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Theo Moore, Syed Kamall, Peter Kerstens, Mark Wetjen, Dan Morgan and Maya Zehavi Discuss Fintech at Blockchain for EU Summit | EU Parliament, Brussels

Theo Moore, Syed Kamall, Peter Kerstens, Mark Wetjen, Dan Morgan and Maya Zehavi Discuss Fintech at Blockchain for EU Summit | EU Parliament, Brussels

Theo Moore, Syed Kamall, Peter Kerstens, Mark Wetjen, Dan Morgan and Maya Zehavi Discuss Fintech at Blockchain for Europe Summit (EU Parliament)


  • Blockchain technology is not ripe enough to cause a disruption in society
  • Data transformation is a major issue
  • Focus on cross-border payments since it is hugely inefficient and expensive


INTERVIEW TRANSCRIPTS: Theo Moore, Deputy Managing Director of APCO Worldwide, Syed Kamall, MEP Economic Affairs & Trade Committee at European Parliament, Peter Kerstens, Senior Advisor to Director General, European Commission, Mark Wetjen, Global Head of Public Policy at DTCC, Maya Zehavi, CEO/Founder of Ontici and Dan Morgan, Head of Regulatory Relations at Europe Ripple

Theo Moore (Deputy Managing Director, APCO Worldwide):00:00:00   

My name’s Theo, I’m the least important person here. We’ll be having a discussion a series of short pieces from each of the panelists. Then a bit of a discussion amongst the panelists, hopefully facilitated by myself. Then questions from the floor when it comes to questions, I would ask their questions, not statements, opinions, theories or other long form essays. And that you identify yourselves when you ask the question. So, if we’re all good, we’ll start with our MEP side Kamall who represents the United Kingdom and has been working on financial servers for a considerable period of time. It’s fair to say Mr. Kamall over to you. 

Syed Kamall (MEP Economic Affairs & Trade Committee, European Parliament): 00:00:48         

Thank you very much and client is apologizing for my voice. I’m normally much louder so you’ll probably be quite grateful that I’m not one of my, one of my whole pieces. I play in a blues band, like kind of a bit too much last week, so I’m still kind of recovering with the voice as it were. So that’s just kind of give me some street credit as well. But I suppose, I suppose blues is actually not as frequent these days basically feel like feel like an old man who says, you know, I woke up this morning and my dog was dead or something like that. So the questions I often ask, I’m, I start off generally any subject being quite skeptical, not because I don’t want things to work, but actually I think you should always ask the difficult questions and you should always prepare to, to look at, you know, what someone’s proposing and actually try and rip it apart. Not to be destructive but actually be constructive and to look at issues.

Syed Kamall (MEP Economic Affairs & Trade Committee, European Parliament):00:01:28         

And I a quick, bit of background about me. I have worked, my first job after university actually was in the IT department of a bank. I was a geek. I’m now a father of geeks, so I love technology. I’ve always done a lot of financial services, legislation and trade stuff and tech stuff in my 13 years here in the European parliament. And the question I ask whenever we see any technology. When I was doing my masters in information technology, it was policy, strategy and technology itself. I remember doing a module on information systems and my lecturer asked us all what is an inflammation system? And everyone immediately talked about computers which had stopped there. And information system is simply a collection of information that you can share with each other. It’s data, it’s information and I’m simplifying it.

Syed Kamall (MEP Economic Affairs & Trade Committee, European Parliament):00:02:13         

It doesn’t necessarily need to be on the computer. If you are local village in a library or you don’t swap books. Has anyone else ever actually you can have a really good information system or paper-based? I’m not suggesting that. I’m just saying don’t think it’s all about technology. So why do I say that here? Because we have this amazing thing that we’ve heard about blockchain, which is simply a distributed ledger on tech and technology allows you to do all sorts of things, put people together and make things faster, have more information available be more transparent in some ways. But it’s also a downside. But it’s also the question I ask is what can you use blockchain for now? What could you use blockchain for potentially in the future? Or actually what will it never be used for? Now I, I’m always skeptical about our own question about what could ever be useful because sometimes you find use of technology completely uninvited at the, at the beginning.

Syed Kamall (MEP Economic Affairs & Trade Committee, European Parliament):00:03:08         

And so, I know I’ve had all sorts of claims. I’ve had people come to me and say, “blockchain will solve poverty forever.” I said, well that’s great. I mean, I’d love that to be true, but tell me how it’s going to do that. And we know that clearly, it’s going to be disruptive in many ways or useful if you think about a permission blockchains and private blockchains. If you think about, you know, I’m quite a classical liberal strip libertarian. I know lots of libertarians are very excited that we’re taking series, taking stuff away from central banks and, and take and, and, and, and decentralizing life. You know, we’ll have as a Saint actually no, be very careful with the financial institutions are just going to control everything even more. Actually, that’s a political debate widen that the question I want to ask today or I’m hoping to hear from the rest of the panels here is yes, we understand it could make processing much easier.

Syed Kamall (MEP Economic Affairs & Trade Committee, European Parliament):00:03:57         

It can make the data much more transparent. You know, and actually that in itself is a good thing, but what can it really do now to make things more efficient and reduce transaction costs? What could it do in the future and actually where is the high pear and what the things that we have to be careful about. I’ll just end as legislators, I’m quite relaxed about technology. I think what you should just do is steps to get there, get the hell out of the way and it technology develop. But what happens when something goes wrong? Because once something goes wrong, people come to us as politicians and expect us to have an answer. It’s not very easy for me to say, well actually you should have been careful. They’re all, you know, buyer beware or caveat or that’s your own fault. Or actually you’re pretty stupid. I can’t say that. So constituents, no, actually that they want to know what happens when something goes wrong. And so what should we be looking out for as well? I’ll stop there. I’m very positive about all these developments. I love technology for excited about some of the positive stories I hear and some of the ones you’re going to hear today. But I also want to get the right balance here. Thank you.

Theo Moore (Deputy Managing Director, APCO Worldwide):00:05:05   

Thank you very much indeed. I suppose if your viewers to get the hell out of the way of technology on one might argue that perhaps Mr. Kerstin’s and the commission might be stepping into the path for technology occasionally. So over to you. 

Peter Kerstens (Senior Advisor to Director General, European Commission):00:05:16

Well, I’m not certain about that. We want to be very deliberate and very careful about it and, and take our time, do no harm. I’m very pleased to be on this panel on market infrastructures because if you talk about blockchain and crypto assets, cryptocurrencies and swarm, not in this room, but generally in the policy community opinions on crypto assets, cryptocurrencies are very divided. A lot of people are extremely skeptical about all these tokens as well, but there seems to be an almost universal support for the fact that while people have doubts about his tokens, they all say, but the underlying technology is very promising and very powerful and we should explore this underlying technology and say, yeah, that’s probably true.

Peter Kerstens (Senior Advisor to Director General, European Commission):00:06:16    

And in particular, if you would then apply this for example, to financial market infrastructures low, there is of course a contradiction in the sense that everyone seems to be in favor of blockchains, but lots of people have doubts about crypto assets. But of course they go hand in hand because there is no blockchain without a crypto assets. There may be a distributed ledger without a crypto asset, which has no blockchain without a crypto assets. So if you’re in favor of one, you must be open or open minded about the other, at least anyway. If you look into financial market infrastructures, what really are they, and I mean no offense to any of them because they’re quite sophisticated infrastructures, but in essence they really are exercises in account and record keeping. That’s really what it is. It’s not more than that. Now, what is blockchain?

