Latest / The AllinCrypto Podcast / The TradFi Door to Crypto Just Opened | Archax CEO on Historic Tokenization Milestone

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The TradFi Door to Crypto Just Opened | Archax CEO on Historic Tokenization Milestone · The AllinCrypto Podcast

0:05
Welcome back ladies and gentlemen to the all
0:08
in crypto podcast. I am your host Rupert and
0:11
today I am delighted to be announcing Graham
0:15
Rodford once again the founder of our checks
0:18
and of course current CEO welcome on board Graham.
0:21
How are you? I'm great. Thanks. Thanks for having
0:23
me back The pleasure is all mine as always This
0:27
is the third time having you on the show and
0:29
we absolutely had to reach out on the back end
0:31
of the announcement that dropped Monday where
0:33
Archax in collaboration with Aberdeen and Lloyd
0:36
Banking Group announced a first ever use of digital
0:41
assets under the financial market. So we're going
0:44
to get into that. Before we do, Graham, could
0:46
you just give us a recap for my audience that
0:48
haven't heard of Archax before? Or this might
0:50
be their first time coming across you and your
0:53
company. Could you give us a recap in regards
0:54
to what it is you guys do? Sure, yeah, we're
0:58
basically from financial services background.
1:00
We've been around since 2018. We set up our checks
1:04
with a view that everything was moving on chain.
1:06
So not just crypto currencies, but all traditional
1:09
financial assets, equity, debt, funds, whatever
1:12
it may be. It was quite a big call seven years
1:15
ago. Some people thought it would happen. Some
1:18
people weren't so sure, but obviously now everything's
1:20
moving in that direction with RWA being one of
1:23
the key terms for everyone out there. To back
1:25
this in 2018, we went to the FCA in the UK, the
1:28
Financial Services Regulator. and got the UK's
1:32
first digital securities exchange, custody broker,
1:36
and crypto asset registration. So what that means
1:38
is in the UK, if anyone wants to do anything
1:41
with securities, we can do it. If they want to
1:42
do anything with crypto, we can do it. And if
1:44
they want to do anything with digital securities,
1:46
that's really our sweet spot, bringing all traditional
1:48
financial assets on chain. I've always sort of
1:51
praised Artax as a pioneer in the kind of digitization
1:56
of financial instruments and the markets more
1:59
broadly. You guys really were certainly the first
2:02
to gain regulations under the FCA, our kind of
2:06
watchdog here, our equivalent of the SEC in America.
2:09
You guys literally were the first and obviously
2:12
were very early on what now is becoming a very
2:15
obvious trend, but perhaps wasn't back then.
2:17
And we'll get into the reasons into why all of
2:19
this is happening. I want to dive into what was
2:21
announced on the 14th of July, which was Monday,
2:24
just a few days ago, where Archax announced that
2:27
with Lloyds Banking Group, Aberdeen, and of course,
2:31
Archax, they had done the UK's first use of digital
2:35
assets with utilizing Aberdeen's money market
2:39
funds that have been tokenized and tokenized
2:41
UK gilts as collateral for foreign exchange trades
2:45
between Aberdeen and Lloyds. Let's get into this.
2:48
Let's give an overview of it. And then we're
2:50
going to talk about why this is all so significant.
2:53
Sure. I guess, you know, there's a number of
2:55
building blocks to get to any of these and people
2:59
are starting building RWA as I mentioned. So,
3:02
you know, for your audience, I guess, yeah, any
3:05
real world asset that really people don't think
3:09
of as crypto and is tokenized, people categorize
3:11
as RWA and specifically Archax talks often about
3:16
regulated securities, so equities, debts and
3:19
funds and bring them on chain. And Aberdeen invested
3:21
in us in 2022. They led our Series A and we tokenized
3:26
their money market funds. And we've done that
3:28
for a number of other large financial institutions
3:31
as well. So we have all of those available already.
3:36
So, you know, Aberdeen, Blackrock, Fidelity,
3:38
State Street, Boney, I'm sure I'm missing some,
3:41
Bailey Gifford, League in general, they're all
3:43
available. and we have them available but the
3:46
kind of the kind of the I guess the everyone
3:49
knows this is the future and everyone knows in
3:51
the future there'll be a lot of use cases but
3:54
up until now if you were a treasurer sitting
3:56
in a corporate and you had access to a money
3:59
market fund from a traditional bank why would
4:02
you buy the digital variant so companies like
4:05
our checks are saying well look you know we're
4:06
trying to negotiate the best prices for you or
4:09
try and maybe reduce the minimums, but it's been
4:12
quite hard for us to find other use cases. And
4:15
we're starting to see some of those utilities
4:17
come around. So people are starting to talk about
4:19
24 seven being able to swap in and out of money
4:22
market funds for stable coins. But one of the
4:24
other interesting use cases is collateral. So
4:28
our tech spotted this, I guess, I mean, some
4:31
time ago now, maybe even a year ago. we started
4:34
working more formally on our Nest product. And
4:37
the idea of Nest is that any of our clients can
4:40
transfer anything to anyone at any time. So,
4:44
you know, if you held tokenized Vodafone and
4:47
you wanted to send it to someone as collateral,
4:49
then you could do that. If you had a money market
4:51
fund and you want to pay one of our other clients
4:53
for something, you could do that. So this general
4:54
concept that everyone should be able to use their
4:57
securities for anything. That's the idea. And
5:00
then of course, in traditional financial markets
5:02
all day long, financial institutions are sending
5:05
things backwards and forwards to each other.
