Dr. Luka Müller: MME – The Law Firm Behind the Rise of Switzerland’s CryptoValley (#316)

Transcript

this is epicenter episode 316 with guest Luca Mueller hi welcome to epicenter my name is Sebastian Cuchillo today our guest is Luca Mueller Luca is a founding partner at Mme now if Mme doesn't sound particularly familiar you're most definitely familiar with their work because they were a crucial player in several token sales which took place starting in 2014

including the most notable one the theorem token sale so Luca tells the story of when a handful of techies and engineers walked into his office in 2014 looking for counsel and guidance on how to raise money for aetherium but also how to set up the foundational governance structure the legal structure that would become the etherium foundation facade Anika and Brian did this interview and having both been part of companies that have raised money through token sales I thought they were very well placed and prepared to have this conversation with Luca so they talked about a number of things like why Switzerland was and in many ways still

is a favorable jurisdiction for token sales the Swiss foundation model that so many projects and platforms have adopted the differences between Switzerland and the US in terms of regulation and contrasting that with regulation in other European jurisdictions and they also talked about Signum a new digital asset bank co-founded by Luca I really enjoyed this interview because it takes us back to the early days of aetherium and there's a lot of great insights and lessons there which are still very relevant today and the current regulatory context before we go to the interview I'd like to tell you about our sponsors for today's episode starting with a brand new sponsor that I'm really

excited to have on the show and that is a Toro now if you're a listener of the podcast you've certainly heard of Ito since we had the CEO Yanni Asiya on the on the show a couple of weeks ago and when researching that episode I thought you know I'll try this thing out so I created an account and deposited some money and I've been using it and I really liked it one of the greatest things about eToro is the social trading aspect and the copy trader feature the way that this works is when you create your account you're presented with Ito rows top traders you'll see their investment strategy the history of their trades over time how their portfolio has performed and eToro also evaluates their risk profile

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couple of weeks what I also like about eToro is that I get exposure to stocks indices commodities currencies ETFs and also crypto in one single platform so to create your account today go to eToro calm that's ETO our o calm and build your portfolio your crypto portfolio your stock portfolio your commodities portfolio whatever kind of portfolio you want to build build it the smart way I'd like to thank each ro for their support of the podcast and now for the obligatory disclosures as required by US regulators this is my personal opinion and is not trading your investment advice investments involve risk eat or

does not guaranteed returns to performance cryptocurrencies are highly volatile please be aware of the risk loss rating were also brought to you by cosmos and I want to tell you about an important change that's coming to the cosmos network very soon on December 11th the cosmos network is due to upgrade from hub 2 to hub 3 as you know cosmos network has an internal governance system and over the last few months a number of proposals have passed and will be added in this new hard fork so there's for governance proposals that we'll be making into this heart Fork first is the Community Fund which was approved and will allow governance to spend funds from the community pool there's also a change to how deposits on

vetoed proposals are burned there's security updates and also an increase in the max validator set size they're going from 100 to 125 alligators so this is all very exciting and it shows blockchain governance at work and it's a great thing to see so for more on that and to stay informed with everything that's going on with cosmos go to cosmos network scroll to the bottom of the page and sign up for the newsletter and while you're there also go to cosmos not Network /g o Z to learn more about game of zones which is the adversarial test met challenge for the upcoming IBC protocol implementation we'd like to thank cosmos for their support of the

podcast and with that here is Scott Attica and Brian's interview with Luca Mueller so we're here today with Luca Merli Luca is the co-founder and a partner at M Amy so enemies a law firm in sook and maybe many people haven't heard of Mme but you certainly would have heard of some of the projects that and some of the work that enemy has done they played a really crucial role when it comes to sort of icos and crowdfunding in crypto doing work back then with the original work with the theorem foundation on the theorem token sale and later with many

many other projects so really and then Lucas been since then involved in lots of different projects from you know starting a bank which we're gonna speak about to working on many different regulatory issues to working with different startups so thanks so much for joining us today Luca thank you so maybe let's start at the beginning what was life like you know once upon a time before all this blockchain stuff came along like how did you spend your days Oh Brian I had much more free time I tell you it was all at that time I was working quite a lot you know lawyers always are busy but the blockchain really changed my life not only because it caught me really hooked on but also

did the amount incredible amounts of work and also from an intellectual point not easy work was as from 2014 for me life-changing you were involved in FinTech even before blockchain right yes I did I was actually in the hole and platform economy already since 1999 I worked for several startups at the the west coast of the US Silicon Valley we had also and it was I was really hard to love when I was looking back into my files already in 2001 we had a or we had a project to issue shares on a web

interface which did not work because at that time you know that was too revolutionary so I advise the whatever had a context to digital transaction and law that was my topic so the beginning was economy then transfer protected in for secure information via and web or Internet infrastructure payment services banking services and always also within I and the speciality on a AML antimony laundering and compliance so that's actually why I actually served into the next wave blockchain so how did that happen I kind of imagined Vitalik in the

