Always On. Always Risky?: Liquidity and On-Chain Finance | DC Fintech Week 2025

All right. Hi everybody. My name is Andre Begansky and I'm a staff reporter at Decrypt. Very excited for the conversation that we're going to have today. Um it's going to focus on liquidity and uh 24/7 markets, whether that makes them inherently fragile.

It's important to note that we're having this conversation within the context of the biggest liquidation wave ever in crypto history. Last Friday, $19 billion worth of liquidations happened in the crypto market. That was more than the COVID crash, more than FTX, more than the tariff sort of debacle that we saw in April. So, with that, I'm going to turn to people to introduce themselves, but one of the things I'd like to know from your guys's perspective is what stood out to you most during this historic crash that we had not too long ago. Amanda, do you want to start?

Sure. Okay. Hi, I'm Amanda. I'm the executive director at the Defi Education Fund. We are a nonpartisan nonprofit dedicated to advocating for sound DeFi policy.

That looks like advocating for software developers and for users of DeFi wherever we can in rulemaking in court uh with lawmakers and we also do a lot of education explaining dem demos of how DeFi work works how the tech works all of that. Should I answer your question now or please? Um, and I would say that the thing that stood out to me the most is that decentralized systems like Uniswap and A and DYDX performed through the entire liquidity crisis and that is um, I think a testament to the resilience of decentralized technology.

Thanks Andre. I'm Greg Xathalis. I'm the general counsel and a partner at Multicoin Capital, which is an asset management firm in the space. I'm also a director of the blockchain association and the DeFi education foundation which is an affiliate of DeFi education fund. Um and I think for me not a legal or policy observation but a practical market-based observation is we're now entering into a world where increased adoption of digital assets is giving the world economy access to something that is always liquid and always available.

And that means that when news comes out after a market close on a Friday night, and we've seen this a couple times, the asset that the global economy looks to as a a proxy for information on sentiment is increasingly crypto markets. And that exists both on decentralized platforms which performed remarkably well uh throughout the weekend and functioned as expected as intended uh as well as centralized platforms which did function but had some hiccups in uh the level of liquidity within order books. Georgia,

thank you. Hi, I'm Georgia Quinn. I'm the chief legal officer at Securitize. I just want to say thank you for and thank you to Chris wherever you may be um to for inviting me here. Uh so at Securitize we tokenize securities.

That's it. Just securities, not anything else. If you want to tokenize something else, go somewhere else. But if you've got securities, you need them tokenized, that's what we do. And um we'll get into, you know, the process of that and the different mechanisms behind that.

But um there's obviously the goal when you're tokenizing securities to be able to trade them in a very highly liquid way. And so I'm hoping that we can unpack that more today. And then my observation uh of the past, you know, week or so is really that um when you think about all the other events that you just mentioned, um those and and how they kind of um pale in scale of what we just experienced, it sure doesn't feel like that at all. like when we went through FTX and you know the Silvergate crash and all of those other events um Teral Luna th that was momentous and it was like an earthquake through our entire industry and I didn't really feel too much. So um Plume uh so my name is Alan Benai um I am general counsel at Plume Network Inc.

which is a project that uh is trying to tokenize securities as well as other real world assets um uh including um uh camels uh durian farms in Southeast Asia um what's another obscure one um micro finance loans for tuk tuk drivers these are these chariots um that uh that are popular in Thailand um among many many other uh projects that uh have launched tokens in in the plume ecosystem the plume blockchain itself um it can be seen as a compliance layer for uh Ethereum. So it's a it's a layer 2 um protocol that is the only uh layer 2 maybe the only public blockchain that has embedded sanction screening um at the transactional uh level. Um so um I uh I I have a little bit of experience with flash crashes. So I got my start as a regulator at the CFTC um in 2009. And I was in the market surveillance unit on May 6, 2010 when we had the flash crash which uh initiated based on a um a large uh mutual fund hedging their portfolio in S&P futures and um it was during a volatile time.