5:07
It tends to be cash or what's referred to often
5:12
as higher quality liquid assets, which generally
5:16
means government treasuries, easily exchangeable
5:19
instruments. But really, unless regulation dictates,
5:23
there's no reason. anyone can't accept anything.
5:25
And that includes cryptocurrencies. I see a world
5:27
in the future where people might accept Bitcoin
5:30
to satisfy a bank margin call as long as it's
5:32
allowed under their agreement. So that's kind
5:34
of the premise of what we had in place. And we
5:37
approached a lot of financial institutions for
5:39
Nest. We actually have about 20 institutions.
5:42
Working with us on this some of them observing
5:45
some of them interested in feeding into it some
5:48
of them just listening and But specifically Lloyd's
5:51
Aberdeen and a couple of others. I can't announce
5:53
yet they said, look, we actually want to do something.
5:57
And a lot of the space is built around POCs and
6:00
wireframes, but what we've actually got here
6:02
is a live product. This wasn't one transaction.
6:05
Lloyd's and Aberdeen have actually, I can't really
6:07
get into details of what's happening between
6:09
them, obviously, but there is a relationship
6:11
between them. One has to post margin to the other
6:13
one. There's a margin call and they used it to
6:16
prove this works and they continue to use it
6:18
to this day. So we have, you know, I think daily
6:21
transactions going through at the moment on chain,
6:25
which is a great use case. So it's possible in
6:30
the future that these money market funds can
6:32
be used. And so why do asset managers like it?
6:36
Because in the past, if someone held a money
6:39
market fund, they held a money market fund. And
6:41
if they needed to satisfy a margin obligation,
6:43
they had to sell it, which reduces AUM in the
6:45
asset manager. If the asset manager's money market
6:48
fund can be used for more things, there's more
6:51
chance of people holding it. And obviously, the
6:53
world's talking a lot about stablecoins at the
6:55
moment. And really, Tether and USDC are still
6:59
dominating that. But around the periphery, you're
7:02
seeing all of these kind of yield generating
7:05
treasury stroke money market fund plays occurring.
7:09
And if they can become as frictionless as the
7:13
existing stablecoins, then we're going to have
7:15
an interesting world where things like money
7:16
market funds can start to be used. I mean, we
7:19
announced a while ago on our tax already, we're
7:21
capable of exchanging money market funds for
7:23
Bitcoin. We can literally run securities against
7:26
unregulated instrument pairs. So there are kind
7:29
of futures in that direction, I guess, where
7:31
these asset managers are saying, okay, we've
7:32
gone from having an instrument, which wasn't
7:33
very useful for much other than having it as
7:36
an investment. And suddenly you're going to be
7:38
able to use it for a lot of purposes. The ramifications
7:42
to all this are just unbelievable. Obviously,
7:45
you'd mentioned that this is the UK first live
7:48
usage in this manner of using guilts and using
7:54
money market funds as collateral, tokenized guilts
7:57
and money markets funds as collateral. But that
8:00
will evolve into this internet of value where
8:03
actually value can be swapped for value. It doesn't
8:06
need to be the way that it's been done traditionally
8:09
with cash or with other things where you need
8:11
to liquidate something to actually make the exchange.
8:13
And that just opens up a whole new world of financial
8:17
activity. And this is why, again, we always applaud
8:19
Archax for being really a pioneer in seeing this.
8:22
I think the first time I interviewed you, you
8:24
actually mentioned that you were very excited
8:26
about the possibilities of using a money market
8:29
fund actually as cash because it kind of meant,
8:32
well, you could get the yield on it, but you
8:34
could also get the kind of liquidity that you
8:36
would get with cash. It's very, very exciting
8:39
all of this. And I just want to touch on what
8:41
you mentioned there. Do you see a world where
8:42
actually outside of money market funds? And of
8:44
course, it's very obvious that they're going
8:46
to be used to do this. You guys are already doing
8:48
it along with Aberdeen and Lloyd's. Do you see
8:51
a world where you could use securities like stocks
8:54
to settle in this kind of a manner? I mean, there's
8:57
a whole perhaps different ball game that you're
8:59
playing there, but are we moving to this world
9:02
where you could literally hold anything instead
9:04
of kind of cash? and use it to pay for things
9:08
directly or to settle things like the FX market,
9:11
which is huge in the UK. We can get onto that
9:13
in a second. Your point about the exchange of
9:18
value is the right one. If everyone knew the
9:22
price of everything at all times and knew that
9:24
it was easily transferable and had liquidity,
9:28
then in theory, why would you not accept it?
9:31
I think the challenge is that, and this challenge
9:33
exists for Bitcoin, as well, you know, it's difficult
9:38
transacting in something with a fluctuating value.