Peter Kerstens (Senior Advisor to Director General, European Commission):00:07:09    

What is distribute ledgers? It’s an accounting system. We is a record keeping system in a distributed way. There’s some cryptography attached to it, but it’s not more than that. Now. the financial market infrastructures, as you say, the most important financial institutions in our system, no one has ever heard of. They do this record keeping these interconnections in the system the account keeping in a centralized way. It is in a centralized way because that’s how our financial system is set up, but also because that’s what our financial regulation requires. And as a result of the financial crisis, this has been strengthened. We’ve seen requirements on central clearing, stronger requirements with central clearing requirements on central trade repositories. Requirements are central security depositories. So basically all of these activities, all of these account keeping has to be centralized. And then the regulation starts focusing on these centralized players.

Peter Kerstens (Senior Advisor to Director General, European Commission):00:08:18    

Now this system works, but it has some downsides. So the system works and financial regulation really is at its essence and exercise in centralization. And creating a franchise around that, that centralization. But it has some downsides. The downsides as a result of the centralization, our potential inefficiencies between the various players, the constant need to reconcile accounts between the, the central accounts and the people using these accounts. The possibility of vertical silos, concentration risks. So there are a number of downsides to this system. That doesn’t mean that the system doesn’t operate. It operates actually pretty well, but you have to recognize and these, these downsides. And the question is, does distributed ledger technology and block chains now or in the future as the technology developed, does this provide an answer to these downsides without creating other downsides? And if it does provide an ounce an answer to, to addressing these downsides maybe there’s a great future for this. Personally, I think there is, but that’s my personal view on it because if you think about it, financial market infrastructures, they cater to many people that need to have a common view of the same truth for assets that have many life. What’s called many life cycle events.

Peter Kerstens (Senior Advisor to Director General, European Commission):00:09:57    

That’s really what financial market infrastructures do. So if you can do that work in a distributed database record keeping system, that’s potentially a very powerful way of using the technology. And so we see a lot of financial market infrastructures and they’re actually quite to minded about this technology. On the one hand, they see this as a great opportunity to make themselves much more efficient or even more efficient than they are already because they’re already pretty efficient but even more efficient and to shorten settlement times and what have you, reduced costs, all kinds of good things. And so they’re trying to, in a way, I think it’s fair to say to co-ops the technology and to sometimes even try to dominate the standard setting bodies so that they control the technology for their own marginal efficiency gain. And that’s good.

Peter Kerstens (Senior Advisor to Director General, European Commission):00:10:58    

I have no problem with that. But some of these marketing plans factors also see the technology as an existential trip because they realize that what they’re doing fantastic as it may be, isn’t rocket science. Some of it looks like rocket science, but it’s not really, and that there are other ways of doing it and a blockchain based system could do it and someone else might be able to do it. And that is force something. Differential market infrastructures are not looking forward to a, that are being displaced. Now are the regulators looking forward to the financial market infrastructures being disrupted or displaced? I’m going to take the fifth on this. I say we are, we have various perspectives on this and the European commission. Like I say, we’re fairly schizophrenia body. We have many, many objectives. Of course, from stability point of view, we’ve required decentralization, or we want this to be kept because we believe it’s better to centralize these activities in certain institutions and then to control these institutions and to regulate them strictly for their risk.

Peter Kerstens (Senior Advisor to Director General, European Commission):00:12:07    

So, from that perspective, we do not really want this disruption. We think that this has to be done in centralized institutions. However, we do realize that the centralization creates vertical silos or contributes to vertical silos, which is bad for competition. And we want more competition. So from that perspective we say, well it may be good if this is disrupt. So at like to sort of sum up on this is that we are a bit conflicted into our perspective on, on this, but that’s not necessarily a problem at this stage because the technology to answer the question that technology is not yet ripe enough to realize this disruption that may happen at some stage at this very day. It is in my view, impossible to replace the big market infrastructures with a DLT based blockchain based system at this days. The capacity, the resilience, the performance of the systems just isn’t there. But I’m pretty certain that as time evolves and the technology evolves, that a moment will be reached. Where does technology we’ll be strong enough to displace these infrastructures. The question that will be, do we want this?

Theo Moore (Deputy Managing Director, APCO Worldwide):00:13:27   

Thank you very much and a powerful question answer to sides. An initial question. What can be done now? And I’m probably not alone in thinking that cognitive dissonance is a, is a worrying thought inside the commission. But let’s turn to two Mark question is what you’re doing rocket science. How do you view blockchain in this context?

Mark Wetjen (Global Head of Public Policy, DTCC):00:13:54     

Peter and I go back. So his veiled insults don’t bother me so much. Nice to see you Peter. Mark, we joined DTCC. I head up the company’s global public policy function and sit on the board of DRVSR, which is a subsidiary that operates the trade information warehouse business. And that is a business that’s being replatformed as we speak on a DLT platform. And I’ll talk about that in just a moment. The other thing I just mentioned about my background is I also sit on the board of ledger X, which is the first federally licensed training venue and clearing house in the U S that is devoted exclusively to Bitcoin derivatives. So unlike a lot of other trading platforms out there, as I said, what’s what is unique about ledger X. And of course, it’s not unique so much anymore since other players have come into this space.

Mark Wetjen (Global Head of Public Policy, DTCC):00:14:59     

But what was unique, it was the first to be licensed to do what they do. And be totally devoted to a Bitcoin derivatives. So that’s been an interesting perspective. I’ve had to just to see how they’ve gone through this journey of getting licensed and dealing with some of these interesting policy questions that have arisen as a result of the Saudi instruments that they deal with. Your question though is, is what we do rocket science. It was right. It’s, no, it’s not rocket science. It’s not, it’s not terribly complex. At the end of the day. I think there is a fair amount of complexity in the market practices. And so if you look at what D T we do a variety of different things. One of them is we, we provide clearing and settlement services in the US so we have two clearing houses and then one central securities depository.

Mark Wetjen (Global Head of Public Policy, DTCC):00:15:53     

And certainly, the CSD is basically a record keeper. It does not too much more than that. There’s some asset servicing that had also performs, but, but that’s layered on top of the core function of the CSD. The CCPs, they, and they’re involved in the provisioning of guarantees. And also the netting of transactions. And so, there’s a little bit of complexity there, but in the grand scheme of things it’s not, it’s not the most complicated set of services in the world. I’ll talk just a little bit about the trade information warehouse because it’s even more basic in some ways then the clearing and settlement services. And as I said, that’s, that’s a business that’s undergoing this pro, this DLT project replatform it at the moment. So, this effort is actually in the user acceptance testing phase.

Mark Wetjen (Global Head of Public Policy, DTCC):00:16:43     

So, it’s significant because it means we actually have our customers now testing this new environment trying to determine bugs and, and work through those. And the plan is to go live sometime in the earlier part of 2019. So as far as we know, this would be the first enterprise market-wide DLT application that goes into effect on a global basis. And I can, there’s a number of things to share about this experience, but I thought what I would do is just maybe spend a couple of minutes talking about some of the key lessons learned. One of the things that’s been discovered, and again, when you explained in this way in retrospect, it doesn’t seem like such a major discovery, but data transformation is a real issue. So, if the technology provider insists on the data coming in in a particular format, but the marketplace is accustomed to keeping the data in an entirely different format that requires that the service in this case has to transform that data into a new format.