Um market sentiment was very mixed. uh nobody had a lot of conviction and so that large hedging transaction uh led to the transmission of um pricing information that was uh interpreted by the market as uh something more than what it was which was one mutual fund in a time of uncertainty hedging its uh position by selling uh shares in S&P indexes. Um so um there's a lot of parallels actually with what happened last week. Uh D5 performed well from an operational risk perspective um it did exceptionally well um from a market risk perspective though crypto as a whole u there's some lessons learned um and at its core was wasn't actually DeFi it was a pricing oracle at one of the centralized exchanges um which uh you know maybe our friends at chain link can help them uh improve um but what we had was a market risk phenomenon which was very quickly um reversed um and I think most uh most tokens have recovered since. Um so I think one of the the the lessons learned is as this ecosystem grows um it's well positioned to adapt to these types of uh phenomenon.

You know one of the things we saw after May 6, 2010 the flash crash was uh we started to see new trading strategies that were looking for these falling knife events. And so I think in DeFi we're also going to see new trading strategies that are going to spot these you know market risk phenomena and trade against them. Um and so when these phenomena happen their severity will be reduced because of these new new trading strategies. And as more uh money comes in with uh additional regulatory certainty we'll we can expect a diversity of trading strategies that will limit these uh tail tail risk events in in the markets.

Well thank you for that Salman. Um, you know, I think we're going to talk a little bit about the role that market makers potentially played in the crash last Friday. I don't think we have a a full picture yet of exactly what happened, but sort of the conditions in terms of liquidity drying up are notable, and I'd love to get your thoughts on those. But before we really dig into the nuances of liquidity, I think it's important for us to establish what we're talking about. So Amanda, my question is for you.

The DeFi Education Fund advocates for policy clarity. What are the biggest misconceptions regulators have about liquidity in DeFi?

Sure. Yeah. So, I think um there's a few misconceptions at the most basic level. Um one that we don't want regulation which is not true. We do want regulatory clarity as you baked into your question.

Um and then also that there is um this misconception that somewhere in a decentralized network there has to be an intermediary somewhere that can do something um that that will look like how it looks in traditional finance right and we are talking about the traditional finance which is an intermediated system right there is a person who can block your trade um keep you from accessing a network or delay settlement on a trade in DeFi that kind of entity does not exist. there is no intermediary and the reason that exists that reason that we it can function that way is because we trust in code to help us engage in self-directed financial transactions where we custody our own funds right that's how DeFi works so I think one of the biggest misconceptions there is that somewhere in the liquidity uh puzzle there is going to be that intermediary that can do something um but instead it's really um making sure that the code functions the way that it's supposed to salman talked about operational risk like that means that um there are people who are good stewards of their private keys that there are people who are u making sure that the system that accesses DeFi operates the right way. Um and I think one last uh misconception is that liquidity in DeFi is only for big institutions and not for the individual person and that's not true. Um many people greatly are greatly benefited by liquidity in DeFi. There are many stories of people who are able to earn an income because they provide liquidity to a liquidity pool and you know we are privileged here in the United States to have a stable currency.

Other places in the world that is not the case and people are able to earn a much more stable income by providing liquidity in DeFi.

It's always important to think about DeFi as sort of a global phenomenon and one that's not necessarily limited by a jurisdiction. You know, you talked about regulation there as far as something like DeFi isn't saying that it doesn't want to be regulated. You know, Greg, I think turning to you from multicoins perspective, what legal frameworks are most urgent for onchain liquidity providers? So [clears throat] you know first you can provide liquidity through centralized fora or you can provide them through DeFi and those are going to be different uh centralized intermediary centralized platforms whether they are lending operations, derivatives platforms or exchanges are going to be regulated just as if they were traditional centralized intermediaries. market structure legislation that is working its way through the Senate is focused on regulatory frameworks for those intermediated players.

Just because something is crypto doesn't mean that there aren't intermediaries. It's just that those intermediaries are the Coinbases, the Krakens, the what have you, the CMEs of the world. So pulling aside that framework where I think it's reasonably well understood how we're going to address regulating those intermediaries or at least somewhat well well understood. DeFi is a little bit different when you're providing liquidity in DeFi. First understand that these are systems that as Amanda said that are autonomous not controlled by any party.

