Widening Crypto World: The State of Global Crypto Adoption

Transcript

well i think we'll get started good evening everyone welcome to today's special webinar focused on the topic of crypto adoption my name is ian simpson from bitcoin swiss and the title of today's event is called widening crypto world uh the state of global crypto adoption and this is an event uh co-produced by the crypto valley association together with bitcoin swiss it focuses on our quarterly themes report which we publish at bitcoin swiss of the same title and tonight we'll start with a presentation from our head of research dr raphael huber who will talk about the paper what is

going on with crypto adoption what we see and what we might be able to expect in the next few years and also some of the driving forces behind that of course if you want to read the paper itself you can find that online at our website at bitcoinswiss.com but raphael will be walking us through the paper and then afterwards we'll have a panel discussion with some great panelists from the world economic forum from genesis from linum labs so we're looking forward to that very much there's also a chance for you as audience members to ask questions we'd ask you to just drop those questions into the chat um here in the event and as time allows we'll take as many questions as possible

and hopefully have a great discussion so with that i'll turn things over to dr raphael huber who will be presenting the paper and talking about crypto adoption yeah thank you very much ian uh welcome also to everyone from my site let me just quickly share my screen all right so it's my pleasure today to present to you the our latest bitcoins with teams widening crypto world the state of global crypto adoption and i would like to start things off with a quote um from naia poukale the president of el salvador and that of course el salvador the first country to adopt bitcoin as legal tender

that this is going to be good for the country for the people for investors and good for innovators so um how did we actually get there what is the state of global crypto adoption um to guide you through the presentation a little bit we'll start off with a short introduction of the topic what actually what is actually crypto adoption what do we mean by that there's two types either the investment type or the grassroots adoption by retail payments and so on then this is really a global phenomenon we'll have a look at the view from developing countries as well as from developed countries and then speak a little bit about the global crypto nation and uh what this whole movement actually

is then we'll conclude with some questions that often come up um also in in terms of will crypto be banned will crypto be strongly regulated and so on and where lee does this all lead in the long term for adoption so the big news this year of course has been el salvador adopting btc as legal tender on june 9th one of the reasons that there they actually did this um was that a lot of el salvador's gdp is relying on remittances so about 20 which are much cheaper and much easier to do using bitcoin than using traditional payment rails another advantage of the move is that

currently more than two-thirds of el salvadorians are unbanked do not have a bank account and with bitcoin you basically get a bank account in your pocket on your smartphone always accessible very easy it should also foster economic growth and more foreign investments being such an early adopter as a as a whole country and if you would like to become actually an el salvadorian and get residency there all you need to do now is to invest at least three bitcoin into the local economy and you will get the residency permit they didn't just uh adopt bitcoin as a currency though

they also tried to support the infrastructure with renewable geothermal energy mining so uh the president announced um a 200 million dollars mining program and that they're going to build using energy coming from the local volcanoes now for many in the crypto community this has been a watershed moment something that was long expected but so far didn't happen and now it actually dated it was the first country to do so worldwide and yeah this is basically the first stepping stone to real mass adoption of course not everyone was equally excited about this so there has been some backlash from

policymakers such as the imf saying that this it's actually not clear whether um salvador can benefit from the same support if they're using also bitcoin as legal tender and there have been a lot of positive or there can be a lot of positive societal effects from doing this such as easier access to banking services bank in your pocket easier remittances but also access to a harder form of money than maybe some of some of the government-issued currencies i will speak about that more in just a minute what i think is also important especially with the recent focus of the mainstream media around the big

bitcoin energy's consumption and this whole esg topic with institutional investors getting into the space is that yeah people mostly focus on the e but it's not all it's not all that there is to esg so um these societal positive impacts should also be considered now crypto is a global phenomenon and this is actually clear if you look at the data it's crypto is being used in more than 140 countries as the latest research of using on and off chain data shows the grassroots usage so really by uh by black people as a means of payment and so on

um is highest in in the ukraine russia and venezuela and it's used as a store of value for remittances and increasingly also for business transactions now looking at the different parts of the world if we look at africa and latin america and there we have mostly low volumes but for the people there it's a high value add because they have uh somewhere to put their money to maybe earn a little bit of interest be that in bitcoin or any other cryptocurrency maybe even stable coins and that is not easily accessible otherwise then asia is of course a behemoth in the crypto space it

accounts for one-third of the global activity and also in asia stable coins are very important um especially tether as we'll speak about in in a moment uh china in china many people are using tether to actually do business transactions and also some cross-border payments in north america and western europe people in getting involved are mostly investors they're doing it for investment purposes but also to build out the infrastructure actually and of course over the recent months we have seen increasing interest from from a professional investors side from institutional investors and crypto is now i would say relatively firmly

in the minds of people as a new asset class then in eastern europe people are using it because they have some distrust in government and in banks in general it's not so [Music] it's not so rosy as it is as we sometimes think it is as as somebody who is swiss it's not like that everywhere in the world and but in eastern europe it's also used um for illicit activity but to say this um or to to to mention this again the illicit use of cryptocurrency in the grand scheme of things is minimal um both within the crypto space so looking at the percentage of transactions that

are actually related to some type of illicit use it's minimal and if you consider that the whole volume of uh of uh crime related uh monetary transactions um then it's it's really a non-factor so this is another picture that is sometimes uh painted a little bit differently in mainstream media but if you look at the data the illicit use of cryptocurrencies is really minimal and for me this always makes sense it it it doesn't make sense to use cryptocurrency because you're basically recording all the all the illegal activities that you're doing on a publicly available lecture um for many many years to come now if we look at the individual

countries um and their adoption like i mentioned the top three are ukraine russia and venezuela but also the larger countries like china and the us have shown significant crypto adoption people getting interested we have some participants also in africa kenya south africa and nigeria and then some many more countries that have slightly smaller percentages than these top ten now if we look at the developing countries what is actually behind this activity like i mentioned a few times already the remittances is a big part um using crypto for that is much cheaper than what you typically get typical

