Buying vs. Building: Crafting a Long-Term Digital Asset Strategy for Banks

Transcript

dived in head first so we keep up the momentum and by moving on to a very interesting panel coming up buying versus building uh crafting long-term digital asset strategy for guess what banks that's the title of the next panel and on stage I'll be welcoming Fritz from Signum Bank Thomas Miller from sales and finance em from this time representing Talos mimti from U chain Swiss and the panel will be moderated by Jerome Bailey from the crypto Valley Association and AD Noom vice president of the association please enjoy and put your hands together for our

panel thank thank you very much uh thank you for all being here almost full room uh for what I hope will be a very practical uh panel uh we have 30 minute to spend together so first uh let's introduce ourself uh so I'm Jon Bay as a I said I'm the vice president of the crypto valet Association I'm also working for adnovum uh we are a software engineering and cyber Security Company swis headquarter out of Zurich we work both with banks fintech and crypto so I would say we are more on the bed side uh but today we have an exciting panel representing the the whole uh industry

buy and and and and and build side okay so I think that in in this audience we have uh several Banks uh some of them already uh started their crypto Journey uh some are not yet um into it and I hope that after this day uh you will be convinced that uh it's the right time to uh to start uh but the first question I think that you uh you will ask yourself is uh is how and we hope that with this panel uh you will have the the key information to take the right start um is is it is it as as I said in in the title is it buy so should you buy existing solution to move faster to reduce uh complexity or should you build

uh meaning building your own infrastructure to fully control uh your strategy okay so today we will spoke about technology not only technology we'll spoke about risk compliance strategy and uh Innovation so we hope that uh we'll bring you the key driver to make your decision uh we'll bring you concrete case study because we have a lot of uh uh case and clients representing today and we'll we'll end with a wrap up uh with lesson learned so I want to thank all my panelists and uh maybe it's time that you also introduce you um maybe let's start with Emy uh first thanks so much um um I wonder can you guys hear me yeah is

good uh indeed it's so nice that such a big audience as Matias and jeram said as well that still after lunch so many people are um in the room despite the sun my name is Emy lurin I have been with Talos for 2 and a half years now um which is a significant part of my career uh of seven years in crypto and um for those of you who don't know Talos we Empower institutions to trade and manage digital assets uh we service a lot of uh sell as well as buy side clients uh we have the pleasure of working with some of the biggest asset manager systematic uh funds as well as um Neo Banks we actually have 16 different client types which is uh intriguing because we always

get to see firsthand what kind of needs are there in the market and um this is such a such a timely topic so I look forward to to diving more into the buy versus uh build question thank you Thomas maybe yeah then I continue Thomas my name Thomas Miller from cian Finance so um I'm the CEO and CTO of cian Finance um we are on the way uh to be a bank in the future um so we are in in in the middle of the build process building a bank and the license process so uh we assume that hopefully it depends on the regulator and I think uh all of you that work with the regulator this is not a very very uh

timed progress um so um we hope that we will be on the market soon and um yeah for now we build and I think we have a lot to contribute to this panel thank you Fritz thank you Fritz J Chief B2B officer at the Signum Bank we have offices we head quarter in zorich we have offices in Singapore in Abu Dhabi in lonstein and we now establish a presence in uh the uh location also of uh Luxembourg uh when I joined Signum five years ago we did a high five because we had the banking license

celebrated this we had zero clients zero assets under management 5 years later we have more than five billion assets on the management we have uh uh more than 2,000 Banks uh 2,000 sorry institution clients on boarded and with the trusted partner of more than 20 banks on the Journey of digital assets thank you and mimo masimo buti and I'm a native from Lugano I'm glad to be here and I see a lot of old school friends in the audience so it's like coming back coming back home really uh I've been based London for 31 years uh but I always kept very strong uh ties with the uh with the

financial community in uh in Switzerland I represent the uh uchain Swiss Consortium the uchain Swiss Consortium is a group of Lugano based firms uh that have expertise in blockchain and DLT Finance uh we cover the whole spectrum of services and to end from legal advisory uh Asset Management uh accounting and strategic uh um advisor for uh clients who are mostly uh mediumsized Banks family offices and wealth managers and today really our contribution is how uh we are helping uh these companies uh transitioning into

digital Finance how we are uh handholding the process and we are uh uh building uh for them uh what is the target operating model that they will be adopting or they should be adopting uh when they are considering moving into uh this new uh uh world of new assets but also new technology all right thank you thanks for your introduction I we are very V various panel and we are lucky and first I want to set the scene with you and start by asking you uh the question of uh your consideration of the buy and Bild so you represent different uh type of organization with different

