The Future of On-Chain Finance—With or Without TradFi

A super-panel of experts and industry players explores the coming wave of opportunities for banks and other traditional financial institutions—and competitive challenges if they resist—to participate in on-chain finance, offering custody solutions, issuing and managing stablecoins for cross-border payments and remittances, tokenization of traditional financial assets, etc. What's at stake? TradFi as we know it—finally.

Transcription:

Bailey Reutzel (00:11):

Let's do it. As some of you all will know, I started in crypto very early. I mentioned in 2012 there was not Ethereum, there was not Ripple, there was not meme coins, there was not shit coins, just good old Bitcoin. In those days, the rallying cry was one of taking over the world. Oh my God. The banks. It was, "We are taking over now." As a rebel myself, I really liked that. It was a real David and Goliath story. I think now we've come to a point where those conversations have mellowed out. Maybe we've come back to reality a little bit. I still have high hopes for crypto one day, but for now, it's very much more measured. I think most of the panelists here will agree with me. With that, we have started being interested in partnering with financial institutions, with banks.

(01:07):

So that's what we're here to talk about today. As we see more consumers and businesses adopt crypto for all sorts of reasons, we're cognizant that both of us can share the space. We have to get along or at least just acknowledge that each other exists. I'm going to get into my introductions and then we're going to start way down there. We have Joanie Xie, she is the Vice President, Managing Director for North America at Ripple. Then we have Danielle Davis. She is the Vice President of Strategy at Chainalysis. Next, we have Tyler Spalding, President of the Acronym Foundation. Next to him is Jason Allegrante. He is the Chief Legal and Compliance Officer at Fireblocks. And right next to me is Robin O'Connell, the Founder and CEO of Uphold. Did I say that wrong?

Robin O'Connell (02:02):

Well, I'm the CEO of the Enterprise Unit.

Bailey Reutzel (02:04):

It's okay.

Robin O'Connell (02:05):

You're trying to get me fired.

Bailey Reutzel (02:05):

Thank you. Sorry.

Robin O'Connell (02:10):

Okay.

Bailey Reutzel (02:10):

So let's get started. I want to start back in the day. I'm wondering what parts of crypto you all think have made the bank sort of have to move? Over the last, what is it, 10, 13, 15 years? Yeah. What technology do you think the banks have really had to come forward on because of the crypto narrative? Tyler, I'm going to start with you.

Tyler Spalding (02:40):

Besides some of the obvious ones, anything around payments and obviously the whole talk around stablecoins that some of the folks here might have some comments on. Outside of that, I think I would have a little less traditional answer to that, which would be, it might be a little more cultural. When you look at what crypto has pioneered or kind of gotten going a little more in a technological sense is that these large institutions are migrating, again, in my opinion, from private to public infrastructure. You saw this with the internet and many other technologies before. A lot of us in this room, when we first started using the internet, we had private email servers and entire floors and closets full of servers and infrastructure and the IT department. Whereas so much of that now has migrated to the cloud.

(03:32):

And it's not because people cared or wanted that, it was a lot more cheap, it was efficient, and there was a lot more you could do with that. I think that especially when it comes now to various financial technologies, we're seeing this again. In my experience now in working with traditional finance and our partners, I'm seeing the exact trend again. So we're already migrating more into, "Wow, we can have settlement systems that could potentially operate on public infrastructure." You see things like Conexus now, the former Onyx from JP Morgan, settling even, I think they're up to 2 or 3 trillion of repo tokenized repo transactions already. And that was just a fork of Ethereum. So it's still a permissioned chain, but with a few tweaks that could start settling on public infrastructure. And you start using zero-knowledge proofs or something to hide or obfuscate the transactions themselves, the underlying information, you can actually just settle now in public infrastructure, which is really exciting. That becomes, you start using composability, you start adding in intense software. There's a lot of power that can come from that, and it becomes just so scalable, much more efficient. So that's something I'm seeing that I think is now really progressing, which is exciting on our side.

Bailey Reutzel (04:48):

Yeah, that's really interesting. I'll go to Jason next if you have an answer to that as well.

