The Use Cases, Advantages, and Challenges of Blockchain and Related Technologies

00:08Welcome to Nasaq Trade Talks,

00:10where we meet with the top thought leaders and strategists and trad Fi,

00:13digital assets, technology and financial planning.

00:15I'm your host, Jill Melendrino joined by Andrew Lam,

00:18head of Global Private Wealth at Norton Rose Fulbright.

00:21We have Dr. Rav Ozer,

00:22Global leading emerging Technologies Expert Morgan Kupetski,

00:25head of institutions and capital markets at Ava Labs.

00:28Finally, we have Poppy Simpson,

00:29Senior Product and Content Manager for Net Years Mural Product Line.

00:33And they joined me to discuss the use cases, advantages,

00:36and challenges of block chain and related technologies.

00:39Panelists, it's great to have you with us.

00:40Welcome to trade talks. Let's kick

00:42off with a round table here, starting with you, Andrew.

00:44When we think about 20:23 what were some of

00:46the more compelling stories around the space this year?

00:49Yeah, so I think really what happened is

00:51that the industry is growing up a lot and you know,

00:55there weren't nearly as many price movements in 2023 as we've had before,

00:59except maybe for the last month.

01:00And so that gave people time, I think,

01:03to sort of slow down,

01:05work on interconnectivity, Explore, you know,

01:09new use cases working with,

01:11you know, traditional finance and, you know,

01:14kind of just pausing to take stock

01:18of the last five years and then figure out how to move the industry forward.

01:21Yeah. I mean, Rob, it really does feel like matured a bit.

01:25Yeah. I mean, I call it, I mean,

01:26I just wrote something called regulate tokenized assets,

01:30which I think that's where the trend is right now.

01:32I mean, you see a lot of institutional, you know,

01:35traditional institutions like JP Morregan, it,

01:38UBS, even London Stock Exchange, Swift.

01:42I mean, they're all doing all kinds of projects, international and national.

01:47So it just says something that they are interested maybe in

01:51a more of a regulated type of environment, which is okay.

01:55I mean, we have to start somewhere.

01:57So let's start with the regulated use cases and go from there.

02:01I think to that end and tying back to what you mentioned,

02:04a lot of what we've seen this year from a financial institution enterprise perspective is

02:10our partners looking at the technology and the various use

02:13cases that it can enable as opposed to looking at crypto as an asset class.

02:17So to that end, I mean from

02:18a macro perspective we went into this year was a pretty bleak picture.

02:21But what we actually saw was it felt like this time was

02:24different from an institutional adoption perspective for a variety of reasons.

02:28I mean, you had greater kind of

02:30enterprise grate infrastructure in place this time around as opposed to the last cycle.

02:34You had rates in the real world going up and the value prop for pure on chain defi

02:38going down and therefore the need to put real world assets via tokenization on chain.

02:43And you had finally major Wall Street executives touting the futurist organization.

02:47So I think collectively, there was like a perfect storm

02:49to really drive forward the future of

02:52finance or on chain finance in a variety

02:54of these different ways with some of the partners that you, that you just mentioned.

02:57Yeah, I mean, I think we have to start with them because, you know,

03:00once they get in, you know, everybody else join.

03:03So it's good to see that they're coming.

03:05And from a creative and cultural perspective,

03:07which is where, you know, I really come at this working with mural and net game.

03:11I work with artists and collectors and audiences and

03:13they were there at the very beginning, back in 2017,

03:16when the first Crypto Kitty was sold for 250 ether,

03:20which was $100,000 at the time.

03:21And everyone was like so confused but now they're less confused, right?

03:25So even though the NFT and I use NFT in, you know,

03:28a quotations, it's really digital native digital art backed by NFTs.

03:32Even though that's got a bad wrap this year,

03:33it's been a great time for building and artists and collectors.

03:36Museums and institutions remain really interested in how

03:40this technology opens up

03:41new creative and commercial opportunities for the kind of creative class

03:45who are at the vanguard of this technology right now and now are trying to

03:49get more sophisticated models that you're going

03:51to see in the finance sector kind of grow as well.

03:53I mean it comes down to when people are now talking about

03:56AI and the copyrights, you know, and all of that.