They are very well a typically and hopefully very well audited code that is designed to function not through an administrator who is managing or monitoring the system, but instead through thoughtful code that contemplates both the game theory and the economic incentives of the participants in a DeFi platform as well as being designed to be to operate in an antagonist istic environment, one where you know you would expect people are going to be trying to find loopholes or flaws in code, flaws in the risk metrics that have been encoded into the design. Uh, one of the significant areas of concern there is actually around around collateral and liquidity provision itself. Um and when we look at how these pools operate, the most simple is you know a swapping and or a exchanging function in DeFi like an automated market maker where people will provide liquidity into an AMM which will allow people to have a trading counterparty for these atomic exchanges of one asset for another in a very well understood well-designed system that rebalances the price based on the assets in a pool. Different from that are what we typically call as borrow lend protocols. But it's important to note these aren't actual like lending platforms where there are contractual obligations from one party to another.

So if I provide liquidity into a borrow platform, I don't have a right to enforce legally a return of my assets. instead I have a power to provide assets back in from that wallet to a vault to reclaim the collateral I have posted. And then the the third real silo is something that looks a more a little bit more like a derivative where I might be posting assets again as collateral. Uh and under both of those cases, both derivatives and uh a lending oriented one, um you know, what we're looking at is how is the infrastructure of the D5 platform designed to manage the loan to value or the coll collateral level and how can it respond to significant movements. And it's incumbent upon the people who are initially designing these systems to think about what type of collateral is permissible, what type of haircuts are applied to collateral, how do you manage most of the significant issues that for example occurred over the weekend related to um you know collateral that was not as robust.

Uh so you know people were getting liquidated not on positions collateralized with USDC uh or typically with Bitcoin but with things that took big gaps down and that's part of the framework on design and I think when we're looking at the objectives for people who are providing liquidity into these platforms you know the first and foremost is making sure people understand what they are doing and making sure that systems have easily understood uh textual explanations. The code is source available. So if uh you know if you if you speak C++ or Rust or Solidity, you can understand these things. I'm a human being and I do not speak C++. Uh so I need textual explanations of how these systems function.

And I've realized I've been going on for a little while. One one thing I would note is this past January, the great Sigal Mandelar wrote an article uh you know bemoning the fact that our government regulators aren't allowed to own, use, and try out different aspects of DeFi. And if you want to understand these things, you have to play around with them. You've got to become familiar with them. You've got to understand how they work through testing them out as well as diving in and understanding how they function from a textual basis.

But currently the office of government ethics doesn't permit government employees who are working uh potentially on the regulation of crypto from owning testing toying around. It's one thing that uh you know I would hope to see the administration rewrite and revoke that guidance because it's very detrimental towards getting good crypto policy in general but particularly as it relates to DeFi.

You need to be elected president I think to be able to

I think you might want to speak into the mic. Oh

oh sorry I was making a bad joke which is I think you need to be elected president to uh to trade in crypto. You know, Greg, you know, something in terms of what you said right there is about code being law. And I find it really interesting that not only is this something that institutions have to navigate, but as well as individual investors. And you know, one of the unique elements about DeFi is this idea that, you know, people really are on the same footing from the perspective of just engaging with these services. But you know, Georgia, one of the things when we talk about code is law is, you know, the idea of how safeguards apply.

You're somebody who's been in traditional markets and digital markets. What do you think carries over well and what doesn't?

Yeah. So, I think it really comes back to the fundamental difference of intermediated systems and non-intermediated systems because the law needs a head to roll, right? The law needs to be able to point to somebody and you did a bad thing and you will be punished. But when we're talking about code, it's it's not an individual. And so I think for me, and you guys will probably like disagree with this, but I don't look at code as law.

I look at code as a tool and a product and something that we can all use and we all just agree to use it or we don't. But we're not going to be able to go and sue the code. So um that's why it's a little caveat mour in that you do have to have the appropriate disclosures and understanding about what you're entering into. And frankly, I don't know who gets in trouble when those disclosures aren't fully accurate. Um, but it probably should be somebody.

Can I make one point, Georgia?

Yes, please.

