Why DeFi & FinTech need each other

Transcript

foreign how's it going I can't hear you no we're not gonna do that um I'm Ben I'm the co-founder and chairman of Nuri uh previously but Walla and today I'm going to tell you why fintech and defy need each other um yeah uh so um I have the confession to make um first and foremost I'm a banker boo boo um so my company does AML it does kyc we are a centralized legal entity we are based on a license that is granted by the German government and the ECB um where permissioned all of that horrible stuff that we're trying to get rid of in defy

um but I feel like I have many of the same values as you and that is based on my belief that Finance needs to dramatically dramatically change but the way I think we will achieve that change is perhaps different to some people here at the conference I believe the best way of affecting change is a combination combining D5 and fintech and making these two work together so before I go into why um my product is a bank account we created the world's first bank account where you can store and trade crypto we actually launched this in 2018 um back at the time it was seen to be almost impossible that you could launch something as unregulated as crypto with something as regulated as a German bank

account but we did it our goal was to make it as easy as possible for people to go from the world of Fiat the world of euros into the world of crypto Bitcoin and ethereum and I think we did a pretty good job um but we think that there's more than just trading cryptocurrency in the world of blockchain and that's what we're really excited about so first of all um fintech who would like to venture a definition of fintech slightly yeah I I think that's that's relatively accurate um I see uh fintech as being the best that we could do until now

so we had traditional Finance which is your brick and mortar Banks your traditional brokerage houses security deposits Etc and fintech is a technological effort it's the layer on top that has tried to make these better but I would argue that actually if we look at the progress in the last 20 years it really hasn't been that much in fact probably the most dramatic change that we've seen is now we have something like PayPal so if we break down the progress of fintech well okay nowadays I can open a bank account with my mobile phone and I can have a sexy debit card to pay for my goods and services but if you look at Neo Banks like n26 like monzo like chime in the US really it's the same old banking based on Legacy technology from

30 years ago in the background the financial infrastructure and all you have is a sexy layer on top so it's kind of akin to painting lipstick on a pig yes it's better but there's only so much that you can change without touching the fundamentals the infrastructure then you have the layer 2 solution uh no way I'm not talking about ethereum latio I am talking about the traditional world of lead 2. so transfer wise it's a great service it makes International money transfer way less painful than before but why do we need a private company to do something as basic as transferring value abroad right the only reason that we have transferwise is because the Swift system underneath it doesn't work

properly and then finally we have this unbundling and rebundling it used to be the case that you had to go to your bank account to get a mortgage and now you can have just a startup that does only that and then you have these super apps that revolute that basically combine lots of things together into one interface so this is the degree of the advancements of the Innovation that we've seen in fintech until today and uh is it through lack of trying that is we've only made it this this far um no it's because fintech is built on this Legacy infrastructure right you have these these banking systems and the technology is extremely old and it's extremely hard to update so banking technology was based on a time

when the storage of data and computational transactions were very expensive so did you have real-time transactions no you had batch transactions which is why when you make a bank transfer you tell your bank they tell the bank of your country and then that Country Bank tells the ECB and it's basically a very slow system that needs to sync batches of transactions in CSV files back and forth and that's the fundamental reason why transactions aren't instant it's the same with Securities um so you know the whole um GameStop thing uh with uh with uh Robin Hood well the reason that they stopped trading wasn't actually because they wanted to punish their customers is because it takes three days for Securities to

settle in the US three days that's just crazy when you compare it to the wonderful world of blockchain and with Bitcoin we had the invention of blockchain and what this was was the invention of digital scarcity first of all and secondly it allowed us to transact value trustlessly between parties without using a middleman now this was very exciting because For the First Time Ever we could transfer any amount of value anywhere in the world all you needed was an internet connection and we could avoid all the middlemen or the banks and imagine me back in 2013 um quite a lot more facial hair um we were really excited and we started off very early on as a Bitcoin

Consultants the Bitcoin barata in Deutsche and we went to some of the biggest companies and we were like hey look now we've solved your problems you can do instant settlement all over the world and um yeah we were a little bit naive the big companies they loved us out of their offices if you look at the the dissemination of new technologies it always starts off with the hackers and the criminals and then the startups and the studiological companies then the Enterprises and then finally the governments so it was way too early along the the distribution curve to actually get these companies to adopt it but we tried and we actually got the piece of advice from Roger there the founder of Bitcoin cash and he was like you guys are way too early to be a consultancy you should start building stuff yourself and so that's when we