03:59And I said, wow, why won't you NFd and then you can protect your right.

04:05Well, let's talk about that some more.

04:07And you know, Andrew, you noted,

04:08let's dispel some of these definitions on what these things actually mean.

04:11Why use NFT or block chain technology in the creative or financial services space?

04:16I think there's a lack of understanding

04:17and all these terms are just like lumped together.

04:19Well, and I love so Poppy,

04:20you said, you know, backed by.

04:22Right. And so, you know,

04:23it's a technology that lets you do things, right?

04:26It doesn't do things itself, right?

04:29So you can't just say, okay,

04:30I'm going to take this block chain off

04:31a shelf and now it's going to solve all my problem.

04:34So, you know, block chain is,

04:37we were talking earlier, you know,

04:38I've been saying it's a database really.

04:40It's the index to a database. Exactly right.

04:43But it's a way of storing and organizing data.

04:47And you can have block chain without tokens.

04:50Right. Right, exactly. You know,

04:52and so that's just a distributed ledger that different people,

04:55either with permission or,

04:57you know, public permission list,

04:58can go in and search for the information using that index and find it that way.

05:04So as a tool,

05:06it can give you transparency,

05:09it can give you a distribution of control over the information which you know,

05:15that's when people say, you know,

05:16it can be trustless, right?

05:18You know, so it gives a powerful tool to run projects on.

05:27And so, you know, different use cases,

05:29but block chain in and of itself isn't a use case,

05:32and tokenization in and of itself isn't a use case.

05:35It's just exactly, that's another thing you have to think about it,

05:38the technology, technology is a tool.

05:40It's a tool to do all kinds of things.

05:42I mean, like you say is just the technology,

05:45you can do a lot of applications for that.

05:48Same with block chain, it's just a technology you can do,

05:50have like the NFT's whether it's artist or authentication for

05:54document authentication for even financial product.

05:58I mean, it could be a lot of things.

06:00So and as you said, you know, it's just like, you know,

06:03I mean a lot, I mean,

06:05when you say database, a lot of people think it's a database.

06:07It's not a database because that's not the purpose of blocking, to be a database.

06:12I mean, it can't. It's a point atationrontationy, but it's a pointer.

06:17It's a pointer to where that artists creation is.

06:21It's a pointer to wear that product.

06:24The financial product is, it's authentication to wear whatever you want to authenticate.

06:29And it makes sure that,

06:30you know, it has records.

06:32You know it's transparent,

06:34traceable, immutable, and worthy.

06:37Right? And if you look at the composition of this panel right here, right?

06:39We're talking about financial services,

06:41we're talking about the creator economy.

06:43And the technology is the technology.

06:44It doesn't differ from, you know, one area to the other.

06:48And I think that's one of the keys where

06:50we saw more institutional adoption and more integration.

06:53Is the interoperability of the technology

06:55has significantly improved certainly since 27. Right.

06:58Yeah, I mean, fundamentally,

07:00even though we're all in very different sectors or have different interests,

07:03what we're talking about is using a technology to enhance and sometimes

07:07transform existing processes and existing transactions.

07:10And so a real world use case is obviously for creators,

07:13they can benefit from a primary market,

07:15but now potentially also a secondary, right.

07:17And that's really exciting.

07:19But to your point, interrupt probability is so important because it expands the market,

07:23it expands the ecosystem. This is all connected.

07:25I think I totally agree with that,

07:27and I think taking a step back,

07:28it's really an enabler for a whole host of different industry.

07:31And I think something what you were saying is,

07:33you know, at the core of it,

07:35the block chain enables this common kind of data standard

07:38and uniformity across frankly any industry,

07:41or company, or client or third party service provider that historically has worked in,

07:45in silos and silod systems that oftentimes require kind of manual reconciliation.

07:51And manual reconciliation is often error prone.

07:55And so obviously that can be applied to

07:57a whole host of different applications and industries,

08:00some of which we talk about.

08:02And I think interperabilityvery key.

08:04And I think that blockin could be the enabler for that because that's how it was built,

08:10if you think about cross border and everything.

08:13And that will open up a lot of doors for everyone,

08:17you know, whether it's great or it's financial, et cetera.

