Fireside Chat: Peter Smith - TOKEN2049 London 2021

i think we're okay how are you good i'm i almost like feel guilty for holding anyone back from the free drinks outside i know i know it's uh you know it's like this this is the tough thing this is the the the difficult gig luckily uh all of this will be recorded for posterity and so uh millions of people will be able to watch us um uh chat um well so actually i met i met you a few years ago actually come think of it seven eight years ago goodness me so quite a lot has happened since then um i'm still at techcrunch so obviously i made the wrong career choice but it's a great gig and um but you guys have just been on an absolute tear in the last uh few years and certainly the last few months in fact actually and i was reading about some of your latest news you're getting a money transmitter license in all 50 u.s states you are aiming for right and uh oklahoma's part of that uh you've also got florida iowa iowa you're sort of working your way through the u.s is that right yeah we're on the the u.s 50 state campaign or i think you know you could also call it a crusade uh it's interesting you know a lot of london fintechs talk about going to the united states very few actually do and actually get the state by state licensing campaign done it's really difficult uh and so i think we're you know a couple states away from the completion of the 50-state campaign right we're super excited about uh did you take any particular strategy in doing that or just sort of slowly slowly uh as it slowly does it you know the u.s team has gone state by state and you're basically looking at the states with a really large population first and you're kind of backfilling from there and there's each state has its own process and the the timing can vary state by state so it's kind of complicated uh yeah i think the interesting thing about it is it does make you appreciate the uk neu frameworks you know where you get one license used to be just one license and you know before the brexit now it's two but two is a lot better than 50 something right yeah uh and so it really does make you appreciate europe and sort of the passporting regime here in the eu right yes uh and actually on that we might as well just briefly touch upon that do you think brexit is going to make any uh difference in going forward as perhaps the uk and europe eu diverge slightly i think it'll make a huge difference uh one of the most tangible ones will be that you know you'll if you're a london-based fintech you are you now have to have a european office as well so there's no way to not have an office in europe and be regulated across europe so like in our case we'll have an office in germany whereas you know three or four years ago we wouldn't be talking about a german office or a german license and so it does create a bigger barrier to entry and one of the things we're seeing in our early stage portfolio where we invest in startups is startups that are starting in europe now fintechs and crypto companies because you'd rather get you know a european license that covers the eurozone than you would a you know a license that covers just the uk and i think that's kind of sad for the uk because it really was the fintech capital of the world you know if not of the european continent and with the brexit that's definitely over that's uh very strong words actually uh very interesting especially to hear from from you um you know with your strategy going forward um but you're also in 200 countries uh some interesting stats i was reading recently that you've got 31 million users have verified their identities on blockchain.

com um and the number of active users you've had that you've got have tripled over the last 12 months are we is that the right right from your perspective yeah it's right neighborhood we've got 37 million verified and i think it's up 4x now in terms of active over the last year a lot of that is you know driven by the momentum in the crypto market today but a good portion of that is in the sort of country by country expansion that we've been engaged in for the last two years where you know we're bringing online payment rails and making it easy to do whatever crypto banking you need to do in 200 countries around the world which really is a it's a huge you know a set of rails to build set of risk frameworks to have and and frankly set of licenses yeah absolutely um and uh you've now got about a third of all transactions on the public bitcoin blockchain is that right yeah and probably the most surprising thing that's happened since our series a so we raised our series eight seven years ago we did about 14 of all bitcoin transactions today we do about 32 percent and that surprised me i thought that ratio would have gone down we also do more transactions per day on the bitcoin network than ever today and we've done about one trillion in transactional volume in the consumer product alone what do you think has been the spur towards being able to maintain that momentum on certainly on for instance on bitcoin for starters i think there's three things one um don't [ __ ] up so our site is usually online 99.9 of the time to be accurate it's usually safe uh well it's always safe there's never been an endemic hack and then third you know we do have a great funnel we have a great brand it stands for trust stands for putting customers first and there's a huge seo funnel at the top absolutely and of course you've got the word blockchain.com which is part of the funnel doesn't doesn't hurt does it um you um in march now speaking of which you know you did your now was your series 8 was it 30 million i can't remember it was 30.5 million that was nearly nearly you almost had it i think you wrote the [ __ ] i think i might have covered it yeah um 35 that's right so you've got goodness me talk about coming a long way in february you raised 120 million funding round this year yeah and then and then and then march you raised a 300 million dollar series c dst global lightspeed vy partners what what was going on you just like decided like you know you're on a kind of a roll so you know let's throw in another 300. look the company's been very profitable for a while now and when we want to bring in new capital partners one it's about acquisition currency with the valuation but secondly it's about who's around the table and the series c round was led by bailey gifford which is the largest asset manager in europe the uk and one of the largest in the world uh and we wanted that brand that credentialing behind our institutional business and so the round was really precipitated by bailey gifford wanting to invest you know i think outside of the equity capital raised and we've now raised 550 million in equity capital we've also raised about 2 billion in debt so about 2.