rates are around six to nine percent sometimes even higher within some regions and uh with crypto you get a basically a fixed transaction fee um that can be much much lower than these high percentages and sometimes it's also the only option um so let's say countries may be cut off from the international banking system due to sanctions or so and so on um then crypto becomes the only options and people will of course do whatever it takes to send money home and support their loved ones it can also act and be seen as a store of value especially in countries that have high inflation rates often there the

the access to some other currencies like the us dollar is also not so easy so crypto offers a way out or at least acts as a bridge currency we have this for example in argentina or venezuela and there has been a very nice report that we also mentioned in in in our themes and that studied uh this this activity by tracking volumes trading volumes on these currency pairs um during power outages and you can also look uh if if you also include staple coins um then china is an important is an important player

in the whole market tether is used very much there china china has some capital controls that is sometimes uh or sometimes prohibitive um for business owners and they use crypto in this case mostly tether to circumvent these controls then another trend that can be noticed is that activity in the in the crypto space is typically growing uh with increasing distrust in the government so during political turmoil and so on uh in this case uh is then often used to replace some older already existing system within local communities such as using vouchers to

put to pass on to each other but it's all not all related to negative effects basically it's also used increasingly for business transactions for example cross-border trade between developing nations and china and one important player in this whole in the in the market in developing countries are also the peer-to-peer exchanges so the way these operate is is like a typical exchange except that they do not have a matching engine so it's more it's more seen like an ebay for crypto where you can pick uh yes i would like to buy uh this much bitcoin for that price and uh some names um that hold a significant market share in

this market are packs full or local bitcoins now the last point which is uh something that we typically associate with grassroots adoption is retail payments one example is el salvador's bitcoin beach which is a coastal region that is basically entirely doing um for doing their business in bitcoin you get paid in bitcoin you pay in bitcoin for your services um for for services and goods that you consume but also outside of el salvador and there are some nigerian companies that allow you to pay for example for your mobile phone bills

um through bitcoin and there are businesses in kenya that increasingly use crypto despite their central bank actually warning about the volatility of of cryptocurrencies now the view from developed countries actually still very much focused on investment um but there's also a growing uh interest in in other aspects and where crypto can actually add value in the long term so there's this rising interest can be seen both in the aspects of blockchain use cases some of which we covered in the first themes that we published actually and then also for investment

purposes by corporates which we covered in the second team so i will not go much more into detail there an interesting statistic is that one third of a small business of small u.s businesses accept crypto for their services um which is i would say quite a significant number already um then also in in switzerland switzerland is of course still a leader with the crypto valley and japan has also been historically important and keeps being important since it allows crypto as a means of payment and it was uh the country that had the first large bitcoin exchange with mount cox which then unfortunately went uh

went bankrupt and caused some pain to many bitcoin holders i would say another another interesting step that just came out very recently was that the visa crypto card spending has now topped 1 billion in the first half of 2021 so that's that's um quite a high number by itself but it also shows uh that the growth is actually significant the demand is there for these types of services to use this new uh this new payment rails and then your your crypto investments also productively in your everyday life now last but not least of course there are also some people

um taking their salaries in crypto for example some nfl players have been very vocal about this and uh trying to support this whole um this whole movement now the global crypto nation what is the global crypto nation it's basically a story of shared ideals so what people into crypto typically like is that it's a it's an in it's independent and it's a natively digital currency and it provides access to financial services especially in uncertain times which can be important for developing nations and in the developed nations it's more about

the uneasiness with the current system so nobody really knows where this big experiment of money printing goes in the long term um we have some ideas but we kind of know for sure and just in general that the current financial system that we have is rather old already there haven't been much changes to it over the past 10 to 20 years settlement times are still very long and haven't been upgraded despite everything else being digitized and becoming faster and faster so having cryptocurrency um just as an option is valuable by itself then it's also it's a global community it's permissionless to access

and it's mostly people trusting in the logic of code and cryptography rather than some some government or some institution like a bank the new this new infrastructure is also innovative um i would say the innovation in crypto is happening at an astonishing pace it's very efficient in terms of settlement so you do not have to wait for uh two days until your transaction is through typically this takes uh seconds or minutes and it's it's inclusive due to its permissionless nature and as such this can also be a catalyst for new jobs for economic growth and bringing the whole world basically

forward now one issue is of course with that uh it's innovative and all that but it challenges the status quo uh it throws up some questions whether but this is actually this is the way that we want to go and this brings brings also with it a lot of regulatory uncertainty we have seen some improvements of this over the past years i would say mostly the past one and a half years or so but there's still a lot of open questions and a lot of gray areas that we're not really sure how to deal with and the question that every country basically needs to answer is do we want to embrace cryptocurrencies and blockchain or do we want to

rather lean towards a ban and this can also be some sort of soft bands by putting some really draconian taxation laws on it and so on which would lead to people not being able to use it as freely as they would like to and just a little bit more on this question and this is also the conclusion and the big question to answer is actually just is there long-term value is their long-term value created for the real world by cryptocurrencies and this is for me this is incredibly tightly linked to the question of will it be banned because of course many many people are afraid of a full government ban and what it would do to their investment

but also to their to the industry as a whole and i would say that if there is a long-term value that is created and i'm convinced that there is then it just becomes a thing of game through theory whether countries are going to adopt it so if there is long-term value to be captured by adopting cryptocurrencies and by embracing this new technology um then any country that that bans it will stifle innovation and it will be at a competitive disadvantage and if you look at the history um basically uh whenever a country wasn't aware or or didn't jump on the train of a new of a paradigm shift they were basically left behind and lost

part of at least at least part of their share in the global economy now the value that is being created that we can already see today in various countries is for example in terms of payments in terms of settlement um we can see new business infrastructures um build new um hierarchies basically new new organizational templates such as decentralized autonomous organizations or dows and you could even see in the long run um entire circular crypto economies building on top of this a whole new infrastructure what i think is also important to mention is that