Jason Allegrante (04:53):

Yeah, absolutely. I consider myself a traditional financial services guy. So much of what I say will be grounded today in concepts of banking actually. That's in fact what I find to be so remarkable about the adoption curve here is in many ways it follows a very linear, almost predictable path, bank activities and really bank competencies. When I think about my journey at Fireblocks, and I think about one of the first really consequential customers we had, it was Bank of New York Mellon, one of the largest and oldest asset custodians of the world, looking to do something very simple, which was offer a private wealth solution to custody digital assets to its customers. Why did they think to do this besides the fact that they're excellent at it and they've been doing it forever? If you go to the OCC permissible activities manual, it'll say right there that this is a core banking activity, being able to custody the assets of customers.

(05:49):

So I think obviously it's a very natural place to start. And then I think if you extrapolate into the future, where is all this headed? You're going to see banks wanting to do custody. Hopefully we'll have stablecoins. I believe, as I may talk about more today, that stablecoins will also include a custody component. But banks are basically going to follow the permissible activity curve. There's going to be some very smart person at Goldman Sachs or wherever it is who's going to say, "We've just made this massive infrastructure investment in preparing ourselves to be stablecoin issuers, preparing ourselves to take custody. How can we increase the ROI in this?" We've seen banks be very, very, very creative about this, and in fact, quite innovative in doing this in the past. So we had the Graham-Leach-Bliley legislation, we had financial holding companies. Suddenly banks were operating travel agencies and holding warehousing potash. So the banks have always had this drive towards innovation, towards expansion of powers. I think what's fascinating is that what we've already seen is following this trend. And I think what we will see will continue to do so.

Bailey Reutzel (06:56):

Yeah, I just noticed your socks also, not to derail this conversation, but I think they have your face on them.

Jason Allegrante (07:02):

I am here to celebrate myself. I'm not here to detract from the panel.

Bailey Reutzel (07:06):

Okay, great. All right. Sorry, just had to make that comment. Okay, Joanie, I'm going to send it to you, and I'm going to add on to that question a little bit because I think the narrative around Ripple has shifted pretty dramatically since its launch. I think Ripple at one time was going to be sort of like an intra-bank stablecoin money mover. And now especially we're seeing banks that sort of want to get into that. So JP Morgan and a slew of other banks are like, "Oh, maybe we'll just create our own stablecoin." So yeah, I'm wondering if you could expand on how you see Ripple's place in this competitive landscape now.

Joanie Xie (07:45):

Yeah, sure. Definitely. Just give everyone some background. Ripple is very well known for its cross-border payment products. We started back in 2015. We created the first payments product called the Ripple Fiat. It really allows that messaging to be more consistent, more transparent for financial institutions to communicate with each other when it comes to cross-border payments. In 2017, we launched a new product called On-Demand Liquidity, where we actually used XRP as bridge currency to allow institutions to settle payments instantaneously. We didn't get a lot of traction back then from banks, mainly because of very obvious reasons: regulatory uncertainty at the time. Fast forward to today, things have changed drastically just because we have now more clarity on the regulatory front. And banks actually are very interested in coming to us and exploring this new way to send money across borders.

(08:53):

They want faster and better products experience for their users, and a lot of them are inquiring about on/off-ramps too, right? So I think that's just the very beginning. We believe that stablecoin is really just the entry point to this decentralized world and a bridge between traditional and digital world. What we believe is that once banks and financial institutions adopt stablecoin, what's exciting is that they can use that underlying infrastructure to actually expand their services into tokenization, for example, down the line. When that happens, having digital asset custody becomes extremely important. Having secure digital asset custody infrastructure is something we believe is foundational to any digital asset business. That's why we acquired a company called Metaco two years ago, providing bank-grade institutional custody service. So where we see this is there's a transition from stablecoin to tokenized assets and to other future great services. And we are aiming to become that sort of one-stop shop, the default bank-grade infrastructure provider.

Bailey Reutzel (10:17):

Yeah. Okay. I think I'm going to push back on the stablecoin thing, not because I hate stablecoins or crypto. Love it actually. But I was just talking to another panel about this: instant payments, account-to-account payments. It is possible in the US to do this now, to have instant payments with Fedwire and RTP. I guess I am skeptical a bit about the stablecoin use case because it is possible now. So I guess what would a stablecoin provide that would be different than just the bank signing on to RTP or FedNow, specifically in the US? I don't know, Robin, if you want to jump in there.

Robin O'Connell (10:55):

I actually agree with you. I mean, there you go. That's it. I agree with her. No, I think really it is worse than the problem. The problem isn't with real-time payments, FedNow, right? I mean, that did take a long time, by the way. So ACH still has a lot of money run through it, which is very slow. But no, the real opportunity, I think, is the cross-border payment system. And I'm seeing a ton of opportunities. First of all, are we allowed to say what we do for a living, what Uphold is?

