Virtual Assets: How to Regulate What Constantly Evolves?

[Music] hi good afternoon ladies and gentlemen and welcome to Virtual assets how do we regulate an evolving um uh uh how do we regulate what constantly evolves excuse me I am Raini Olivier um and I would like to give a warm welcome to my distinguished panelists um Miriam Ro um Shing Lang and and whum um we are at an historical point in time virtual assets enables machines to add value and we can impact the trajectory what truly empowers growth and one element would be confidence and addressing the lack thereof by putting regulation in place um across geographies to create a sustainable Marketplace I would like to start off um by asking RAV why regulation matters to support virtual asset growth and create a thriving Marketplace to protect consumers awesome thanks for having me um it's an honor to be here uh first of all I want to thank um everybody who put this event together it's been an incredible week um I want to thank adgm I want to thank especially muad who's been extremely helpful and supportive of us at Andalucia labs and going back to your question how regulation and why it's important to growth of virtual assets I mean this question is basically why we built Andalusia Labs very quick story is you know this is like a two three hour story but I'll con I'll compress this into 30 seconds and basically what we've done starting out as a child uh you know got into programming at a very young age we started building in crypto when I was in you know middle school and high school got into when I was 14 years old and you know as I got into college as crypto started to grow at a really rapid rate there was this idea this basically this gray cloud hovering over the industry being associated with risk being associated with you know illicit activity being associated with massive fluctuations and asset prices and basically what we wanted to do is we wanted to build this thing that solved the most important thing for people which is consumer protection and I think ultimately this is the most important thing that regulation can help enhance and Empower I will caveat this however it's not just regulation it's the combination of regulation in addition with Innovative technology that actually understands these risks at a very deep abstract level and more importantly able to build a technology that's able to help protect these users against their risks and ultimately I think that's how we can help uh bring you know digital assets to a billion users Miriam what's your views I think regulation is a critically important to the growth of the sector overall um it for various reasons first one would be obviously like how mentioned consumer protection um where regulation can protect consumers and investors when it comes to illicit activities Market manipulation as well as sort of scams what does that do also is uh on board very important stakeholders that we need in this sector for us to to grow further and that's institutions um as well as uh corporations um I think the second thing is also uh Market Integrity by having um fair and transparent practices it helps us uh create a really a good Baseline when it comes to best practices that we can all sort of uh look to adopt I would say risk management is another element and most importantly I think ultimately this helps create or um enable collaboration between different jurisdictions um where we can mitigate the risk uh um against um I would say what I would call regulatory Arbitrage uh where players can sort of look at jurisdictions that are easier uh to avoid uh accountability um Shang leang anything that you want to add from a regulatory perspective and how we can create that thriving Marketplace yeah so uh my background is a researcher from National University of Singapore I'm also founder so we Face choices like uh I can use superc computer to simulate and build a p model that in short term we can gain some money but in long term it's not going to be sustainable and it's harmful for Consumer well another choice that we can face that is that we can use the same computer but we are going to train AI models or machine learning models to help detect on these games so this aligns with the way that we want to create secure and sustainable e economics especially with crypto growth so um so we hope that the Eon economic can grow uh can work in the way that when we are contributing positively to the economic to the ecosystem we get reverted and this should be some mechanism in place that discourage and penalize those uh harmful activities well this comes with the regulations approach and other uh incentives well we hope that we can also encourage young people to contribute positively to the to the economic growth especially with all the DT fun dlts and the blockchains all the new technologies we hope that young people can be guided to be the right direction in this way um wum from a regulatory perspective what can we expect in 2024 um both globally as well as locally wow that's a that's a tough fun I usually don't look at things by the year because uh um you never know in this fast evolving space what you say today might just be irrelevant tomorrow uh but I think from the developments in 20 22 to today um certainly we can sense that there's a global regulatory tightening um and it's very clear for all to see in the US you have actions enforcement actions starting to take place um in UK they have released discussion papers around introducing recory Frameworks in Singapore you do have the tightening in terms of prohibition to um the prohibition of um marketing to retail investors in the crypto space and the leas goes on right so generally I think regulatory tightening is uh happening and it's bound to happen with any new asset class the other Trend I would say is there is an increasing regulatory convergence I remember when we first started in 2018 we look around the world um the focus back then was very much mlft risk um and there are some who just want to sort of watch uh and wait and see how it happens so most of the people jump into to sort of regulate the the MLS ft risks uh we adopt approach where we think that beyond that we need to address the whole range of risk before players can really get into this space and having spoken to the institutional players certain things were clear right if coins continue to be hacked and stolen uh it can't be mainstream so we introduce safe custody rules U the market Integrity has to be safeguarded before someone is um confident that the market uh is not subject to abuses and so forth so we introduce rules around Market abuse so I think um you find that with 2022 happening you the The Regulators are starting to introduce rules and regulations around custody stfe protection of the client monies technology governance and so forth