crypto and fiat are not mutually exclusive in my point of view for example if you have a cpdc a cbdc that is interoperable with a public blockchain and can be used to access this new infrastructure then this will be very valuable and we are seeing this today already that the demand is there for something like that by the explosive growth of stable coins there are now more than 100 billion of digital dollars already circulating um on this new infrastructure so the demand is there and the question is just when our country is ready um to embrace this and to connect and their currency more directly and to this to this open infrastructure

of course there's also a large vocal and powerful community building behind cryptocurrencies and so that also speaks against the ban at least there will always be a part of the population that embraces this shift and that is willing to willing to adopt what's coming and i would say to to round it all up this next stage of uh where our cryptocurrency is going to go has really been kicked off by el salvador adopting bitcoin as legal tender and it will be interesting to see um where we end up in 5 10 or maybe even 20 years so that's already it from my side thank you all very much and i'm open to taking any questions of course

thank you very much raphael that was super interesting thanks for the overview um the complete picture of the themes paper again you can read it for yourself later but um we'll we'll start the discussion and maybe i'll just kick things off with one question to you from my side the paper highlights and you highlighted also just now developing countries developed countries this is just in the natural world or or in in normal terms there are there are great divides um where would you say the actual balance is when it comes to crypto adoption is it actually be driven being driven more by grassroots people

using it and seeing the potential to change their lives fundamentally or by investors who are perhaps bringing large amounts of capital and raising markets from the developed countryside i think i think both play an important role so um if you if you have just the one if you have just the investors but nobody's actually using it then where's the long-term value on the one hand but if you don't have the investors um i mean certainly uh certainly it is very clear that um of course people are building and building also in uh when markets are bearish and some developers actually have said that this this is the best time to build

something because you you can take your time you're not being asked by community all the time when when this when that and so on but i would say this also attracting capital um makes it um yeah makes it very profitable also for talent to go into the space and to engage with what's possible there with building new things so i would say both are important um of course in the developed nations we we are looking more through the lands of an investor maybe and in developing nations more of more direct use for for everyday life just having a savings account that doesn't lose

uh 40 a month to inflation and while being cut off from the u.s dollar as an alternative store of value um is is certainly something to consider and yeah so overall i would say both are equally important and just to follow up to that um of course as you said in developing countries it's maybe people looking for a quote unquote better way of survival versus people in developed countries looking for a way to get ahead but do you think that blockchain and crypto offers an opportunity for that to level out so that people in developing countries actually can do investment more easily and actually

get ahead faster yeah i mean certainly market access is is is free in crypto you can do whatever you like more or less and that's not something that's guaranteed right and um i would say um yeah so over the long term of course this will level out but uh maybe one thing that i should add is that in some cases you can also see see this being relevant in the also in developed nations so for example there has been a d5 protocol maker daw which has actually given a loan to a real-world business that is now building some

auto parts shop in some part of the us and you can already see how simple it is to get to get a loan um just in this new infrastructure you can just you can go to the protocol deposit your collateral and get a loan instantly without um going through uh the hoops of what you would have to go through at a bank of course that's that's all over collateralized loans so that's a little bit different and the types of collateral is mostly cryptocurrencies today but i think this is just this just points to where this all could go in the future if you could easily pledge your assets uh maybe have them represented by an nft on the blockchain and easily get a loan because you are in need for some cash we'll take a couple questions from the

audience one is uh of course kovid how has kovit in your opinion affected adoption some of the numbers maybe that you showed were pre-covered or maybe not i'm not sure what what do you think the impact of the pandemic has been on crypto adoption i think it has led to an acceleration of of the adoption so like in general we saw that people are that that this trend of going fully fully digital like having like we are having this uh this event now has already started before but kobe was basically a catalyst for all of these people are now very comfortable working from

home they're very comfortable paying with something uh without touching anything credit cards and so on smartphones and i think it all just it it was a catalyst in the sense that now it feels a little bit more natural to just have some money on your phone um or your hardware wallet in some cases and then just on your bank or in your in your analog wallet so to say so i would say it has been a catalyst it's certainly been also a wake-up call for some that have ignored this for too long and um yeah i would say it's one positive thing to come out of all this hardship that came with code

and one other question we'll take before we move to the panel discussion we've seen some actions by larger banks including barclays block-in transfers to binance and there has been some resistance which you mentioned also in the presentation today how do you think that actually plays out um when it comes to crypto adoption is it kind of like um you know the lady death protest too much um banks are trying to to to fight hard but in in vain or will this actually have an overall negative effect on on crypto adoption well you know this type of stuff always reminds me a little bit of this old

saying of first they ignore you then they laugh at you then then they fight you and then you win um of course if a bank if a bank is reasonable um then either they will try to jump uh on the trade and get at least build up the knowledge about what's coming as fast as possible and see how they will need to adapt their business model um or they will try to fight it as has been the case of course now with the case of binance it's a little bit special since they also um yeah they they have chosen this uh headquarterless uh setup which has caused many problems to regulators um actually getting good grasp on violence

and and like i said the regulatory frameworks aren't there yet and they aren't well established or well known so so of course there will be some precautionary measures that uh some banks might take and this i mean this is also nothing really new so banks have been very careful um interacting with with anything crypto related and maybe because of this narrative and it's just a narrative nothing more that so much crypto usage is somehow related to money laundering and uh yeah i mean that's that's that's how i see that the whole thing and long term um

yeah if there is going to be a fight then this type of stuff is not something will not be something unusual [Music] very good um there are some more questions in the chat but i think we'll we'll move directly forward to our our panel discussion thanks again for the presentation raphael you'll stay with us i'd like to shortly introduce our three other panelists who are joining us today from various locations around the global crypto world so to speak first of all we have ashley landquist she is the project lead for blockchain and digital currencies at the world economic forum then we have paula pettit head of