strategies so I think it would be nice to open with this type of contriction maybe we can go uh and start uh with you okay so then um yeah for for us um the build side um of the things is um for me it's it's it's unavoidable so um maybe to understand this uh a bit better um our plan is to build a digital asset bank and a digital asset Bank means that um we prepare ourselves for so we believe in the future where digital assets are not only a category um a new Financial assets but it's the railway of the of of a new kind of financial ecosystem and you can't build such a

such a bank such a digital focused Bank uh based on yeah an infrastructure that is you that you can buy um on the market and it is built for a completely different uh yeah era so this is a 50-year old core banking system uh that is uh that is U yeah this one size fits all approach that will not be ready to serve such age of digital assets um but build does not mean that you hire a bunch of developers and build all from scratch for me build is more building the orchestration the process layer um to um enable things like um instant settlement uh compliance Automation and

and and much more and um yeah the components like trading solution for instance Talos um um also custody Solutions this this this this can be or should be um existing components that you orchestrate in a layer but you as a bank you really own that orchestration layer and therefore you need build competence from my point of view thank you uh here I uh absolutely uh agree pretty much with everything you said obviously I wear loud and cleared by um hat uh I believe that in order to build and to have quick time to Market you definitely should go with uh buying especially when it comes to something so

complex as trading because if you look for competencies internally until you find um a capable Quant who can really program algorithms uh that's that's skill a skill set which is really hard to find especially for uh digital assets as well and and not only the time to Market but when you look at Innovation for instance and um if you purchase uh um trading infrastructure for instance then you can also just see is the company doing advancements into innovating do they do m& are they looking into pre and postrate capabilities are they trying to help my entire digital assets Journey smooth L by it's by by um being able to connect

these various building blocks so that they can seamlessly communicate to each other uh so yeah absolutely I think buying but but how are you buying so you have to to buy in a Smart Way thinking um of the future and making sure that it's aligned with your longterm as well as a short-term strategy what my colleague said before uh resonates because from the more than 20 Banks which we have on boarded only one has built and the 20 Banks which have gone live they took between 60 days to maybe 12 months depending on complexity the bank who built uh took several years and when I look back at

five years ago the discussion with banks was very much like the what and the why today the why you don't discuss anymore it's the what and by by when so I think time is of the essence uh Banks they need to uh be F to the starting line also because they lose assets under management they also see they need to be ready or the future Readiness for cbdc stable coins to be relevant in the in the payment system for them it's important to be ready and Outsourcing doesn't mean that you are stuck we have model we have a model approach that means if over tanks over over time the banks want to insource some of these

Services which could be natural then they should do so so the banks they do business with us because they want to and not because they have to thank you well I'm a little bit preaching to the converted here but uh uh most of our clients are interested in uh uh buying rather than uh than building and that's uh obvious because of the uh sides of the institutions that we talk to which are me me to small size institutions who tend to require specific skill sets to develop their objectives and to develop their journey into digital assets so they tend to come to us with specific problem problems that uh we uh solve and string together for them in order to give them a road

map to to delivery and clearly the biggest elements in that that decision are time to Market and also uh just the sheer pressure on competitiveness in being able to offer these services to their clients because uh as we just heard asset preservation is extremely important and there is at at this stage a feel that if you're not competitive you're if you don't have a solution that is ready to hit the ground and maintain and expand your client base you're going to be left behind so what is happening at the moment and what we're seeing our clients who come to us with this specific this specific request uh based also on another on another consideration

is that there is a journey of Discovery behind that and uh uh internally uh they feel that if they Outsource that process and they Outsource the risk of delivery of that process uh they are better uh positioned to manage the whole uh delivery to not only to their clients but also internally they need someone who understands also their internal processes and their internal uh uh compliance setups they that are already existing and they're not going to change and they need uh someone who can bolt on these Solutions on what already exist so uh I guess that this is basically you know uh uh also the uh the the view from

uh uh a uh uh more of a of an horizontal uh engagement with with clients rather than more of a vertical uh type of thing but clients and in in the end want products that they can sell and services that they can sell to their product to their clients and they tend to be highly customized and highly specialized because that represents their competitive Advantage so that's why they tend to Outsource and uh buy rather than build themselves because building is just not a is is not something that they can contemplate it takes too long uh the uh the the capital outlays are too high and the risk is enormous Jeron we all agree