08:20And what I like is that there are all kinds of, I mean,

08:24pilots that we see with even, you know,

08:26financial institutions, I mean,

08:28that are looking into toorability.

08:30Well, it's Swift that just had a project that looked at interoperability.

08:34We have about four major regulators that came together to understand,

08:43you know, the interoperability of,

08:45you know, between countries.

08:47I think we have Switzerland, Singapore,

08:50UK, and Japan that are coming that create this forum.

08:54So I like that, I see that,

08:56that they are thinking in that terms that, that will open up.

09:00So we're talking about the advantages in use cases here.

09:02But Andrew, you noted that there are some challenges.

09:05If it appears to make obvious sense to employ this technology, what are the challenges?

09:09What's hindering continued adoption, Particularly from the legal?

09:12And so some of it, we were talking earlier,

09:14it's still just about the vocabulary, right?

09:17So when you say the word token or block chain,

09:19people have a kind of knee jerk reaction to that.

09:22And if you know,

09:24let's say you are securitizing a royalty stream,

09:28but you're tokenizing it because you're using

09:30block chain technology to track the records from that.

09:35Right, So is the token a separate security from what it represents

09:42or is the token the security or is the token

09:45simply a digital representation of the security?

09:48The way a piece of paper stock sounds?

09:51Priti, there's riots of the but it might not be vast.

09:55So maybe it's a derivative or maybe it's the thing itself. Exactly right.

09:59And that question, there's a legal analysis to that,

10:03but then there's also a business analysis to it and a plain English,

10:07you know, ordinary language analysis to it.

10:10And a piece around market education.

10:12Exactly as well, people understanding what you're talking about.

10:15You know, NFT's got such a bad wrap this year.

10:18But if you think about it, actually,

10:20did I really remain bullish on digital art?

10:22You know, like serious digital art is going to rise out of

10:25the boom of NFT's and that kind of market correction is appropriate.

10:30It was madness and now it's not.

10:33The skepticism that you see is often really just about misunderstanding, right?

10:39Nft's will help museums know about the provenance of the artworks that they collect.

10:46Like that's a use case that's obviously going to be adopted at some point,

10:50but the skepticism is kind of around

10:53these areas of misunderstanding and confusion. Right?

10:56Yeah, I think also to that,

10:58to the extent that we can talk about it in

11:00a kind of use case first or business first approach.

11:03And then kind of say this is enabled by the technology.

11:06I think that resonates with a lot of our partners,

11:08a lot more so than kind of putting that, you know, in their face.

11:11So definitely the education component.

11:13And from a regulatory standpoint,

11:15when we talk about tokenization,

11:16I mean a lot of the things that we're talking about as it relates to

11:19tokinization for financial assets, they're securities.

11:22So there are existing laws,

11:23rules and regulations that govern securities.

11:25But I think to your point, it's in terms of

11:27that record of ownership. Where does that lie?

11:29Is one question that I think is still unanswered.

11:32And then in terms of being able to facilitate a lot of this kind of

11:36interoperability as well as really bringing finance on chain.

11:40A lot of it actually at this point isn't technological challenges.

11:43A lot of it's regulatory in terms of

11:45jurisdictional uniformity from one jurisdiction to another.

11:48And that's a problem or a challenge in web two or in the traditional world still.

11:53And I mean if you talk,

11:55I mean whether it's long with stop change a JP Morgan and our city that will all say,

12:00oh, we already have a technology,

12:01we're just waiting for the green light from the regulators.

12:04I mean, once they get the green light, we can just, you know,

12:06push it away and so it's there.

12:10We just need to be like approved,

12:13like, you know, like it's okay to do it.

12:15No one is going to come at the door and

12:16knock on your door. That's what they're waiting for.

12:18I mean, that's kind of a hurdle a little bit, especially in the US.

12:24It's a huge hurdle. We can't get legislation passed on daily topics that,

12:29you know, the broader audience understands.

12:31And we're seeing the braindrain of

12:34block chain and technology talent leaving the US for those reasons.

12:38We're seeing companies, you know,

12:39domicile elsewhere for those reasons.