business development at linum labs and finally also noel atchison who is newly the head of market insights at genesis trading previously she was the head of research at coindesk so a warm welcome to all three of you glad to have you with us today um just following up on on raphael's observations and and presentation of of the themes paper uh i'll throw this question out to all of you because we see different aspects of of crypto adoption whether it's payments it's remittances it's now legal tender in el salvador but we know that maybe in developed countries it's mostly about investments

and it's kind of hard to come to a a clear-cut definition of crypto adoption so in your opinion or from your observations also from the work you've been doing would you say this means that because there is no single definition or a single metric crypto adoption is actually expanding even more maybe than we can quantify is this is this um is this something that's maybe escaping the notice of some people how would you how would you look at that maybe you actually can start thanks ian and thanks raphael and thanks to crypto valley association for having me looking for this looking forward to this conversation

and in terms of adoption some of the things that i think we could talk about and try to measure really really getting past or really thinking about payments perhaps and use of decentralized applications and investments to some extent and i don't really have the answer as to which one of those we should be monitoring but um you know investments alone prob to me doesn't signify adoption because i think the cryptocurrency ecosystem we think of adoption is like more mainstream use to some extent for payments probably or at least decentralized applications

around the world um and i think part of the reason we don't have all very clear data on payments usage beyond investments and dapps is or part of the issue is that i don't think it's very high i don't think cryptocurrency is being used very much for payments um around the world i could be wrong but i haven't seen data that would point to that some things that i don't think we should use for metrics are a total value locked in defy applications some of these terms get used sometimes and that can double and triple count actual money in d5 because of recursive lending

where basically just repeating the use of the same money multiple times to be counted in that measure or things like exchange volume in trading trading exchange volume a recent academic paper by economists at cornell found that 70 of the trading volume in unregulated exchanges so basically non-us and other unregulated exchanges is wash trading so that's um quite significant of the the exchanges trying to up their own trading volume by trading in their own books so i'll stop there but i actually uh wanted to mention that i think that there's two sides to the cryptocurrency story

and representing the prospective war of the world economic forum i speak with a lot of policy makers and i also do a lot of research on cryptocurrency for financial inclusion and for other use cases and i actually disagree with a lot of raphael's points we can talk about those a little bit later but i strongly disagree that there's an axiomatic argument for cryptocurrency being better for remittances actually i just pulled up world bank data on el salvador and it's only 1.6 to 2.9 percent uh to send money from the us to el salvador using traditional means with fintech and western union and those providers so you really have to measure okay

what's the bitcoin transaction fee involved here and what's the exchange fee from going from us dollar to bitcoin then to be sent to el salvador and then in el salvador if there's an on-ramp off-ramp exchange fee or other cost for its use in the economy if it's not accepted because it's not required for everyone to accept it um then like all of those total costs have to be added up i also think that there's a little too much of an emphasis on el salvador being presented um i don't think there's any reason to think that it means there would be widespread adoption of bitcoin even in el salvador or elsewhere for instance there was actually a coindesk article

that found that 65 of respondents in el salvador said they would not want to be paid encrypted in bitcoin 46 knew nothing about bitcoin and only 20 approved of this decision and of course bouquet the president there is known for certain acts like uh bringing in the military to the legislative assembly to push his agenda and transparency international and the us have found him or several members of his administration as being corrupt so we have to think about all of these factors um and then lastly related to illicit use um you know even though bitcoin i agree is

very traceable for illicit activities i'm not sure why it could why it would be used uh the fbi certainly has no issue finding those criminals monero and other more privacy oriented coins are being problematic for ransomware around the world and i think that's a serious issue and i think um yeah that that shouldn't be uh forgotten about okay i've said a few things a few more things but i'll probably stop here thank you sure thanks ashley let's jump over to to noelle um just just coming back to to adoption right how how how should we actually think about it and um maybe you have some to respond to also what raphael presented or some

points that ashley made what what is your perspective uh thanks very much ian thanks for having me a quick disclaimer everything that i say is my opinion and not that of my employer and one of the things that i love doing in our industry is is picking on our semantics we do have a very loose way with vocabulary shall we say an adoption is just one example one of many examples of how we we do play loose with the definitions of words um i'm going to disagree with ashley on this one i'm going to not disagree with her because she makes an excellent point i'm going to come at it from a different angle i do think buying bitcoin as an investment to hold is adoption it is a use case it is one of many use cases that bitcoin and other

cryptocurrencies can have but it is a use case so if you are buying to hold for a long term then that is adoption if you are trading derivatives that is adoption if you are interacting in my opinion in any way with the crypto ecosystem and that qualifies as adoption it's a fairly loose definition but we don't even have a more a stricter definition when it comes to traditional finance what defines adoption of fiat currencies for instance we don't even have any ways to measure how much money there is in the economy it's all based on on estimates so adoption is growing i think that was one of the premises that the paper was based on adoption of all types is growing and the definition of adoption in some parts of the world is going to be very

different from that in other parts of the world but they are converging i think even this is something that you mentioned also adoption in the united states in chicago for instance to pick one trading capital is different at the moment from adoption in nairobi shall we say but in as we saw when the riots are well when the tensions escalated in nigeria when the central bank was talking about camping down on crypto businesses we saw that many of the youth that much of the youth that do not have access to employment opportunities are depending on crypto trading to make a living so we're seeing some convergence there and while ashley is right remittances are not a great use case for many corridors

they are still a good use case for some card or some corridors are still very expensive costs are coming down for sure but bitcoin cannot be overlooked in that aspect and we also know of many regions in the world where you just cannot send dollars no matter what the cost you'll be willing to pay them but that's just not an option venezuela comes to mind iran is another different type of adoption for different type of use cases but yeah adoption is definitely definitely increasing on all fronts in all parts of the world thanks noelle then we'll jump to paula just to follow up um you've had two different uh or different uh aspects what what is your view awesome so really uh thank you first for having

me here some really good taste kind of all overall i agree in many ways with both with what ashley noel said i do agree with noelle that investing is a form of adoption you know when you have these huge players um you know goldman sachs and all these big players starting to invest that is a good sign that is showing that you know these these companies these professionals are taking this seriously and um you know that is a great stride from a couple years ago when it was laughed at or ignored that that is that is huge movement um but then you know there is i would say the true true map like mass adoption is when your masses are using it um and that is you know making it usable