Bailey Reutzel (11:31):

Yeah, sure. Yeah.

Robin O'Connell (11:35):

Uphold is a company that's been around for 11 years. We have a retail side of the business where you have tens of millions of customers globally. So we have customers in the United States. We're fully regulated from an MTL perspective in the United States. What we do on the enterprise side is everything that we offer on our retail product, it lives in a platform, and we can offer it up to other companies. Typically they're payments companies, neobanks, et cetera. But I'm here because hopefully eventually it'll be banks. I see an opportunity with stablecoins, but it's got to be a bank. That use case is important. If you're, I don't know, a small community bank and you don't have a lot of customers that are sending money across borders, then maybe stablecoins isn't that interesting.

Bailey Reutzel (12:30):

Yeah, I gotcha. Danielle, I want to pass it to you. I know this isn't necessarily the area of expertise of Chainalysis. I mean, you can talk a little bit about what Chainalysis does, but yeah, it seems that there is a misconception within banking or broader TradFi that crypto is maybe scary to adopt. And I know you talk a lot about that at Chainalysis. So tell us a little bit about Chainalysis and how you would answer that.

Danielle Davis (12:58):

Yeah, so Chainalysis is a blockchain intelligence platform. We help customers prevent and remediate risk, particularly across fraud, security investigations, and compliance. We started in 2014 with the Mt. Gox hack and helping the US government there and have just continued to expand. I do have to say though on the prior question about stablecoins,

(13:22):

I think when we think about the US, there's a changing dynamic where Gen Z and other younger workers are working abroad. I think there's at this point 1.5 billion freelancers, and a lot of them are in economies that have unstable currencies. Even younger people in the US want to live abroad. Companies are going to need ways to pay them that's efficient. So I think even if you are based in the US as a company, you may start to rely on cross-border payments more. Banks are going to want to get into that game so they can take a share of that. But on the compliance angle, I think actually a stat I was reading from a Fireblocks report was that two years ago, 80% of firms said that they were nervous about compliance and that's why they weren't getting into crypto.

(14:07):

Two years later, that number is below 20%. The compliance landscape has completely changed. We're going to talk about stablecoins in a little bit, the hot button topic. But even with stablecoins, you have the ability now through technology we provide and other blockchain analytic firms to monitor your stablecoin. You can get real-time alerts on illicit activity. You can have automated freezes if you have suspicious activity. The game has just changed so much. It's largely been modeled after what we see from a compliance standpoint in traditional finance because the industry grew up and realized compliance wasn't optional. A risk-based approach is what you're going to have to do. So I think a reason we're now seeing continued growth is that there is comfort and that the industry is growing with sort of traditional finance needs.

Bailey Reutzel (14:55):

I never wanted to grow up.

Danielle Davis (14:56):

Neither did.

Bailey Reutzel (14:57):

Why did we have to do this? Okay, both of you are making good points about the use cases for stablecoins. I think when I think about different payment flows that I use, there is, I do use my credit card for some things. I use Venmo for other things. I use crypto and stablecoins for other things. So there are just different markets. As a bank or financial institution, you would probably want to take advantage of all of those. I'm going to pass it to Tyler here again to just talk about your company, Anvil. It's pretty DeFi focused, which is maybe not exactly where banks are going into, but yeah, I want you to talk about the different audience that you're seeing maybe for that and where there is maybe crossover for the banks to get involved.

Tyler Spalding (15:41):

Yeah, I mean, I think that if this technology is worth anything, then there has to be crossover. You mentioned earlier around, "Oh, we're fighting the banks," or "Can we get along?" And I have the opposite stance that banks aren't going to go anywhere. They're really fundamental, integral to our society and function. If we have good technology that's valuable, you'll absolutely use that. So it's sort of inevitable for me. And so then it's sort of like, "Well, where does this even make sense?" When you start looking at just what crypto is more fundamentally, it's really just a state-based decentralized network, which maybe sounds more complicated, but the internet is just, there's no state in the internet. You're just transmitting data between servers. There's no state that is getting passed along or agreed upon. That's why things like cookies exist and you can maintain the state through other private servers, but it's just a stateless internet. A decentralized and distributed database like crypto, Bitcoin, Ethereum, and others, they're just stateful networks. So you can pass the state of a transaction or a balance or of anything across the entire network. And so that just means that transferring value or any sort of transaction of value, whether it be money, a stock, a record, anything, it's really good at.

