Trailblazing Crypto Product Development

Transcript

um cool um so we've got a really exciting topic today um trailblazing and crypto product development um and the brave organizers let a salesperson do it so I'll be asking all the questions you always wanted to ask um I hope so thanks so much uh um for joining us today um guys I think um we'd like to try and touch on three aspects um of product development in crypto so the one is like the process itself because it's really interesting for me at least um you know what some of the differences might be or the challenges in developing a product in our fast moving industry compared to say um within traditional Finance um and then we'll try and dig in a little bit

to the products themselves because we have the experts with us so perfect time to ask questions um and then look at um what um we can expect in the future right so um we hit an all all-time high yesterday um for btcs really exciting um and hopefully that means that really pushes the industry forward in terms of new products too so I'll um ask the panelists to do a quick intro of themselves and the companies to kick us off um and just to to keep it interesting if you could have developed one crypto product which one would it be so what did you wish that You' done so we can start with Dan maybe if

you're ready or sure thanks and uh thanks for your invitation um my name Danny cpro Chief product officer at the appeal and one of the co-founder uh we founded the appeal 2018 with 15 co-founders um originally have been uh in the retail um traditional Finance wallet then we pivoted into uh business banking and now serving banking as a service as our main purpose um being fully fintech licensed in Switzerland was the first company that ever received that license and having a Visa principal membership to issue cards for us and our uh third

parties so the product that I would have invented and as speaking there more from the traditional Finance side I thought this uh Libra idea at that moment was really great uh I would have it done more independent not strictly attached to the The Meta world uh so from that point of view an independent Network where you can transform or transfer funds uh over borders that would be something that is quite awesome because still in our days um International payment is one of the big pain points and I think that would be a huge potential to solve

cool Hello I'm Aros Salomon I'm the CEO and founder of uh mon Pelin um mon pin is U basically a simple on and offramp solution uh and we serve two type of clients there is a large retail base obviously that are using an app or the web and we also serve the high networks individuals um mostly I would say 80% on the cash out side right now so like crypto Wales trying to cash out part of their Wells into Swiss private Banks um so we work closely with Swiss private banks on those topics to document the origin of the fund and to make sure that you know the funds are indeed makeable um as to what would be the product that I would have loved to have buil myself

um that would be something like a decentralized exchange like Unis swap um this is something that I'm truly in love with obviously and this is also something we did work on it and and before Unis swap was a thing we did create it one of those maybe we can discuss it later on um somehow we never launch it and I will explain maybe later why cool yeah looking forward to hearing that hi my name is Eva Lawrence I am the head of Amia for figment figment are the leading institutional staking provider we work with everyone from uh VCS hedge funds asset managers all the way through to exchanges uh and Banks to help offer staking services to to them and their clients we also partner with all of the

leading crypto custodians um to offer these Services um I'm London based but I enjoy being in Switzerland uh as well and um looking forward to our discussion today Stephanie and then in terms of the product I think that it's really difficult to pick one because I think in in the industry we're all working on so many different things that every day we're slowly kind of chipping away at achievements improvements within the industry but I'd say maybe a more topical product or launch depending on how you look at it um I I'm really excited by is is Deutsche bors's announcement uh in terms of spot crypto trading um I've been previously working

with the banks who've been trying to offer something like that for the last six years so the fact that they were able to get that off the ground and and launch something there I think is a Real Testament to the team and is a great great progress for the industry as well that's really awesome and uh just so everybody knows I didn't align with Eva beforehand and ask her to say that but yeah um yeah so my name's Eve Holstein I'm head of custody and staking at Bitcoin Swiss we're one of Europe's oldest crypto Financial Services providers around for 11 years now and we started with brokerage then added custody um staking payments lending businesses and most recently uh

investment products um and also very happy to be finally in Geneva live so close but never make it um and actually you took my idea uh I was think of Unis swap uh because um they really enabled all of defi that we basically know and initiated all this creativity on building Financial products um so an automatic Market maker a DEX decentralized exchange but if I would have to pick something else um I'll probably say inventing the ec20 standard was another um one of those initial um