for everybody and i and that's the portion that i'd say we still have some ways to go um you know once my mom's holding it and she's spending it and everybody's just using it yeah i would say we have crypto adoption it's absolutely um growing it's grown a ton this year the amount of tools the amount of things that are being built in it the amount of people who are talking and investing it there is it's undeniable that it is growing but there are many things that still need to be covered i'd say before we can have that adoption i'd say some of the main things we kind of touched on them would be the fees when you use them you know if you are primarily in fiat which most people let's be honest still are getting into crypto getting it out all

of those aspects you know for remittances that adds up um any fees for you know things you do in it those types of things add up so um you know working towards those to minimize those as well as just general experience of using um cryptocurrencies they're very powerful and um they're really great but they can be scary to use still you know you're dealing with a you know 26 letter number address um you know it can get lost which you know we understand is part of it but there is still a lot of things that if you're not in this space you may not be ready to really dive into so working towards making that more

comfortable for even our non-tech friends and um you know just your average retail user once we've solved some of those experiences and i i'd say then we've we've moved towards crypto adoption um the last thing i'll say on it is we are moving towards blockchain adoption quite a bit you know we're starting to see that more and kind of like spike supply chains areas um other other aspects more utility-based aspects and those are starting to grow um but just like um cryptocurrencies both have some some things to kind of work out before i'd say they're just truly um implemented everywhere but we are working towards them and i'd say this past year there has been a ton of growth

um so i definitely believe it's coming actually if i could add one tiny thing um the nft craze the big thing in a decrease was that's mainstream adoption you've got gucci you've got sotheby's you've got industries that would not normally look at crypto assets interactive crypto assets dressed up as nft so even just from that you know we're seeing a spread [Music] yeah and uh jumping off of one of polypoid's pause points i think consumer protection could be discussed a lot more um i mean i've lost more than ten thousand dollars of cryptocurrency from wallets passwords that i can't recover and i've been working in the space for many years um so we're talking about extending this to the financially

vulnerable uh i think yeah that issue needs to be discussed a lot more um of course bitcoin and cryptocurrency price volatility can also harm people as well even if they keep all of their keys and everything secure so i just wanted to add that in i think the industry talks a lot about these positive aspects and doesn't pay enough attention to consumer production i'll come back to rafael now um on two points one we talked just briefly about metrics um you published recently one of our bitcoin swiss decrypt episodes about the state of the bitcoin and ethereum networks and there was one interesting stat in

there regarding smart contracts i believe that was the last illustration in that article something like 320 verified smart contracts going live on the ethereum blockchain every day is that right or yeah i i don't remember it was every a number every day but i think it was a bit lower okay okay it was like 85 or so this ties in a little bit to what paulo mentions about blockchain adoption going beyond purely financial shall we say necessarily um usage um that's also another metric and and something to to see um which is which is interesting but then

that that ties into some of the barriers which we also see when it comes to fees and so on let's jump quickly to el salvador just because this came up this was the start of what raphael presented i am no policy expert or international finance expert but i i understand el salvador has up until now you mostly had a monetary system based on the u.s dollar that may have some advantages surely when it comes to capital markets it might also have some disadvantages when it comes to being tied to actions by say the federal reserve which a company like el salvador has no control over

um is bitcoin adoption and kind of the freedom narrative now come to a different level when you think about not just people being able to send money when and how they want without a bank account but perhaps countries having some more independence [Music] from from other factors which might influence their economies raphael is that a false narrative or is there some truth in that uh i would say we mostly don't know exactly yet i mean it's it's so new what what i saw or did they were the very first ones to do it um i would say it's a rather brave step some uh voices have also just claimed yeah it's a pr gag and they just wanna um

uh somehow uh get the innovation and uh some of these crypto people uh going in el salvador attracting them to build stuff there um so i would say overall we'll just need to see how this all plays out and of course we have seen this backlash from uh various sites where his policymakers deciding not to help them um i think was the world bank issued a statement that they will not help in the implementation of this um so of course this is there are going to be roadblocks on the way and um i'm not sure how fast we'll see somebody some other country do the same as el salvador did um or if if they just choose another way

um to include crypto in their economy and i think um overall yeah it also comes back basically again to this question where where is the value actually where is the value created where where can um where can the people in their everyday lives benefit from it from it it fills up with our shows okay this is actually something that people like to use um most most of the people there i i think are using the lightning what network also to some extent um with strike and uh so we're just we're just we just have to see where this where this all leads

i mean uh in in terms of in terms of this this type of adoption we're still still very early maybe not as early we're maybe not as early in terms of the investment type of adoption but i would definitely agree that mainstream usage is not here yet um so and and it's it's like like ashley also mentioned consumer protection is still a big thing um which is for example why why some of some more modern wallets also allow for things like social recovery which is something that i think is could play a very important role so uh what what this actually is is that instead of just having this 26 uh this your seat phrase of 24 words so

um you would actually have um people that could help you restore your wallet if you lose it and uh i think it's those simple things that could actually lead to a breakthrough at some point if they start to take off and if you're if you don't have to scare to be scared to lose your money every day um or that you could even have some functions like um like withdrawal limits on your wallet um so that even if you get dropped you you will not lose your entire net worth but just a small part of it that you would have used anyway um then i think that's that's something certainly worth considering [Music] back to you ashley you had something to add there yeah

and to to reply also to ian so el salvador moved from its local currency to the dollar in 2001 because it was experiencing inflation and it wanted to avoid inflation hence it shows the us dollar which has a stable price level in recent decades and it also thought that usd would help it trade more with the united states i haven't seen the data but i imagine that probably did help it's totally unclear to me what benefit the use of bitcoin would be for most citizens in el salvador it seems like if anything the key point is that it would increase their transaction fees um certainly bitcoin volatility easily has 100 standard deviation or volatility month over month

