Highlights from the FT crypto and digital assets summit | FT Live
At an agenda-setting FT Live conference on April 26-27 2022, industry and policy leaders - from the governor of the Banque de France to the head of Binance - debated with FT journalists how to bridge traditional finance with crypto and digital assets. Visit ft.com/cryptosummit for the full video.
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If I look at cryptos, how can we build the best of two worlds? We have on one side a technological promise which is very interesting, we'll speak about blockchain, DLT, we are very interested in all these technologies. And we have on the other side, the trust, the long-term stability, which we central banks provide and in a better way than unregulated cryptos without any doubt. I could say it this way, unregulated cryptos are so to say a stimulator to general innovation. But they are such a bad answer to a real challenge.
If we don't regulate cryptos, if we don't innovate on the central bank side, and we will discuss that with CBDC for instance, then we could have private fragmentation in payments. Let me insist on that, perhaps. We have at present geopolitical fragmentation, obviously, with Ukraine, Russia, and with this whole troubled world we live in. We shouldn't add to this geopolitical fragmentation, private fragmentation in payments. And this is really the purpose of all our efforts on experimentation and innovation.
We are now integrating with traditional financial sectors much better. And so I do believe that crypto cannot exist on its own. Today, 99.7 per cent of the money is still in Fiat. So we need to build a bridge. Binance wants to be the bridge between the crypto world and the traditional financial world. And in order to integrate with the traditional financial world, we have to be fully regulated, fully licensed, et cetera, and that's a process we're going through.
We have a standard corporate structure now. That's a prerequisite for getting licences. So we have a licensed entity in Abu Dhabi in Dubai, in Bahrain, and very soon, in a G7 country in Europe and in the US as well. So our corporate structure is very clear now. So when we first started, we wanted to embrace the decentralised philosophy of no offices, no headquarters, no corporate entities. None of those are needed if you run a pure crypto exchange. But as soon as you want to get licences, you have to have what we call the traditional structures, which we do now.
We think of crypto as a great opportunity. We have been the one that have enabled the exchange of value digitally in the Fiat economy for as long as people can remember, over 60 years now. The crypto economy is another way to exchange value. It's by tokenising currencies and it operates on blockchains. And so we see that as a big opportunity.
I think we're solving actually a systems and trust problem. And even in the United States, there are 40 plus million people who are unbanked, not just emerging markets. This is a problem actually in many different countries. A lot of the communities who are quote-unquote unbanked are some of the most vulnerable. And we have a systems problem, meaning the current system doesn't really care about banking. And frankly, it's probably not very profitable to bank those particular groups of people. There's also a trust issue with some of those communities not trusting the banking system as it is today.
So what does crypto solve for? It's an alternate system, a network, that helps give and particularly think micropayments, microloans, and put micro in front of any word. It's all the micro stuff that people don't generally care about in the traditional financial sense that can be offered in a very frictionless way. We're not there yet, but the frictions are being removed in a more frictionless, low-cost, fast execution kind of way that then serves those types of communities.
And I think when there is utility, people will adopt it. And then that trust hopefully will grow. But likewise, if the crypto alternate rails fail to build that trust and fail to actually deliver, then you won't have that people adopting that either. So I think actually I'm pretty relaxed about the worries that people have about who is going to win in this space. It's a question of actually what types of solutions will work for those types of communities around the world.
I think the younger the demographics in a given country, it's very important. The digital native group is going to be a driver of the future. However, I'm going to take a more sober tone on El Salvador. If you are a world leader and you have millions of people you're responsible for and their future, I think if you're kind, you say that was a bold move. If you're not so kind and a bit more pragmatic, not coordinating with other entities, like IMF, World Bank, being cut off from the global financial system in many ways, is a very limiting world to exist because of the move towards making Bitcoin legal tender.
I'm observing, I'm watching. You know, I want to be balanced about where this comes out. But I think I would have taken much more consideration and probably analysis before making a full blown move to legal tender status.
Now one of the things that the kind of crypto true believers if you like push back to that kind of sentiment with is well be patient. This is a very new asset class, these are very new currencies. I'm not so sure, right. It's had 13 years to prove itself, it still doesn't have that many real life use cases. I still can't buy a cup of tea with Bitcoin. Do you think it's had the time to prove itself yet?
Yes, I think 13 years, I mean it's been 13 years since the Satoshi Nakamoto white paper, which is, if you like, the foundation of all of this. On the other hand Katie, I wouldn't be so sceptical about the technology. I think there are some elements that we can certainly learn from. And I can give you a couple of examples that the central banks have used, really taking some lessons from the decentralisation using public key cryptography that is really powered some of the innovation within central banks.
So I wouldn't be so sceptical as to say there is nothing of use here. I think there's definitely a very useful technology that we can draw. In particular, the way that public key cryptography can be used to validate transactions in a decentralised way. And I think one of the things that is very, very important for the central banking world is that as soon as we get to cross-border usage, there's more than one central bank involved and, therefore, more than one currency.
And almost by definition, you need some kind of decentralisation. And so the way that we've approached decentralisation is let's bring in real names rather than using private keys so that we can tackle the underlying laundering and fraud and so on. But make sure that we give privacy to the transactions.