I first agree wholeheartedly that code is not law. Law is law. What it though is interesting that attaches to that point is within truly decentralized systems the code does govern not in that it establishes individual's rights but in that it establishes the powers of everyone who interacts with the systems. So everyone is playing in the same sandbox by the same rules. And that's again where you have this concept of building for an antagonistic environment because there is no one who you know can be an arbiter and a legal recourse within those systems generally speaking

right and in many ways that is a feature

because we have spent like this country has spent a hundred years now building up controls and systems and regulations to ensure that we can protect people from ourselves. Right? We have to protect them so that that that finger at their, you know, broker doesn't accidentally liquidate their entire position. We have to protect them that a bad actor at their bank doesn't steal their life savings. In this instance, we don't have those issues, right?

Because we now have a code that is pure. It has no motives that is performing all of these functions. And so I think that I'm very excited to see, you know, to have a little time horizon on this and see what performs better, humans with all of their flaws and the need to create layers and layers of regulation and controls or code that can be drafted, you know, Xanti with uh, you know, these sorts of protections built in at a fundamental level.

You know, just to chime in here, I'm not convinced that code is law either at this point. I think when you do see DeFi projects encounter things like exploits or hacks, very quickly that sort of veil can fall down for projects where they take sort of radical action, whether that's coordinating people that are involved in these systems to act quickly or in some cases exercising control. Um, you know, Salman, that's obviously a safeguard when it comes to sort of managing uh risk in protocol-based finance. What do you think can help reduce uh systematic fragility in the space? Yeah.

So um at at at the tech at a technological level um DeFi is uh you know a unique innovation um really a riskmanagement innovation in some ways um in that it uh it's it's achieved uh unprecedented levels of transparency and enabling um radical levels of automation um which you know you see for example through 247 uh availability of uh you know onchain infrastructure Um and the combination of these two features um also enhances you know what I call the self-healing properties of DeFi which is uh the ability of the market to to spot um vulnerabilities um you know that arising out of this PVP player versus player um nature of of DeFi. um that also enhances the ability of the the DeFi system overall to adapt which is uh you know an anti-fragility promoting um feature of of uh of DeFi. Um we're a bunch of lawyers. So let's talk a little bit of policy. Um the the the ecosystem, you know, I'd like to see evolve and and in some ways we we've already achieved is um we can have a universe of DeFi developers that don't need government approval.

um for you know launching a new protocol, launching a new app. Um but the next phase that we need is we need pathways for regulated institutions to be able to use this technology in a safe way. We've made considerable progress. Um you know I think the the market structure bill does a great job of protecting the developers. I think it could use some improvements though in terms of providing those those pathways to enable regulated institutions to start participating in this ecosystem because ultimately that's where the capital is and with the capital comes liquidity and with liquidity comes enhanced uh systemic stability.

Can I just share one

of course

little baby step. So at securitize ah okay sorry so um at securitize we are taking like small steps to you know engage with institutions and bring them into the D5 space and one thing we've been able to do is um work with certain DeFi protocols to allow tokenized securities so these are like SEC regulated tokenized securities to be pledged as collateral natively into the DeFi ecosystem and then you receive the native um DeFi token and you're able to participate in that ecosystem. And this has been a really nice way because it still maintains that level of separation, right? The actual SEC registered security is never breaching and entering into the DeFi ecosystem, but it allows the the investors and the holders of those securities to have access. And so, you know, I feel like it is a small step that we're able to do.

Um, you know, coming from the more highly regulated side,

I hear what you're saying about sort of like the separation of those two things and them being able to coexist to an extent. You know, I want to sort of turn our focus back to what I brought up at the beginning of this conversation, which is our flash crash on Friday. Um, you know, we talk about the PVP environment that's inherent in DeFi and how that's different from traditional finance. um you know market makers are something that I've seen come up in reporting in terms of you know liquidity drying up quickly and in to some extent a coordinated retreat among market makers. I would just love it if I like everybody could chime in in terms of how those incentives between participants in DeFi systems versus traditional markets really showcase themselves here to an extent if they did or maybe they didn't.