9:41
Now, some of us that are kind of believers in
9:44
digital, we don't really care because we're like,
9:45
it's going up in the long term. So of course,
9:47
I'll just take it and hold it. But if you're
9:49
running a business and you know, you're operating
9:51
on small margins, you can't, you can't transact
9:54
with something that moves around, you know, even
9:57
one, two percent a day could be a problem. But,
9:59
you know, we've seen things flip around five,
10:01
10 percent quite easily in a day in the crypto
10:03
market. So That's why we're seeing a lot of stable
10:07
coin interest, a lot of money market fund interest.
10:11
These things are priced at one. You want to do
10:14
a transaction for $1 ,000. You transact with
10:17
1 ,000 of them. You know you can more or less
10:19
get 1 ,000 of them from someone else. So that's
10:22
why people are in that direction. But from a
10:25
technical and regulatory point of view, I mean,
10:28
unless sometimes regulation stipulates what you
10:29
can use as margin. If you ignore that, there's
10:31
no reason that, you know, if I come around your
10:34
house and offer to buy your car and you're willing
10:37
to accept Nvidia shares, then that can happen.
10:40
And there's loads of tax and stamp duty and transfer
10:44
issues that exist around that. But just theoretically,
10:47
if you've got a transferable instrument, then
10:49
yeah, you can use it to pay for anything. It's
10:51
very interesting. I think this came out of Silicon
10:52
Valley as an idea back in the nineties. And it's
10:55
amazing how well it's progressed towards that.
10:58
you know, this kind of new monetary world. I
11:02
think, you know, if you look at the implementation
11:05
of ISO 20022 standards and things like this,
11:07
more broadly talking about the financial world
11:09
at large and the kind of inner workings of it
11:12
or the standards that accompany it, I think there's
11:15
definitely a push towards a kind of new monetary
11:19
regime that isn't perhaps new in the sense that
11:23
you have new instruments, but instruments that
11:25
take a different form and can be used and utilized
11:27
in a different manner. I think there's a huge
11:29
unlock coming for the world that at the heart
11:31
of it is DLT technology. Yeah, it's massive.
11:35
I mean, it kind of exists already a little bit
11:37
with currencies, right? I don't know, you've
11:39
got your MasterCard visa, you go wherever, you
11:43
can spend multiple things and it all consolidates
11:45
it back for you. So I think these... you know
11:49
that that being able to convert from one to another
11:51
you know that's where someone like our tax would
11:53
come in we'd sit in the background someone transacts
11:55
because really most people want to get it back
11:57
to their base their base currency so you know
12:00
i think um Yeah, to be honest with you, I suspect
12:03
it's a long while off before those sorts of things
12:05
happen. Yes. But the reality is when you start
12:08
looking at it, you do start saying, well, I don't
12:10
know what your bank, obviously, I don't know
12:12
what your bank pays you, but what are we getting?
12:15
1%, 2 % maybe in a current account, and you're
12:17
sitting there going, well, base rates are like
12:19
4%, 5%. That makes no sense. But as individuals,
12:23
as long as you're a professional in our tracks,
12:25
you could hold a money market funds. Now, if
12:27
you had a token that you could spend in the exact
12:29
same way as cash and be getting four or 5 % and
12:32
you're protected from banking solvency because
12:35
you hold an asset and not cash, suddenly you've
12:37
got a more protected asset, the shield generating
12:39
that you could spend in the same way. Why would
12:42
you have cash in a bank? So there's some, you
12:45
know, there's There's an interesting move happening
12:48
in financial markets. Banks are now moving quite
12:50
quickly in this direction, so I'm sure that they'll
12:53
adapt, but the financial market in 20 years'
12:56
time is going to look a lot different to what
12:57
it does now. Yeah, and people need to understand
13:00
that as an opportunity, I think, and look at
13:01
what's going to play a role in that world, what's
13:04
going to get value or become more valuable because
13:06
of its role in that world. There's a lot more...
13:10
Going on, I think a lot of crypto people kind
13:13
of get into the financial markets through coming
13:15
into crypto and then they kind of have to understand
13:17
a little bit about how the financial markets
13:19
work. And it's very interesting the kind of joining
13:24
of these and the unlock that they ultimately
13:25
bring. I want to go back a little bit and sort
13:28
of simplify for people why things are getting
13:31
tokenized. And what the kind of unlock is with
13:35
bringing things on chain in opposition to how
13:38
the kind of fragmented financial system works
13:42
at the moment? Why are banks like Lloyd's? Why
13:45
are corporations like Aberdeen, why are they
13:49
tokenizing and doing this? What's the unlock
13:51
that this technology is bringing? I always find
13:55
the money market fund one is probably the easiest
13:58
example. So in the company I used to work at,
14:01
Like on a Friday, you'd often say to yourself,
14:04
okay, you know, we're in cash at the moment.
14:06
Do we want to buy a money market fund which takes
14:09
away from the bank risk but gets rid of all your
14:12
flexibility? Or do we want to hold cash and have
14:14
the bank risk but have more flexibility? And
14:18
then the issue with holding a money market fund
14:21
is usually they trade once a day, Monday to Friday.