rest of the he theorem founders marching into your office and explaining what they were setting out to do can you tell us the story of how that happened yes they can tell it they walked in in the February 2014 in my office and started to talk about decentralized concept blockchain Bitcoin and like and the Bitcoin version 2.0 and I was sweating because normally I I understood digital infrastructures but I had no idea really no idea at that time what they were talking about and interesting to say is that I think it was Charles hoskinson he said you know Luca I mean I see that you you have certain know-how

in the field but you need to have a reading and he sent me a link of a very interesting publication which was issued in 2013 in the u.s. describing the Bitcoin protocol and I was amazed about two things first that this paper was really good really good very easy to read gave a very good explanation of the basics of a Bitcoin protocol and secondly you know in the u.s. they were already writing such comprehensive papers while Switzerland was at that time you know in a deep crypto sleep now nobody was actually really dealing with it so that was I was amazed by it it's kind of a mixed crowd right so

basically it's charged then and Joe and then Vitalik and Gavin would what did you make of them so I mean it must have been funny view for the out putting all of them sitting in your lawyer's office right I tell you at that time I did not really think that they were so having famous blockchain person sitting around in my meeting room at the beginning they were more like Nord nerds type all highly intelligent all with their special character in their t-shirts normally coming directly from a flight some from somewhere you know flying economy class sweating running into my office yes it was a crowd of tech guys

trying to explain me what they want to achieve and for me was at the beginning I had read read in cliques to understand and you know then her then Evita League showed me his the white paper I was completely lost I did not understand a single word at the beginning so I was forced to read in and these guys they helped me a lot and I had really for me it was a chance that I could work with them to understand what would be the an adequate structure to launch a decentralized open source public protocol which at that time was not known apart from the Bitcoin protocol to the world how did they end up for example coming

to you and coming to Switzerland and the idea of creating a foundation was that your idea or how did that idea first come up very good question I'm asking myself you know who really had the idea and I think we all were working on a structure first we thought that it might be a typical AG or GmbH but then it was particularly with Alec who was very strong on this point that he said public protocols should not have an owner and so we were searching to what kind of structure we could apply a structure which works like a smart contract you know it has a predefined structure a

predefined functionality you can load such a functionality with assets and the assets will be used according to the predefined purpose and so that was that was the way why we came up with a foundation structure which has no owner which contrary to the u.s. structure is a legal personality very solid an old structure and very difficult as a smart contract very difficult to change so we then after about four months of consideration we decided it might be the best way to set up a foundation as let's

say as a governance structure element to launch and to maintain and to support such a protocol not only for the initial launching process but also for the whole operation of such a protocol I think having a foundation has tremendously benefited aetherium as a project and I understand why they would seek you out given that they were going to do this in Switzerland but how did they settle on Switzerland as a jurisdiction to set up this foundation in as far as I remember they already made a search on different jurisdictions Switzerland was only one of them

what they particularly loft is first that the Switzerland had a very solid legal framework a long-standing DNA of decentralized way of living and creating laws and operating so that's what they always mentioned you know these we are actually in a country which has in their political DNA already decentralization and yes I think that was one of the reasons why they finally ended up in Switzerland and so I I guess at the time already I mean I remember a little bit back then that securities law was was a concern is that also something that you investigated and look and how did you

look at sort of the this from an international perspective and from the perspective of you know potential securities laws around the token sale of course we had to make an analysis what is it really what we are gonna do what kind of potential laws would apply and you know as a Swiss law firm we could only advise on Swiss law and that we were quite clear so listen I mean we can advise on Swiss law how it works and Swiss law but you know we don't know how it is in other countries so if you have any activities or if you intend to old let's say to market your product somewhere else you have to be aware that

there might be other laws which which will be applicable and for the team was you know was specifically the US was a concern I think only the US was a concern and we were looking for we had advice in the US and you know at that time you can imagine there were 2014 it was also for the US lawyers very difficult to assess what we really have here what is a pro to call access how do you launch such a protocol you know it was difficult to say to what extend really and it's the list I mean it's not solved yet you know CIC we can see five years later it's not solved what it

really is that does do the US security legislation really apply and when do they apply and when not so yes if you are if you launched such a protocol because it's the national project all the jurisdictional aspects needs to be considered and can be relevant yeah and I'm curious maybe you can go into a little bit because there I guess after the etherium fundraiser of course it ended up being a big success and then ichiran launched I guess it was around two years later maybe after the theorem fundraiser that it started sort of happening with the entire IC o---- Christ that in the end ended up becoming massive tell us a