I might quibble with one thing you said because the traditional markets are also quite PVP. I I I think there I think there's a greater expectation um or there's more layers of compliance controls and um you know more of an expectation that hey if I do something you know a little a little uh aggressive you know I might expose myself or my company to uh to more risk. I think there's there's there's more of that sense there there's definitely that sense in crypto too. But um in Tradfi I think just given the layers of supervision at the regulated institutions it's uh it's it's more pervasive. So with that with that one quibble um we can continue the discussion.

No, I appreciate that counterpoint because I do think when you talk about DeFi, the PVP nature does come up a lot. And so saying that, you know, this really isn't different from the conduct from the conduct that you're seeing in traditional finance, I think it's important for people to understand in terms of just how there are similarities and at the end of the day, these are these are financial market participants.

Yeah, I think on and that's a great point, Solomon. The I think the distinction is the code for DeFi is designed to create a fair platform for participants based on the committed code. Whereas in centralized markets, we rely whether this is the CME, whether it's ICE, whether it's, you know, Coinbase, we rely on the market operator to establish and follow rules and do so transparently. Whereas in DeFi, the code is fulfills that role. Everyone is on equal footing on uh on a DeFi platform.

Just as in any blockchain network, everyone is an equal. Uh all you need is a little bit of internet access and that startup capital to pay your gas fees and everyone is an equal. Um as far as the market makers, uh you know, I think it's an area of evolution in crypto markets. Um market making is certainly different than it was three years ago and three years ago it was different than it was six years ago. Um the market is evolving, becoming more robust, becoming more resilient, learning from mistakes and uh you know the structure of even the centralized crypto platforms often looks slightly different than the existing trad uh you know broker access versus direct access or FCM access versus direct access.

uh and I I think we will see a lot of focus on market makers going forward whether it's you know market structure regulating dealers in in the space um and you know when we look at this past weekend I think it's too early to really dig into a postmortem because we don't actually know fully what happened other than as Solomon mentioned uh you know the markets have responded um and as Georgia mentioned this was very different than the experiences of early 22 with Luna where the market wasn't able to absorb the supply shock of credit being withdrawn from the market and instead we saw a significant pullback based on you know extr extrinsic factors to crypto and we saw instead crypto being utilized by global markets as a way to express an opinion on the news of the day. um which unfortunately also led to uh cascading liquidations on certain collateralized platforms.

Thank you for that. Um Georgia, I think you're a great person to weigh in at this moment because of what Securitize does in terms of issuing um tokenized assets that people would call sort of native to an extent where they carry the same rights that you would get traditionally if you bought stock through your brokerage account. Um, you know, one of the considerations here is that people are tokenizing things, but um, you know, as Hester Pur pointed out this summer, a lot of sometimes that can look like a synthetic asset. Um, and you know, it being synthetic when markets are closed, there's this potential for, you know, asset prices with these synthetic assets to deviate from ones that are native. um you know how does securitize think about this in terms of market risk when it comes to native assets versus synthetic assets?

Yeah. And the market doesn't even have to be closed for that deviation, you know. I mean, if you want to pay uh 10 times as much for some wrapped Tesla, like you are welcome to it. But um I think at Securitize, we we understand the problem, right? We prefer what we call the issuer-led model where the issuer wants to issue securities and they want them to be in a tokenized form.

So they are natively issued on a blockchain of their choosing or multiple blockchains of their choosing and the actual ownership record is the blockchain as augmented by PII. Um that is a harder road right than just going and buying up a bunch of Apple stock or other things putting it in some sort of SPV and selling tokens of that. Um, so I get like speed to market and why people want to create these synthetic versions, but ultimately that can't be our goal because that's going to create these little pockets of nonfgeable assets because they are not the same thing, right? that thing that I bought is now wrapped in my credit risk and I'm issuing that underlying thing plus my credit risk to someone else versus in the issuer native tokenization. Those investors have a direct claim on the issuer and they have all of the same underlying rights as the actual stock or note or whatever the underlying security is.

And in fact it for most purposes is the underlying security. We'll talk about UCCC some other time but it is quite quite different than a lot of these other instruments that you're seeing where they are either acquiring them and holding them in a custodial basis or actually creating other um vehicles to sell those assets. And you'll see that's why you know for the most part those kind of things aren't being offered in the US because those actually become another security that has to find either you know be be fully registered or find some exemption to be sold in the in the US.