14:25
So, you know, if I held the Aberdeen Money Market
14:27
Fund in my brokerage account, I log in, I can
14:29
see it. That's great. I can't do anything with
14:32
it. And if on Saturday afternoon, I want to buy
14:35
Bitcoin, so on Monday, I have to contact Aberdeen,
14:39
say I want to redeem, maybe I get my money Monday,
14:42
then I have to convert it into a stable coin,
14:45
and then I need to go buy Bitcoin or I find a
14:47
fee on round. But the problem is, it's going
14:49
to be like 20, 48 hours since I want to do the
14:52
trade. So with a tokenized money market fund,
14:56
you've now got something that's transferable
14:58
and you can transact on a Saturday. I mean you
15:01
theoretically could have recreated this with
15:03
traditional instruments anyway but no one really
15:05
did. So you know somewhere like Archax these
15:08
things are priced at one if you've got a buyer
15:10
and a seller and you can transfer value. Pretty
15:13
much for free as we talked about on chain Then
15:16
you've got the ability to get in and out of these
15:17
assets and then where it becomes really interesting
15:20
is in this And there's a lot of people looking
15:22
at this now and this like crossover between stable
15:25
coins and money market funds. So Let's say Circle
15:30
or RL USD or tell it doesn't really matter Those
15:35
those guys take cash they issue tokens and they
15:37
put that cash into things like money market funds
15:41
now They don't need to take your cash and invest
15:45
in a money market fund if you just send them
15:46
a money market fund. So Saturday afternoon, you've
15:49
got 100 grams worth of Aberdeen money market
15:52
fund, you want to buy Bitcoin, you send it to
15:54
Tether in a smart contract, it instantly gives
15:56
you 100 ,000 Tether and away you go. You can
15:59
go and transact. They don't care because you've
16:00
given them the reserves. You've got your stablecoin
16:03
and it all happens outside of traditional market
16:05
hours. So it's not that the instrument doesn't
16:08
change. I think in the early days of crypto and
16:10
RWA, there's a lot of conversation around what
16:12
are these assets? How do we regulate them? They're
16:14
the same assets, but the utility and the functions
16:17
around them are changing. And that's what makes
16:19
them more valuable than their analog counterparts.
16:22
The same exposure, the same costs, the same return,
16:25
massive increase in utility. Yeah. And I guess
16:29
a lowering in costs to enable all of this. I
16:32
mean, in some ways it wasn't possible. You know,
16:35
one thing I've... Certainly understood in regards
16:38
across border payments was just how fragmented
16:40
those systems are And I think when you kind of
16:43
unify everything on it, you know using DLT It
16:47
really unlocks this kind of more globalized world
16:50
Where assets I think there's a major benefit
16:53
for assets for people? You know you look at I
16:58
mean for example, there's two billion people
16:59
roughly out there that don't have access to banking
17:02
services that will with this technology and potentially
17:05
somebody around the world somewhere will be able
17:08
to actually gain access to or indirectly perhaps
17:12
to money market funds through something like
17:13
Tether or whatever it may be. There's this major,
17:16
major thing taking place. And I also think, and
17:21
this is one thing that I think about, when we're
17:23
talking about money market funds, typically,
17:25
or when we're talking about guilds, government
17:27
bonds, I think a lot of people are questioning
17:29
right now the... I want to say value of these
17:35
instruments, certainly with kind of monetary
17:37
systems going in the manner that they are, you
17:40
know, debt seems to be ever increasing and people
17:42
are kind of questioning the value of these and
17:44
the stability of the bond markets. We saw that,
17:47
for example, in the US with Moody's rating or
17:50
downgrading of US debt. What ramifications do
17:55
you think? because it's almost in government's
17:58
best interests or central bank's best interests
18:00
for this technology to be adopted so that the
18:02
kind of bedrock of the financial system can really
18:06
remain there and that there isn't this shift
18:09
to other things as it continues to proliferate.
18:16
Do you think it's beneficial? Do you think governments
18:19
and central banks and the financial system should
18:22
adopt this technology because it provides or
18:24
introduces another buyer to government debt and
18:28
sovereign debt? Yeah, I'm generally in favor
18:31
of efficiency and I generally don't like it when
18:36
we try and regulate to reduce the benefits of
18:39
technology and efficiency. So I think some of
18:41
the ways that regulation has been put in place
18:44
across the world is kind of protecting banks,
18:47
I think, across Meeker, it's protecting Europe.
18:50
So, you know, I mean, one of the things I've
18:52
been chatting to a few of the guys lately about
18:54
is like, look, you know, there was there was
18:56
there used to be one Nvidia traded by financial
18:59
services and one US dollar. Now, last count,
19:04
I counted like 280. US dollar stable coins. And
19:08
then you've got like, I mean, our checks can
19:10
tokenize Nvidia and I know that like Robin Hood,
19:13
Kraken and others have announced it recently.