(17:04):

Okay, well now just look, does that have other applications? Surely you have things like the FX market is the largest market in the entire world. It's actually a decentralized market on top of that, but it's about exchanging value in one currency to another. Wow, it's exactly what this other network thing does really, really well. And then payments would be another example that clearly would make sense of transferring value from one to another. Another piece would be the credit market. You could argue the credit market and all its extent bonds and derivative instruments could arguably be the second largest market in the entire world if you kind of add everything together. And it's in the hundreds of trillions of dollars. When you're issuing credit, it's all about like, okay, what is the state of this collateral? What is this collateral? What are the conditions of the collateral? Is it re-hypothecated? What is this asset? How do I claim it? How do I sell it? The whole myriad of just that whole process. Again, now crypto would address that very well because that's again, the whole state of the network. That's exactly what it does.

(18:10):

So roundabout way, that's what Anvil is, a product that we created, which is the collateral management platform. It's a DeFi system on Ethereum, but you basically just lock up assets and you can create a digital letter of credit against those assets. Then anyone can use that and they can extend credit themselves, just like a traditional banking system. They can charge interest, they can whatever the asset is, whatever the credit asset is. But rather than having to go through the entire process of verifying, securing, seizing, liquidating collateral, they just press a button and then they get the credit asset delivered to their address right away. So it's kind of this whole seamless process that we've built that again, just addresses the core need of just what does crypto even do well, why can this even be valuable to people? We're seeing actually a greater use and more traditional companies than anyone else using this now as a way to leverage digital assets and then issue credit in any sort of form, whether it's even consumer loans or simple as if you want to verify that someone can be good for an apartment loan. You go and move into a big city and now they want nine, ten months rent up in advance. If no one has, you can say, "Oh, here's a letter of credit that I have, a digital letter of credit."

(19:29):

It took me two seconds to create with no background checks, no verification of my employment or my income or anything else. It's just, here it is, I'm good for it, and that now works. So they could issue some sort of digital promise in that way, which has been really good.

Bailey Reutzel (19:45):

Okay. Where are you living that they're asking you for nine months of rent?

Tyler Spalding (19:48):

In New York City all the time.

Bailey Reutzel (19:49):

Really? Oh man. That's why I left, but I only left six months ago. I want to go back. Okay. Yes. I want to bring it to Jason again. I want you to talk about stablecoins. I have the stat here that I'm going to read out for everybody just so you can have a jumping off point. Last year, Fireblocks did 3.6 trillion notional transactions on the platform, 1.5 billion of those having a stablecoin leg. And you're saying that was all institutional flows. So I want you to talk about what those flows actually were and what that means for the business.

Jason Allegrante (20:21):

Yeah, I mean, it is fairly straightforward, right? You don't have to believe me when I tell you that there's product market fit with stablecoins. Just look at the customer data because the customer data are voting with their transactional volume. Nearly half of the volume that we see in the platform has at least one stablecoin leg. The use cases where we're seeing real uptick, and it will echo what others have said in the panel so far, is the cross-border payments use cases. We're seeing a lot of new payment service company customers. So payment service providers are signing up to use stablecoins. So the institutional demand is really strong here.

Bailey Reutzel (21:01):

Yeah. Okay. Cross-border. I'm going to push back on this too, not that I hate you all, just we're trying to have a fun conversation. The cross-border flows, this was definitely a big narrative in crypto forever. It's always been there. And I largely think that some of those corridors, the corridors that get the most action, generally have pretty low fees. The corridors that don't have much action or have more fraud attached to those have higher fees for those corridors. Right now, crypto can be a cheaper, a stablecoin can be cheaper, but I wonder if that remains, right? And it's only cheaper because what, you don't have the chargebacks, you can't bring it back? So fraud is not really fraud.

(21:46):

Does that? Yeah, please.

Robin O'Connell (21:47):

So it's not just that it's cheaper, but it's also faster, and it's actually real because you can send data to say, "Hey, this transaction's happened," but then there's always that settlement piece.

(22:01):

The settlement piece has to go through correspondent banking, and that takes time.