Mark Wetjen (Global Head of Public Policy, DTCC):00:18:00     

Whenever that happens, you obviously introduce a level of complexity into the business that leads to the opportunity for error and therefore additional costs potentially for the customer. So that’s, that’s been one thing that was discovered. I would say the hard way. Another thing that’s been touched on in the previous panel relates to these different legal requirements, whether they come from GDPR or some of the more basic records and books and records requirements that a lot of financial firms have around the world. And the real issue here is again, reconciling the fact that you have a database that for the most part is designed to be an immutable, but yeah, these legal requirements that actually require changes to the database. In the case of books and records, it’s kind of interesting because whether there’s a conflict I described depends on whether or not there’s a view that the data that sits on the blockchain really should be properly viewed as part of the books and records of an individual firm.

Mark Wetjen (Global Head of Public Policy, DTCC):00:19:05     

I’d be interested in to see or hear what Peter has to say about that issue. But as a former regulator, I would imagine that most regulators would view or take the view that in fact those or that information, that data on a blockchain is part of the firm’s books and records. I would guess that’s how most supervisors around the world will look at it. One of the advantages of doing this replatforming a with just the trade information warehouse business, however, is that it’s not a regulated business, so that actually makes this a little bit complex but nonetheless still raises the two issues I mentioned GDPR and books and records. Another issue that has come up is the processing that the TIW service does, and this relates to credit events affecting the referenced securities as well as the provision and of payments and settlement of payments.

Mark Wetjen (Global Head of Public Policy, DTCC):00:20:03     

If that is being done by a software that is the subject of intellectual property, then the question comes whether or not users of the service who are availing themselves of this processing on the ledger Oh, some kind of royalty to the provider of the software. And one way to address that challenge is to take that processing off ledger and do it separately. But of course if you do that, it’s a bit like the data transformation issue. You’re, you’re introducing additional complexity which could lead to, again, more errors and more costs. 

Mark Wetjen (Global Head of Public Policy, DTCC):00:20:49     

And this is the last issue, concerns the hosting of nodes. So if our customers in this TIW business decide to host node a number of other issues are raised and I have to give a shout out to Barclays because Barclays has been involved in the and it’s one of the customers at TIW, but they’ve been heavily in, they sit on our board, but they’ve been heavily involved in this project and they have some very, very talented people that have helped have worked through some of this issue. And, and I remember being in a meeting and someone from bark was actually raised this point I’m about to share with you, which is if again, there are certain things being done on the validator node and it’s hosted by a firm what is it that other market participants are uses of the service should see and what is it that they should not see.

Mark Wetjen (Global Head of Public Policy, DTCC):00:21:38     

And so, again, it really gets down to governance of the nodes. Who makes decisions about that and what kind of potential legal liability could arise depending again on what sort of processing and information is kept on a node that’s hosted by not DTCC as the provider or the owner of the service as a word, but rather a affirm or a customer that actually hosts one of the nodes in the network. So those are just a few issues. And but I think in port once we’ve had to learn and I’m happy to share those with the group here today.

Theo Moore (Deputy Managing Director, APCO Worldwide):00:22:12   

Thank you very much. I mean, I’m tempted to ask Dan from ripple whether what you do is rocket science as it seems to be a nice leading question. But you are a perhaps distinct from where DTCC is, DC’s and established. It’s an incumbent. You’re new, you’re emerging. What’s your take on blockchain in FMI from what you’ve heard so far? 

Dan Morgan (Head of Regulatory Relations, Europe Ripple):00:22:26

Sure. Thanks. First of all, thanks to APCO for putting on a great event today, I’m to get to the organization, so I’m thrilled to be a part of that. So unlike the DTCC ripple is not FMI, not yet. And so I thought it might be helpful to give a run through about who we are and what we do or what we’re trying to do and interesting questions that may bring up in the future around how FMIS and infrastructure will develop.

Dan Morgan (Head of Regulatory Relations, Europe Ripple):00:23:00   

So ultimately ripple is a technology company that tries to remove the friction from cross border payments primarily by using DLT solutions, but also crypto assets. We sell our solutions to financial institutions including banks and payment providers. We’re focused on cross border payments cause they’re hugely inefficient. You know, the costs are expensive. They’re slow. Take three to five days to settle [inaudible] expensive. Primarily because correspondent banking patches together domestic systems which are efficient. And on top of this, the demand is going up at 22 trillion in 2016. Cross border payments to around 30 trillion. The, the way to send it corresponding banking relationships with declining down about 8% annually from 2011 to 2017. So the market is there. And we see the opportunity also my add it costs 10 times more. It’s the money overseas than it does to send a domestic payment in the U S and because of this, obviously the committee for payments and market infrastructure the global standard setting body for payments and clearing as in the Aretha report said there is room for improvement in the infrastructure of a, of payment systems.

Dan Morgan (Head of Regulatory Relations, Europe Ripple):00:24:19   

So, I think that’s that. And under and understatement, we’re going to focus on payment systems and settlement cause obviously FMIS can be central securities, depositories and other parts of the broader, broader infrastructure. So what are we trying to do? We’ve got three products in the market. First of which is, is X current, which is a DLT. And third are, is, is that trapping and XVA, which brings the two together. Payments system today work in a sequential fashion. So banks have relationships with each other. They debit and credit their accounts that they hold with each other through a series of file-based messaging. Obviously this is slow. Can be costly. There’s delays, there’s risks and uncertainty. And there’s huge amount of FX and reconciliation risks involved. And obviously it may work if you’re sending a GVP to USD or Euro to us dollar.

Dan Morgan (Head of Regulatory Relations, Europe Ripple):00:25:09   

But if you don’t have a direct relationship, if you’re going Brazilian router to Philippines pay, so you’re going to go through a whole host of correspondence on the way just going to be extremely costly and time consuming. And actually for many consumers are not possible. So we try and do with, with ex current, which has 200 customers today, including banks and payment providers is linked by direct from a messaging with settlement. May sound simple but most corresponded bankers day use is file based messaging, which is one way. This is more akin to a WhatsApp message rather than a PDF file or the key killer app on, on, on X current is a phatic links to settlement. And you use a technology called Interledger protocol, which has a DLT permission system to do this. And we think of this like the HTTP of the internet of value.

Dan Morgan (Head of Regulatory Relations, Europe Ripple):00:25:58   

It can connect different ledgers in the fact that we have open sourced it and has been used by the Gates foundation today to connect different Melbourne money ledgers. So it can connect Bitcoin to RTGS or a different mobile money ledgers in Africa and it can relay in route payments through different networks. So it’s the interoperability layer, but like a DLT system, there’s no central operator and leveraging cryptography and encryption, but it is a permission network. Well then we start to think, well, what is a payment system or payment system? The sets of instruments and procedures and rules transfer Mons between participants. So ripple is a technology provider but we do actually have a set of rules and governs to ensure that it works in practice. So, the members of ripple net come together to decide what payment finalities disparate resolution, any technical standards or messaging fields and interpretation of them fields and updated through committee as the software updates.

Dan Morgan (Head of Regulatory Relations, Europe Ripple):00:27:00   

So, because there’s no central operator and you think about in the future on payment systems made develop, the network is developed through a set of rules as well as the technical protocol layer. And that was essential to, to make the product viable. And we also developed the system where the, the ledger are all maintained by each financial institution and the permission network because of scalability issues and obviously data privacy concerns whether they’re not comfortable at all with, with using a proof of work blockchain or different systems. So, the system is slightly different, and you think about where we sits in that payment system. Well, we are a data provider, so the KYC and AML stays with the bank that’s unchanged. The data also stays between a financial institution and does not come to Ripple. So, we’re a third-party tech provider.