little bit about your involvement there like you know what kind of and you know we work together us a little bit on Cosmo side which you also did so yeah shares a bit like how is that what was it like from your perspective what are some of the projects you're involved in you know how many did you work with yeah you know just the term IC o---- you know at a time when we launched a cerium nobody was talking about I SEOs and actually I never liked this term ICO never ever this is a term I and I never I hardly ever use it you know because it's also a misleading term a ICO as such as a type does not exist there are some common denominators you can say

this could be let's say something which you could say this is a common base of an IC o---- but there's so many different types so many different types of launching projects and some of them you know looking back now or I would say they are clearly yes they Curtis especially under the US law but also on the Swiss law but the really really some of the really old and decentralized launches which we did were clearly not and so back to your question or we did I myself I did not very very much of such launches I concentrated only on protocol or on application protocol launches so I did not many I would say five six but the big ones and I always when I said

you know I will participate in a launch it was always a protocol launch always which are the protocols did you launch cosmos then was they source it was etherium I need to have the list in front of me I'm getting old now Kedah no we did not do the Cardano we just helped them at the end setting up their structure so I assume you learned a lot in the last six years so I mean obviously it's been almost six years since they marched into your office if you had to do it again today you know like six years later would you do anything differently good question I would probably do one thing a bit more differently or two

things I would still use the foundation structure for me still the most advocate structure for a decentralized open source launch of a protocol that's I would not change that's what I would actually have a little bit more as I say a better ion is as I said two things one is I would draft the internal governance rules a bit more details than we did in the beginning so let's say version one foundation was very simple and also the internal governance structure was simple here I would invest more time I would invest more time and I would also propose to the teams to the core teams guys listen spend a little bit more

money you know these young guys in as I know we don't have money for these elite these technical things you know legal stuff you know we know what we do and things like this but you know here they were all young guys you know and I would more fathering or grandfathering them to say listen guys even if you're wrong young and believing in your decentralized world add a little bit more structure to your idea one thing secondly since you have a foundation structure the appointment of the Foundation Council is very important so here I would suggest to the court eeeem that they are very carefully choosing who sits on the board of such a

foundation because this is paramount so these were the two things more structure more governance structure and really be very careful in choosing who your point as a board member in your foundation yeah and I guess that probably both sound very pertinent especially to the whole Tasos episode right where it seems like they were basically in some sort of deadlock for I don't know six months nine months or maybe it was longer and could basically or we were paralyzed know since there was this fight going on between the the president of the board and then the tasers founders yeah absolutely but you still think like

today let's say some the next II theorem comes a lot those similar ambitions you would again advise them to use a foundation structure or what what are the biggest differences in terms of how one would today go about launching server with those ambitions if you intend to launch a protocol as etherium the same way you want to have an open-source decentralized community I think the foundation is still the most adequate structure you can choose however no if you just change a little bit you add some centralized elements in

your project then you might consider to use a another structure like an AG or a gmbh but coming back to your question if you want to launch again something like aetherium I would do it in a foundation I would still use the foundation so tokens layers have become somewhat unpopular in the last one or two years what do you take on this development I think because some of the token sales were really not protocol launches but were yes there were sales of securities for which you need the year especially in the u.s. special approvals and that

got a bit too expensive and also what they underestimated that if they launched token which is considered as a security the trade ability of such a token is very limited because all the trading venues exchanges would need to have another license to deal to actually exchange and to trade such tokens that really worked there was getting clear and clearing to some of the projects and that was it that's was the reason why some of the approaching said you know can we launch it in a way as a decentralized open source project and I for us we say no if it's not a project like aetherium for example then it's not then it's another project then find another adequate structure and if it is

a security token it's a security token you cannot change it just if you trust by naming it delivered differently and I think this was one of the drawbacks you know that you said okay if you look really clearly to one some of the structures they were securities and that beat the market learned that it's more difficult to launch security token secondly there are not so many really good projects around I mean they are but not in the amount we had in 2017 but they're still coming you will see there is there some really good projects in the pipeline can't tell you now but there are some really good projects still coming at the hope they're coming because what I always say you know you

should embrace the protocol developments because the protocol developments they are they are planting the seeds for decentralized world because all the thinking all the development comes from their non tokens their crypto projects do they also choose Switzerland as a base actually yes Switzerland offers some advantage for such projects it's all about such an infrastructure if you talk about such DLT or blockchain infrastructure it is all about trust it's and trust is a very important issue so if you add some other services to run let's say an application or take the example of a of a wallet service

provider you have there a physical storage where do you want to have your physical storage you want to have the physical storage in a very stable jurisdiction or if you have let's say exchange transaction activities which have a potential to be taxed vit taxing and thing like this you want to have any jurisdiction with low vit tax regime so here Switzerland kicks in as a jurisdiction which has a trust reputation and that helped and you know what really helped and I'm very often being asked you know tell me why Switzerland had for such a long time a lead in this space swiftly had an advantage and it was all thanks to helium the tax authorities as

