna is gonna win we don't think in terms of of bitco we don't think we have to be uh stuck to one so we're pretty agnostic and we are spending a lot of money in trying to you know hack every single one of those setups to see what wins yeah and this needs to be done in collaboration right

for this we need to exchange to build those standards but this needs to be done in working groups and and that is clear but I also believe now it's a really a race about the business models and I think now I mean you asked why they the clients are not staking well our clients are mostly big Banks like City BNP BBVA they're just getting in there they're just starting to explore their use cases I mean they're starting to offer maybe Bitcoin and ethereum and now they're learning quite fast but still they need to have all the processes in place because they have compliance departments risks all that so it's taking a bit slower but eventually they will get there they also want to look into staking and I already get

those requests um but now it's like well the big players are starting to offering the same as centralized digital exchanges well who's going to win the game is it going to be the trustworthy bank or are they even trustworthy or are the tech providers not trustworthy because what we see is also I mean we we trust in alipay We Trust in Apple pay it's also another bank so where do where's the trust are allocated in the future that's a interesting question I think it's after that it's also about history right I mean looking at the banking industry in my money it's existed for hundreds of years and we're still learning to trust it and new technology is still developing as you said Apple pay and so on I mean looking at a normal example my

grandma still doesn't use a credit card she's afraid of it so same thing here right if the crypto industry is so young and it's about 10 years I mean we're just at the beginning and so we're still learning as we're going and the trust is developing and we're developing new technologies and we're trying to kind of you know it's a race to the finish line but where is the Finish Line is their Finish Line because regulations in the stratify industry are still developing and you know something is always changing and being added on so I think just also looking back at history to see what we can expect from the future so I think we almost responded to the question yes it can it can coexist but now is it I want to to discuss about the the possibility of

having a hybrid custody solution because over the last few months I've made quite a lot of crypto startups and also crypto Banks and uh they told me that um yeah some of their clients are requesting nft and device service and obviously they just can't serve them with their centralized custody solution that they have at the same times they don't want to let their clients alone with South custody and yeah I heard that some some new development around kind of hybrid uh let's call it like like this of clients having a self-custody but which kind of

a safety net by by yourself party what is that is it is it real is it a trend I think shall we we we talked about that briefly yeah I think you know coinbase have touched on this without with their retail wallet uh it's something we've seen from client demands in terms of consumer Brands who are terrified of being labeled the term custodian and I think the consumer band segment has probably been the most notable over the past year or so with issuing nfts or it's sort of unite shoes or your Tiffany uh pendants um but I think one of the issues it's actually the opposite where we advocate for more centralized custody because for those Brands these are more marketing initiatives and if they are creating an nft and distributing it to I don't know

a thousand unknown wallets like some of those wallets might be lost that nft might never do anything it's like are you actually achieving anything for this budget that you're throwing up are you just trying to like you know sell something 50 Grand and make a you know a quick Buck off of it and I don't think it's that um so this is where we kind of we've been more advocating with clients say actually you want to take a semi sort of centralized custody approach and think about non-custodial wallets so you can easily provide uh sort of a web free wallet experience to your end client but without sort of also birthing in with this sort of like governance policy over it recovery and Seed phrase um you know protection you know but equally don't concentrate that on yourself and these are those hybrid Solutions so you have a non-custodial

wallet where you can basically provision for a retail customer they they own it they control it uh you know they are sort of the authority over it but they're not sort of burdened with those processes they can do key recovery together with a trusted third party and I think that's what Ledger were trying to achieve they completely ballsed up the PR but you know they that I think generally that that's why they're trying to make it how do I get users to use me more and and trust it because it is about trust in that sense um and then for these some consumer Brands if you actually do have some sort of ownership and relationship with your end client that you've distribute that nft the more likely you can engage with them and that sort of direct to Consumer has been a growing Trend not just in

crypto or nfts but also in the way that you know you generally sell into your consumers Thrive through covert we've seen how business models have shifted so if you're going into the qcm round space you definitely want to be distributed nfts and it went in a manner which you could then future engage with that end client and that also might provide a bit of a bridge with you know regulated institutions eventually you know they're not going to give that up initially I don't think you know but that will also Bridge them so their clients can still trust them as that sort of we'll say the Swiss bank vault to keep the recovery kit and all of that but also not restrict them from terms of you know exploring other areas that the way you know the web three uh can can offer them just just maybe a few words I believe

that the hybrid approach is the only right way to to get a significant progress and uh really can see that this is exactly happening right now uh because like yes if you'd like to to take full control of your keys of your custodies yeah you can use your cold storage in many different ways like Hardware wallet different software wall Etc but in order to convert one asset into another asset in order to access traditional assets you need to use this hybrid approach like and something interesting actually happening here yesterday we had some deep discussions with uh some of guys here like Thor wallet for example they started from totally defy space and now they're moving to this hybrid approach because their customers asking for

credit cards or for i-bands it's impossible to go fully in decentralized way providing cards or eye bands right so they started from totally non-custodial defy part and they're moving to this hybrid approach we're doing the same we started from traditional side with centralized approach and now we're adding non-custodial wallet into our application this is hybrid so if you'd like to get full control over your funds of course you have to use non-custodial way but you need to have a smooth way to access conversion service Lending Service trading service and all these Services should be like provided in hybrid mode and this is totally fine so um uh you if we'd like to simplify like

the the this kind of model uh we should follow decentralization model for crypto segregation model for Fiat but we should always have a Hybrid part in order in order to follow the Simplicity uh of usage and the efficiency in terms of pricing efficiency in terms of you know overall models and connections to traditional markets so yeah private is the key I think if I may add something and this is something um we're very proud of we've actually um very quickly I know we're running out of time we've actually resolved this exact question for nfts uh with Nike Nike launched their first their first nft Marketplace whoosh a few months ago we basically helped them build wallet