We're going to call that a layer 2 security.

That's [laughter] good. That's good.

Um Georgia just to dig in on this just a little bit more. I've talked to people who are in the business of the of issuing these synthetic securities. One of the things that I've heard them talk about in terms of a talking point is this idea that um native assets have certain uh considerations that need to be made around custody. Um particularly like the idea that it could be challenging for me to own a native asset in a self-custodial wallet to an extent. Um do you sort of uh see uh native tokenization as having limitations compared to the synthetic approach?

Limitations, but custody is not one of them. So I'm going to call a little on that guy. You can tell him I said so. And no, there's no issue. And we have, you know, multiple um issuers that issue direct to the wallets of their investors.

Also, you if you don't want to self- custody, you can have a custodian custody it and you don't like that, you are more than welcome to use, you know, go back to your broker dealer, put it in street name and put it back in DTC. And that's, you know, something that people don't really talk about much as well, but because we kind of sit on the the connection point between traditional finance and and digital assets, we do have investors in our issuers that move their assets back and forth from book entry form to tokenized form um depending on the activities that they're engaging in. And that is, you know, it's not seamless, but it is very possible and and people are doing that. And so custody custody is not the problem. Secondary trading that is a problem.

That is a problem because especially when you're talking about um NMS securities um you know publicly registered securities those assets have to be traded on a national securities exchange and these tokenized versions of them will not qualify to be listed on a tokenized on a on a national securities exchange. And so there are other alternatives like ATS's and other things, but there are these rules. I'm going too too much too much rules rules, but there is a rule called uh regs that you have to comply with that is becoming a little problematic. And I think that's where we're going to see chair um Atkins and and the SEC staff focus a lot of their attention because number one, he already doesn't really care for that reggg very much anyway. And number two, it is actually becoming an impediment to the secondary transfers of tokenized securities.

There's also the PII collection information collections that have to happen with shareholders. That's another impediment to uh onchain equities.

And in just not for me, but

two two quick observations. Um you know, one, you also still have the ability to get your share not in your Schwab account, but on a paper form. It's an older form of media, but you can still get your paper certificate. And in fact, they all sit with Seed and Co. as the the name owner presently.

Um secondly, for those of you in the room who have not read uh the American leadership in digital technical technology finance uh the project crypto speech from Chair Atkins from two months ago, uh I would argue that it's probably the most important collection of words about the blockchain industry since if not Satoshi's white paper than the Ethereum white or yellow paper. Uh it is remarkable and the one thing I would note which goes to to George's point right now is that that speech chair Atkins puts a call out to the staff of the SEC that we will work on rules to allow people who want to bring financial instruments onchain to do so. It does not mean we are suddenly up and porting everything from legacy finance to blockchain. But it's a recognition that if we don't figure out these tough rule issues largely in the 34 act from a securities law side that we are stunting our ability to improve the system at large and utilize this technology. And and if I could just follow up on that, I think um one thing that's very important that project crypto and the SEC crypto task force is working on is figuring out how tokenized securities might someday trade on DeFi.

And I don't I don't I don't think that there is perfect clarity at all as to how that might happen. But I think it is coming. It will happen whether we make rules or not. So I would argue it would be much better if uh we had some forward-looking rules on how that might happen. But it's important to think about where those rules are placed.

And I think everybody's made this point at some point. There are already regulated entities, people who have already registered with the sec with the SEC or with the CFTC that are able to comply with these rules right now. They are able to make disclosures about the DeFi protocols that they might plug into that they might pe give people access to right now. And that allows them allows all of us to benefit from consumer protection um and allows us to understand better what those DeFi protocols are capable of doing. So I think that at least my expectation is that the SEC will provide that clarity to us maybe even faster than we get market structure but like we'll take it either way right like we want to understand software developers want to understand users want to understand what the rules might look like so that tokenized securities can trade in DeFi

and Amanda's making a a great point which is what we're likely to see in the mainstreamization of DeFi is a a sponsored access model whereby existing regs will be using D5 protocols subject to conditions imposed on them by the commission largely to make sure that you know the traditional goals of securities regulation are still being met even as this new technology is being deployed um and that'll be informing you know a broader um approach to DeFi in and within the regulatory architecture of US finance.