well as the regulators they could early start to really deep dive into the technology and to deep dive in D let's say specific relevance either on the text or legal side and that was an advantage so give you an example if you have to talk to tax authorities to explain them what happens in a token generator or in a token exchange for example in Duke they understand it they understand technology it's easy to access them because they speak more less the same language yes so that I would love to actually dive in a little bit there right because when you started there was no you know there was no blockchain regulations or rules in Switzerland and there were there was no kind of thinking around out so how has Switzerland the wall has a regulatory

environment crypto space you know what kind of guidances rules or regulations have you know have been put forth and you know how has that sort of changed the environment one encounters today first what helped is that Switzerland before this blockchain wave hit Switzerland Switzerland has a very liberal legal system that was is one thing which helped on secondly in the especially in the financial market regulation aside Switzerland has a very formal approach in a way that either it is a security or it is not so this kind of more like functional vague description which we mor have in the

u.s. in the USA which makes sense but on the other hand is also very difficult to get a clear opinion whether something is or is not security here we had an advantage in Switzerland now the second advantage which we had and which was also a little bit surprised to me because I didn't see it in earlier examples in a way like I saw it with on the on the blockchain space especially in 2014 now it's you early in the early days of TLT in Switzerland the Swiss government issued a report on Bitcoin so that what they did is about 170 or have closed 200 pages they made an evaluation on different legal aspects you know to what extent you know a Bitcoin is

regulated or not regulated bitcoin activities are or are not regulated in Switzerland so that was a starting point that some of the departments at the government were starting to think and were starting to write about these new protocols and then you know they follow they were following into hole development and in early 2018 the financial market authority issued the ICO guidelines issuing or let's say proposing three types of tokens and that helped or this helped a little bit to guide all the projects and the market in the right direction and was very helpful and finally what was really remarkable in 2018 in December the government issued a

secondary port on DLT infrastructure and the law and relevance on to all different laws in Switzerland and this was a very interesting report this report set the basis of a legislation project which kicked off in March 2019 by issuing a draft on a new DLT law and not only a new DLT law but also a DLT maybe I'm overstating English about a DLT security and a DLT marketplace license so this in very fast speed the government proposed a new law there was six or eight weeks time to comment these new proposals by the industries which we did and now it's back to the government

to finalize the proposal and we hopefully hopefully and we will have a the fully proposed new draft which then has to go to Parliament by the beginning of next year or let's say the second quarter of next year so Switzerland is getting ready to set the legal basis for DLT applications very good movement but for me a little bit still too slow so it should be faster but it's a good speed for Switzerland for people know Switzerland you know this is really already high speed so I don't want to criticize a lot but just my message to all the politicians you know we need it please work we need it fast so do you think in Switzerland the main benefit is having regulatory

clarity or other laws that are being passed also more permissive than elsewhere the good side is we have more regular clarity that's the good side let's say the negative side is we have some unclear situations especially on the civil law side on the transfer of Rights based on a DLT transaction here we have a unclear situation on the Swiss law and here it's a little bit disadvantaged and the new TLT securities tries to now overcome this gap on the Swiss law that's a little bit downside on and what I also think is what is a potential risk in Switzerland is that as a small country we always need to be very

careful that we are not doing something which is let's say outside of an international standard because the big countries might then increase pressure on us so to sum it up I think Switzerland is on the good path to adapt its regulation to all these new technology to the new technologies but the speed is as I said a little bit too slow so if in mother Swiss a financial market supervisory authority they recently issued a stable coin guidance right yeah so from my reading it divides stable coins into different classes and that determines how they will be treated by the law this is particularly

interesting one because sabre coins you know building block of open on decentralized finance and secondly Libra is also based out of Switzerland so how would you sum up guidance and what do you think the consequences are the guidance are very generic the guidance of a generic is they contain a certain discussion so let's say it's more like an a overall view on what different kind of potential staple coin structure to exist and fill my eyes or doesn't already know and they want to make clear as well to what would be their regulatory assessment of a stable

coin concept as presented by the Libra Association so I think these would be the two main information parts which they wanted to show now on the more generic part you know it's very difficult also to give a guideline here because you know it's not so easy to define what the stable coin is there are so many different concepts of stable coins and if you read the guidelines or later the guidelines of Vilma what they say basically is that every project has to be assessed separately because it's really depending on the detailed structure of such a stable current concept whether it is a payment token or

it is already a fund structure like a collective investment scheme or whether it falls into a payment system under financial market regulatory license it really depends on how such a stable concept is set up I was recently in Switzerland and speaking with a few different lawyers as spoke about if you also briefly once and many people mentioned this idea of an asset token in Switzerland which i think is considered the security there and you know people are probably familiar with the u.s. understanding of securities or at least as a sort of common one where you have this Howey test but this asset token seems to be something quite