12:41And we don't have the luxury of time because if you think about it,

12:45economies are becoming digitized.

12:47It's happening now, right? Cross border payments exist.

12:49Billions of people use this technology and don't

12:51even think twice about it's like another app for them, right?

12:53Right. If we built the most robust capital markets here in the US, right?

12:57Why would we not want to be at the forefront of

13:00the next iteration of the capital markets?

13:02I think it's a big concern that we don't have

13:04the framework in place for a number of reasons.

13:07Yeah, I think also part of that is at this point,

13:10from a financial institution perspective,

13:12a lot of them are kind of parallel processing on

13:15chain and off chain processes because we don't necessarily have this clarity.

13:18And then to be honest, I mean a lot of the incumbents out there,

13:22it will be costly to,

13:24you know, really kind of re,

13:25architect certain certain systems and certain kind of ways of working.

13:29And so from an upfront perspective,

13:31of course there's a cost associated with it,

13:33but to your point, you know,

13:35the world is kind of moving ahead and there's a lot of

13:37start ups out there that are working to either dis intermediate,

13:39or really kind of drive the space forward in the end,

13:41but but the incumbents are there.

13:43I mean, if you think about the big ones,

13:45P Morgan the City. Oh, yeah, you're right.

13:48With that. I mean, I mean,

13:49yeah, I'm working with them.

13:51They are the incumbent, right?

13:52And they do have it.

13:54They already have the rails and everything.

13:58They built everything. As they say,

14:00we're waiting for the green light from the regulator.

14:02Just, you know, say yes and we are on it.

14:05The fact of the matter, I mean, especially US capital markets,

14:08our institutions are regulated.

14:09There is no getting around that.

14:11So, you know, regardless of where we are in the integration phase,

14:14those laws are always going to exist.

14:16So, I mean, it's interesting, Oregon,

14:17you mentioned disintermediation just now and earlier reconciliation of records, right?

14:23So, you know, there was a time where people wrote on paper, right?

14:28And maybe you had a calculator, you didn't, right?

14:30And as we've evolved from that, you know,

14:33we went through similar kind of

14:35intellectual upgrades and similar fears when you went from

14:39a paper record that someone walked it down the street

14:43for reconciliation and walked it back to be able to fax it to do it,

14:47you know, completely digitally and people did have a separate set.

14:52And I think part of what we're dealing with right now is

14:55the regulators concern that the system won't function as intended.

14:59That maybe it's too new, maybe it'll break.

15:02And so how do you maintain the safety and

15:05the security of the financial markets if everything

15:08moves right away onto a new technology and

15:11something turns out unforeseen with that technology.

15:15You know, I read something, I forgot,

15:17you know, who wrote that.

15:18But it was interesting to say,

15:20you know, that it's kind of hypocrisy.

15:23I mean, I'm sorry, that,

15:26you know, for regulators because in fact,

15:28they're using technology in everything that, you know,

15:32in every dimension that they work on from

15:35the investigation to everything else, they are using it.

15:39I mean, but it's as if, you know, oh,

15:41we're using it but the public or the private sector is

15:45not allowed to use it and it has to be controlled and think about it this way.

15:48We used to have physical stock search, right?

15:50Exactly. Now, everything, you know,

15:51digitization of the markets,

15:53whether you know, on the exchanges or I mean,

15:55look at the platforms that retail investors have now.

15:57They did. I mean, we didn't even have those tools when

15:59I got into institutional trading in the late '90s.

16:02I mean, it's like night and day.

16:03But look at what that digitization has provided.

16:06Democracy and the access,

16:08accessibility way, cheaper costs for the average retail investor to get in.

16:12So that was progress in terms of,

16:14at least for the retail investor.

16:15Clearly there's, you know, benefits for institutions as well.

16:18But perhaps this is the next iteration of that.

16:20Absolutely, yes. Right?

16:22And organization can make it even cheaper and costs even more

16:26and faster and faster as are cheaper and secure.

16:30Part of it is also that the potential is so

16:32clear and the technology can accelerate so fast.

16:35But these things do take time.

16:37Yeah. And so it feels often like a very frustrating and that's why you

16:42see creatives at the forefront because they get to innovate faster and messier than,

16:47you know, these kind of institutional.

