Exploring Institutional Engagement with Crypto Assets - TOKEN2049 Singapore 2023

let me begin thank you um and good morning uh there's more people than I expected I've got to be honest it's 9 45 second day lots of parties yesterday so well done to you all for making it um very quickly you're probably thinking this is going to be the 18th time I've heard this kind of Spiel in the last day I'm going to try and keep it a little fresh and a little bit different but I've been talking about institutional engagement in crypto or I've been hearing about it for four or five years it's the Dream It's the Nirvana it's coming why is it important and actually am I even qualified to talk about it so I'll give you a little bit of background about me hopefully I am qualified to talk about it otherwise you can all get up and leave and go get more coffee um a little bit about yeah he's gone thank you um so I got in yeah I spent 18 19 years in traditional Finance um that what does that mean I was a technologist I worked in investment Banks I worked around the world um for some reason people decided I could do that and kept promoting me but eventually I kind of got bored Banks typically struggle to innovate now this is going to be quite ironic because I'm going to explain where my company comes from but Banks struggle to innovate because they are regulated it's very difficult they've got to be safe they've got to be secure I dropped into the crypto sphere in 2018 went into the Rabbit Hole uh came back out to Asia spent some time in Hong Kong and helped scale the business scale of company I then moved back to the UK and put a partnership together with Standard Chartered they're small bank if anyone's heard of them they're kind of around here a little bit um 90 000 people 59 countries 20 billion market cap yeah decent sized organization and very Emerging Markets focused and I ended up co-founding um and becoming the CEO of zodia markets which is backed by Standard Chartered who are a major institution have been in the digital asset space since uh probably 2016 when they took an investment stake early doors in Ripple so I hope with that reasonably well qualified to talk about institutions getting into digital assets are we still waiting for them now I reckon Franklin Templeton might have stolen my thunder on this one yesterday um or the day before latest announcement of a Bitcoin spot ETF or they're applying let's see if the SEC actually do anything but they are applying at least um I just wanted to touch upon a couple of different areas because a lot of financial institutions a lot of large-scale firms started exploring and investing and trying to understand digital assets and typically they started with custody why do they start with custody it's really the best way to understand the underlying technology and distributed Ledger I'm a firm believer the distributed Ledger technology is going to transform finance and actually that's what a lot of banks also think and a lot of Institutions also think but frankly I talked about Banks struggling to innovate they've invested um they're exploring but they're really slow there's a huge number of capital impediments Prudential regulatory impediments um and and well the SEC um but actually institutions more broadly are adopting so I talked about Franklin Templeton BlackRock announced their spot ETF application they've been active in the space for a while so we're talking about real money asset managers BlackRock with nine trillion dollars under management um one of the biggest in the world probably got more money than most countries um but you've also so you've got real money asset managers you've got banks that are exploring so they're kind of already involved um and you've also even got Pension funds so Pension funds started getting involved even from an indirect perspective there's something here so we've gone from 2009 the Genesis block mine for Bitcoin you know go forward a year to 2019 everyone's kind of getting a little bit interested we have a bull run your prices go up everyone's super interested but we're now in the middle of a bear Market yet people are still building companies are still investing institutions are still continuing to proceed and move forward so my thesis here and as I said yeah Franklin Templeton kind of stole my thunder they are already here they're already engaged and they're active in the ecosystem but actually why is the price of crypto where it is why is the market cap at a trillion dollars I mean it's pretty big but don't get me wrong a trillion dollars decent size right um I firmly believe it's going 10x at least um as things scale and crypto is a gateway into the rest of the digital asset ecosystem the engagement opportunity now one of the things here is where do we look who's doing what where and when um I'm going to talk a little bit about what the opportunity has been and where it's going so if I wind back if I wind back over the last 10 years or so we've you know we've had basically a zero interest rate environment there's a lot of VCS and investors around where frankly for the last decade Money's been free what that also meant was two of your typical asset classes where people look for volatility hedge funds asset managers look for volatility look for return they weren't there the interest rate markets and the foreign exchange markets there was no volatility I launched zodia markets um about 18 about two years ago signed a partnership agreement with Standard Chartered um the thesis we had at the time and we and we launched the business officially about a year ago we got registered with the financial conduct Authority in the UK the thesis we had was the client segment that's going to be fast is to adopt hedge funds they're already involved they're already active they can take risk they look for volatility opportunities um and then government started raising interest rates and we were talking to the hedge funds and they're like well actually I've got more volatility right now in FX and interest rates than I've had for the last 15 years because we've come out of an entry low interest rate environment and the role that they were looking for in Bitcoin or crypto had kind of gone a bit sideways if anyone's been watching the markets it's you know it's been trading sideways for a while and what do I mean by sideways the the extreme up down 30 percent type activity where hedge