Dan Morgan (Head of Regulatory Relations, Europe Ripple):00:27:51   

We meet third party vendor requirements, but obviously play a quite important role in fulfilling a payment. We get don’t enough to tessellate touch or transfer funds. So future discussions around payment infrastructure it could be potentially developing this space, but ex current today you still need to pre-fund overseas. There are two, 5 trillion to 10. And depending on McKinsey report, your read out, I can’t believe which one’s Ryan. There was a lot of, a lot of money that trapped up in nostril of Ostrow accounts overseas. And that’s how payment systems work. You still need to do that with, with X current. So our second product X rapid, which is commercially available but not lie. So, we hold our hands up. And the one there’s reasons for that we’ll touch on is regulatory uncertainty around digital assets. So at trap it does, is trying to replace the need to pre-fund by sourcing for liquidity domestically through a digital asset.

Dan Morgan (Head of Regulatory Relations, Europe Ripple):00:28:47   

You may say, how exactly does it, does it do that? Okay, well what we’ll try and develop that a little bit further. We leverage different institutions and you were doing is typical payment system. Typically, digital asset exchanges or platforms, a financial institution, a payment provider typically would connect through an API to, to digital asset exchanges at the local exchange would exchange fear, domestic fear for, in our case XRP or digital asset. There will be a movement of XRP across the ledger and that will exchange fit XRP for FIA in the beneficiary market. The final leg of that payment could then be over the domestic rails or they could have a direct account with the exchange. So there’s been two domestic payments on one movement of XRP removing the need to pre-fund overseas. And particularly typically if you’re going to go through exotic corridors, low volume corridors, whether there isn’t pre-funding expensive to do, so they typically won’t have the relationships.

Dan Morgan (Head of Regulatory Relations, Europe Ripple):00:29:46   

That’s the type of market that we’re targeting so far. So, places like Philippines where we’ve got some pre-production contracts. So key benefits obviously reduces costs by around 40 to 70% in trials that were run in 2016. It’s obviously a lot faster, instantaneous at links, payments to settlement, and it can expand reach to, to markets which are currently difficult to, to access. So what does this mean for a modern FMI? Well, the financial markets and Demetrius grew up around the same time as dematerialization where bilateral relationships were no longer efficient. So obviously we’re conducting new activities with new assets. So not necessarily typically replicate what we’re doing, but I do think in some respects we do have to replicate some of the, and if we look around the world, we’re starting to see that the G 20 is identified a whole host of intermediate.

Dan Morgan (Head of Regulatory Relations, Europe Ripple):00:30:38   

They’re starting to look at I ASCO is looking at exchanges. Fsps looking systemically. And Basel again, is looking at from a Prudential point of view. So for ripple it’s a similar view. We think it’s kit T that classification of the digital asset is essential from a legal framework. Obviously many people will see what’s going on in the U S but globally thinking for instance in Switzerland where they’ll identify only through guidance or digital assets are, this has provided much needed certainty to interact and potentially utilize that asset in the on and off ramps for fit a are going to be really important part of the financial market infrastructure in the future, including things like consumer protection AML, which is obviously going to come in through the fifth. Anyone a laundering directive here in Europe and, but obviously in the future, safety and soundness message, Capitol cybersecurity and a separation of, of clearing and settlement is going to be key.

Dan Morgan (Head of Regulatory Relations, Europe Ripple):00:31:32   

I think also important in the financial system is around how institutions interact with it. So, from a potential or capital perspective at the moment, digital assets, no matter what regulator perspective, they are classified as other assets. So I think it’s important to, to really try and understand what we’re dealing with here, provide some certainty around them, particular assets. So that’s me. We’re not a FMLA at the moment. We’re reasonably small. I think we raised a few questions about what the future might be. 

Theo Moore (Deputy Managing Director, APCO Worldwide):00:32:04

Thank you very much indeed. And obviously a lot of different assets there, but for every different approach to something like digital asset, there are different perspectives on things. And I think Maya will give us a, another perspective on what we’ve heard so far from the various people both in the regulatory and on the sort of FMR and not quite FMI stage.

Maya Zehavi (CEO/Founder, Ontici):00:32:24   

I’ve had the privilege of seeing the space of all where just the fact that we’re all sitting here in within the EU parliament discussing different a taxonomy about crypto assets, incentive systems and standardization is real. But having spent a few years in private blockchain projects, I think we were at this point where we need to understand that we went through the first iteration and yes, probably blockchain at this point in time is not a credible solution for a lot, but the second generation is where more of these worlds and crypto and blockchain financial markets and identity and in other purposes are actually going to collide. And the reason for that art efficiencies in financial markets, but also and here I’m going to kind of, I think of the word complexity that has been referred to earlier as anonymous with intermediaries. And one of the major breakthroughs that blockchain had promised or consensus systems in general was the, was having one golden source and not having to trust a third party in order to interact.

Maya Zehavi (CEO/Founder, Ontici):00:33:35   

And as we’ve matured more as a market, we realized that’s not something that is probably feasible on a global scale, on a national scale for financial assets in general because you always a, you need an intermediary because you want someone else to Sue. If something goes wrong, you want someone else to complain to. And you need to know who do you trust, who you don’t try to tell you who not to trust. Right. and we see that the state of financial market infrastructure in the world, the fee at world and in markets in general is also at a pivot point where it might actually diverge. We see some people in Europe start talking about a new financial Solomon system. We see China taking its own path in terms of wanting access to all data. So that makes me in, in when we’re looking at security tokens, we’re looking back and trying to understand what the progress that we’ve made as an industry with the financial markets DTCC, back and so forth.

Maya Zehavi (CEO/Founder, Ontici):00:34:38   

And we can see that in the beginning blockchain was the huge promise that was going to save everything. And then people start experiment and they realize that they can’t put all their data on a blockchain because they don’t want everyone to see it. Consensus is only achieved if the blockchain serves as a transparency machine. And then the second iteration was that people started not putting the data on the blockchain, but just tokenizing or creating crypto assets that can be referee referred to other pieces of information. And then they just timestamped whatever transaction happened onto that blockchain. So the information, the data is off chain, the computation is done off chain and the blockchain is only used to change tokens or assets or and time stamp, different information that’s uploaded that gets us to the point where this efficiency that we were promised doesn’t come through.

Maya Zehavi (CEO/Founder, Ontici):00:35:34   

We’re not using the blockchain for PDP transactions, right? Cause we’re doing everything off tape. We’re not, we can’t even verify or validate data. We’re going to need another blockchain for that. And that introduces more and more levels of complexity and hierarchy. And we’ve seen that lesson being learned in the ICO space these days where they’re basically relearning a thousand years of financial history and rebuilding the same kind of financial hierarchies that are needed in order to have inefficient regulated market that doesn’t get the sec on your back. Now that doesn’t mean that there isn’t a promise. The second generation is of what I think we’re going to see as crypto assets is a going to be very distinctive from what we’ve seen as cryptocurrencies. Crypto assets being assets digitally represented issued and traded and reaching their entire life cycle on chain, including corporate governance and everything that ensues with that.

Maya Zehavi (CEO/Founder, Ontici):00:36:28   

And the other hand you’re going to see cryptocurrencies, those are tokens that are used, incentivize, networked, and we had a really good question in the last panel that I thought it should be questioned to every single private blockchain project that is in works. How do you incentivize people, new people to come in and join and basically support that network? How do you incentivize people to validate the data that is unloaded? There is such a thing of an incentive system on a distributed ledger. It’s called the token economy. It’s called mining value of validation rewards. And what we’re going to see in the second generations are going to in, especially in terms of financial market infrastructure, right, is a convergence of those two economic schemes of regulation, financial markets, auditing and compliance demands along with the incentive system of token economics. Now a lot of it has been referred to the fact that a lot of financial market infrastructure, FMI players basically all they do as account setting.