5 billion total raised which i think makes us one of the most highly financed startups in europe the thing that's unique about that though is because we waited till late to raise you know our series a was done at 100 and i think 120 pre we're still very much a employee controlled you know very tightly held business which has given us sort of the ability to weather out a lot of ups and downs in the crypto market and really stay true to our exact product vision and i think that's probably the the thing that's most special about the business today speaking of ups and downs i mean there has been a few ups and downs across the whole industry i mean it must have been kind of i mean i've met you seven years ago or more i mean just the sheer you know craziness of the of the industry has just been uh off the charts i mean how do you guys kind of like keep your band together kind of thing i think the first thing is you have to hire people to really believe in the underlying mission of building a financial system for the internet um you also have to hire the right people uh and that that's tough like you have to hire people to have a track record for resiliency track record for kind of sticking to things for a long time what i will say though is uh you know eight years of this will make you very old very fast i'm like practically i'm like a crypto boomer at this point i like i can't even keep up with the young trend so i'm like i'm like a grandpa at 32. which is uh super weird and also i think kind of fitting like we're the last talk of the day it's like the two sort of elderly people they've wheeled out well i don't know i'm 33 i don't know about you i just dye my hair this way um uh that's uh well i mean yeah yeah absolutely and it's uh it's certainly a tribute to uh what the you know the company you've built so that you've kind of managed to kind of like stay pretty uh like pretty steady ship compared to a lot a few um um i mean speaking of which there are you know some obviously interesting things going on with coinbase right now you only comment on on any of that controversy um you know i think our approach for the last eight years has been to proactively uh and privately work with the regulator and we've had a long engagement with the regulators here in europe and we have had really positive engagement with regulators in the u.s for the last couple of years and we plan to continue that but i'm a very low-key guy i like to build i like to ship product i don't really like to tweet so i don't think you'll see you know i don't think it's productive to fight with regulators right i think that regulators like everyone else are trying to figure out what it means to live in a world where you have the internet controlling financial systems where you have algorithms that control people's financial futures where risk protection is going to be different and i think the fundamental innovation that will happen from all that is really important and really key but i think it's uh unsurprising that regulators are worried about it and i think it's sort of our job as the industry and as entrepreneurs in the space to help them wrap their heads around it and help figure out rules that keep markets and consumers safe so do you think there's too much tweeting i think that you know this may be an ironic statement but i think that in crypto generally there is too much tweeting and too many events oh well welcome to event but it's nice it's nice to be back in the real world to some extent though it is you know it's funny like it was a couple years of no events right and then we were in miami um for the big event there and it was like so cool to see people in person and even here in london this is like the first crypto of in europe in a while and it's been amazing to see people and i think if the whole industry could agree to have like one america one europe one asia that would be really awesome that would be my suggestion yeah uh so it's not that i think all events are bad it's just that i think sometimes there's too much tweeting too many events yeah not enough delivering products to bring real value to customers well fair enough and certainly uh i can i can't really argue with that to be honest with you um uh now you've now going back to your raise i presumably you're looking at acquisition so you know that's a big war chest let's face it so what sort of things would you like to acquire i think we are interested in acquiring either like infrastructure technology that makes our business more competitive in the future so anything from you know crypto infrastructure to fraud and payments infrastructure we're looking at acquiring smaller players in the brokerage space so if you're running a really successful brokerage in the netherlands or in poland or you know wherever we'd love to talk to you about joining a bigger platform um and then uh you know i think we're also like doing some acquisitions right now that fall into the category of like because we have four deals in progress right now there's a lot and so there's also some acquisitions in the category of like wow you're [ __ ] cool and we like what you're