moments which then it also triggered a lot of scams because everybody could build tokens for whatever using that standard but it was also a big enabler for many projects that wanted to get into the token business yeah absolutely and um I think that is really a big topic um within the crypto space isn't it um a standardization and um you know how we all U start to build on the the same base or at least um um compatible base layers so I mean if Bitcoin Swiss I think it's fair to say that um you know when it comes to S of the banking license discussions regulation has always been a Hot Topic um how does that

impact your product development process like do you how do you think about regulation um as you develop new products um I would say we're we working very much like a trafi institution in the way we we develop products um so I would say more than half of the time at least maybe not all the effort but the time that goes into developing new efforts is really dealing with all the legal clarifications compliance clarifications and risk management um and then there's always a certain un there's this uncertainty with uh with many of the decisions because

there's just no no um Court decisions there's no no jurisdiction or anything that you can base on um so you always have to decide do I want to take that risk um and potentially get fined or whatever um or do I play it safe and then miss out um so that's really a large part and very often we don't do things and I think it's most prominent in the area of defi MH because most of what defi enables is permissionless which means I do not in most cases I do not know who else is involved in using the protocol which is by definition an issue talking

about when talking about AML and KC topics so that basically makes a lot of defi ideas impossible and those that are are compliant or claim to be compliant they're usually playing in such a small Niche that there's no real business case behind them yeah and it it's interesting because I mean this is talking as a player out of Switzerland right and actually we're quite far ahead in terms of the regulatory landscape and the legal landscape right um and you mentioned the Precedence I mean also the legal system as I understand it um it's also different in Switzerland that you don't have sort of the the case law kind of um Ro say as in countries like the UK

and South Africa um and I mean either you are looking at products more as well as a an infrastructure provider um um non-custodial staking provider how do you see it I mean does regulation impact your business um when you service these institutional clients yeah I mean definitely um I think you know you've got the advantage here that in Switzerland there is some clearer regulation if you compare it to the rest of the world even to the UK you know someone was asking me that question just yesterday do you know do I think that the UK or Switzerland is further ahead in terms of Regulation and I would say Switzerland is is further ahead has clear regulation that brings you know some things that you have to address and

that you have to focus on as you're thinking about launching new products but also at least it brings some some clarity um and the the other thing to think about is you know well what about going forward do you build products to try and trying to predict where The Regulators will go next and that's you know that could be a a game of chance a game of luck but I think you know you do want to keep in mind um the general guidance from Regulators so there are areas such as staking um if you look at staking say the the UK where there's not uh uh strict guidance around uh around staking the same under ma there's no strict guidance around staking but you

understand um you know the the general view of of the regulators and and what we focus on is rather than necessarily predicting we are conscious of the views of The Regulators around you know smart contract risk around pooling of assets and so we will always look to have an open dialogue with the regulators and bear this in mind when we're building products we'd rather not uh build something that we know although doesn't fall under a particular regulation is kind of leaning towards something that that that they are looking to to regulate on um so we kind of I'm very mindful of that and and that's how we as a company kind of think about this space

although we're not predicting the future we're being kind of considerate into into how The Regulators moving forward and where we think they'll go next yeah yeah it's very interesting because of course you um you might think that it's only infrastructure or you're only providing sort of a technology service but um if there isn't like that Clarity you can find yourself going into the that R and it's also a concern for for all of our clients right a lot of our clients are regulated entities so they need a to work with a partner that is also focused on these areas even though they might not be the ones regulated they still need to be coming at this and you know from that mindset I worked at Morgan sany for eight and a half years um and previously in a legal role and

then trading and and you kind of see how working with large entities that kind of mindset needs to be brought across needs to to apply in crypto as well regulation and compliance you know are still a key factor for for all of us yeah absolutely and I think that um these large institutions might actually have a good chance you mentioned um deche bza to like push um the industry in a certain way um and I think Eve you had some comments and I'd also I mean I'd love to hear your view a little bit around also um you know once you already have products on a platform for example um how that impacts your your process well sorry not once you have products if you already have clients and that are using

your existing um products how that changes your your process yeah thank you um I would like just first to react to to to Eva and Eve um I mean for us what we see today is that finma is indeed very Advanced when it's about the topic of tokenization yeah so incorporating real world asset incorporating shares incorporating bonds and whatever you want um into tokens that's very clear in Switzerland because here we basically regulate substance of a form yeah so we don't care if the form is crypto or if the form is paper or if the form is Excel right um whereas in Europe they decided to go with MAA so it's really focusing on the form itself so everything that looks like crypto then it falls into this regulation yeah um and but when it comes to crypto itself