Maya Zehavi (CEO/Founder, Ontici):00:37:27   

But a lot of what we need in compliance and auditing and report for securities that are issued are usually GAF reports, quarterly reports. And we can also achieve that with some cryptographic tools. And that’s really what we’re working on is usually privacy preserve preserving technology for more than just privacy. But having privacy compute with those tools. For example, have the regulators set the rules and prove that you set those rules, have the reporting being done by private computation and then just validated and verified via the blockchain. Now we have to understand that what we’ve already proven, and maybe it’s not something that we should be talking about, but product market fit for new security asset class somewhere between private markets and public markets has been validated in the ICO rush and it shouldn’t be so easily dismissed. Even if there were a lot of bad players, what we’re going to see is a lot of the new security fundraising that is on public blockchain started here to FMI rules with everything that that, that auditing compliance, KYC AML, those are going to be the first real tangible uses of digital identity before I’d ask goes into effect because people are going to need to verify that information on chain.

Maya Zehavi (CEO/Founder, Ontici):00:38:47   

They’re going to need to verify jurisdictions for their investors on chain. And we’re going to need to also start thinking of securities as something that is editable and composable and not just a digital or presentation for contract that is enforced in one specific jurisdiction. And that also involves the corporate governance throughout that life cycle that could, we could see happen on chain. So right now we’re just dealing very specifically, I think with automation. The next generation is where things are going to get interesting.

Theo Moore (Deputy Managing Director, APCO Worldwide):00:39:20   

Fantastic. Thank you very much indeed. I have a question for site you said in a way that you as a liberal stroked libertarian in some ways I’m guessing you don’t want to be intervening in what, in what’s going on. But what part of my Maya set out seem to be slight dichotomy for you? Either we can let things run or we can seek to incentivize certain behaviors and maybe incentives aren’t per se bad, but they’re definitely a form of intervention. As a policy maker, what do you think about what you’ve heard so far leading from where Maya started?

Syed Kamall (MEP Economic Affairs & Trade Committee, European Parliament):00:39:52         

Sure. Yeah. For those of you who are worried about my views, I should let you know, I’m quite a minority here in the parliament. So there are lots of people who would happily intervene all day long and write more and more legislation. And then we have sequels, just like Hollywood blockbusters, you know, we’re, we’re, I think we’re up to use its five, six, seven or seven, eight. I know diner with anywhere up to five and joking, we worked, we were expecting you six, six or sometimes didn’t happen yet. 

Syed Kamall (MEP Economic Affairs & Trade Committee, European Parliament):00:40:24         

You people come from a kind of ideological background and then you kind of come, then the real-world hits you. That’s what happens with all politicians. So today I was in a meeting of colleagues and we were discussing distributed reserve assets around Europe and we’re talking about disruptive, fun story. And we’re all from different political families, but we reached compromise and because that’s the way, that’s where the, that’s the way this place works. And we found actually it’s good enough to meet my, you either it’s good enough to meet my concerns or to address where I’m coming from. You know, it’s always suboptimal or what you’re saying is actually all your out voted. It’s as simple as that. So, you know, I kind of mock myself a little bit.

Syed Kamall (MEP Economic Affairs & Trade Committee, European Parliament):00:41:13         

There’s kind of no regulation world will never, it does not exist, and it will never exist. But the question someone like me asks is why do we need a speculation? And I think we’ve heard enough from the panel to say, actually there are, there are good reasons why you want, you want this. Sometimes it’s rules, sometimes it’s harmonization, sometimes it’s, sometimes it’s mutual recognition. Other times it’s actually because to make sure that you see, you see a potential problem ahead and you want to make sure that that potential problem doesn’t happen. And that’s why, that’s why we do it. And actually Peter and I are not that much in disagreement. I’m not trying to call you a libertarian here, but Peter dye or not, you know, you know, I’ve been on panels with people as well before and you know, Peter’s not asking to intervene every possible moment. You know, he’s, he’s also prepared to step back and just see how the, how the thing evolves. But actually, to be aware of what could potentially go wrong as well.

Theo Moore (Deputy Managing Director, APCO Worldwide):  00:42:08  

And Peter, you were called out as not necessarily being a libertarian, which is something but what, where do you stand on what we’ve heard from, from Dan and from Mark and from, from Maya. There’s a lot going on. And you talked earlier about sort of a level of initial skepticism, which perhaps you know, has overlaid this technology is amazing and we should use it. What do you think about what Maya said about the next generation and what Dan’s basically saying about the shape of things to come? Imagine if you’re allowed to Belgian based interbank money communication agency like Swift. You might be thinking about what Dan is saying with, with the interest of least, so what, what does it, what does it mean for how you see this? The, the shape of commission approaching regulation.

Peter Kerstens (Senior Advisor to Director General, European Commission):00:42:56    

Swift’s interesting example. We don’t regulate Swift. It’s a communications company. It’s supervised in an ad hoc system by G 10 banks, but it’s example of a global infrastructure, which is not subject to any particular regulatory system. So actually his work quite interesting. If you look at other financial market infrastructures now of technology will develop and we’ll see what happens. But the way the regulation is at this moment in Europe blows in other jurisdictions is that to carry out certain activities, you need to be licensed as such a service provider. So even though, because we’ve established that what financial market infrastructures do is not rocket science. So even if you are an almost rocket scientist, so you can do this, you may not be allowed to do it because unless you are licensed as such institution, now you can debate as to whether that is necessary or not.

Peter Kerstens (Senior Advisor to Director General, European Commission):00:43:54    

But that we had that debate and we’ve introduced, and we strengthened these licenses because these companies conduct business that attracts a lot of [inaudible] technology with a lot of financial risk. And you need to regulate that for stability purposes. So if you are a large firm let’s, let’s go. If you are a large financial institution, large financial market infrastructure in Belgium and you’re not Swift, you’re the other one. Would you, should you be worried about these blockchain developments and then taken over central securities depositories? Oh, probably not. Because in order to be a central securities depository, you need to be licensed as one. And so far these people do not seem to be licensed as a central securities depository. They may become, and our case there is competition and we are always in favor of competition. The more the merrier.

Peter Kerstens (Senior Advisor to Director General, European Commission):00:44:52    

But of course, in order to be licensed as an institution, you need to meet a lot, a lot of requirements. You almost need to look like this financial market infrastructure, which I’m not going to mention. And so the technology as such will not displace this. Question is really, is that, is the regulation as we have it, is that technology neutral enough? So does it allow these new technologies to be introduced either by alternative players or by the incumbents? Can they actually set up a system which is DLT based or does the regulation either implicitly or explicitly required them to do it in a particular way, which is different if that is. So that is probably something we would want to adapt because we do not think that our regulation should hold back technological development. Certainly not if that technological development is an improvement and efficiency and improve and a performance improvement, but the technology evolves quickly, but not as that quickly that we’re at the stage that we need to decide now because this technology is ready, and it can be implemented.

Peter Kerstens (Senior Advisor to Director General, European Commission):00:46:12    

First of all, it’s not ready. It’s not, it doesn’t have the stability and the scale yet. And even those elements where you can see interesting proof of course, of where it is ready. That doesn’t mean that the switching costs you’ll incur from going from one technology to the other are justified because it may be great technology, it may solve for some of the problems you have, but switching from one to the other may just be prohibitively expensive and you still don’t do it. And of course this allows us to look into these technologies really and in the business models that revolve around them and see what it is they really bring. Do they really bring these efficiencies and do they cater and solve for the problems which we have identified? And if they really do, I don’t think that the regulators will hesitate and try and try to seize opportunities.