so that you know they could lose the value of their savings and pay higher transaction fees i don't know if i'm missing something noelle paula do you want to respond to that um yeah i definitely agree i mean i think it's a very interesting experiment and i kind of hate to say that but i also feel like it is an experiment where you know we're just dropping bitcoin in there and seeing like how that you know performs you know and in the best case scenario it works well and bitcoin continues to go up and el salvadorians get access to that and you know it pushes them above you know some of their neighboring countries that is that is a good case scenario

in some of the poor case scenarios you know the transactions the adoptions internally i i just don't i um we'll see it's only been a little over a month since it's been launched we'll see how that goes i mean i do definitely believe governments and countries will move towards adopting cryptocurrencies i mean at the end of the day it's a technology it's a technology that's more efficient can you know move quicker with less infrastructure um depending on the network have less fees i know raphael mentioned it briefly in his presentation cbdc's i i won't dive too deep into them but i could see a world where we start moving to cbdc's which is basically central bank digital currencies

which are issued by their local governments that are tied to their local reserve um but it's built on the blockchain china is starting to do some of those um they're doing a pilot project um over this these upcoming years to do that with the with their currency we'll see how that plays out it does in some ways help them if it works create a more global currency because it allows if they are able to digitize their currency it allows disenfranchised people from other countries be able to buy into that currency um you know their citizens who may not have bank accounts be able to buy in it and it actually allows much more people to buy into this currency

which could you know is very strong um for a currency so i do think we will see you know crypto financial systems in governments um you know create kind of this global system whether it's actually bitcoin or cbdc or something in the middle i think that's still to be determined no well and um to add on to that um paula and is right it's an experiment i think raphael inferred this also it is an experiment fascinating experiment what's more but in terms of the transaction fees they are precisely one of the reasons mckinley wanted bitcoin to become legal tender because the transaction fees on lightning are orders of magnitude lower than the transaction fees on the us dollar in the country and

the transaction fees on the us dollar were draining the reserves plus the dependence on a monetary policy totally not yours and volatility is a short-term phenomenon it's much much higher in bitcoin than in the dollar for sure than bitcoin and just about you know any other non-crypto asset much much higher but volatility over the long term anyone who's investing in bitcoin for the long term is expecting it to hold its value a lot more than say the dollar or any other fiat based asset that's one of its investment problem premises so the volatility those that those investors in el salvador that are worried about it will convert out fast i mean that's a facility that has been offered and the transaction fees on lightning

are negligible um but the monetary policy of bitcoin is totally determined by the bitcoin network and el salvador wouldn't have any control over that either right and because they can't affect the supply of bitcoin when the demand for it moves you have all this price volatility so i think i mean now salvador could adopt another currency or revert to its own currency if you wanted to control it it could but you do still then have the monetary policy issued in salvador hasn't had a great track record on that and being beholden to the monetary policy of a of a different name of another nation with perhaps conflicting interests at times is politically uncomfortable for many so the bitcoin adoption was in part a political measure let's let's stick to that point and i'll

take one question from the audience this will come maybe slightly to to ashley but also touch on the topic of central bank digital currencies and adoption beyond just bitcoin um you know we've talked about how cryptocurrencies now move forward in different use cases but then that also leads to adoption of the underlying technology blockchain then uh central banks explore blockchain or dlt for central bank digital currencies one of the aspects which is often highlighted is transparency and the world economic forum perhaps with its its influence and its focus on transparency and moral integrity would of course encourage this is this

an aspect of dlt being used by governments and by global monetary systems or global superpowers which is good could we say that bitcoin like through the back door encourages more transparency among governments yeah i saw the question thank you and i was i was typing a reply answer here i actually lead the world economic forum's work on both cbdc and blockchain for anti-corruption and government transparency and um i led the authorship of a report that's i think to my knowledge the deepest analysis of blockchain for government transparency that's ever occurred i haven't been up on my i don't i have it up on the computer i don't see

a chat place to drop it in um but yeah it's called we'll make sure we can share it yeah [Music] this was done with government of colombia a year or two ago and with with its inspector general's office so i think dlt particularly public permissionless blockchains that have very you know a lot of nodes participating in them so they have higher security is really um is quite high potential for anti-corruption and government transparency use cases i think that's really where you get the benefit of blockchain uh situations where you want to eliminate any risk of corrupt anyone you know government officials from altering records um so it is interesting to think about

what kind of data we could put on blockchain public permissionless again in my opinion that where it's it's vulnerable to censorship or it's vulnerable to manipulation by government uh and yeah that could provide useful transparency i don't know if i would go far as saying um it or rather it's it's unclear for me to tie that directly to cryptocurrency and bitcoin of course if actors in government are paying in bitcoin or cryptocurrency you would everyone would be able to see that so you get some transparency there but that would involve a lot of other issues um like um yeah several several governments with with corruption issues

um also have money laundering issues and the government's there for instance this was the case in colombia are very hesitant to deal with cryptocurrency because they could be um blocked out of uh participating in global trade and come under a lot of scrutiny for endless activity that could also happen in cryptocurrency um whether or not to what degree that actually happens different conversation but there's a perception there yeah um related to cbdc uh [Music] yeah to the extent that public spending occurs with cbdc and that information is on a publicly visible very secure type of proof ledger

then i can also see how that would improve transparency i but i i don't know how much that's going to happen and i think it's very possible many cbdc implementations don't use blockchain and if they did use blockchain they would probably very very likely be private permissioned chains not public permissionless blockchains because of scalability lack of control security vulnerabilities etc i just want a small tack on to that yeah i definitely don't think it would be completely public cbdc's because yeah you're just you just yeah you can't have everything being shown

um i know some were looking at kind of hybrid solutions where certain amounts of certain types of transactions were public and certain were private um you know the specifics of it i don't exactly know i will be honest but you know making it so government spending sure you can see what type of um you know does it go to the parks does it go towards this infrastructure you can see the spending go that you know those specific routes but maybe you don't see what each employee makes because at that point it becomes private data and you if it's built correctly you can create a hybrid solution of sorts um but it definitely does need to be built correctly with you know a government that is has the people's