(22:07):

So yes, it's possible that they've negotiated, if it's a big amount of money, some lower fee on FX or what have you. But that's a big deal. And what a lot of companies end up having to do is have pockets of local currency stashed around the world simply to move money around. I'll ask the Fireblocks gentlemen, but I think a lot of the stablecoin flow is also in the crypto industry. We have to have relationships all over the world with different exchanges, and we always need to have money there because it's good money and you have to make transactions. Well, how do we get it there? We're like, "Of course we're not going to send it through a bank." I mean, that would be absurd. We'd have to wait all that time. We'd probably pay an extreme amount of money for it. But instead, all the flow around the world to support all the exchange volume globally is all done through stablecoins, right? Is that more or less?

Jason Allegrante (23:14):

A lot of it is. To very briefly address your point, obviously the price is going to be dependent on the liquidity in the market, and you're going to have more or less liquid exchanges. Fine.

(23:25):

But to your point, Robin, absolutely. We even experienced the use case for this ourselves fairly recently. I wanted to engage a law firm in Nigeria, and it was a really pressing matter, and it had to happen over the weekend. We got down to trying to figure out how the heck are we going to pay these guys? They wouldn't start work until they were paid, but it was Saturday. They had a bank holiday on a Monday. We were just like, "Can you please take stablecoins?" Because this is exactly the use case itself, where immediate settlement gets them. We don't have to worry necessarily about Fxing into the local Nigerian currency. And to be honest, I don't think we talked about this, right? The depreciation on certain currencies is such that you might prefer not to off-ramp into the local currency. You might just prefer to stay put with your stablecoin, and that might have a way better outcome for you in terms of value retention than the alternative.

Danielle Davis (24:28):

Yeah, that's fair. I mean, I think there's, even, I think there's a lot of bankers here. We've all done large-scale M&A deals where you are sending money from Great Britain to Singapore, the US to, I don't know, pick a different place. It's a Friday morning, and your treasury department is having a mental breakdown because if you miss the wire deadline and you send the money and it never lands, what's your exposure over the weekend? I mean, that to me is like, why doesn't everyone want to solve that problem? And that's where I think stablecoins are just an instant solution. Why would a bank do something different? I think it's about melding what works in traditional finance with new technology that solves a real problem.

Bailey Reutzel (25:07):

Yeah, fair enough. Fair enough.

Joanie Xie (25:08):

I just want to add, an obvious use case is for SME B2B payments, where let's say importers in Latam want to pay their vendors in China. There isn't an easy way for them to access USD, and their vendors on the other side don't accept their local currencies. What do they do? And stablecoin payments provides that solution, solves that problem, and can make that transaction a lot more faster, cheaper, and ultimately it's accessibility as well for these SMEs.

Bailey Reutzel (25:44):

And Joanie, you can bat off this as well, the regulatory regimes across the world. How is trying to triangulate all of those different regulations to do this?

Joanie Xie (25:56):

Yeah, I think we've been around for a long time. So we were founded back in 2012. We're way ahead of our time. So we have always taken a very compliance-first approach, and we've obtained more than 60 licenses globally. We work very closely with regulators in every region to make sure that we're fully compliant. So we always start with the markets that have more clear regulatory guidance. For example, our businesses expanded quite a bit in Asia and Europe in the past couple of years, and that's where our focus was prior to now. Now, given that we are seeing more and more regulatory momentum and a change here, we're shifting our focus back in the US. We believe that just by working and supporting policy makers and helping them to make the right decisions and coming up with the right framework, it can really benefit the entire industry. So we do work with all these regulators and policy makers very closely in every market.

Bailey Reutzel (27:14):

It seems like chaos here in the US, to be honest. Are we sensing that also? Or does it just feel good to finally be loved? Yeah.

Joanie Xie (27:25):

It's chaotic, but at the same time,

Bailey Reutzel (27:27):

Nobody wants to answer.

Joanie Xie (27:28):

But at the same time, we are making progress. We are very happy, at least about the overall momentum. I think this administration, at least, is very willing to come up with very constructive regulation to really make sure that US doesn't lose out to other markets or other countries when it comes to innovation. I think that's important. The path might be a little bit chaotic, but I'm confident that eventually we'll get there. Yeah.

Bailey Reutzel (27:57):

Robin just loves to be loved, he said. That's what I said.

(27:59):

I love to be loved. Does anybody else want to comment on the chaos?

Danielle Davis (28:03):

I mean, implementing Dodd-Frank was chaotic. So I think this assumption that crypto is different in that respect is false. Any financial regulation that's come into play has been chaotic. I would say Dodd-Frank continues to be chaotic.