different where you basically say okay if there's a token that's represents a claim to an underlying asset then this is an asset token and of course it makes perfect sense like if you know let's say I have a token it wasn't a claim to some sort of gold that somebody holds or real estate or you know some off chain acid that's custody of course it makes sense that this is like something that would be regulated but I'm curious how that plays into the entire decentralized finance space so if you have a let's say smart contract that's custody in something doing something and then you have a token that kind of represents a claim there now an example could be

compound right so you can put ether into compound and then it's going to be lent out and compound gives you this other token the C token which represents the ether that's locked up and the accrued interest so do you think those will will end up being regulated in Switzerland and if so what do you think that will mean for how sort of decentralized finance as a broader space will end up being looked at by regulators again first of all the term asset token is not any legislation which we have in Switzerland so as the token is something which is used as was used first time by FEMA

for the for their interpretive notes which they issued in 2018 so and it's very difficult to say what is really an asset token what we do ademma me we are we differentiate between BCP ones and PCP two PCP one is a token which does not have any counterparty the PCP 2 is a counterparty is a token which is issued in a counterparty context which might give you or can give you a claim against the counterparty either because the token itself does in in the token itself that such a right is embodied or embody it or the token is used as let's say an instruction and/or booking of such a

right in another legal context so it's very difficult to define what is an asset token for example if you have a payment token such a payment token can also have a claim against the counterparty but the functionality is more payment than having it as an asset you know because the asset token is more like you know you I invest it and they keep it as an asset on my balance sheet now if you look how the Bitcoin has developed the Bitcoin as a what we called PCP 1 a counterparty less token used to be a a payment token and now when you see you know for payment purpose to use the Bitcoin slow very expensive high price volatility so I

would record now a Bitcoin more like an asset token so I want what I want to tell you or want to show you it's very difficult to use these kind of undefined terms which you used and afterwards to make a regulatory qualification for me again if we if I qualify a token and you can go to our website you see how our functional approach is on the qualification of tokens you have to go into and dive into the clear functionality of such a token and assess it in the counterparty context only if you do that then you can actually draw a quite a conclusion on what kind of quality or qualification such a token has I agree with you in Switzerland there is a tendency to

qualify such tokens if they have a counterparty context too easily as a security and that's what I can actually mean if you use what you know to a technology which is new and you know at the time the legislature was drafting a law qualifying something as a security they would not even think of something like a token at that time so I give you an example if you say okay I issue a share which gives you also counterparty right because you have share all those rights and you say okay is this a security yes or no I would say yes it's security now if you issue a token which

gives you access to a scariest resort to get it as a ticket for a one-day pass up in the mountains now it's a counterparty right you can use it as a asset yes you can but is it the security isn't security as it was the idea of the of the legislature when they were drove drafting the security laws I doubt it so my message is you know we need to be more liberal and clear also say ok to to what extent do we want to have it regulated as an as as as I want to have it qualified as a security and whatnot because the moment we qualify such a token and security the secondary market looks completely different

because you only can deal with securities if you have a certain license so yes there is a tendency to go back to centralized ation by a qualification of the token so so you're moving for us or for Switzerland to be less formulaic about how to classify these tokens no I mean to take out also a little bit a regional approach to say okay yes according to our framework which is the pre-existing it could be regard as a security but in the context of the space Q's it's definitely not and here that's the dilemma we in which we are now if you ask a regulator you know they sometimes you know or there is a moment

they have to actually issue a policy or set the policy you say shall we now qualify it as security or not and for us you know as advisor you know we sometimes difficult to advise the clients because we see a certain tendency and also certain dilemma on the regulator side and that's why I say you know we need to move either we have a very liberal approach by the regulators which lately there is not tendency if you see what happens after 2008 so financial markets tend to be a little bit over regulated on the other hand you know we would like to have also an open mind that approach how to deal with these aspects and will ask tokens or counterparty tokens which are clearly

not the securities as it was the idea of the old lawmakers so there's a little bit in the context of other jurisdictions so obviously Switzerland was super early to the blockchain party but now other countries are moving in so Alicia Stein matter looks work even Germany to a certain remedy my thick sunrise I tell you what you take on this and what do you think will happen in the longer run on a global scale you see some tendency of standardization I come to this point later on but I'm so happy that the smaller jurisdictions like Malta deeper Gibraltar and the Principality of Liechtenstein that they started to do to pilot to move very good

you know and you know they're the bigger jurisdictions they love a little bit about you know these are the offshore jurisdictions small ones that try to be attractive and love about these these guys but I think I'm very proud of them that they started do it I start to think with all this content thank you to all these smaller jurisdictions it will be difficult for them you know because if the big ones move in and they would get to be more liberal they will have a more a better market and that's what I always say when I took when I'm talking to politicians and stakeholders here in Switzerland you see okay guys look what the smaller's are doing but also have an eye open to the big ones as you mentioned Frederica germany you know they actually implement now in the

enforcement of the fifth AML directive you know they they they set up a new legislation which properly comes into force at the 1st of January 2020 which is a real advantage for the german DLT community so I said you know at France you know France they easily I think in one as a one or two Patriot they made it clear that the securities can be transferred on a DLT infrastructure something which in Switzerland is not really happening at the moment so brilliant and I think the UK are also working on something Singapore and China they are moving also very fast the u.s.