That's a really interesting concept. Um maybe uh at its most basic are you saying that the commission could look towards um sort of policing participants more than the platforms themselves?

No. So the the SEC's jurisdiction extends through its you know four primary organic statutes. The 34 act being the the biggest one. they have jurisdiction over those 34 act regist um and through their approach to regulating or exempting those um different regist um apply standards around sponsored access to D5 protocols and D5 infrastructure. Well, thank you.

Um, you know, Amanda, I wanted to sort of give you the sort of last question as we sort of uh put a button on this conversation around onchain liquidity. You know, when it's Friday and sort of prices are plunging for cryptocurrencies, one could naturally think of circuit breakers, you know, somehow finding their way into the crypto market over time. But you know if anything this conversation has really showed how DeFi to an extent will always be separate from traditional finance. Um you know do you think something like a circuit breaker has a place in DeFi? Um what other sort of speed bumps or you know considerations do you think are part of the dialogue today?

[snorts]

Yeah I mean I think uh assumed within your question is like DeFi is always on right 247 there is no off button and that is because code is autonomous. So once when we are talking about a decentralized system where there is no control point, there is no person or entity that has unilateral control over the network or the assets in the network. There is no one that can flip a switch and say trading stops. Now um there are frontends that connect to DeFi that in in theory could possibly block access through their front end, but that just means there are a million other frontends that can access the same protocol, right? So DeFi is always on.

There are risks in DeFi, but they are different from the risks in tradi. And I think that it is under it is important to understand why DeFi was created. Um, and I will not go on too long, I promise. But that as a result of the 2008 financial crisis, our trust in traditional financial institutions was broken. That was because of a lack of of opacity, right?

A lack of understanding what was going on in financial institutions. Um, and as a result, Bitcoin was created so that you would have a totally transparent autonomment system that people could send value back and forth peer-to-peer without any third party being involved and and everyone could see on the blockchain what was going on. DeFi further iterated on that and said, "We're going to create other ways to do finance on chain." So, not just payments, we're going to do lending and borrowing, as Greg talked about earlier. We're going to provide the ability to trade all sorts of different assets.

Um, and because this was created to be a trustless system, the risk is not from opacity. It's not from not understanding what's going on because everyone can understand what's going on. The risk instead comes from cyber security more than anything else. When you hear about a hack or an exploit, you are hearing about a cyber security issue. You are hearing about code breaking or you're hearing about an opsseack issue.

Somebody um like all like was scammed, right? somebody uh put their private key in, meaning they were put their control uh access to their wallet, their password, right? Somewhere where uh somebody had access to it and then people were able to access a system that they shouldn't have been able to or move money that they shouldn't have been able to. So the cyber security risks and OBSAC risks are things that we can address by addressing those. But that is those are addressing code, those are uh making sure that we can audit code, making sure that it is well audited and it's functioning well.

But it's a different kind of risk that we have to control for. But it is doable.

And Andre, one last point because I see Adam coming up. We have to also remember that the solutions that we look to for new markets must be designed for those new markets. So DeFi and circuit breakers kind of tough. But one of the other components just generally within crypto and you look at circuit breakers, it's something that works quite well in US securities markets or global securities markets where you have a primary listing exchange and a consolidated order book. In crypto, you don't have that.

This stuff trades throughout the globe, arbitrage throughout the globe, different venues. So the only thing you implement with uh with with a circuit breaker is a dislocation of one market from the rest of the world. And so that doesn't mean we can't come up with solutions to throttle risk and design them whether on centralized markets or or even through risk parameters as you're designing a DeFi protocol. But we should be careful not to fall into the trap of thinking that yesterday's solutions will always work for tomorrow's products.

It's a good point to end it on. That's it for the conversation everybody. Thank you for listening.

All right. Thank you all. I feel I feel smarter. uh 35minut break and then we're going to come back here for final panel on uh custody.