already started our journey has anyone been to room 77 in Berlin so room 77 is a very famous Bitcoin bar unfortunately shut down now it was the first place in the world the first physical place that accepted Bitcoin and you could use it to buy a beer and burgers and we used to go there every week and people would would make a cheers they would raise their glasses and it would be the end of the banking system right we don't need visa anymore we don't need PayPal we don't need central banks private Banks because we have this better technological solution um me and my co-founders were a little bit different because we saw this as being a way of of upgrading the existing World rather than replacing it and so we started working um and now I want to say um why this

actually should read why fintech needs defy this is a typo so why does fintech need D5 well we have a lot of unsolved problems remittance is still a mess it's still very difficult to send a small amount of money to different parts of the world you're also paying high credit card fees so in the US is around a two percent on every single purchase which is passed Back To You by The Merchant and we have a complete mess in terms of savings and investment so you're earning zero percent interest on your bank balance and then finally accessibility of services so about about a third of the world's population is unbanked and this means that we cannot transact with them so we cannot provide them liquidity or take liquidity from them or trade with them so easily now it's quite

difficult for us to think about the tangibility of that because hey we're here in the developed world we all have bank accounts but I want to give you another example um hedge funds so I think a lot of people woke up just to um what hedge funds can do with their assets because of the GameStop Fiasco and it becomes clear that hedge funds can lend out their stock and earn interest in it and borrow accordingly now those possibilities aren't available to People Like Us right are very sensible investment strategy if you're out of crypto is just to buy ETFs and to hold them for a long time so if you're going to hold them for a long time why can't you lend them out and earn interest from them just as you would you'll die or your ethereum well the reason is that's not possible

because it's not accessible to you and the reason for that is that it just isn't cost effective to deal with such small amounts and tokenization blockchain begins to solve that but actually this question is posed wrongly it's not as um not why does fintech need a defy but it's rather why we need Defy is because the people inside of fintech and I know a lot of them it's not that they don't want to solve these problems it's just that they can't because they're building on this Legacy Legacy infrastructure and so while we've been able to disrupt the distribution of financial services because of the infrastructure that we have we haven't been able to disrupt the fundamentals um so I would argue broadly that fintech needs defy to survive and the reason for

this is very simple if you look at the properties of defy you have a whole new system built from a blockchain technology which is only 11 years old and it's open source it's composable it's interoperable so when I in my bank want to create a new product I have to talk to Regulators I have to set up spvs I have crazy legal costs and financial advisor costs just to think about creating say a new ETF product in the world of Z5 you can go to ethereum you can go to GitHub you can Fork your project you can tweak it a little bit then you can launch it that same day and what's more you can have it interfacing with the other projects inside of ethereum as well so these are the three properties that I believe is a recipe

for far faster and sustained innovation in the world of defy than in the world of C5 and hey I don't think you need much convincing here like if you've been in this space for more than six months you will see just how crazy fast things are moving right we've had so much more progress in the world of G of D5 than we have in C5 in in 20 years so if C5 doesn't adopt the best parts of defy then it will fall behind and it will die and just as fintech was able to disrupt traditional Finance D5 is going to disrupt fintech so fd5s are amazing then why do we need fintech um well I think that adoption equals value minus friction and I think the

value of D5 is relatively clear but there's still a higher degree of friction to get into it right so if you think about the prospect of say earning a high yield on your stable coins everyone would like that but if you tell them okay you have to go to an exchange you have to deposit money you have to buy stable coins then move it to metal mask then chooses protocol Etc there you've already lost them um and so what we need to do as a community is to reduce the friction and we believe that our approach does that so our hypothesis is customers did three things to be able to reduce the friction of defy significantly enough to get involved broadly speaking they want the Comforts of centralized Finance but with the benefits of defying so what does this mean well on our front built in so

customers think in Euro not ethereum not die they want to go for their credit card from the bank account into these protocols and then exit the same way secondly it's customer support so trust me customers get very unhappy when you don't answer the question where is my money um you need to have someone that you can pick up the phone to send an email and guide them through a process because when people are dealing with value they need a lot of handholding and then finally trusted counterparty customers want to deposit their money with trusted brands that can be held accountable um and uh I think that is unlikely to change and it's kind of happening in D5 as well right you trust projects where there's trust behind it like you know if Andre quandre uh launches a new project

then you trust him based on his track record so we're already seeing a parallel even though D5 is about trustless and interfaces um so yeah this is um this is the the kind of the um the broader explanation of of what we think will happen so until today we've had central banks and then you have I'm building on top of those you have the private banks on top of those you have the fintechs in the future we will have blockchains as being the fundamental base layer uh then on top we will have the decentralized applications the RVs and the compounds and then on top we will have a centralized layer which is providing these brokerage and these value add services like the ones I've said on the previous slide so um what are we doing