in Switzerland finma is not that very open today yeah it's still you know they receive a lot of pressure of course from the fatf and and you know there are a lot of things like that and uh to come back to the uh to the earlier topic that was mentioning about the dexes yeah the decentralized exchanges so back in 2017 we created a DEX um we're very proud of this product yeah um somehow our legal conceal they told us no no no no before releasing it you should actually ask a no action letter from finma um that was the worst advice ever um because it took two years so of course the market has moved like you know Unis Swap and popped up and had the success that we all know um and of course two years later after

you know like asking every six months for an answer um we finally got an answer but this answer was obviously basically empty so it was not really a no but it was like a not a yes at all and it was also you know the list of um you know all the enforcement that we risk if we screw up in the process yeah um so of course we didn't release such a product yeah and today what we see is that most of the biggest protocols today they are in Switzerland they never ask permission and nobody now is uh is uh annoying them yeah so that so so that was to to to react on that um for the second question that you ask um yeah it's it's actually tough um if you think of it today we offer a Pure

onof service for users so especially for retail um so it's in order to connect as easy as possible your bank account with the the blockchain world um and now we would like to transition into what we call self custodia revolute so like the look and feel will be like you know using revolute um connecting iands with addresses because at the end of the day an iban is a roting system and an address on chain is a rooting system so we need to build those bridges in order to make it seamless working between the two payment rails um now in that regard basically we're just basically updating that much to product that we are also afraid of um um annoying customers longtime customers that are very happy

with the current product yeah maybe they just don't want that yeah so it's always a bit tricky when you know when you start uh the startup is you're in startup mode you have zero client and you focus on the product then you level of ideas you build things Etc and it go super fast when you're already live you're already serving tens of thousands of clients and and you have to basically it's not a pivot but it's an evolution um the process of evolution takes a lot longer yeah a lot longer first of all you still need to Ser to service the existing customers you need to make sure they're not breaking things because otherwise people will be yelling and unhappy and etc etc so it's always uh kind of balance uh as to like should we basically create a new product should we make the existing product evolve you

know yeah no I can imagine and I suppose it's a scalability question right like um if you start um offering new Miss products and then you have a slightly different um Target client segments for each um product and I wasn't planning to ask you this but maybe a quick vote I mean what's the optimal number of products to have like is that um I think that depends on the on every company so some companies they love to um to multiply the offers and and and some wants to have like the simple version meaning like the one button app you know and there are two schools here so I mean some are really focusing on the one button app because you know easy is the the master of everything uh and some others they focus on power users and power users um they use things that

most of the common world would be would say like it's unusable if you think of it I don't know if people know curve for example curve protocol um uh I I mean did they do it on purpose to have such a front end because it's a I mean I mean for most average o it's it's impossible to use yeah yeah exactly and then some people love it so yeah and I mean if you also I mean as a Bitcoin s you've been in the space since 2013 right you definitely um are a good example of a company that uh needs to innovate and add new products within existing client base I mean how's that experience been um in terms of also the pivot to slightly more institutional base and trying to roll out new products I have

just some spontanous thoughts um number one is to be honest we were very often pushed by our clients to innovate new products and uh I think the most obvious one was how we got into staking so we did do the Ico for a protocol called tsos and Tas was one of the first proof of stake protocols that got some traction and they kind of nuted us into why don't you offer services for that and so we were like yeah client asks uh and now it's uh our second biggest Revenue driver um so sometimes clients actually nut you into that and because we have extremely Crypton native client base um they fall into what you just

mentioned power users uh so suddenly they're like oh um this protocol offers onchain governance voting um we would like to have that um and so suddenly you build um for a lot of those clients sometimes even bespoke and that's really difficult that you don't lose your focus uh you have especially since a few years ago when we started going more into the institutional trapfly space uh the needs are totally different it's like a 180 degree split um so you have the Crypt natives that want always the newest protocol the newest features and everything and then on the trafy side you could actually offer Bitcoin in