19:15
They're all on different chains. You've got everyone
19:17
launching varieties, some direct, some synthetic,
19:21
some natively digital, some mirror on different
19:24
chains settling with multiple different stable
19:26
coins. like we're supposed to be making the world
19:29
easier. And in some respects, we're making it
19:31
a bit more complicated. So I think the technology
19:34
needs to be embraced. I think regulation should
19:37
be put in place carefully. I'm not sure we're
19:39
going to see all of the efficiencies that we
19:40
want to see because of the ways that government
19:42
are adopting it. However, yesterday in the UK,
19:44
there was the mansion house speech. And we doubled
19:49
down on our focus on digit. And for those that
19:50
don't know, that's the UK's digital guilt, which
19:54
is being put in place. So that's something we're
19:56
really interested in because whilst that may
20:01
have been downgraded in certain countries, still
20:04
getting debt issued by the UK is kind of considered
20:06
a bit risk -free and getting that on chain is
20:08
quite useful. So I think we're both in agreement
20:10
that the things that should tokenise will be
20:12
tokenised. In regards to sort of UK money markets.
20:16
What kind of a size of market that is? I know
20:18
in the US, money markets probably right now sit
20:21
at about $7 .8 trillion. How big is the UK money
20:25
market market? Oh, I'm not sure. Definitely not
20:28
as big. It's smaller. One of the things in the
20:33
speech yesterday actually was all about the UK
20:36
investing. We see this in our checks in the countries
20:39
like the US. individuals like investing, they
20:43
think of it as part of their savings. In the
20:45
UK, we're much more bank savings account, post
20:48
office, term deposit, split your money around.
20:51
And so we're trying to encourage people in the
20:53
UK to invest more than save more. I don't know
20:57
what it is, but it will be a fraction of the
21:00
US market, I'm sure. And it will be more than
21:04
the per capita adjustment. I'm pretty sure it
21:07
will be larger. And also, obviously, dollar is
21:09
kind of the investment currency of the world
21:11
so anyone in financial services who's hedging
21:13
their portfolio put it there but we've got you
21:15
know we've got money market funds in euros pounds
21:18
and dollars and we see interest in all three
21:22
of those actually some companies can only hold
21:26
so they regulated that they have to hold their
21:29
clients money in certain places and they can
21:31
only hold it in certain types of money market
21:33
funds those that only have government instruments
21:35
so A lot of those companies are underserved by
21:39
banks and are coming to speak to people like
21:40
us to get exposure to the instruments. Where
21:44
do you think we are in regards to the tokenization
21:46
of everything? You guys are, tokenization of
21:48
everything, not the right statement, but the
21:50
tokenization of financial instruments. Where
21:53
do you think we are in regards to that? This,
21:55
of course, was the UK's first live use case of
21:59
digital assets. Obviously, we're right at the
22:02
start. What's in store for us? Not so long ago,
22:09
we announced with Bailey Gifford, we did the
22:11
first natively digital tokenization of a fund
22:13
in the UK. We're doing this collateral transaction.
22:17
But the difference here, we've been around seven
22:20
and a bit years now, but the difference now is,
22:23
yeah, this Lloyd's and Aberdeen transaction,
22:25
that required them onboarding us as a counterpart
22:27
to work with them. And the same with Bailey Gifford
22:30
as well. You know, this is no longer just our
22:33
checks and any other FinTech stroke startup in
22:36
the space talking about this happening. All of
22:38
the all of the big guys now agree this is happening.
22:41
They're starting to adjust their processes for
22:43
it. So I mean, to answer your question, I thought
22:46
we'd be a lot further on than we are now. But
22:48
that was just obviously founder optimism without
22:51
which we might be here. But but with with somewhere
22:54
along that journey, I mean, regulation is being
22:56
put in place across every major jurisdiction
22:58
in the world. um black rocks bitcoin etf which
23:02
i think is fascinating was like i think the one
23:04
i checked the other day and it's more than that
23:06
now i'm sure was 83 billion the fastest ever
23:09
to get to that level in 300 odd days and five
23:11
times quicker than any other, the 20th biggest
23:14
ETF now. So now you've got people interested.
23:17
You've got insane demand for these products as
23:19
shown by all the Bitcoin treasury stuff, people
23:21
learning about it all the time. You've got a
23:23
young generation that seems way more fascinated
23:25
in digital assets than they ever were in traditional
23:27
securities. You've got banks and institutions
23:30
now playing catch up to make sure they don't
23:32
get disrupted and the regulation being put in
23:34
place. So slowly you've got like all of these
23:36
foundational blocks. that are being put in place
23:39
which frankly we were missing for the first four
23:42
or five years of our existence and you know we
23:44
were talking about the benefits but it was quite
23:46
hard to demonstrate but now you're starting to
23:49
get used cases like Nest where people are seeing
23:51
real value, savings in cost, faster processing,
23:54
more efficiencies. In the next three to five
23:58
years we're going to see meaningful shifts and
24:00
it only takes someone like DTC or Euroclear.