building so come over here right yeah well it's certainly because you know this is crypto you got a yolo sometimes yeah you've got to you've got to move fast absolutely so it will be interesting to see uh what uh acquisitions you do make uh perhaps we're able to run some of those stories ourselves um but you know your business straddles in a number of areas you've got a crypto wallet you've got an exchange you've got a block explorer you've got a few other products what kind of areas interest you then um in terms of product wise i think my heart's always with the consumer business because uh that's what really brings me a lot of joy the fastest growing business of blockchain today though is our institutional business i think this year it's averaging about 50 month-over-month growth which is sort of insane like 50 year-over-year is good 50 quarter recorder is like good for a high growth company month over month is actually challenging to maintain like operationally that kind of growth um and so that business is growing the fastest and so i'm spending time there as we try to build that out in immature sort of the operation side of the business but the institutional market is here much bigger and much faster than i thought it would be and i think that's really interesting about the crypto market today i'm going to presume the pandemic had some effect on things people found themselves locked down dabbling crypto i think it did um i think it impacted sort of every market right like it made consumers more interested in trading equities it made consumers more interested in trading crypto people just had a lot of time on their hands right and it changed the way we all live and work which is really interesting i kind of think that this market cycle was inevitable regardless of the pandemic just because of the market structure but it definitely intensified it i mean um obviously you know one of your big biggest products is is the wallet of course where do you think wallets go from here do they sort of become more extensible or you know more sophisticated uh what sort of things you see i think a future i think of a wallet in crypto as like a super app in the sense that the wallet is going to eventually be the operating system for you know the way a user engages with the crypto finance world uh and so with a very expansive use like thought of the wallet that it will control your balances across your trading products your lending products your transactional banking products insurance like the whole financial services stack i think with the advent of like highly scaled blockchains and layer twos we'll be able to roll out ways for developers to build apps and we'll probably roll out an app store in the wallet i'm really excited about that as well like the idea that just like when you had an iphone you know any developer could roll out an app build illegar and alpha to iphone customers that we're going to be able to let developers around the world build a defy app and roll it out inside our app store i think that's pretty cool what are some of the layer two projects that you might you find most exciting out of curiosity just between you and me of course yeah that's like such a hotly contested thing and because we are one of the three companies in the space that generates the most transactions i think we get asked a lot uh logically i will say that of the like five or six market leaders i we couldn't really figure out what we thought would win so we invested in all of them and you know we're building a generalized support layer for layer twos and our goal is to not support or try to pick a winner but try to support as many layer twos as get transactional volume so we're trying to take a very sort of uh neutral approach to layer twos and we'll support as many of them as customers want to use i see so um i mean another um issue that's obviously a uh you know a big topic of discussion recently is defy um uh for obvious reasons um what are some of your thoughts about the whole sort of d5 sector as it were um are you uh you know as as a per do you feel it's sort of encroaching upon traditional finance you know how far away are we from uh becoming very significant well i think from a numbers standpoint it's probably significant by asset class size at least within crypto but insignificant in user terms there's definitely less than like a million users a day using d5 maybe a million a week so in the grand scheme of things that's like nothing um i think that it's super interesting like i'm super into it oh you know i've got all of the defy apps all of the farms all you know it's just like in an endlessly entertaining i think it's really hard to use it right and so until some of those use case usage issues are resolved it's going to be hard to get to a mainstream adoption of devi apps like even within our team you know almost all of our engineers are doing something with d5 you know using a d5 app on a monthly basis and when you go outside of the engineering team that probably drops down to like ten percent right uh and so i think the apps have to get a lot easier and cheaper frankly it doesn't make