(28:18):

So I think it's kind of a trial and error thing. As long as the administration remains open to getting feedback from industry participants, we'll make the right steps.

Bailey Reutzel (28:27):

I'm going to stay with you, Danielle, because I want to talk a little bit about the fraud.

(28:32):

I don't know why I said it that way. About fraud specifically, because all day today I've been getting text messages that say, "Here is your Coinbase one-time password. If you did not request this, please call us," and then probably give us your private key, and we're going to steal all your crypto. So it's rampant out there. I feel like especially for banks and financial institutions, the regulatory regime might not be the scariest part. It's the fact that as soon as you decide to get into crypto, your attack vector is huge. So yeah, I guess how are you thinking about that and what are you seeing as well? I know you have insight into all that.

Danielle Davis (29:12):

Yeah, I feel like you just teed me up to make a pitch for a company we just bought. No, I think the interesting thing here is we can't make it this panel without saying AI. AI has made it so much easier for fraudsters. I think one of the actual bigger fraud issues is first-party payment fraud, where I think I'm sending money to Joanie. She's saving animals, and really, she's a fraudster, and I met her on a Facebook platform or something. We see in the UK, they passed regulation that payment providers are responsible up to a certain amount if their customers participate in first-party fraud, where I willingly gave my crypto to a nefarious actor. At the same time though, we bought a company in December called Terria, who uses AI to combat that. They use AI to collect data from fraudsters on fraudulent websites, and then we can give that to banks or exchanges or financial providers.

(30:07):

When someone goes to push that button, it says, "This is actually a fraudster." Because it's AI, we're doing it at scale. I think you're always going to play a cat-and-mouse game with fraud. I think a big part of it is education. We see a lot of financial institutions leaning into educating their customers, especially those who are elderly, those who are newer to the financial system or to Bitcoin or Ethereum or whatever they're using, about what fraud can take place. And that a lot of it is actually first-party fraud. It's not someone stealing your credentials, it's someone sending you a link, getting you to click on it, and you willingly passing over information. So I actually think the industry is really moving quickly to combat some of that, but it will continue to be a cat-and-mouse game.

Bailey Reutzel (30:47):

Yeah. I mean, I haven't been swatted in many years, but it did happen three times in one year, and that was really a pain. So we are down to 10 minutes. I do want to take some audience questions. I can kind of see, just like a show of hands, who wants to ask a question? I just want to sort of gauge my time. Don't be shy. Okay. No. Wow. Alright. Who here has Bitcoin? You can raise hands. Everybody can raise hands. Bitcoin. What about Ethereum? Okay. Yeah. Stablecoins? Okay. I got a few. Okay. Fun question while you get warmed up. Surely you have a question for the panelists. Come on. Now, this is a silly question. What is a cryptocurrency that you think is undervalued? I'm going to start with you right beside me.

Robin O'Connell (31:47):

I mean, this is not financial advice.

Bailey Reutzel (31:51):

Yeah.

Robin O'Connell (31:51):

Geez. Yeah. That's a terrible, not financial advice. I mean, I think Bitcoin is, for me, is the obvious one.

Bailey Reutzel (31:59):

That's easy.

Robin O'Connell (31:59):

That's easy. That's a safe answer.

Bailey Reutzel (32:01):

That's a safe answer.

Robin O'Connell (32:03):

I don't have any other inside scoop for you guys.

Bailey Reutzel (32:05):

Okay. Jason was looking at me.

Robin O'Connell (32:07):

Do you just want to skip me before I give the same answer?

Jason Allegrante (32:09):

No, I would've said Bitcoin easily.

Bailey Reutzel (32:12):

Bitcoin. Yeah. That's such a cop out. Tyler,

Tyler Spalding (32:20):

Man. I'm going to say stuff that will get me in trouble. So I would probably say Bitcoin for the same reason, as much to my grin, being a payments person. For way too long. That's why I got into Bitcoin, what, 14 years ago? I used it for payments, I bought stuff. So I probably bought billions of dollars worth of things in the current amount of Bitcoin. So that's my love. For better or worse, the way it's been positioned right now, you could really make these arguments of if this digital gold narrative is a real one. That is a meme. It's a meme. Gold is a meme too. It's not worth anywhere near what its market cap is. Oh, it has utility. Yeah, right. It's like 2% of what the actual meme value of gold is.