so I think over time there's a sort of a gradual reg convergence towards the traditional uh financial sector um um that um we see in the security sector in the banking sector so I think those are the two broad Trends uh but in just looking one year ahead uh I am particularly excited by what the r token R asset tokenization has got to offer I'm particularly excited about um such tokens in the private markets private Capital markets space where they can introduce uh efficiency U accessibility and transferability of value uh stable coins is another area that I'm really excited about because in every transaction um you need to have a transfer of monetary value I would perhaps throw a bit of a um dark C in into the compensation and that is uh you know with the increasing focus on ESG issues you would actually see regulator starting to maybe introduce ESG disclosure requirements on uh the crypto uh the use of cryptocurrencies and the offer of cryptocurrencies yeah that's my take um Mariam while not all GE well most geographies um not all geographies are um where the the adjm is for example in terms of Regulation um in in Virtual assets what can a consumer do to protect themselves while the other regulation uh the jurisdictions rather are playing catchup I think um education is key uh consumers need to learn more about the space um it's building awareness and and and education I think is key to to this and circle as as a as the issue of usdc part of our business to do this uh especially in Emerging Markets where we seeing a huge need uh and big problems to solve um usdc has been sort of um I would say a very important tool uh when it comes to contribution to financial inclusion we're seeing real world uh use cases uh especially in markets where there's hyperinflation devaluation of currencies um and especially if you look at uh the large segment of M banked or end bank today in these Market um regulated stable coins like usdc become very very important so as part of I think the role of usdc as well as or Circle as well as our key partners that help us grow in different markets is to actually make sure that we educate these users uh we do see you know other tokens that are sort of you know circulating uh in the ecosystem they're not regulated the users don't really understand them they don't understand the difference uh between what's good what's bad and what's ugly um and I think it is our duty to make sure that the wider public understands that um as the um you all know that have attended today um we've uh another Hot Topic is artificial intelligence um um the new companion so to speak on the blog um shengang how can AI play a role in combating Virtual asset risks to ensure Innovation is implemented responsibly yeah that's a good point everyone noway looking into how we combine Ai and web cryptocurrency so we are looking the way that um of we can categorize AI into two broader categories one is more narrow AI or specific AI the other one is more General we can think about narrow AI as a specialist in the room they can be very efficient and very accurate in detecting certain types of uh task for example fraud detections or you know your transaction analysis on on blockchain by looking into mountains of data on blockchain on social media even profing of company but they can be appreciative so that we can take proactive actions uh before everything is too late and it Al also can be very accurate so that we can take immediate response to medicate risk which confidence confidence is very important as we can be sure that is something we need to take actions so the general AI in another way it's more like chity it's more broader in capability and scope we take broader AI in a way that it can cop it can be a co-pilot well they assist analysts detectives police and Regulators in analyzing uh operating on different application that has been powered by narrow AI so narrow AI more specific uh General in the way of leading multiple narrow in doing the task that is how we Vision the architecture uh in AI is helping of risk management so this General AI um they can study by understanding very complex queres by preparing the inputs of narrow Ai and also understanding outputs getting insights the more important part is that it can provide strategies as well as in helping with decision making so that is uh in our company when we build product we hope that we can build in this model that combining of both narrow Ai and general AI it helps with both the risk analysis and on the other on the other hand that also protect Innovations in this domain um Miriam what are some of the virtual the 2023 virtual asset industry trends that we've seen this year and what can we expect um in 2024 we're continuing to see I think 33 um has been great for stable coins especially for regulated stable coins like um usdc We are continuing to see the growth uh of the space and real world cases as I mentioned earlier um if we look at given the the fact that we're in a sort of a crypto winter until very recently uh 40% of the crypto transactions were still in stable coins um if you also look at some of the settlement numbers from last year alone I think there were about 7 trillion ion dollar settled in stable coins and this is um starting to compete directly with the likes of Visa and Mastercards right for us um a circle I think with over 12 .5 trillion dollars in circulation we're already seeing how uscc is empowering users to both be on boarded on the web 3 space to um contribute to this digal economy that's being built around us we also to be able to send receive save and secure that money um again specifically if you look at the backdrop uh of the global macroeconomy that we're experiencing today um I think it's becoming vital for for regulated stable coins to play a very important role in in um in the space uh that's one I would say regulation I think uh wayam covered this very very well I think we're likely to see uh more regulation coming into place specifically for stable coins we're already seeing this both in the US um there are current discussions about sort of stable coin bill being passed hopefully very soon uh theae is currently sort of looking to space uh with their Market consultation which we expect to probably see some decisions around early next year um which is great news I think this is what we need because this will help us really on board um a huge part of the ecosystem that's not yet from the financial traditional Financial space that's not yet uh part of this and I would say um institutional and investors and corporations coming on board uh really uh injecting Capital into the space but also building credibility even more um to enable the digital asset to thrive and and really sort of hopefully be embedded more into the traditional Financial Financial space um to your to to