24:03
to announce that they're going fully digital
24:05
and that's it. Most of the world's assets are
24:07
moving on chain. I know that they did their collateral
24:11
experiment and I watched Andoni talk about, I've
24:14
also looked into a number of patents that they
24:15
filed where they talk about all this, but I know
24:18
he mentioned the kind of enabling, doesn't mean
24:21
it's going to happen, of the $90 trillion plus
24:25
that DTCC have actually been able to become on
24:29
chain. And when you look at who DTCC are, I mean,
24:32
you couldn't kind of get more evidence that the
24:37
world, the financial markets are moving on chain.
24:40
I suppose the only thing you really need to see
24:41
is it actually happening. I know that was a proof
24:43
of concept, whereas the unique thing about what
24:45
you guys are doing or certainly did with this
24:47
and have done previously is this is live. And
24:50
the UK market is huge. I mean, the UK financial
24:52
markets are one of the reasons that we are who
24:55
we are in the global stage. I mean, UK FX trades
24:58
and interest rate derivatives. account for about
25:01
half of global activity. It's about $5 .4 trillion
25:04
daily. And this was used, this kind of initiative
25:10
that you guys conducted was used for that. So
25:13
there's a big market that you guys are kind of
25:16
unlocking. And what do you think? The UK has
25:19
came out and said they want to be the kind of
25:21
digital hub of the world. How do you think that's
25:23
going? I know the FCA recently just allowed ETNs.
25:28
I haven't got it over the line yet, but you're
25:31
right. It looks like it's heading in that direction.
25:35
I don't want to say talk is cheap, but everyone
25:38
says, right, it's easy for a nation leader to
25:41
come out and go, we want to be the senator of
25:43
the world. That's great. I can tell you 10 things
25:46
that you could fix with a regulation right now
25:48
that would make that more likely to come true.
25:50
And anytime I email anyone about it, it takes
25:53
six months to two years for it to change. I know
25:59
there's due process and everything, but this
26:01
market is moving quickly, and those that move
26:03
fast are going to win it. The US is moving rapidly.
26:08
There's a top -down approach there. Whether or
26:10
not it will all get through, who knows, but there's
26:12
definitely good momentum in the US. You're right.
26:13
In the UK, listings on our exchanges, people
26:16
trading here, it's been going downhill for a
26:19
while. We want to make sure that we're still
26:22
one of the centers of the financial universe.
26:24
given that I think every instrument's moving
26:26
on chain, it's a great opportunity for us to
26:28
do that. For an example, if you're a UK broker
26:34
like Winter Floods and you've been trading Vodafone
26:37
and Aberdeen Money Market Funds your whole life,
26:40
you can't sell our taxes tokenized Vodafone or
26:43
tokenized Money Market Funds unless you're on
26:46
the crypto asset register. It makes no sense
26:48
that the same instrument, they're on different
26:49
technologies. If it's on a spreadsheet or a database,
26:51
we don't make them apply for something else.
26:53
So why do we do it for digital? Now, there might
26:56
be some little tweaks that you want to do to
26:57
their permissions, but making them go through
27:00
what is like a best, a six month process, but
27:04
more likely a two year process where the failure
27:06
rate has been, I think, 60 to 80%. Why are they
27:10
going to do that? So as a result, Artax can create
27:13
a load of digital securities right now, but we
27:15
don't make use of the UK's brokerage distribution.
27:18
So that's one they've talked about where they
27:21
really should just say, if you're already regulated,
27:23
tick this box, prove these two things and away
27:25
you go. Rather than say, you know what, you have
27:28
to go through the same process as if you were
27:30
a crypto exchange. Like the ETP band that make
27:33
any sense at all either I can go and trade on
27:36
Uniswap, but I can't buy BlackRock's Bitcoin
27:38
ETP. It doesn't make any sense. You're probably
27:43
paying more fees. You're paying more spread.
27:45
You've got fewer disclosures. You're taking more
27:47
risk. You're not dealing with a regulated instrument.
27:49
You can't put it in your SIP or ISA, but I'm
27:51
not allowed to trade it because it was caught
27:53
up in the derivatives ban. Both of those things
27:57
are quick solutions for any nation saying we
28:00
want to be the global digital center. I know
28:05
we're trying and I know that we're doing stuff,
28:07
but we should... there's some things we should,
28:10
we could do so much quicker and make the UK like
28:13
genuinely an innovation hub. Yeah, and I think
28:16
we should. I think you're totally right there.