like what a oneid so now let Deep dive into uh the some key drivers that should be taken into consideration when the decision is taken I want to start with cyber security and I want to start with stoas so cyber security is something we know very well at ad there will be by the way a presentation later this afternoon by the CEO of albor on Cyber SEC but I want to hear uh you Thomas but but building your own infrastructure your own Tech does not increase the cyber security risk no uh how can you manage that okay before I answer to that question I have a short comment to to I I feel a bit like the lonely wolf here

um so the only one that represents uh the build side of things and uh I I I I I agree with that what you said but uh uh only partially because I think if you treat it it depends on what kind of Bank you you are or you will be also in the future um if you treat digital assets cryptocurrencies as an additional product offering to your for your clients then of course you can do this business process Outsourcing thing and then you also and then I come to security you can also Outsource the risk part um and and and and rely on someone who can manage this but if you really want if you believe that digital assets

will be the future and you talk about integrating a digital asset based payment system for instance if you talk about instant settlement trade finance things also uh you want to be able to to Really uh use yeah later we know all this is all comp licated from a regulatory point of view but these regulated defi things you have to build on some decree you cannot Outsource anything because then you Outsource your entire company and then it comes to cyber security and yes the level of complexity increases but the bad news is if you go into this direction you have to completely independent of Outsourcing or not you have to build the

competencies of cyber security of digital resilience within your organization otherwise and we saw this recently with the with the recent Hecks in in in in in the crypto space um this is not only a technology question this is also uh um human or or Social Security things so and and this is only doable if you really integrate this in your organization and and you need competences in in in in in De dimension in in in in each and every Bank yeah but isn't this a problem of scalability then that companies start with a certain size and then at a certain point they reach an inflection point where they start to insource Services rather than

Outsourcing so it's more of a part of the journey but the starting point perhaps is more of a buy versus bill yeah that's true uh and and and and the bank uh should be in the driving seat of the of the of the strategy for this and and therefore you need deep Technical and also cyber security competencies in in in your court team yeah okay me let's assume that the bank decided to go uh on the buy side and to purchase its trading uh infrastructure what are the the key aspect to uh consider uh for selecting the right partner because I assume there are plenty of uh solution available on the market but uh what what should they consider especially um I mean there are

uh rfps which are you know so many pages long or like in the aile you have like hundreds of uh aspects but I'm going to just highlight three so proven security and compliance uh I think it's really important that it's a battle tested solution you're working with they have sock to type two so to type one all sorts of certificates which ensure the client that the solution is thinking about risk management about INF forac about um just helping its clients to be compliant and in line with their Global as well as local um requirements legal requirements then um in crypto and and of course also in in uh trade fights

really important how much are we connected to the ecosystem I'm thinking of um I'm I'm work talking about connectivity here so is the vendor connected to exchanges of course this is very trading specific what I'm talking about how many exchanges how many OTC dealers how many custody layers are they connected to these connections it's not enough that it's it's there but are they Main maintained regularly and if even if the these connections break because it's crypto things break it's it's a new industry then is there a global team who's available to fix these in a in an acceptable uh time so um this is this is absolutely very important as well as um operational efficiency as well as

operational resilience um up time we just touched based on that um then um let me think um I think I touched based on the Innovation which is highly highly important uh for instance that Talos recently purchased um portfolio and risk management tool which is seamlessly integrated into the other parts and uh this gives a modular way for the entire offering maybe someone doesn't need only um trading but uh as in trading execution but they want reconciliation of portfolios as well as reporting tools so I think these systems and if if they are

modular then it's a very nice user experience and it's a smooth way of uh of utilizing um the the solution what the vendor offers thank you now now Fritz so I understand that uh around 20 Banks uh worked with you uh so you have a lot of experience uh working with with this bank so maybe uh can you sum up or give us the the different digital asset Journey uh which which which are how do how do they look for for this this type of Bank either one case or several case uh going all in or you know buy end build maybe uh so can you give us you

share the ex example that you had well the the journey is the destination I think that uh the the banks which we have uh been the partner on the journey really started first with buy hold and sell also because it's quite complex what you need to report to the regulator also do you need an approval do you need to change your orra so start with the basics then expand to staking lending transfer and the like so it's certainly a journey which you have to map out the other thing is that uh we have seen recently that it's almost all banks now go live fully integrated into the ebank ring a mobile app they really bring the