infrastructure for the three main use cases the first one where Nike would actually have control of the actual nft and therefore the client asset custody would be with with Nike we've uh given the solution an option to be actually custody by bitco so the client has a risk with pit go and we focus actually figure that which is the most complicated part a way in which the actual final owner the Nike client owns the private Keys have control over it and therefore has control of the nft and can send it wherever they want regardless if Nike is there or bitco is there so

ultimately my point is this can be solved with technology it is very complicated okay we spend a bunch of money on this and a bunch of great Engineers doing this but it is solvable and it will be replicated in in the next few years for sure so being agnostic around this is not a problem it's actually something good right so giving this opportunity for the clients to decide it's good your grandmother probably will say I like Nike or be it go to have a control of the keys I don't know my nephew 15 years old probably will say you know what um I want to have control over mine so yeah that's exactly what I I was saying before

had this and this is giving the retail clients that's right all right so I see it's 12 sharp uh I I I asked the timekeeper Nikki what do we do do we stop or people are hungry five more minutes if you're not too hungry I see the hungry people leaving the room already uh the one who can stay five more minutes you should just one quick comment actually so uh right before us we had an excellent presentation from signal you remember this slide about technology about structure of custody so this is another illustration of hybrid approach so if you would ask question can we trust centralized exchanges or can we Trust

Banks the answer is yes if if centralized exchanges for banks applying this technology like signal presented just half an hour ago so so just stay in a room there will be enough food for you uh okay my so my last question is um so we we covered custody of cryptocurrency of staking um nft D5 maybe the last one is real world assets tokenization this morning during the very interesting uh institutional adoption panel I've I've heard that from from the panelists that institutional MO most of them are coming into crypto Via Real World asset tokenization so what

um yeah what impact about the custody choice for for them do they go fully self-custody I don't know Richard you want to you answer this one because I know it's a big part of your business this last few months it's probably been one of my my main focuses not you know less so on the on the crypto native side but certainly a real world asset tokenization is probably yeah taken all my time this past sort of six to six to nine months you know I think what's interesting about these different sort of solutions is they are they are a little bit fragmented so you know we're solved you know in some areas you solve for very specific use cases so then you end up with a sort of fragmentation at the at the at the wallet level ultimately you miss the interoperability piece and I think that's what questions

start to come out when particularly regulated institutions come in yes they've got crypto Ambitions but they've also got a much greater ambition around tokenization of real world assets and one doesn't necessarily support the other so that's where some of the limitations have come in and we've you know what we've been doing over the past few months I think has been extremely unique not just in terms of you know how Tel Aviv Stock Exchange which was the the main FMI that we worked with on this but how they've approached uh the term of custody because they've got this sort of you have this sort of centralized you know custody background where you think okay everything the whole world will revolve around me because I'm the main FMI in Israel uh or Switzerland or or the US um they've actually taken this sort of decentralized custody approach where yes

you can leverage their expertise for digital asset custody but for the project that we were doing with them called project Eden it also allowed for direct custody by market participants who were joining this this pilot and what project Eden is uh it was the Ministry of Finance in Israel they wanted to issue a Government Bond on chain um and they wanted to do it on a permissioned ethereum-based uh blockchain and for Taste Tel Aviv Stock Exchange to essentially orchestrate all of this and I think you know what was very unique about it was not just like the time frame we actually executed in which was just under five months from start to finish but it was also as an entire ecosystem which took part and that's the other piece a lot of these projects are taking place they're very closed it's one institution doing one

thing for them for their clients for this to really adopt and be standardized you need ecosystems to combine right we don't have cross really custodial settlement in the crypto space but equally when you're doing tokenization you want to see you know UBS issuing a bond and selling it to clients of Deutsche Bank that's what you want to see and that's essentially what was happening here so every single primary dealer of government bonds in Israel took part in this so it was eight International Banks Goldman JP Morgan Barclays BNP barrier by Deutsche Bank City uh and um and five local banks as well took part of this pilot everybody you know it worked by Clockwork actually executed yesterday which was uh which was which was amazing everyone on boarded to to the Firebox platform we worked with one of our close Partners in

the tokenization side block fault and you know this is a not just a lab project this is a full production ready to scale platform if they want to issue govies like this in future they can take that and do so and I think that's really a big step in the direction that others are looking to take throughout the globe it's not quite happening in developed markets yet but certainly we're seeing it in in South America we're seeing in australasia uh and now we're seeing it coming over towards Emir as well so I think there's some exciting things to come particularly on the tokenization side and I think the developments which we've covered off on the cryptivities here as well have been extremely valuable for adding to this institutional adoption that's been happening over the past few years yeah I totally agree less words yeah no it's

fine it's fine yeah it's five yeah last word I just I can I can't agree more um it has been keeping me busy as well so I think this is really something that you can also sell to the top management for example dica they said they're not looking at all into crypto they're only focusing on tokenization of assets because this is more tangible more connected to process efficiencies and so on but yes you have to do it in collaboration I mean we've also projects where Banks tokenize some some physical assets like art or whatever and of course yeah their clients can trade it among each other but now we are focusing on okay what how can we really increase

liquidity how can we work with others how can they work with others where are the marketplaces and I think this is all coming up quite fast but it's a new new wave of digitization it's just a new way of putting more assets on in additional form and then on Jane and because it's all sitting on decentralized ledgers you can use the same technology for it I mean you use the custody technology for digital assets and if you have a tokenized security or if you have a Bitcoin it's an on-chain asset let's continue this interesting discussion during our boat cruise tonight yeah oh yeah thank you thank you very much

thank you