ethereum and do it with a lot of integration and they would be happy and you have only a certain number of developers and I think one of the biggest difficults we had or challenges we had was always like deciding on where we focus because we don't want to lose the Crypton native client base while starting to cater for the trafi institutional C base yeah absolutely and there's definitely a bit of a crowding out um impact right and yeah and on the on the on the client side themselves doing something changing something usually means on our side uh we always have to like change contracts and you have to reach out to 7,000 clients and

getting something signed by them within a time frame that's a huge effort uh so we have to focus on making that more streamlined as well yeah no absolutely and uh I mean maybe we come back to it at the end but the other exciting thing is when clients come to you and it's you know or sales comes to you and it's a huge business case huge and in in our Market it's very difficult to evaluate that right like um um so Dan I mean if you look at um sort of the decisions around um a building versus buying um product I know um you coming into this discussion a bit more from an embedded Finance perspective like how do you do look at that like when should you build

versus buy um product well there I think uh we do have a a very good story that was even started before we founded the appeal because make a buy is something that we um considered already then and we found a very Innovative core banking solution and we were very in that's that's something we need to have and uh yeah then we met these those guys from this startup that's a a a blockchainbased core banking solution with um smart contracts for the product definition what could it be better there on the market that's absolutely

topnotch um yeah unfortunately as time evolved um they became as well on the radar from a tier one bank and uh they had to First solve their needs so we got pushed back in the priority list and based on that we uh were forced to build our own technology BAS based on that and yeah so in that sentence it was not a a decision that we took our own it was a decision that we have been forced into today we profit a lot of it um having the technology uh under control having the freedom in which direction we can uh develop our product that's really I think our USP at

the moment oh that's really cool and um the fact that you used a provider first and then did it yourself like was that uh would you do that again I mean I know it wasn't a choice but did it help well I think there is always [Music] um a tradeoff and and I think you should have a a good overview what's what's on the market you should not invest uh your limited development resources in something that you could easily serve from a from a vendor um but yeah in the regulatory environment that's always then the case that if you talk about an Outsourcing it needs to be fulfilled all those requirements too and yeah from

that point of view at the moment I would say uh most of our environment is is more on the build our own system and um yeah keeping there as well the the Legacy freeness so that we not uh getting partnering up with somebody that brings us the Legacy in into our system yeah and it makes a lot of sense and um and on the the crypto Finance side I mean we have a partnership with um with figment actually and um of course we're always the number one client right but but EV how do you look at that right like why would you encourage um providers to use figment or to use um to build um versus buy how do you look at it and and when does it make

sense actually to do it yourself yeah I mean I think staking or otherwise when you're looking at build uh versus buy or or partner um you know you you should really look at the three things so firstly expertise second timing and third risk so we have a room here filled with a lot of experts whether it be custody trading um risk management compliance legal and um you know at figment what we focus on is is staking and staking only we don't have our own wallets set up we've got no plans to go into the custody business we we purely focus on staking and we have around uh 25 people across the globe

doing just that and I think that you first have to take a look at your your team and your your company and say what expertise do I have internally that I could leverage do I have the expertise needed to run custody to run staking to um have a liquidity management desk all of these types of things is it something that I can do um based on the team that I have um and then obviously if you decide that you you want to to build yourselves and you you decide to hire what will the cost of that be if you don't have the expertise already in house and most of the time um you know when you're looking to launch a product

it's not a oneandone you don't build something and then you say okay that's great I've rolled it out I never look at it again we're finished it it's it's um unless it goes wrong of course um it's continuous monitoring management and oversight so you have to be able to have the expertise and the team to not only get the product off the ground but to manage it going forward um and then secondly how quickly are you looking to get the product to Market um you we touching on earlier missing an opportunity and waiting two years for for the regulator to come back with you I think the same applies in in the buy versus build and is when are you're looking to launch this product

what is the opportunity cost of building it yourselves um and how long will it take you to do uh we we often have have prospects that I speak to that say yep Eva I'm doing this all myself we've got a team um they they're going to be working on it yeah we're going to get this done we'll be live with saking in a couple of months and then a couple of months passes and they call me up and they're like so um about this staking it's a lot harder than we thought so I think that yeah you've got to be realistic about timings uh and then thirdly risk what happens if something goes wrong um is it reputational or is it like something like staking where if