Peter Kerstens (Senior Advisor to Director General, European Commission):00:47:05    

Because of course we are constantly looking at efficiency of our financial system and try to make it more efficient. We are not ones that won’t long settlement times. We want to reduce settlement times and we then get control where we want to reduce them. But people say, well, but don’t settle that quickly because of course if you want to settle very quickly, I need to have the cash to pay for that. I don’t have the cash. So it’s actually quite okay to have slow settles in the systems. So, everyone comes at this with a different perspective and a different interest.

Theo Moore (Deputy Managing Director, APCO Worldwide):  00:47:33

Change it. So long as it doesn’t affect me too bad. Maya, you wanted to say something based on what Peter said.

Maya Zehavi (CEO/Founder, Ontici):00:47:44   

Well, we were waiting for a private blocking fleet, a caucus to evolve and leave you a few theories in the market that have evolved. I’m not going to probably could be better regulated in the idea of indicative activity that have kind of pain and this position, what the role of broker dealer like and he likes [inaudible] and so forth. And the question right now that, that is happening as we’re talking is a lot of these new Afropop if you call them whatever you want, but essentially you bear your [inaudible] that were issued on a page in our previous and have a futures markets and rebutted markets in cut. The markets are now starting to get integrated into wall street. It was accurate as if he had knee [inaudible] email. Now we’re going to be different big one back in a year in back the clarity happening in ninth on out.

Maya Zehavi (CEO/Founder, Ontici):00:48:37   

So, what we had with the wild West of ICO has happened in the last year, 18 months ago. And then we had different E O E that often has to be on the sidelines of the company by the incumbent paperwork by doing something. And now as you can Rover Convergys back I think is a fascinating case study in that because what right now it might be a while things happen, cryptocurrencies yet much more attractive than any other popular athletes. Now the reason that people really like you got to be able to did it with it easier for them as a project or as a confident you get cheaper funding without all the intermediaries in public market up offering. And we can see that with we’re looking for, you can be here. I believe that the public market has become less efficient.

Maya Zehavi (CEO/Founder, Ontici):00:49:34   

They’re much more concentrated and the, the companies that are references there are bigger in the left third of the year, the public market and have 30% less companies registers it. That means that if you’re a startup, if you’re a company and you want the financing and the interest rates are going to go up, you might be better off looking for an offering on a blocking product than anywhere up. I know. Really believe me because I don’t want to be right. Then you want to understand how we work together, but the seven of them are okay because I probably waited it out, but basically need to understand is not that the regulatory clarity, but how do all these worlds kind of live together.       

Maya Zehavi (CEO/Founder, Ontici):00:50:09   

The opening of the market is the wealthy. Back then they had interview hype application. We’re going to be right back into your rebutted. The landscape and the vehicle theory go deal. Cryptocurrencies all converged together along with an Apple. The market intersected. A lot of them raise the frenzy,

Maya Zehavi (CEO/Founder, Ontici):00:50:35   

Right? You have decentralized exchanges. It’s that broker dealer. How do you define them if you’re a relayer, I’m one of these networks. 

Theo Moore (Deputy Managing Director, APCO Worldwide):  00:50:43  

Let me, let me before, before we get into the inquisition on the panel and I’m going to open up to the questions from the floor shortly. Is we have this interesting sort of interesting positioning here. So here we have DTCC over their rebel. And we’ve, we’ve talked briefly about Swift, but the question to Mark and Dan is, does the future hold something that, that is this transformational moment where incumbents and revolutionaries meet in the middle and people turn to old models where somehow blockchain becomes just another form of intermediary or more clever into majoring but focused down in some way. If you are transferring stuff that you weren’t doing onto blockchain, does that become something that someone else could more easily replicate and you lose your, your USP? And from, from ripples point of view, what is to stop, you know, you in a few years’ time becoming as it were, a new Swift facing whatever challenges fist Swift is facing, whether it’s Iran, North Korea or other issues. So, a question for you, Mark, and for Dan, whichever one wants to go first.

Mark Wetjen (Global Head of Public Policy, DTCC):00:51:44     

The question of whether the revolutionaries come together with the incumbents. I think we’ve already seen that. So the, the, the vendor provider for the tech technology that we’re using for this replatforming project I described, that’s, that’s a, that’s a startup software vendors. So they’re not necessarily looking to disrupt DTCC, which is to say they’re not looking to become licensed themselves to provide the services that we do as far as I know. Nonetheless. Yeah. But nonetheless there’s a, there’s a willingness to partner with a company like ours on their part and joined forces in that way. So I think we’re already seeing that. In fact, I think that was a lot of the story of last year. When we saw previously designs to try to displace, I think last year as much more about efforts to try and partner with incumbents in the part of some of these firms that previously had been, I think looking or more interested had been more interested in replacing.

Dan Morgan (Head of Regulatory Relations, Europe Ripple):00:52:49   

Yeah. Obviously I think it’s a middle ground for ripple. We obviously our view is to create the internet value and the centers of value of financial centers that the banks so there were main, usually important, at least for the foreseeable future of C regulation is either activity or process-based or intermediary based and both may evolve all the time. And I think we’re seeing that process now, which is happening at the standard setting bodies level, which is evaluating how, how both are evolving and new players and what their role may be and new processes and what their role may be. And as may I said earlier on me, we are really learning thousand years of financial history and some elements, but there are some new parts as well, which will probably involve a closer inspection around elements of decentralization and other pieces which are a bit more tricky in the current process in how we, how we regulate. So, you know, pretty political amateur and the fact that we are there, the current system isn’t going anywhere, but it’s evolving in both intermediaries and, and processes and, and slowly but surely, I think we’re slowly getting there.

Mark Wetjen (Global Head of Public Policy, DTCC):00:53:52     

Peter made reference to this, providers like DTCC and I’m sure it’s true of the European firms as well, are not necessarily held back because of technology when it comes to the period of time it takes to settle a transaction or at least a securities transaction. Just to make clear for the audience, the, those who want to settle virtually instantaneously in the U S and clear their transactions through DTCC, they can do that today. The issue is what Peter also said, which is none of your firm wants to do that. So that’s not an issue of technology whatsoever. In fact, the, the clearing services that we offer, I would argue are very, very, very efficient. We’re talking fractions of pennies to clear transactions. And as I said, ones that can be cleared nearly instantaneously. So, it’s not really a technology issue in that respect.

Mark Wetjen (Global Head of Public Policy, DTCC):00:54:44     

I think it’s more the issue of what Maya described. The complexity really comes from the number of players involved in the ecosystem. But it goes back to another point made previously by a panelist. I don’t know that we’re ever going to do away with that. And never saw that because at that really to me, I think is largely a policy consideration. And if, if policymakers, because of the public insists that there’d be trusted entities there’s always going to be intermediaries and there’s always going to be as a consequence of kind of complexity that this technology and a lot of ways is trying to try and get around.

Theo Moore (Deputy Managing Director, APCO Worldwide):  00:55:23  

Thank you very much. So what I’d like to is to see whether anyone would like to take a stab at a first question to the panel. I do have a question up my own sleeve obviously, but there’s a lot. Ah, if you could introduce yourself and a question rather than a theological statement. Thank you.