(33:07):

It's shiny, and you can mold it into cool things. Yeah, 2%. So we can't kid ourselves that Bitcoin's any different than that. But with that narrative, if you apply that, especially from any sort of an investment perspective, if it is a digital gold-like thing, and I think you can make the argument that Bitcoin is better than gold for the properties of why people like gold, from its transportability, its storage, its accessibility, some of the other ingredients. Well, that means it could get close to the market cap of gold, if not exceed it, if it becomes way far more accessible, especially through all these other ETFs and companies investing in it. I think BlackRock put it in a pretty interesting way:
they're viewing it, I mean, they're promoting it, of course, but this is an asset that isn't tied to any government. That's a super interesting narrative to say, "Oh, here's a digital asset that isn't tied potentially to anything that one government does or anything that one currency does." So you could, I think, make a reasonable argument that could be worth, let's say, more than the total market cap of gold. If you say something like 2x hypothetically, that'd be like a 20x from where it is right now. So at that sort of a market size, that's interesting. So I would say from that as a safe answer that it's undervalued.

Bailey Reutzel (34:26):

Okay. Danielle,

Danielle Davis (34:27):

I'll not say Bitcoin.

Bailey Reutzel (34:29):

Yay.

Danielle Davis (34:30):

But I think I'm going to go with, I'm deciding if I'm going to say Solana or Ethereum for the same reason.

Bailey Reutzel (34:39):

Love it.

Danielle Davis (34:40):

Which is I love something you can build on. I think the future of whether it's with traditional finance or beyond is what you can build on it. So I'm going to say one of the Layer 1s that is truly allowing people to build Layer 2s and other applications that are really lowering fees, making things fast, secure. I probably am going to lean more Solana in that, but it's too early to tell. Okay. Yeah. So Solana.

Tyler Spalding (35:06):

Can I counter that one?

Bailey Reutzel (35:06):

I'm good. Yeah.

Tyler Spalding (35:07):

I have the opposite. I would argue it's just a database, and what's the most valuable database in the world by market cap? It's not a trillion dollars, so that means it has to be worth less.

Danielle Davis (35:19):

So I don't think they could really, I'm thinking of value, not in dollar terms necessarily, but the power of what you could do.

Tyler Spalding (35:24):

That's super valuable. But everyone here, everyone just wants to know the number go up. So I think it's not so much about the utility of the world, but I think that those assets are probably, I'm taking a utility worldview.

Bailey Reutzel (35:35):

Yeah, I'm a humanitarian. Ethereum's having a tough year, but I mean, it is quite powerful. Joanie.

Joanie Xie (35:41):

Yeah. Well, I'm biased, definitely. I think it's XRP. We don't own the XRP Ledger, but we are the largest developer on XRP Ledger, and we invest a lot of resources in building out the ecosystem on the ledger. What we want to do is really, we see a tokenized world in not too long from now. If you imagine a tokenized world, all the assets can be tokenized in the world. Those are trillions and trillions, and if they can be tokenized on several select chains, I mean, that can generate significant value for the native token on that ledger. That's why I believe XRP will be one of those that will create value, and eventually it will drive up.

Bailey Reutzel (36:35):

Yeah. Look, it's a silly question, but also it just signals where our heads are at for people who are in crypto all the time. Hopefully signaling to the banks and the financial institutions, too, where some of that innovation is. There is a question from the audience. Great.

Audience Member 1 (36:50):

Yeah. So in the case of gold, we do know that the supply side ramps up very slowly, but with the proliferation of additional forms of digital asset, digital currencies, why should any one of them have a market cap bigger than gold?

Bailey Reutzel (37:09):

You guys are the panelists. Come on now.

Tyler Spalding (37:11):

I didn't quite get. I mean, I would just say because it has meme value and nothing more, right? It's the one that was around the oldest. It has the best security. People all know it. It's been accepted from a regulatory perspective. It's really hard to do. Throw in that it's the same thing as gold. You could do the same for silver. There's also platinum. There's how many infinite other types of metals or compounds we can create that could be more valuable or pretty or better than gold. But they're not, right? As humans, we find one, we latch onto it, we say, "This is where the value is." I like it because you like it. So the meme value is very, very overpowering, and we should just really not overlook that. It's not rational at all.

Bailey Reutzel (37:53):

Yeah, it's frightening to hear you say that, but yet it's true.

Event Member (37:57):

Bailey, with a question over here. Yeah.