28:18
You know, it would make sense. Even myself, crypto
28:21
sort of natives can be quite hostile towards
28:23
EPS ETFs and ETNs here in the UK. And actually,
28:28
there's no reason for them to be so if you want
28:30
to self custody things, you've got every right
28:32
to do so. You know, there's lots of things that
28:34
people shouldn't do that they do or should do
28:36
and they don't. But actually, if you allow for
28:41
exchange traded products, whatever they may be,
28:43
you're absolutely right. You can save fees. You
28:45
don't have to worry about custody and things
28:47
like this. You can put them in your ISA, which
28:49
is going to give you tax benefits or whatever
28:51
else. There's a whole list of things that people
28:55
can benefit from. And you mentioned something
28:58
a while ago that I want to come back to. And
29:00
that was perhaps a wealth transfer towards a
29:04
crypto native audience. If you look at the majority
29:08
of wealth in the world out there, it typically
29:11
sits with older people. We're talking probably
29:13
the richest demographic has got to be 65 years
29:17
and older, right? A lot of them aren't in crypto
29:20
yet, probably because of, for example, here in
29:24
the UK, you couldn't buy ETNs. You couldn't put
29:26
things in your eyes, so you could buy an exchange,
29:28
but you couldn't do it this way. Do you think
29:31
more broadly about the adoption of crypto down
29:34
the line when wealth trickles down to what is
29:37
going to be a native demographic, a generation,
29:42
if you will, that has grown up with iPads or
29:45
things like this. I'm very blessed that I got
29:47
to see the introduction of things like mobile
29:51
phones into the internet. I saw all that take
29:54
place. Whereas people nowadays, if you were born
29:56
2000s onwards, you grew up with an iPad glued
30:00
to your face. investing is kind of similar in
30:03
the sense that people will be more familiar with
30:06
assets like crypto that's very well positioned
30:09
to kind of capitalize on that wealth transfer.
30:11
Yeah, one of the most pronounced things I noticed
30:15
in the first two years of doing our checks full
30:18
-time was that, you know, I mean, there's a lot
30:22
of people that don't really know what they're
30:25
talking about when they talk about investment,
30:26
but there's also some people who have no background
30:29
in investing and just and they tend to be young
30:33
and they're really good at analyzing the market
30:36
and the value and where it comes from. Obviously
30:38
there's those people chilling their wares. But
30:41
there's actually a lot of people that are interested
30:44
in investing and never in 20 years of hedge funds
30:49
did I ever log on to Twitter and see 50 people.
30:53
I know there are already groups on maybe the
30:55
big tech stocks and some people doing penny shares
30:57
or whatever, but it's not like... just not the
30:59
same level of interest and yeah I don't know
31:03
if there'll be a generational shift because you
31:06
know there's been a lot of money made but there's
31:07
been a lot of money lost too I mean if you look
31:09
at coin gecko or anything if you look at the
31:12
charts for the last whatever 10 years seven eight
31:16
years maybe I don't know coin gecko has been
31:18
around a long coin market cap before that I think
31:20
but anyway if you go through any of them what
31:23
you'll see is that like the utility tokens that
31:25
were there at the top fade away over time so
31:27
people make money in those movements but you
31:30
know there's a bit of a there's a bit of a zero
31:32
-sum game in a way because for everyone that
31:34
made money there's probably a bag holder somewhere
31:36
that sat on them it never went back to its peaks
31:39
and the same with meme coins and NFTs but when
31:44
you when you do look at the charts you'll see
31:46
that the layer ones the strong layer ones are
31:49
there and they're strong the stable coins are
31:52
there and then there's a few exceptions like
31:54
Arve is one that I've always just thought was
31:57
a like a platform that actually did something
31:59
and had a use case and I've had a reason and
32:02
obviously like Uniswap's done pretty well as
32:05
well and then Hyperliquid now like there's some
32:08
market infrastructure plays coming in there anyway
32:10
my point is I don't I think there's a big survivorship
32:13
bias in the space. The people that are still
32:15
here talk about their gains, but there's a lot
32:17
of bodies along the way as well. A hell of a
32:19
lot. I obviously got in pretty much right at
32:22
the top as an investor in 2017. Didn't go too
32:25
well for me and it was a painful few years, but
32:28
it was well worth it to be here where I am today.
32:31
So there's trials and tribulations. I mean, I
32:32
guess if you look at - Yeah, you make money or
32:35
you pay for an education is kind of the way to
32:37
think about it. Absolutely. I've done both. And
32:39
I think - But then again, if you look at like
32:41
the internet with the internet stocks and things
32:43
like that, there was kind of a similar thing.
32:44
And the ones that have real staying power like
32:46
Amazon and things like that, that are fundamentally
32:48
useful, they kind of shine. And that's going
32:53
to bring me really perfectly onto something else
32:56
that I want to ask you. Now this initiative was
33:00
done on Hedera Hashgraph. Now I know you guys
33:02
have a great relationship with Hedera Hashgraph.
33:05
As you do many other DLTs out there. Why was
33:10
this done on Hedera Hashgraph? Was it just a
33:12
case that obviously Aberdeen or a governing council
33:14
member, you know, why did this take place on
33:16
Hedera Hashgraph? So what are my favourite projects
33:18
out there? And I'm always interested to find
33:20
out why people are using it. Yeah, so we like
33:23
those guys, obviously. And Nest, our collateral
33:27
product, is actually available on... We're going
33:30
to announce another new chain relationship soon,
33:32
but... all of the others that we have, Ripple,
33:35
Ethereum, Polygon, Arbitrum, Solana, like it's
33:38
available on all of them. So we can do tokenized
33:41
security transactions between parties on any
33:44
of them. And without naming particular parties,
33:49
and not necessarily one of the ones in the press
33:51
release, but some people are uncomfortable on
33:54
some chains and some people are more comfortable
33:56
on other chains. And I don't really have a view
34:00
yet, but In theory, nodes on certain networks
34:05
can be run by people in any jurisdiction. And
34:07
that can be a problem for these institutions
34:09
because if they send me a security and it pays
34:12
gas fees and that gas fee goes to a sanctioned
34:15
jurisdiction, it can be argued that they're sending
34:17
money to that jurisdiction. So Hedera, the way
34:20
that they're structured is that you sign up to,
34:23
I can't remember the name of it, but let's call
34:24
it a node operating framework. And if you're
34:27
part of their council, then you're not in one
34:28
of those jurisdictions. So it's a... infrastructureally
34:33
works well for them. And from a cost and operational
34:37
point of view, it's obviously we work with them
34:39
and Aberdeen is on the council. So there's a
34:42
lot of good stuff as well. We didn't choose that
34:44
chain, particularly in this case, it was more
34:47
driven by participants. Yeah. And I think that's
34:51
the beautiful thing about Archax is you guys
34:52
work, for example, with Algorand, Arbitrum, Ethereum.