is a little bit defining which authority is responsible for what so we'll probably have to wait a little bit more but once the u.s. is settled as well you know and I believe they will be settled soon because they see the market yeah there will be some pressure there will be some pressure around for other jurisdictions now coming back to your question whether or not we see some standardization F ATF it's this summer issuing the let's say changing recommendation 16 you know also having now the vasp s-- be more clearly defined and and also implementing the travel rules for blockchain transactions they start to do some standardization for the

DLT service sector so we see already some international standardization now limited to the AML part yes I'm very curious how that is gonna play out because you see of course that blockchain and cryptocurrencies and decent trust technologies are also very threatening but you have to existing nation-states and especially let's say the very large states like the United States or maybe European Union you know that benefit tremendously from having a sort of global control and reach of having their financial system there having maybe also the u.s. dollar as a

global currency so there's a lot and I'm curious don't won't they try to kind of clamp down on Bitcoin or tried or in cryptocurrencies and try to use regulations as a way of doing that and then also trying to you know for example put pressure on these small countries whether it's Liechtenstein or whether it's Switzerland to you know sort of harmonize and you know make a joint effort at regulation do you think there's a chance of that happening I think it's you or the younger generation that's also something which amazed me when I was talking to vitalik you know

for the first time he was also a little bit an eye-opener because my generation you know we I mean we were born in a more free world but step by step we experienced that you know based on different considerations you know market failures tax evasion and whatever if got more more compliance was taking over business activity and we had new legislations specially Switzerland for example after 2008 adopted or let's say copied some of the European financial market regulations in a way which implemented new laws which we never knew before in Switzerland so we were all born in this tendency you know to have

more and more and more and more regulation and now your generation coming up you have more like a sense hey guys we have the technology that we can be we can free we can actually now transact and change values without asking the bank without even asking the government to do that and this is really sexy and is actually in leasing something which we have in our DNA it's freedom we want to be free we don't want to actually be told what to do and and and all this protective way of doing regulation that you have a government which starts to think for you what kind of laws we now to have to implement in order to protect our citizens the younger generations they don't want it

because they have probably a bit more enlightened they have more education than we had at that time you have more let's the sense of freedom and I hope because you will be the next generation of politicians of people ruling the world so I hope you finally will run a more liberal world in the future and because actually I myself you know I already when I'm asking myself you know I'm yeah I already gave in a little bit on to all this development of new laws and what we need and how we want to protect and how we should protect in other world now coming back to your question regarding really attack on on a Bitcoin protocol on Libra there are two different things I think the world will

be liberal to protocols because protocols I think what I have seen in the back in the past it's an interesting piece of technology and tokens like Nate real Native tokens which you use for the use of such a protocols government's they are not afraid of such kind of tokens even if they can be used for payments and exchange and things like this and even if they grow however if you see projects like Libre especially if they team up with tech giants now already having such a huge community base and you see what the potential of technology combined with such a huge huge community base can do then it gets

dangerous and then governments will actually start to interfere which they did in the liberal concept you know you have seen what all the governments how they reacted how negative the response was to such a project what do you agree that governments try to preserve their own control under the guise of consumer consumer protection is one thing I mean it's also consumer and investor protection but on the other hand you know and I think this is yes there is a concern I think this is concern which also can can be overcome by time but I think the concern of the government is to losing to control over

their own currency that's I think their main concern so take for example Venezuela you would have Libre in Venezuela you would have an in even a more fast running inflation nobody would use the local currency anymore if you had a possibility to use a stable currency issued by somebody else so here you lose every possible control mechanism of a national bank if you would allow such a system specially if such a system would run on such a large scale you know using the whole infrastructure community infrastructure tech giant so I think

here governments they don't want because they would lose complete control on a very very important let's say steering mechanism of the government economic so one of the things besides you know all of the legal work you've done right is you've also been fairly entrepreneurial and you co-founded a bank named Signum that I think all the full banking license just a few months ago so tell us a little bit like how did you end up working on Signum and what is Signum about actually Bryan was my whole life and to proneural because actually this isn't our family DNA so it was for me as from school on clear that I will have my own company and I was never thinking of a

law firm but you know that was clear I will have I want to be my own boss from the beginning why am Signum signal came out of of what we have seen in 2016-17 that if you want to make let's say protocol or protocol tokens bankable you need to have a bank able to receive hold and transfer such protocol tokens if you do not have this kind of banking layer installed institutional investors will never touch or will hardly ever touch Bitcoin or ethers of the ripples of the world so that was what we have seen and