Audience Member 2 (38:00):

Hey, this has been super interesting. So preface this by saying, pro-crypto, former Ethereum miner, have been holding XRP since pre-COVID. My question's with respect to stablecoins. Can we coexist with regulation, compliance, and decentralization? Can those three coexist, or do we have to give one up?

Danielle Davis (38:22):

What was the third one you said? Regulation and compliance. What was

Bailey Reutzel (38:25):

The third one? Regulation, compliance, and

Audience Member 2 (38:28):

Decentralization.

Bailey Reutzel (38:29):

Yeah, regulation and compliance. Decentralization. Can they coexist? Look, I'm going to add onto that question a little bit because I think you see people using crypto and you can use it outside of any business and use it decentralized and not be able to get found out, right? There aren't many blocks to that. But as soon as you add a company in, those companies have to abide by the rules or get pressured to abide by the different rules. So I guess that's sort of building out that question.

Robin O'Connell (38:59):

I'll jump in just because Uphold, as I said, has been around for 11 years. We have to have all of the compliance. So we have MTLs in all the states, the auditors come in, they're looking at all of the transactions, et cetera, et cetera. So there's a few companies out there like us that have survived through the years, and it's just because we've been more conservative, and we have, I shouldn't be bragging about it, but our compliance team is the second largest group in our organization behind the developer group, and a lot of them came from traditional banking. So it's the same bar to a lot of the banks in terms of the levels of compliance and so forth. That's how I would answer it.

Bailey Reutzel (39:52):

Jason, you want to?

Jason Allegrante (39:53):

Yeah. For me, the immediate or near-to-medium term trend is clearly towards centralization, institutional ownership, and issuance of stablecoins, but also a whole bunch of other products and parts of the ecosystem. I think that's a really interesting story, and I kind of look forward to seeing how it unfolds. But I also envision a world, frankly, because I think there is a really strong libertarian ethos, and I think there is a really strong demand. I do envision a world where we do have decentralized products in a really robust market for decentralized products. Not going to say necessarily a regulated or legally compliant market, but I think that demand will exist. I mean, you could think about Tether as being the flag carrier for that sort of thing.

Bailey Reutzel (40:36):

Yeah, I totally agree. These are two different markets. Sometimes we see DeFi thriving. It is a very different market. Some of those people might also be TradFi people. But I think also to Tyler's point, it just takes a little bit at a time. Crypto has made inroads into how banks and financial institutions, and largely, I don't know the world, can we be so bold, to how we facilitate all sorts of things. So I just think it's like baby steps. Overthrow everything. I don't know. That's what we used to want, but now we just have to take little baby steps.

Danielle Davis (41:12):

We didn't even really talk about zero-knowledge proofs, which I think try to bridge some of this. Yes.

Bailey Reutzel (41:16):

Correct.

Danielle Davis (41:17):

So it is baby steps, right? Aren't where we need them to be. They're expensive to implement, they're complicated, et cetera. But that's another step towards the decentralization or a little more anonymity about your information. Right? We probably...

Tyler Spalding (41:30):

I have one little part.

Bailey Reutzel (41:31):

Yeah, please.

Tyler Spalding (41:31):

Very small. Just the whole overthrow the world thing. I'm an early crypto person. For me, all it is is just having a choice. That's it.

Bailey Reutzel (41:38):

Yeah.

Tyler Spalding (41:39):

That's it. It's like, "Hey, there's all these things that exist. I'd love to have the ability to be able to transact and use the thing that I find value in and nothing more." That's really all it is. It's not about overthrowing or destroying anything. It's working with everything. But giving me the choice. That's very, very powerful, and that's what I meant it for.

Robin O'Connell (41:55):

Can I say one more thing?

Bailey Reutzel (41:56):

Sure. Yeah.

Robin O'Connell (41:56):

Okay. But I am seeing, and I'm sure you guys are too, these two worlds are coming together, right? Yeah. I mean, you take some of the big, let's say self-custodial wallets, like Phantom, all of that, MetaMask, all of the self-custodial wallets are moving away from, "Oh, we're just self-custodial and DeFi." And they're like, "No, we actually want to create a solution that's a better user experience, et cetera, et cetera." So then they're working with companies like us to say, "Well, but we don't have the licenses. We don't have the compliance. How can we blend these things together?" And so they absolutely coexist.

Bailey Reutzel (42:33):

Yeah. All right. Well, we've come full circle. We have to get along whether you guys want to or not. Thank you very much. Join me in thanking our panel here.