Speaker 1: 00:55:39      

Sure. My name is Peter. I’m an entrepreneur in the blockchain space. Mark is a question for you because you said it’s a policy that has some intermediaries in, in involved. I remember when I used to work on the floor on the board of trade, there were a lot of middlemen from phone clerks to brokers and that made it more efficient to be a screen trading. So, you see it in that way, the heading the same way down the line doing this kind of work?

Mark Wetjen (Global Head of Public Policy, DTCC):00:56:18     

Ask the question again though. So, you’re talking specifically about settlement?

Speaker 1:00:56:26

Correct. You said the always middlemen need to be in between with the settlement. Then I just saying that same kind of middleman, a lot of middlemen in them in the floor who are doing other people business because they want to have some kind of a person in between who they can yell at when they make their mistakes.

Mark Wetjen (Global Head of Public Policy, DTCC):00:57:01

What she just mentioned as it relates to as it relates to settlement. You know, I think, I think obviously at the end of the day there’s always going to be some entity, whether it’s a company or, or a consortium or what have you. That is actually the one providing the governance around a particular blockchain that is also providing settlement services if it, if it were to come to that. And I also think that at least in the U S and again, as a former regulator myself, having some understanding of how supervisors look at these things they’re going to look at the activity and they’re going to decide whether or not simply because of the use of a different technology, whether or not those responsibilities that normally apply should, should not apply in a particular case.

Mark Wetjen (Global Head of Public Policy, DTCC):00:57:29     

And I just don’t see that happening. Just to share another anecdote about this. I get these calls every now and again from entrepreneurs in the U S and they just want some informal advice about how the CFTC might look at one thing or another. Having served there before and, and recently the theme is really around decentralization. If you have more and more decentralization of the protocols and actually execute trades, will the agency nonetheless still view that platform, let’s call it as an entity that has to be registered, whether it be as a swap execution facility or designated contract market, what are the cases? And my informed informal advice to them is yes, they will. Yes, they will. I don’t think it matters that it’s decentralized. It’s an activity that’s being performed and, and there’s some level of, I’m not sure the right word, but I self-identification of an entity or consortium that’s providing that service to the marketplace.

Mark Wetjen (Global Head of Public Policy, DTCC):00:58:38     

So that’s been the most recent flavor of it. But yeah, I think another example, and then I’ll shut up. Custody I think is really fascinating and you know, what’s happening now, and I can’t speak for ice or its new platform back, but it would seem that they’re pursuing something along these lines as well. The, if you involve a clearing house in these derivatives transactions that are referencing Bitcoin that physically settle and the, and the contracts physically settle, the clearinghouse is going to take in the cryptocurrency. And that’s, that’s the way ledger X does it too. And that’s being allowed for now. But the question is, does, will all clearing houses going forward want to be the custodians of all that cryptocurrency? And the question there would be, you have a huge target on your back, right? And it’s considerations like that, that doesn’t tell the whole story that gave rise to various custodial requirements, not just in the derivatives markets, but in the securities markets.

Mark Wetjen (Global Head of Public Policy, DTCC):00:59:50     

There’s a view that some of these assets needed to be placed in a third party because he wanted some separation between the custodian is actually holding the assets and that and the asset manager, let’s say, who, who’s trading on behalf of a customer. So I don’t think that’s a, that’s another issue. I don’t see that going away. I think policymakers are always going to see that there’s some value in having that type of separation to come should, it might come in a different form through verification, let’s say instead of ownership but, or physical ownership. But you get the idea.

Theo Moore (Deputy Managing Director, APCO Worldwide): 01:00:26  

I have a question which is based a little bit of what you were just talking about when you talked about concentration of custody and trust has been mentioned in relation to the blockchain repeatedly. The concomitant, the opposite part for trust is, is risk. And we have talked in other sessions about concentration of risk occurring through, through blockchain in light of this sort of need for trust and this realization that risk will accumulate in certain places. What is the thing that each of you thinks might derail the positive progress of, of blockchain? Is it going to be a, a, a risk event as it were or is it going to be a failure of trust or is it potentially something else that could take what you all I think broadly think is going to be a positive direction travel and make it go slightly sideways. I’m just asking you to put on your darker spectacles and look into the future in a more negative way than perhaps we’ve done in the last few minutes. Dan, did we start with you and then move down? 

Dan Morgan (Head of Regulatory Relations, Europe Ripple):01:01:25   

I suppose the biggest barrier to adoption, particularly around crypto assets are regulation, regulatory certainty in the moment. There’s clearly a case to be made or a number of use cases. But at the moment we’re in a bit of a chicken and egg cycle where particularly financial institutions who are ultimately the buck stops with the financial system, whether they’re just providing banking services for a payment provider that may want to use a service, unless they’re totally comfortable with how to define their exposure to what there’s going to be particular issues around adoption. And again, as a repeat around potential capital requirements as well as conduct and some of the institutions like exchanges and how they’re regulated at the moment. So, I think the immaturity of the market so far and the regulatory uncertainty is a barrier to adoption, particularly in the space that we’re in.  

Theo Moore (Deputy Managing Director, APCO Worldwide):01:02:19   

Let me ask the question though, just if, if you do get a level of certainty, you Are sort of brought more into the heart of the market. Is there not a risk a little bit, as Maya said, that you start getting sucked into some creative packaging out of wall street and in rather than mortgages causing the end of civilization, it will be a crypto asset that is underlying that somehow suddenly evaporates and causes disaster.

Dan Morgan (Head of Regulatory Relations, Europe Ripple):01:02:43

Clearly that’s not Ripples view and I don’t have a crystal ball at the market so far is very small in terms of financial assets. And I think being unregulated is probably not the way to prevent issues around that. Of course, it didn’t work with in 2008, but having more oversight and accountability will probably be helpful assessing any market risks. 

Peter Kerstens (Senior Advisor to Director General, European Commission):01:03:06    

Well, I think you have to make a big distinction between the spot market or the underlying market, which is still relatively small. Well, it was bigger that it’s smaller again, in terms of at least Mark market capitalization. But we’ve moved from an area where it was too small to care, which was too small to Mo to notice. Too big to ignore. And sort of when we’re in that space now you asked, well how can trust be undermined and say, well, we’ll be a risk event or a trust event. I think it be a risk event that will undermine the trust. We’ve seen certain risk events like in the Dow, but we’ve seen some of the hacks at the, at the exchanges, which turn out to be the result of poor governance and poor implementation.

Peter Kerstens (Senior Advisor to Director General, European Commission):01:03:56    

It wasn’t anything wrong with the blockchain and search. It was people that were ran running exchanges or platforms or brokerage firms that weren’t really behaving in a way you normally operate such activities and separate assets out as Wong. But to come back to sort of the risks, you’ve got the underlying spot market, which is relatively small, but the potential to explode this market to derivatives is enormous. And I’ve used the term aware that some people see the spot market as financial alchemy. I don’t really think it is, but some of the derivatives that may be developed around it certainly will be financial alchemy. And there you can sort of see potentially replication of what we seen in the credit crisis where you had not even that small of an underlying credit market supporting a fast derivatives market and changes in the underlying grid market really completely exploding the superstructure of this market.

Peter Kerstens (Senior Advisor to Director General, European Commission):01:05:04    

Imagine you have a fairly narrow spot market of crypto assets and a huge market of derivatives build on top of that. That could be a recipe for disaster. If, if, if you’re not careful now derivatives, I think there’s little debate among regulators that derivatives, whether they’re referencing crypto assets or something else or financial instruments and they’re regulated as financial instruments. The real question is about the spot market is the spot market regulators, the underlying market. And there are other asset class markets that are not really regulated spot. Many Spock markets in commodities are not regulated or at least not from a financial services perspective. Yet they are far, far greater than a glass of market. The foreign exchange market is essentially unregulated. So people say, well, and these markets strive, they work. So why do these markets not need regulation and descript to ask them market, which really is a fraction of it does need regulation? I don’t know the answer to the question. I’ve just observed this.