you need to have a banking layer you need to create a banking layer and a very secure Fiat gateway close to holding such assets that was actually the starting point and not only did the counterparty les tokens but you know also need to have an infrastructure for the security tokens and this was because we have seen already a COS up coming and the sto wave which also then started to go down a little bit and because all everybody saw the risk or let's say they did the challenge of having a secondary market license secondary market infrastructure so both on the side of the countless poem protocol token as

well as on the security token we saw a need to build a regulated licensed infrastructure and that was the reason why we said okay let's try to do it in Switzerland and start in Switzerland so Signum actually holds to banking licenses or banking licenses in two jurisdictions Switzerland and Singapore that's an interesting choice of location why Singapore we only hold one banking license in Switzerland and the capital market service license the CMS license in Singapore now you're asking coming back to your question why did these two jurisdictions we think that Switzerland is a solid trust basis for a banking

service and that's why we start in Switzerland we also decide that we'll start Switzerland wider Europe and we think that the future market is not only but probably in next phase predominantly in Asia because we have seen Asia they are moving very fast for it and that was the reason why we explored Singapore and actually as a matter of detail we found that the whole signal project was started in Singapore during the FinTech Festival 2017 one thing that's very impressive is the ISO you mentioned only started in 2017 there's a full banking license I

remember at one point that years ago looking at you know new banks being licensed in the US and it basically seems almost impossible there to create a new bank how was that process to get a banking license how much work was that how much resources have to go into that it was actually a one-year work with a lot of resources I would say there were about 20 30 people working all the time to set up such infrastructure not only from a paperwork side but also you had to create the whole technology stack at the same time you were applying for a banking license even without knowing whether or not you will get one we had two main working streams we had the we had the regular working stream and just

closely working behind the regular working stream we had a technology working stream setting up all the technology to be able to pass all the security audits which were a pre requirement and finally for the license in the summer 2018 we started with the launch of the project of the real I mean license project and thanks to have really the management team this is a Mattias Infeld and mano l3 it did these two guys they are asked co-ceo they were responsible for the whole management of the project and the whole team and I must tell you I am so proud that we have a multi-jurisdictional sensational team working on it and still working on it

thanks to these young team all young guys highly educated team it was able to have these all these resources available to file and submit all these documents in addition I must also say we were so happy that also the financial market Authority was quite open to learn and was quite open to work together with us so we had many workshops with them we could develop banking cost solutions we could work with them on the AML solutions and that was very very helpful so also during the application process thanks to these workshops we could slightly adapt our application we could also then adapt the technology to see okay this is probably he's going the

direction they want so that was a very very very intensive period and I think some of the team members they worked seven days a week that sounds like a really agile process or regulator if you also raised an impressive seed round right yes we had a very impressive round we were surprised ourselves I must say Signum entered into a strategic partnership with dodge shippers and Swisscom to build a trusted digital asset ecosystem what is the vision at what stage is this at I mean the press was writing a bit too much you know we were build the new

infrastructure it was actually not the idea to build a new infrastructure the idea was to team up you think it was more like teaming up to think what is necessary to make the best use of the technology for the financial markets of the future we had Swisscom we had dollar per se we had Signum and all these companies who were sending the most today the brightest guys to think about what how the infrastructure could look like but it was not the idea that we will create together a huge market infrastructure it was sometimes a little bit in the press you know all while these three companies are coming together to build a new marketplace no that was not the idea it was the idea because you know you had Swisscom as a

technology company who had Signum as a bank you have Deutsche per se as a market infrastructure service provider so actually what for us let's say the idea was after of the partnership was to learn from each other and take back for each of the company what is important to be successful in the future the work will go on we will have several projects we had one project now this summer we had a POC an instant settlement of a Swiss franc token with a Swiss share in a banking environment and that was very nice so we had a ring transactions around four banks sending money on a deal to infrastructure on one

side and sending and settled the share transaction at the same time so these are the projects we will have in future but it's really like we'll have the project to learn and then everybody goes back and they'll execute what everything is useful for their own operation what do you think are the kind of use cases or the products that are most needed one thing would be maybe this doing accounts for crypto companies there's you know maybe doing custody for funds what are some of the possibilities and products that Signum could pursue in the future that you're most excited about as you

said you know it's the custody and transfer services and gateway services for all the protocol token worlds this is already a huge business as such you know and do it more if the efficiently transparent and secure that's one business line the second business line will be changing into the BCP to what we call these security tokens here you can help as a bank on an issuing process then also on issuing digital money there can be a business case there will be a business case and on the custodian services for example you say okay we have in physical custody a sum and asset and we tokenized now these assets so as we click non-bank we have three token engine we have one

token engine with three token classes one is the payment token the other one is the equity token and the other one is the custody token which we'll issue and I think these three categories will serve as a first product in the market however what we see we are very early our all secondary market I mean this the necessary secondary market infrastructure at the moment does not exist six is is also working on it the Swiss Stock Exchange but it's not ready yet even if we have the product you know available there will be difficulties to get access to license the secondary market the infrastructure on the security token side but it will come it will come