funds make a lot of money that's kind of normalized but that is a you know a sign of maturity in the asset class the huge spikes in volatility you know is is not really great for the market it's an evolving asset class it's turning into something that you can correlate or decorate from other asset classes and you can add crypto to a balanced Investment Portfolio so from a maturity of an asset class perspective what people look for is not the well I'm going to put some money in and it's going to go to the moon and I'm going to make a return and get out actually people want to be able to track it like they would another asset class so the maturing of the asset class is super important it comes into a space where models can then be applied historical data is available and people can then look to invest with a degree of certainty the other thing we've had and it's unfortunate but we've had the demise of a number of firms in the space that perhaps weren't doing the right things I'm not going to bore people everyone can infer what those firms are but one of the things that has done is it's taken out uh one of the drivers of that volatility over leverage leveraged firms or over leverage firms that were lending with no credit risk management no insight into how they're going to repay if things go wrong and on the assumption that prices only ever go up um prices don't only ever go up um and we've had a Wipeout and frankly in some cases quite Justified wipe out of firms for bad behavior or or inability to manage risk effectively other areas that lend itself to the Future engagement from institutions but actually the maturation of the asset class and that move from a trillion to 10 trillion um stable coins now yeah I've got a vested interest from a stablecoin perspective where we're looking at a secondary Market capability through zodia markets But ultimately if you look at the stable coin space right now one of the big drivers for stable coins was earlier this year we had a U.S banking crisis or a U.S Regional banking crisis three fairly major banks for the crypto ecosystem yeah svb a lot of the fintech investment was held there um signature and silvergate which underpinned and worked frankly the lifeblood in many respects of the crypto ecosystem disappeared pretty much over a weekend um a slightly smaller Bank a little bit later called Credit Suisse also vanish but that's a different matter um but what that meant was firms that have been involved in the crypto economy basically had to Pivot just started using stable coins more and more that's how things carried on what we've also seen is stable coins right now if you think about the market cap 99.4 of stable coins right now are dollar denominated the FX Market as a comparison um the dollar dominates but it's about 85 of total volume flow because it's the world Reserve currency what we see and we've got a strong thesis that non-dollar stable coins are going to start growing why is that important why is that interesting well I have the benefit of the backing of a global bank one of their major client and there are trade Banks so what do they do they connect the world one of the major client bases and I have access to that client base are corporates now this is an area from a maturation perspective corporate so large multinational corporates who build stuff they move stuff around the world they pay for oil gas they pay for steel they yeah they they you know they create sneakers they you know they make soft drinks they're actually talking to us about how do we move value more efficiently how do we get movement of money around the world without having to rely on frankly what is an archaic yet monolithic um system of cash movement and it's the big kind of for me is the big impediment to the Future adoption one of the big impediments to Future option is banking and we saw that earlier in the year with svb um so we're getting signature and we're continuing to see it despite the fact that the world has gone 24 7. the world has gone 24 7 but we haven't in crypto we haven't in finance so crypto sorry has but we haven't in finance why is that we all expect to be able to go online on the weekend and buy something from anywhere in the world and we pay for it companies can't they kind of can but they can't really and what that does is it lacks it locks up Capital it's massively inefficient it delays activity it's an inhibitor for global economic growth I'm not getting ahead of myself I'm not you know you know but crypto is not going to solve global economic growth don't get me wrong that's a great sound bite but that's not what I'm saying but stable coins as a proxy for foreign exchange and movement of money are actually growing significantly relative to a potentially shrinking market cap over the last 18 months and we have a strong belief that sodium markets because of the relatively unique proposition that we have in the in the ecosystem um yeah we are backed by a major financial institution that has access and gives us access to wholesale FX rates we can get wholesale FX rates and stabilized banking which many other crypto firms unfortunately don't have access to um that means we have a great opportunity that Global movement piece facilitated by stable coins is incredibly important and I'm going to finish up by talking about the big hype boom uh that continues with tokenization every major financial institution is looking at tokenizing real world assets tokenizing Financial assets there's a major impediment to the potential success of that tokenization and that is again the movement of money you can tokenize an asset but if you can't pay for it using real world funds it's pretty useless fractionalizing something making it really small does not make liquidity it does not facilitate movement it does not facilitate transfer what does is everyone being on a distributed Ledger or a set of distributed ledgers that are intra interoperable and can be trans can transfer value quickly and efficiently that's where my firm belief is the engagement opportunity remains with the transfer of assets movement of value and crypto being a gateway to allow institutions to continue adopting and engaging my name is Usman Ahmed CEO co-founder of Zodi markets thank you very much for your time thank you very much for listening if you want to find out any more please hit me up on LinkedIn and I'm very happy to talk thank you