you are uh if if you something goes wrong if you do this wrong you you can be slashed that could impact you that could impact your customers so that's also something to consider yeah definitely and I mean I I think two topics that came up that are particularly interesting is this uh you know either as you said you have the pain of doing it yourself or and also maintaining it right but then otherwise you have to do the DD on your Outsourcing provider and as providers we all know um how painful that can be and I imagine depends who you speak to within the organizations as well right it organizations always want to build it themselves and business so like please can we Outsource um maybe just as a comment uh

what you also have to consider is how much talent is around and I think there's hardly any developer um field that has as scarse resources as the blockchain related developers so you almost have to uh find somebody that helps you out because it's really really hard to find developers at least our experience and and look how you can utilize other people's um uh other people's work right so for example we have apis that are made public you could take part of your own infrastructure use apis from others and and kind of build the the midpoint between doing all the work yourself and

utilizing what other people have done and utilizing that expertise and that uh those developers yeah absolutely and uh this uh focusing on your API versus UI is also interesting topic right within organizations if you have different client bases and yeah um and maybe we could touch a little bit on the the specific products within your businesses and I don't know if you want to kick us off um or know I had um a good look at your website before our discussion and our our preall and I uh yeah would love to hear a little bit more because as you said it's um you know you're doing a lot of cash out and there's a bit of a pivot within the business so maybe if you could each tell us a bit starting with

ano about your sure maybe your favorite product in your business no I mean like we we we cover a large Spectrum to be honest so I mean um we started with the tokenization aspect um so we're quite well known for being the first company to ever incorporate its shares into tokens yeah um because of course at that time there were a lot of initiative for that but it was mostly private contractor agreement right so it was just a a contract between the issuer and the token holder and if you looked at those contract at the time it was mostly a donation token because you you know there is always in the contract something saying like oh by the way the issuer can change its mind at any point in time for whatever reason yeah um so the idea was really to change that craziness of iOS and all those things at

the time and was to say no let's you know I mean let's not bring another shitcoin on the market but let's do something that makes sense and that align values with everyone so we said okay let's toonize shares and let's focus on that because then people would buy the same shares as we Founders do own so basically it aligns all the incentives for everyone yeah so usually on on traditional token Market the incentive of the company is more to dump as much as possible because it's a business model they earn money out of it we don't I mean it's shares so there is no there is no reason for me to devalue my the value of my own company right so so that aligns everything yeah so there's no I mean on our side for example there's no share class different share class so the crowd owns the same

share as I do yeah so that was really the idea and that has proven to be quite successful so since then we have helped a lot of companies to do the same um and we help them on several aspect of course the technical aspect um and this is something we quite part of it's called The Bridge protocol um basically we work also very closely with cmta so the the idea of the bridge protocol is how can you embed rules so by using a rule engine in order to restrict the transferability of any token based on a set of rules that could be first compliance regulatory but that could be also functional for example shares you know sometimes you have a shareholder agreement that you have in place you know with tag alone drag alone right off refusal and all those CLS that you can

indeed pre-program into it so so that during the life cycle of your token it would respect the the sholder agreement yeah um um for example you know you have employees uh you want to give them shares but you don't you don't want them to leave the next day with the pile of shares so maybe you have a vesting period over five years with maybe a cliff at the beginning and so stuff like that you know so that's really um amazing how you can create a digital cockpit to Pilot a company today you know and and that's what we do so on every year um we organize our annual general meeting in our wallet so that means that if you own if you own at least one token so it's called The NPS token the mob shares if you own at least one then you have access to the public

room and when you access the public room you will see me as a president obviously presenting and then people can ask questions and then of course then there is the onchain vote you know but I mean it's boring vote because it's like you know like allocation of the profit and loss and reelection of the board Etc but at least for the governance part you know people are having a digital experience of it you know and today of course we need that because we have like thousands and thousands of shareholders of course we won't rent P Expo to to do our annual general meeting so that's something that that you know that that's something that we we like a lot um that's not really a business today to be honest it's more philanthropy um everything is open source um um and basically anyone can do it on their own