um people people in mind and aren't corrupt so it yeah i don't think it would be public or private completely is all i wanted to say primarily well did you have anything to add there i do it's a fascinating topic and i actually agree with ashley and and paula and that it's not neces it's not going to be on the public blockchains but there's a question will it even need to be on a blockchain if it's going to be private then why not just use the similar system to we have that that we have now i understand why there are many advantages but i'm sure there are many people in positions of power who are looking at that particular use case because it does imply a certain loss of control flipping the transparency

on its head there's also the questions around how much insight do we want to give the authorities into our personal transactions and i think that's also where the hybrid solution that paul has been mentioning could perhaps end up being part of the solution another question is the politics again much like el salvador's position bitcoin is political so will the cbdc's end up becoming political especially given the increasing likelihood that china will be the first major economy to launch one and its approach to privacy tends to be somewhat different from any of the nations that we live in and that is that could end up conferring a certain competitive advantage to it an efficiency advantage and the

control advantage in terms of economic profit and global power we'll uh we'll wrap that part of the conversation up i have i have one question or comment from from my side which will maybe lead us into perhaps the last question of seriousness to what paula was about to say yeah the one thing i was going to say thank you um the one thing i was going to say is one of the reasons china was looking at the pilot for cbdc's is the amount of transactions that happens on their infrastructure is obviously huge because of their size um they were able to by using the cbdc um process 92 000 transactions per

second on it which other countries need like an entire day to process that many transactions um so there is some efficiency things that come through it i was like searching for that stat but yeah and i think sometimes people attribute nefarious motivations of the pboc for cbdc and i don't i won't you know i'm not in the position to speak on all of their motivations but one very evident one that's globally relevant that many policymakers also in developed economies think about is that cbdc can provide a competitive counter force to monopolistic payment service providers or even commercial banks in an economy

so with china you have a duopoly where 90 of payments are by the two major providers and so one of their motivations could easily be challenging that um duopoly which could provide services with potentially lower fees better services etc just through the healthier competition of the cbdc as especially relevant the united states now with the anti-trust measures that biden is focusing on and the fact that we are starting to look at the influence that technology more broadly has on our individual lives the one thing that we noticed in some of the data that raphael brought up in in the paper is that the ukraine and russia are both

countries which have seen quite a lot of activity in cryptocurrencies now you could perhaps attribute different um motivations to that as a person who lived nine years in eastern european country in poland also spent some time in ukraine um i can say one thing that is quite true from my experience with people there is that there is a large distrust of the government and of their actions on on a general level this is one uh factor which is often brought up for the adoption of cryptocurrencies or the at least the interest in cryptocurrencies um do you think this is is legitimate and is this a factor because we do see

some elements also say in the united states or in other countries where trust in centralized authorities among people maybe not among a certain other institutions or or companies but among people on on a grassroots level is is dropping and is this a is this a strong factor will it continue to grow and then the follow-up question to that which will round out with what other factors do you think could uh contribute to greater crypto adoption maybe we'll go back to noel to start with i think trust is such a fascinating aspect to bring into the equation

especially since bitcoin was built around that very concept and especially after what we've all lived through over the past couple of years the edelman trust barometer it's a fascinating read always and he especially now came out in january showed that trust in governments is not just declining in some of the countries you mentioned ian but trusting governments is declining notably in countries such as the united states the united kingdom germany canada and many other areas that we would call the developed world so this is not just an emerging an emerging economy phenomenon we're seeing this also in the headlines every day with increased violence on the streets because of various various triggers and this is all part of the

general shift that we have seen since before the pandemic since even before the great financial crisis of 2008 of decreasing trust in centralized authorities and in the establishment actually triggered by the growing inequality accelerated by the pandemic which was the great accelerator of all accelerators and yes it has in that way influenced the adoption that we talked about earlier of cryptocurrencies many people living in oppressive regimes are seeing cryptocurrencies not just as a way to transact outside of the eye of the authorities but also these countries often have inflation growing inflation so often it also is a way to protect your future savings

against that and sometimes it is just a preparation for a time perhaps when people need to move and this is not just political question we know that climate change is going to bring great habit on the world at some stage especially in terms of migration cryptocurrencies offer a window into a hopeful future for many people that have not had that kind of a choice but have not had that kind of a tool in their toolbox over the past few decades so in summary trust is the key we are all of us trusting less the centralized authority not just my generation but also generation z they were born digital they don't have trust in the establishment we at least you know have the mentality of this is how

it's always been this is how it always will be generations coming up behind us don't have that and they also are much more internationally minded much more open to the possibility of a totally different future especially after what they've lived through over the past couple of years let's go over to ashley and i'll just mentioned before you start you sent a paper from the bank of international settlements before the session today which was exploring some things from from the u.s side interesting to note if i read it right that uh people who have shown an interest in crypto currencies also have shown relatively high skepticism in cash which is kind of an interesting

correlation but on the trust issue how do you see it and what do you think could or would potentially drive adoption of crypto and blockchain in the future i think you're still on mute ashley related to trust i certainly agree that uh it depends where you are and there may be some governments where the citizens don't trust their um citizens don't trust their governments or or financial institutions or whatever it may be as much the data that you were referring to there's a new paper by raphael auer and david tercero lucas at bis it uses us data only that's because i believe because that's the best data and the most reliable data that economists could find um they found

that cryptocurrency users in the us are on average educated young male and already experienced in digital finance um that they show no difference in their level of security concerns with the use of cash or commercial bank services compared to the rest of the population so they're not more suspicious of cash or commercial banks but compared to non-cryptocurrency owners as you are saying cryptocurrency owners do tend to find cash and traditional banking services a little less convenient although not the case for online banking so i think it's mostly driven by other motivations like investment wanting to participate in this trend perhaps in terms of what will