product directly to the end user why is that it's uh and we've seen it uh it's 24/7 crypto never sleeps and clients actually trade a lot of our banks have thousands of transactions every single day and particularly if you don't give advice so it's execution only make it easy so all the banks they now go live even private Banks where you can see they have large large clients fewer transactions you can also do it a little bit handishop the a the integration via API what's also important is that it's interesting to see that the banks then

realize we don't really know our clients because every single time a bank announces that they go live with crypto they realize how many of their clients actually already have crypto we recently had a Retail Bank going live had one of the uh Private Client as sort of retail client 75 year old grandmother called up and asked where she can actually transfer in the 10 million equivalent of Bitcoin she was mapped retail so it really is an ability to become much more relevant in front of your clients and the last thing to share is that uh post Finance uh who is one of our partners they did the recent analysis and they

realized that more than 60% of the users investing in crypto are for the first time actually investing in investment products because everyone who has my age with children their face falls asleep when you talk about the exciting world of uh equity and treasuries but with crypto you really connect to the next gen thank you so I see we already have six minute left so I want to finish with uh one can you please all share one lesson learn learn one do and don't select the maybe Massimo the the the if you have to say one thing uh one lesson that you learn well one lesson is to

understand the client need properly and the key uh lesson is to get the design process right is a design and Discovery stage that you really unearth all the problems uh you really unearth all the uh potential uh uh issues that can materialize Downstream uh everything that is connected to the particular setup of the client so uh if there was a lesson that we learned is really spend a lot of time in the product and service definition uh design and Discovery phase thank you uh thas maybe you you want to add your lesson yeah for me the the lesson this is this is not really a

digital asset uh specific lesson but um if you really want to change um yeah the the core of your organization based on uh in that case digital assets then it's really necessary to integrate this knowledge uh to understand what it means what what what's behind that um also in the business departments to really draft requirements that that are not only requirements that someone else is then executing but that they are really uh um focused to your organization so uh strengthen the team um to do technical driven requirements management this is one of the lessons

which was really helpful and also painful for us but maybe I had one question for you uh earlier you you you talk about core banking system uh can you can you tell us how you you you're managing that yeah we also have a core banking system because we need one but we do not uh put this in the center of our uh processes it's uh there for that what it's necessary but the entire orchestration all the processes uh crypto related processes are built uh by our own okay Emy your lesson yeah I'm I'm going to uh share that but I just wanted to comment on Thomas is that how exciting that you're real life building a bank and uh you're just um in it and

I'm sure maybe in the audience there are other uh people who are in the same shoe they are in the midst of building and that gives me 2019 ch when Signum got its license as well as the other took Bas Bank Amina so it's a bit of bit of a flashback um but yeah just the excitement it's it's um it's definitely here in the room um I can feel it dos and don't um do think of the long-term strategy and scalability I think that's so important that you have this Innovation and and the Automation in mind where you don't want to have manual processes you just want to make sure that scalability is uh possible uh as well as uh we are not um super big

industry yet do talk to to others who are in the same shoe what are their best practices uh who are they working with ask for references because people are so happy to share success stories and uh and Lessons Learned and don't I would say don't underestimate the complexity of trading uh specifically because uh because yeah you need experts to do this 247 so that they Empower you to have a seamless trading as well as pre and post trade experience so that you can focus on your core competencies you can build client relationships you can think about um your go-to market and yeah just just

really focus on your uh core uh goals um yeah perfect thank you and the last two minute for your Fritz well I can only Echo what my colleagues have said map the journey the Journey's destination make those Milestones they're super important buy hold and cell staking transfer lending whatever you want to have on the journey make it a comprehensive business plan why because it gives a lot of answers to what is the infrastructure you need what sort of Partners you need on that journey and the don't as a bank don't just offer ETFs and etps and think that you have a crypto offering thank you and uh also what what I like you said in the beginning um

Fritz is that some of you Bank uh start buying and might uh after in their their the next step of their Journey they might build so I think we all agree it's not buy or build it's buy and build could be a hybrid solution uh luckily we have a some good Solution on the market with a more I don't know five eight year of experience and uh yeah we are happy to have uh you also coming on the market soon as you said am um and uh yeah that's it for for this panel we please stay in the room because uh I think we the next uh fire set chat will be kind of an an an extension of uh of this panel um because uh there will be a real

live example of uh Z cab uh and uh crypto Finance so that's exactly still in the in the in the seam uh with a deep focus on uh on on on on Z cave so I think that's time um almost right on time 25 second Ben go thank you very much everybody please stand in a ro