Theo Moore (Deputy Managing Director, APCO Worldwide):01:06:09   

I mean, one could argue that people have been watching entirely too many dystopian futures where technology is the cause of disaster, whereas Forex is too mysterious for people to truly understand and worry about. Maya and leaving aside my silly summary, but where do you think you might go slightly sideways?

Maya Zehavi (CEO/Founder, Ontici):01:06:29   

A bad fit if you’re a low road? When did the cryptic rather than spotlighting rabidly that we’ve seen so far and I think a lot of people got hurt in the lab with money. A lot of retail if you’ve known about her. Yeah. I mean I’ll kind of dip their toes and try out the water. And I think the biggest I don’t know the threat that we’re going to build something and there was some come here that the willingness of the people to try to get presence. You’re going to hit copy in the Philippines just to validate your identity, you know, different. I think along long economical haul and trust is attacked in the service providers in in the infrastructure and it could have this fear of them at least for another year and a half, not one day. The other thing is regulatory clarity.

Maya Zehavi (CEO/Founder, Ontici):01:07:29   

And again, you’re all going to have to be by the, by for the thought market that people who are treating, whether at fit point, point days, if theory of in blue, all three providers are going to tap into that and feel where people who are going to use this path. You can’t have even a problem of eat something that you would be accessible to everyone. If we want this to be successful, we’re going to be talking about oil or identity or just the bottom market. Settle in the native currency on the blockchain. That means they’re going to have their own flat margin, whether or not centralized or decentralized fees. And we need the regulators. Would they think that even if it is you really good job aid in different other regulators around the country, around the world, after we keep up with this attack and then you’re dealing with people we’re working on and what kind of questions that opens up.

Maya Zehavi (CEO/Founder, Ontici):01:08:26   

The other thing that also did not, if you asked this, not about walking in a lot of abstracts, right about the first Jesus is his philosophies and Marcus and Frank that they’re trying to sit someone down who’s not as tech savvy to know what it is and tell them that they need to start using the wallet. We still have a long time to go in that. And what the thing I would say is interoperability. If we’re going to feed both public markets a lot fewer than the competing departments outside private, private, you need to be able to move in between prop pain and mobility without having to compete for new engineers and complexity.

Theo Moore (Deputy Managing Director, APCO Worldwide):01:09:13   

Thank you very much. So you mentioned the police band and I, despite Brexit, your policy making career careers almost certainly not over. Do you think at some point you might wake up and sing to yourself? A digital asset done me wrong.

Syed Kamall (MEP Economic Affairs & Trade Committee, European Parliament):01:09:28         

You can write my next song if you want. So I think I started off by saying, and I, I’d come back to this about one of the things that we look at as politicians. What happens when something goes wrong? So what could possibly go wrong here? Well things that could, I could, I could foresee, you know, something get lots of letters or emails from constituents would be something like, I don’t know, some say two, two or three years, I think of one of the bubble. And you know, actually at some stage these crypto currencies get converted back into real cash at the moment, you know, and you’ve built up a bubble and, or actually have people lost a lot of money. I mean, you started seeing people asking questions, you know, “Oh, you know, a bit about technology. Should I invest in Bitcoin?”

Syed Kamall (MEP Economic Affairs & Trade Committee, European Parliament):01:10:13         

But Whoa, hold a minute. You know, even in the, even in, in even in standard investment non-technology stuff that we do here, I’ve, I have always argued when it comes to you know, invested in in the stock market, you should only invest money that you’re prepared to lose. We, we say, we always say, you know, the value of your investments can be, can go down as well as up. That’s kind of our warning. I don’t think it’s enough. I think you should always say to people only put money into the market that you’re prepared to lose. And now it’s a bit of a stock warning, but you know, it could, it could, it could all go wrong. So one is the bubble. The second thing is what happens with a smart contract? If you want to challenge that smart contract, who do you challenge?

Syed Kamall (MEP Economic Affairs & Trade Committee, European Parliament):01:10:56         

And also, why do you want to challenge it? And has there been deliberate fraud. Can you trace where in one case, can you trace where the money has gone as it were and therefore that’s, you get less constituents. So actually outright fraud. Would any tech in anything, you know, whether it’s technology or not, there are always people out there who are trying to call on others and if that happens and people will blame the technology rather than just blaming the individual fraudster. That’s something that we have to watch out for. The other things that we’ve look about, I look out for from previous issues is actually our, our supervisor is going to be up to it. I’m not, there’s are criticisms of supervisors, the very difficult work, I’ll regulate it to legislators going to be up to it. Let’s be honest.

Syed Kamall (MEP Economic Affairs & Trade Committee, European Parliament):01:11:41         

Who takes responsibility when something goes wrong? So for example, you think back to the financial crisis, no bank directors and went to jail. There was, where was, where was the direct director liability or partly because I have of having no direct liability as Warren Buffett said, they didn’t actually care what was on their balance sheet. Actually it had someone said to them, you are responsible. If something goes wrong then you’d be, you. You’d probably be asking what are these CDOs and CDs is, how do they work and cheat? Hold on. I’m about a CDO, you know, how w what that relates to the CDO, you know, and when you look at some of the stories from back to I’m picking the CTOs, in some cases it took six months to work out the bits of debt that were connected with particular CTOs, you know, so that’s not related to the blockchains specifically, but these problems occur anyway without the technology. And you could get these same problems in the blockchain world and people might well blame blockchain rather than the forces themselves. And that’s where we as politicians have to be to introduce bonding. So, some of the same old stuff and some news.

Theo Moore (Deputy Managing Director, APCO Worldwide):01:12:44   

As a former regulator, so what do you think that the stipend future of blockchain might lie? Just a loaded question. 

Mark Wetjen (Global Head of Public Policy, DTCC):01:12:57

Yeah, that’s a, that’s a big question. You know, for, for reasons that we’ve covered quite a bit already, I, I oftentimes wonder whether most of the benefits are going to come outside of the financial services space. So I guess in that respect, it don’t see it as so dystopian. And if it’s outside of the highly regulated industries such as financial services and there’s and there’s tolerance for dealing and trustless environments on the part of commercial firms.

Mark Wetjen (Global Head of Public Policy, DTCC):01:13:31     

And you know, let, let people have their own views about which industry that would be that that might be the area where you could see something really interesting in, in something far different than what the world looks like today in those particular sectors. So I’m just trying to think like making up stuff. You’re basically, cause I’m not really an expert in industry is always dangerous. Yeah. But you know, I don’t know if it’s something that any industry, like I said, it’s not really a specially regulated, I think would probably be an area to watch and where you have to keep track of provenance or ownership of assets. So essentially the people along this table working in the financial space, I’ll probably secure because there’s pointing out a lot of what they’re doing.

Theo Moore (Deputy Managing Director, APCO Worldwide): 01:14:12   

But in another space, you mentioned, for example, we might suddenly find ourselves getting slightly sideways. Okay. Well. We are supposed to finish at half past the hour. Thank you very much indeed to our panelists. Thank you very much for taking the time to listen to them. We’ll wrap up now and make way for the final panel, which is on mobility and transport. Thank you for your attention and thank you to our panelists.


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