sense to use a lot of these defy apps on ethereum if the transaction costs are 10 20 bucks a transaction or 300 bucks a transaction would you like would you prefer to see people move to different uh different platforms to do that that kind of thing i'm a big believer in the layer twos like i actually think the layer twos are gonna work polygons already working um big polygon fan which is sort of controversial some people don't like it because it's not like a classic layer two approach but in my book like it's working and tons of people are using it so like bravo interesting uh i think i have this big bias as like a product engineer generally where i just give a lot of credit to people who ship things that work versus like achieving technical superiority right um so i love polygon and i think it's quite cool but i think most things will go to layer twos and we'll settle back to the ethereum blockchain and i think that a lot of the evm blockchains that think they're layer ones today will end up being layer twos to ethereum interesting okay um and now next of course uh you can't get away from a conference like like this without mentioning nfts um just you know just what are your thoughts uh you know and and also what do you think about nfts in relation to blockchain.com so we have our first nft thing launching in a couple weeks um is that like new news or did you announce that already i have no idea okay that's awesome but uh you know and so we'll start making some things possible for customers in that space i think we'll take a pretty slow and measured approach at first mostly because i don't really know if like how much of the marketplace right now is really about collectibles or unique items and it is about sort of a hot money game which always makes me nervous because at the end of the hot money game there's always hurt customers and customer protection is very important to me i think some nfts are quite cool i own a couple um but i think everything in crypto and in the world generally goes through this like hype cycle then there's like a blowout and then people sort of rebuild and like build things that have real value and i think that you know i think we're like probably need to blow out so that we go back and customers are like wait why does this nft have value like why does this rock have value you know why does whatever and we haven't had that blow out yet and so i'm nervous about the space until that blowout occurs very interesting i see so it's yeah it's still early days i guess you would agree i think nfts need a bigger reset before i take them seriously right um and uh and finally i mean i i started out talking about how you've been rolling out in the across the states and uh i noticed that you now have um you've uh hired a regular a lobby team in in washington uh which is rather interesting um zooming out a little bit um how do you feel the industry is going to be able to engage you talked about you know uh you know engaging with regulators you talked to you have a you've said in fact you're on record of saying that germany's very crypto friendly country zooming out where do you think say in a few years time uh you know the sec the financial conduct authority in the uk the german authorities will be uh on the industry um are you optimistic are you bullish uh and what sort of timelines are you working on i think in the near term i'm much more optimistic in europe it's a than the u.s yeah it's an administrative process here in europe um i think that the challenge in the us is that crypto is now a political issue things get very political very quickly in the united states and it'll become a voting issue in the next election like where a politician stands so anytime something gets out politically charged it's much harder to come up with a safe reasonable framework because it's loaded um and i'm not a politics guy thankfully we've hired some of these people um and i think it's gonna be challenging to figure it out in the us over the next couple years think europe will be fine short answer yeah and america is going to be pretty complicated for the next couple years so you think if trump runs again that it'll become a hot issue or it'll become a hot issue whether he runs or not it's going to become a hot issue in the midterms right which campaigns start for in six months and i know that you've been in miami recently and the the mayor there has been very crypto friendly do you think it's going to be almost state by state becoming a political issue absolutely i think uh florida is very crypto friendly california is texas uh and i think that you'll see a lot of the industry mirror where they're getting a positive reception from the regulator well i'm i'm uh excited to hear that you think that europe is going to be uh pretty crypto friendly so hopefully the uk will be a part of that success but uh unfortunately we're out of time and and i want to give everybody an opportunity to uh say hi to pete uh off stage so um for now thanks very much my name is mike butcher from techcrunch and i hope you had a great day and thank you very much to peter smith from blockchain.

com thank you