yeah with cmta they have created the blueprint so it's very easy for them to learn and do it on their own the tools are completely free and it's open source um of course at the end if they want to raise money they need companies like us or like bit countries to actually do the the the compliance of it so documenting the origin of the fund having a kyc on each and every participant making sure that your funds at the end are bankable yeah so that's really the the added value of the service where we do have a business so at that interface really between like the the crypto and traditional world and it's actually really exciting to hear about um cases where you not just um creating a duplication right where you have oh here's all the traditional legal contracts and we just like embed

something you know and you actually are um removing that redundancy which is very cool um and just being a bit um conscious of time um Dan we said we'd also talk a little bit about what you were most excited about going forward in terms of new um products in the embedded Finance space yeah embedded Finance that's our main topic and uh as well our most popular product and I think there um in particular it's our card as a service solution we are rolling out now uh for private Banks um that's that's very exciting for us because traditional offerings for specific P private Banks or could be as well web 3 companies they

are very limited in in terms of uh uh customization tailor made products and and we with our solution we have there really a complete new approach um so whenever it comes to um issuing cards debit cards credit cards prepay cards that's something we think really that we have a found a new way how to resolve that part and um yeah I think that's uh really something we really looking into it and um yeah upcoming next month uh we will see how it evolves and how many banks we can convince to follow our our process there and uh open as well to uh have discussions about cars for crypto

companies yeah and um I mean you mentioned um A banks a bit but I suppose it's a lot of um potential use cases with corporates who want to use you instead of um well as as a to have digital banking embedded in the process right indeed there is a study out um especially for the European market that to tells that uh within the next three years there is a revenue potential about 300 billion euros around and um currently for example in UK okay there already 20% of the companies are using embedded Finance products this number to be expected for growing up to almost 70%

within the next couple of years I think embeded Finance has their a huge demand and a huge potential and we already feel that um so yeah our sales pipeline is quite full cool and hopefully there's some opportunities for you to do something with um Aro to get you into the crypto space too right so that when we have this conversation next year then I'll ask you all the crypto questions cool um and uh maybe from you guys does anybody else want to talk about what they're most excited about going forward in terms of products that you have on the pipeline um from our perspective we are pretty excited about um the progress that we're seeing in terms of igen layer

and reaking I mean obviously the first hurdle for some firms is understanding e staking um but as soon as they get past that uh I already have some of them calling me up saying okay now I'm staking but I want more Revenue I want more I want want more rewards um so I think that anything where people can restake and and more rewards is obviously instantly attractive to some people I think there you know be caution to be exercised but I think that the progress there is very interesting um we are also the first validator to be working with the STA found um so we will be launching U essentially Bitcoin staking via the stack token that obviously opens up a whole other part of

the market that are long-term hold of as holders of an asset anyway um to U generating additional returns by by holding and staking their assets and that that will be via the stack token itself um so that's interesting exciting I think you know as uh as an industry overall this um um this year feels promising it feels like there's some really interesting interesting and exciting new projects launching feels like we kind of just come out of of a uh of the clouds up up up above a little bit and and so I think for us not only the stuff we're working on but just the industry in general was it seems like a

positive Year I hope so then I can just confirm the excitement about I layer and and stacks we're observing both of them espe espcially yield for Bitcoin is something they all have been like waiting for forever um adding on to that I think on our side uh the the banking or investable products is where I believe we will have a big hopefully big success we're actually uh end of this week we're launching our first uh ETP um oh cool our Insurance Partners launching it um basically while and uh that's based on a um blueprint index issued by stock so Contigo so Europe's

biggest index provider where we are basically we built that index with uh with stocks so it's a basket of blue chips and it's basically Bridging the tradire with crypto and there's been a lot of etps around I think there haven't been any etps with baskets with that type of methodology behind so hopefully repair yeah that sounds really awesome I think um so as we sort of come toward an end I think we could probably summarize to say that even though we have a number of actually fairly different companies actually um with the diverse products that there's a lot of

um similar challenges within at least the the product development process um and one of the things that stuck out for me is that um you know there's a lot that traditional Finance needs to learn from crypto but maybe um as we start to develop in a regulated environment as we start to develop with clients on the platform maybe the things that we can learn from tradire as well um and uh yeah very excited to to hear that um there's a lot to look forward to in in 2024 so um thanks very much for the time and uh the engaging conversation thank you