you also involved in a number of projects that are kind of adjacent to this or you know complement this in some way shifts so one of them is Dora which tokenizer Swiss SMEs and startups then there's custo digit which is exactly what it sounds like a custody solution and kyc spider which obviously is also a kyc solution how did this come about so how did you come to spin these up as well kyc spot is a very old project I found that kyc spider in 2003 already with a spin-off of the Federal Technical High School it's an AI solution so we

were spidering big data's and extracting compliance relevant information and made them available for the e financial in the industry so we started there and now we are extracting such information on the deal we merged ELT compliance relevant information from DLT transaction with all style compliance information that's what we do and now in kyc spider it was more like a pilot it's not a big company we earn a little bit there but it's a very interesting technology pilot which is now running for many many years already and has a lot of clients Dora was actually the idea we started with Doran 2016 so it's very early already we had the idea to

use now because we saw what the BCP one the protocol world can do and then we said okay now we have the smart contracts we use a smart contract as a share registry let's see what we can do and this is was when we start with torrent and twist come as a also government half government-owned company was very interested and that's why we started to design it I provided the first legal concept as well as founding 2016 nobody wanted to fund it you know at the beginning you know because yeah we don't need that - its what do you talk about it's a very interesting very interesting concept so the issuing of shares on a blockchain infrastructure here still

some regular challenges but we will come around it now cause the digit was another project which we already were also discussed with Swisscom many many many years ago already in 2015 we discussed you know what could be a potential business case also for Switzerland in the future of digital assets and I said look if you look at the structure of a digital asset you have the protocol consensus level but you have also the custody of the private key level so here you have a physical touchdown and the physical touchdown you know is something which is also from a regulatory security and also from a

trust side very relevant I said you know who else then a trusted half government owned Swiss company could better plays a role here then Swiss come you know so I think you should invest in a in a costly solution and I helped them a little bit design also how they should do it that such a costly solution can be used in a banking environment what do you deal with them conflicts of interest that's the reason why I'm not sitting in the board anymore of doubter because you know as a board member of a regulator bank you're not allowed to be in you have certain strict governance

rules and every process or let's say every transaction which involves two companies in which I'm involved I have to step aside I'm not allowed to decide which hurts sometimes because you know I would be more in favor of projects but you know it's good its governance the rules exist and you know how to apply it so there's another Swiss crypto bank that got a license the same week a signal and named sever crypto how does Signum distinguish itself from sever crypto or does it not have to I think from the offering we offer more or less is the same what the difference

is is Ceiba is sitting on an infrastructure of a bank we have created the whole technical infrastructure ourselves so I think this is one of the major differences we are maybe more a tech company and we have more tech involved in our project than saber you know the blockchain space I think you still at its beginning so I we don't have yet for example applications that really used you know on a daily basis by millions of people and you know it's so still there's a long way to go when you look at what the future holds for blockchain you know the next 10 years the next 20 years what is your kind of

greatest hope of the change that we're bringing to the world and whether some fears you have around how it could all play out as well one of the let's say beautiful architectural elements of a blockchain application is that you really can hold yourself assets and you can transfer these assets I mean yes you what might be need to have an custody solution or a wallet service provider for security reasons but finally you get you as a user you get access and you can directly transfer so it's really a possibility that you directly can hold something without any additional let's

say balance sheet contamination or or intermediary and I think this is an incredible development this kind of demo democratization of services or access or or holding property digitally represented I hope that we will have a lot of digitally represented assets which you can directly hold and that your asset or your property is protected that's what I hope in the future and that we can have all different kind of assets on the blockchain now what is my fear my fear is that because it's so efficient that everything can be traded that it will be

too much of financial market regulation contaminated that's a little bit my fear that we have a lot of laws which we apply unnecessarily and we again restrict ourselves that's what I am but my fear is my hope is that we have an more like an open society open for technology and yes if there are any misuses we should be strongly fighting against such misuses but not really covering every every activity under a very burdensome and sometimes stupid regulation well I hope that you're gonna be right and it's gonna turn out like that and bring much more freedom and autonomy to the world and not to end up

being crippled by too much regulation thanks so much for joining us and sharing about all the exciting things you're working on I'm really excited to see how you know Signum and Mme and Switzerland as a jurisdiction will evolve hey thank you Brian Thank You Frith Rica was a nice talk thank you thank you for joining us on this week's episode we released new episodes every week you can find and subscribe to the show on iTunes Spotify YouTube SoundCloud or wherever you listen to podcasts and if you have a Google home or Alexa device you can tell it to listen to the latest episode of the epicentre podcast go to epicenter TV slash subscribe for a full list of places where you can watch and listen while you there be sure to sign up for

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