those who attended um um a session earlier today in the arena a question was asked to the audience do do we have confidence in the virtual asset market place as it is um and with that in mind um if you had the opportunity and I'm I'm going to um ask this to all panelists if you had the opportunity to come together as a panel to work on specific initiatives or projects Levering off each other's virtu uh specialities within the virtual asset space um what would that be and what would that look like um line Let's uh start with you sure uh yeah we have all these type of different uh expertise in the room and we hope thate specifically adgm is so great environment in helping people to get together and build further together and we are so honored that we have been already been working with viance Team VI himself and the team for almost a year so we are co-building the compli assessment platform in reviewing digital accet service providers but I hope that this this model can also be working for other uh my final panelist so um we can help in reviewing Service Partners but this is just a small pieces come coming out of from my mind I hope I suppose this question is more about that we can build something big and that yeah this uh regulating and reducing the risk in crypto assets that requires multiple parties to join no matter you are studying from the infrastructure like rths building Layer Two with all the infrastructure is ready and all stable coin that is regulated we hope that I'm I'm not I'm not having a concrete idea but definitely there something we can join together and inside is going to be the AI expertise in this room to help him review and ficate the racek thanks shanglong Ral yeah I mean I think uh I would love to have their expertise on what we're building right now um you know I think at end Labs we're our core Flagship product is building the risk management infrastructure for All Digital assets so we're all we're already working with WM qu's team and um at adgm working with MAA but as well as I mean across our Marketplace product across our institutional security platform where we do a lot of uh quantitative modeling a lot of um you know correlative risk across different sort of digital assets that just does not exist in the industry today um if you look at traditional credit markets and insurance Industries they have sort of centuries of under writing Frameworks um you know different types of correlative risk data whereas today in digital assets we have no idea if a lending product on a certain chain goes up we have no idea like what are the cascading liquidations look like what are the different fluctuations asset prices what happens to stable coins right there have been some questions about that in the past and I think this is a really um you know interesting opportunity you know like you know we would love to get the you know expertise from miam and you know same thing with um uh you know with Shang Ling's expertise in AI we're actually doing a lot of um MLA uh you know sort of deep reinforcement learning specifically around um making risk management going from proactive instead of reactive I think the industry over the past few years you know looking at FTX and hindsight people were like oh you know we should have would have could have done this I think for us we really want to build a technology to actually do that and prevent these things in the future and really ultimately provide the infrastructure where you know governments financial institutions developers and ultimately consumers can all come together to build and benefit from the benefits that they can get from digital assets so yeah it' be great to work with all you guys on that thanks ra um whum what would you want to tackle with this um um all these expertise and and subject matter um expertise sure I I think all of us have got a common interest here and that is to uh enable mass adoption right of cryptos uh uh and for us as a regulator we always in the business of risk management so my wish list would be to be able to work with the two cutting AG uh risk uh technology solution providers here um to help me understand and monitor the risk that I see in the crypto space or those that I don't see in the crypto space and hopefully in that process to be able to evolve an appropriate regulatory framework uh to um better regulate this space a classic example that looking H at least for the next six months D5 staking right so there are a lot of risk that I want to identify together with the experts here right then I need an industry um participant to test those uh uh to give me the use cases and that's where the stable coin issuance Circle and miam team would be very useful because only when we have the theor the Practical construct can we then apply our theoretical construct and all the supervisory tools that develop in concert with our RIS experts here so so that would be my wish list thanks whum um our last question Miriam any advice uh for institutions that would like or interested in setting up um in this region specifically in uh virtual asset space I'm going to be biased um I've been fortunate to work in this space and in this ecosystem specifically within adjm andw for the last six years years um and even before that in Dubai as well I've seen the growth uh of the tech space initially uh before we moved into digital assets space there is a huge shift happening especially when it comes to the regulatory landscape if you look at other markets which we consider sort of developed markets uh that are traditionally leading uh the regulatory uh Frameworks we've seen how the likes of adgm have been leading the way in developing a very comprehensive digital asset framework back in 2018 allowing sort of institutional players to come in and sort of use the UAE and Abu Dhabi as a Launchpad to the masasa region and I'm not just saying this as a PR there is a huge momentum and it has been uh going on for the last few years but now we see the result I think this this event is is probably a very good example this started in 2017 probably as a simple fintech event uh with few hundred people I heard today that uh adjm had 16,000 people registered so that shows sort of all of this is probably a testament to all of the amazing work that has been put uh over the past years and the momentum that's been pulled from different key stakeholders whether that's policy makers Regulators the investors um as well as the investment ecosystem and the startups themselves so it's it's great to see that and I would definitely advise uh these institutions to come in and speak to the regulators and and really explore the ecosystem themselves which I see happening already today um unfortunately we have run out of time um I would like to thank my distinguished panelists and thanks everyone for listening thank you