um well we think that D5 will solve most if not all of the problems of traditional Finance but we are focusing on a very specific angle which is to become the bank account to grow your wealth we think that of all the problems in the west right now in the developed World access to wealth growth is one of the biggest again you're earning zerbs and interest on your bank balance that's pretty insane if you think about it if you told our parents 10 15 years ago that the interest rate would be zero you know they would freak out equally you have people going to meme stocks like GameStop so I see this as being an expression of of traditional Finance failing to provide viable wealth growth opportunities to the Next Generation and so at Nuri this is our

goal we want to take the best parts of decentralized Finance well you want to create a brokerage layer around them and allow our customers to access them from the Eurobank account uh so actually we rebranded um we were previously but Walla which was more techy more nerdy more for crypto I love that brand but we chose a more mainstream brand because we really believe that D5 blockchain is for the masses and not just for the Nerds so um some of the products we're building uh first and foremost a Euro savings account so imagine being able to pull your Euros from your bank account and move them directly into a savings account and then you would get the yields of decentralized Finance but all of the Comforts of centralized finance

and for you guys you probably care about what's happening under under the hood but for a lot of people on the street um they don't actually care that much right people don't care so much how fractional banking works or how credit cards work and so while today the the focus of D5 is very much D5 as a product D5 as a what I believe in the future it'll move more towards the how because unlike the internet Revolution that necessitated a change in the interfaces we use D5 and blockchain can just change change the infrastructure we use and I think in the future everyone's going to be using blockchain but people won't think so much about using it because it's going to be abstracted away and so for our customers yes they're going to have to sign terms and conditions saying this is uh being

powered by defy and usdc in yearn or whatever um they will have it feel like just moving money from one account to the other I think another killer app is the ability to take liquidity against your assets so I just mentioned a very common investment strategy is to invest in ETFs msci World msci Emerging Markets you buy a little bit each month and then you hold on to that and then it compounds great of course it's better to buy Bitcoin and ethereum but you know for the average person um and if you're going to be making long-term Investments then you should be able to get cheap credit against those Investments if you need to put down a deposit for a house or you're moving flat you need to put down a security deposit you should be able to get access

to cheap credit against your ETF portfolio against your crypto portfolio and we can make it cheaper because it's glitterized right it's way better than getting a loan from the street so broadly speaking we think we can do better savings better Investments and better loans than the fintech of the day because we're working with a different infrastructure we're working with blockchain infrastructure opposed to the world of centralized Finance um and yeah I know this is kind of like a conciliatory like everyone be happy message but um this is my true belief um to actually have the biggest impact we need to combine both sides of this using Define blockchain as the infrastructure layer and then having a distribution layer which is partially centralized and uh yeah that's it I'll take any questions now

thank you um so two questions uh one is uh how are you offering four percent uh on Euros I mean I would understand if it's dollars that you can put in usdc but Euros are not really in demand on the blockchain and the other question is um is the regulator completely fine with what you're doing and if yes why are not more companies doing the same thing offering crypto uh as part of a bank account thank you yeah so with regards to um europostale USD um unfortunately it's the case so there isn't much of an ecosystem for Europe at the moment there's you know just some synthetic euros and there's um uh there's the other Euro s coin uh which is still very very small by market

cap um one of the ways that we're looking at solving this is by doing um off-chain hedging so just doing Forex hedging to protect our customers risk so because our bank accounts are denominated in Euro we want to be able to provide a Euro based savings account um that's one option the alternative would be just to provide them purely USD denominated balances um but that is already an additional barrier to for our customers and ideally we'd like to avoid it because yeah you want to be thinking of it as a savings account and not as a you know Forex Hedge um with regards to the second question what will Regulators think about this um we chose a very uh prudent regulatory environment so we um we we established ourselves in Germany um and Germany is actually pretty

Progressive with regards to blockchain so the local Administration publishes blockchain strategy so I think if you're a company you need to think very carefully about where you want to register register um we see that now with binance and stuff you know being a little bit attacked by by those choices that they've made um everything that we do is working within a regulated environment so we're currently working with a partner bank and we are working with an umbrella license and when we create Financial products then we would for example file our prospectus for a security with the regulators and then provide it to our customers in in a regulated way so um it's really difficult um you need to be strong on the technical side and on the uh the regulatory side as well and have a good

working relationship with regulators and so that's why not so many companies are doing it there's by the way why I love defy so much because you don't need to worry about that stuff you can just clone a repo and start building whereas in C5 unfortunately you still need to have significant amount of startup Capital just to get those costs down to build the products you want to and no more questions cool thank you so much [Applause]