16:49They don't forget about regulation.

16:51They think about, you know, just do Yes.

16:54And they also think about innovate.

16:55Exactly. So not just existing processes but like how can

16:58we do something new to move it forward.

17:02So it's messy and everyone's at different kind of,

17:04it feels like everyone's at slightly different speed.

17:07I mean, the crypto native industry obviously moves at a very quick pace,

17:11but I think people forget it took I think over 25 years for

17:14the ETF to really gain kind of mass adoption and gain trillions in AUM.

17:18And so, you know, a lot of people tout

17:20tokenization is kind of the new version of the ETF.

17:23And, you know, I think obviously institutions are moving ahead.

17:26But we're still early, right?

17:28We definitely are still early. And speaking of early,

17:29we've got about 5 minutes here.

17:31We want to get everyone's outlook.

17:32And when we think about 20:24 I mean we're coming into US election,

17:35I'm sure we're going to hear about, you know,

17:38digital assets are going to come up in some part of the debate,

17:40so that's one thing to think about.

17:42And then as you continue to see more adoption,

17:44more integration again round table, el, let's start with you.

17:47As you think about 20:24 where are you going to be focused?

17:50Yeah, So I think it's, you know,

17:51these more institutional projects coming out publicly.

17:56And I think, you know, you're going to get questions

17:59about the US competition with other countries and where does

18:04that all fit in regulatory harmonization

18:09or divergence as different jurisdictions try to compete with each other,

18:13whether it's for talent or products or just investment.

18:18I think, you know, all of these trends.

18:22Just a better, more sophisticated conversation around

18:27the technology I think that we've seen in 2023 is going to continue into 2024.

18:32And hopefully that leads to whether it's greater clarity or

18:37certainty in the regulatory landscape that then lets people go ahead,

18:43you know, with everything that they've got, you know, cooking right now.

18:47Yeah, it'll be your outlet.

18:48Yeah. Well, I mean,

18:50it's kind of like not so good for,

18:53you know, the innovators.

18:56You know, when we getting into

18:57an election year because legislators usually don't do much.

19:01Sorry for saying that during that time.

19:04And it's a little bit because we need that.

19:06We need to get clarity from the legislators.

19:08But I don't think we're gonna get that this year.

19:11But it's not gonna stop us and we shouldn't, shouldn't stop us.

19:15We should, you know, continue innovating.

19:18And whether it's creators and digital arts or financial institutions,

19:23or anyone who thinks about we shouldn't stop

19:26innovating just because the legislators are now taking their time.

19:30We do have, you know, things happening also in you and everywhere else.

19:36But, you know, the way that I always say to innovators is like, you know,

19:42if you innovate responsibly, you know,

19:45because what is responsible innovation?

19:47It's basically making sure that you

19:51benefit from the new technology without creating more problems.

19:55That's of course what the industry looking at.

19:56A problems from the capital markets perspective.

19:59Your outlook. Yeah, I think just in general,

20:01whether capital markets or enterprise,

20:03we'll see more real world use cases bringing

20:06real world utility to

20:08those end users that are currently not inherently using the technology.

20:12Using the technology because there's a cool app,

20:14whether it's in social file and financial services institutions and

20:17loyalty rewards in deep in whatever it is where the technology is the enabler.

20:22And oftentimes they won't know or even

20:23care that they're using blotching Yeah. And glass word.

20:25Poppy. Well, I would be remiss if I didn't say that.

20:28I believe that digital art is going to.

20:31I do think that the sectors going to grow.

20:35I think digital art's here to stay, but in a new way,

20:37it's going to join the traditional canon,

20:39but you're also going to see a new class of digital collectors.

20:41And that's because that real world use case is already here.

20:44You can already get native digital art back by NFTs and you can show it at home.

20:51You can share it in galleries.

20:53So I think you're going to see that sector slowly

20:56stabilize a smaller amount of artists and more institutional buying.

21:02But I think it's going to begin to grow again.

21:05All right, we appreciate everyone's insight.

21:06Thank you for joining us on trade talks and thanks for joining me from market site.

21:09I'm Joe Melanino, Global market tree Porter at Nasdaq.