improve adoption um i think there are several barriers to adoption uh especially when we talk about um financial inclusion this is a bit of a side point because i focus on that topic i think about this a lot and some conditions that have to be in place would be a tolerant regulatory regime um lower transaction costs in general lower and lower transaction fees uh lower volatility of the cryptocurrencies of course if you're using stable coins that's not an issue but you have to be confident then in the financial management of the stable coins um more prevalence of exchanges or these on and off ramps as

i believe paula may have mentioned and internet electricity smartphone access computer access can't use cryptocurrencies on future phones because the bite size of transactions are much too high for what we tolerated with future phone messaging um digital and financial literacy so these are all barriers to financial inclusion that exist around the world today that still exist for cryptocurrencies and of course you know for any adoption though having these conditions that would be useful but like we're talking about countries where they're not already connected to the banking system um they currently face a lot of barriers the same barriers to access

cryptocurrency as they would to access the banking system so for instance i would disagree with an earlier point from raphael in the report saying cryptocurrency is a bank account in your pocket um there's a lot that needs to be done for someone to access cryptocurrency and to also use it responsibly without losing their money but maybe those things will all develop i don't need to sound too pessimistic but it will take ecosystem development education literacy and and exchanges to also um behave in a way that uh uh is more um protective of consumer funds uh where you have these exchanges where

the owners run off with consumer money or illicit activity is happening that's why regulation is trying to get on top of them etc okay so slightly pessimistic but maybe not totally i don't think you'll write crypto off 100 thanks for that paula and i own cryptocurrency for the record i'm just i'm just a little bit fatigued of arguments that i think we've been hearing since 2017 about mass adoption when these obvious barriers still exist sure okay fair point fair point good paula and then raphael will finish up yeah so i think there are some really really good points from both sides um i do tend to agree with ashley actually i'm quite a few of her points

um i would call it like less pessimistic just a little bit just realistic just looking at the situation sometimes um i heavily believe in cryptocurrency but i i just do know the issues that we face when i'm trying to get a friend on boarded it's not an easy task um but what what i want to add is i do agree that you know in this you know in some of our developed countries the people that are adopting cryptocurrencies um i'd say maybe like if you took a if you checked the demographic in 2014 i'd say sure they were you know much more distrusting of governments and you know it was to be outside of the government and everything like that but

with the amount that it's grown over the past year and its interest in investment and um everything like that the demographic has shifted quite a bit to it just being people that want to invest in it and are interested in the technology that are starting to balance it out a little bit more and it's it's not looking that different from your traditional person um as far as their trust against their government how that plays out in more developing countries that that is probably a little bit different um you know countries who have you know we have there is reason to be skeptical of you know even the u.s government the uk government some some of these but they are a bit more established um but when you go to of course more

developing countries that there's not just some thought that you should be distrusting of your government you know you should not trust your government there sure i can see a lot more reason to so for that to be the push into cryptocurrency still um at this point um but yeah i think it just it is it is starting to lose that tie however bitcoin and cryptocurrencies for many years has been touted as a hedge against the dollar um you know it was always said that it was the doomsday currency when everything went down you could have your bitcoin and whether that's a self-fulfilling prophecy or not i do think that does happen a little bit so when you know they were running the capital

back in january 20 this year january um you know i think bitcoin popped up ten thousand dollars in that like day or two it went from like 24 to 35 somewhere in that range um and for me to think that those were not connected i i do think that there was something in there so it still ties in i just wouldn't say it is the major driving force anymore um but also tagging on to what um noel said i do agree that these younger generations are going to be a good push for it as well because they do they are more internationally focused they they do trust less in their governments and that's not to say that they're trying to escape their governments with bitcoin but it

just means that maybe they're just they're okay looking for alternatives like it's you know let's just check out what's out there um and they're just more tech savvy so i think we are gonna see some growth there but i think there was a nice variety of really good points here that i just wanted to touch up on thanks paula and raphael uh a closing thought distrust is it still actually a driving force in in crypto adoption or not so much well i will basically create i would say the importance of it has uh uh has become less over the over the past years and uh it's now much more your traditional investor but one other thing that i would like to to

mention is that um we always think in terms of adoption like we see the prices going up and down and crazy and people then think oh okay now something must be happening right and yeah maybe something is happening but in general adoption is something that takes time and then happens very explosively and i still i think we have we are not at this point yet um where this where this explosion is happening but if you look at the adoption curve um it's usually some type of s-curve um that that is basically linear for a very very long time and you can see this just just if you look around people uh especially young people don't have such a large problem like of course it's a little bit hard to get

people onboarded into crypto but um once you get the hang of it you actually quite like that you can also send your money around on a sunday and the person gets it instantly more or less and that you don't have to uh get some sort of permission if you want to send maybe a little bit more money and someone and i think um those those are some of some of the factors so it to some extent it will come natural um to people that that yeah also grow up with it and then it's just something that has always existed so it's also some sort of generational shift and these things just take time and markets are always very enthusiastic and then people think now now is the time right it has been the same in 17

it's maybe a little bit the same now although i have to say uh just on this linear progression we're much further ahead now i would say that we were four years ago so that would be my my closing statement very nice with that um i think we're going to wrap things up once again thanks thanks very very much to everyone for joining the session today i hope it was a good discussion for you as well thanks for the points that everybody brought i have to say on the crypto adoption side just for myself i had a conversation a year and a half ago or so with some friends from the western part of switzerland very conservative people um very traditional

living on a farm in western switzerland never in my life would have thought that they owned crypto but when they found out what i was working in suddenly it came out that they had bought ethereum two or three years before that so there's perhaps some element of statistical adoption that is still out there not measured yet hard to know i guess we'll have to wait and see so thanks again all of you ashley paula noel and of course raphael for joining us stay tuned we hope to bring you another themes paper and event like this in a few months in the next quarter and wishing you all a good afternoon good evening wherever you are and stay well thank you

very much awesome thank you so much thank you all thank you so much ian thanks everyone goodbye