34:55
you know, Hadira, Polygon Solana, Stella, XDC,
34:58
obviously XRP. Yeah, XDC, we did some test transactions
35:03
as well. Yeah, your point's right. We are friends.
35:09
We try not to too much be involved in the kind
35:13
of our chain is better than your chain. We're
35:15
just trying to get people I kind of think of
35:21
the chains as countries, right? And in those
35:25
countries, they have like different theme parks
35:27
or things you can do in them. And to go to that
35:29
country, you need the currency. And people want
35:32
to travel, and they want to go and do one thing
35:34
in that country, then they want to visit another
35:36
country for something else. So if I give someone
35:37
the Aberdeen tokenized money market fund, and
35:40
I give it to them on Hedera, Well, that's great.
35:43
They can use that on Nest on Hedera, but let's
35:45
say Aave launch on Polygon and they allow borrower
35:48
lending against happening money. I want people
35:50
to be able to bridge it over and be able to go
35:53
and play with the apps that are on that chain.
35:55
So that's kind of the world we're trying to create.
35:58
Hopefully over time, it will be a little bit
36:00
more obfuscated, but you know, there's a lot
36:03
of good people building a lot of different chains.
36:05
And when you go out, a chain is better than your
36:07
chain. You're kind of throwing away all the good
36:09
stuff that's taking place in those other communities.
36:12
Yeah, I absolutely agree. I think there's trade
36:13
-offs. I think some chains do things better than
36:15
others. Some things do worse than others. We
36:18
like Hedera for a number of reasons, but it's
36:20
not for everyone. We like the fact that, of course,
36:24
this was done on Hedera, but not exclusive to.
36:27
You mentioned your Nest project. So for example,
36:29
theoretically, this could take place on XRP,
36:34
for example. It's not specific to Hedera. It's
36:37
just Hedera work. in charge of obviously conducting
36:39
this or the chain that was chosen to conduct
36:44
this on... Yeah, exactly. If someone came to
36:47
me today and said, oh, can we buy your BlackRock
36:50
Money Market Fund on XRPL? Then I would say,
36:53
yes, that's fine. And if they said, we want to
36:55
send it here, then that's fine as well. When
36:57
it got to the other side, if that person said,
36:59
when we receive it, we want to flip it over here,
37:01
well, that's okay too. In the same way, USDC
37:04
is like multi -chain. That's kind of how I think
37:09
about it. It's just a kind of a record of ownership.
37:13
And when they're on multiple chains, you're just
37:15
bringing them all together for this consolidated
37:17
record of ownership. That's kind of the way that
37:19
Circle do that. I think that's the best way of
37:22
thinking about it. They've made their currency
37:24
available to a number of communities, and that's
37:27
a good way of being. And of course, you can work
37:29
with chains and get development and support them
37:31
more. And we do that. We have some closer relationships
37:33
than others. But we're just trying to give institutions
37:38
what they want. Yeah, I love that approach. I
37:41
truly do. So Graham, you mentioned that you've
37:44
got a number of things in the pipelines that
37:46
you can't talk about. When do you think you will
37:48
be able to talk about those? Are we looking at
37:49
this year? I mean, you guys are an extremely
37:51
busy company. I don't want any names or anything
37:52
like that. Not that I'd get them anyway, but
37:55
what are we looking at? So we've got an announcement
38:02
that's similar to nest coming up. So not collateral,
38:05
but a different use case. And that's going to
38:08
be pretty exciting. And we've got another chain
38:10
relationship that we're really proud of. You
38:12
know, we didn't go into this announcement, but
38:14
we'll be announced that soon. We've just signed
38:17
a letter of intent to buy a German company that's
38:21
going to add a bit of something to the group.
38:24
So that could be pretty cool as well. So yeah,
38:26
there's a few, I mean, you know, if we pick this
38:28
up in a month's time, I can probably chat for
38:30
all of them. But we're, you know, we're You know,
38:33
there's a lot going on in this space. You kind
38:35
of have to be pretty nimble and move around.
38:37
There's not tons of money flying into RWA right
38:40
now. So you need to be in the exciting projects
38:42
and embedding yourself into the traditional financial
38:45
system so that when things start moving, they
38:47
know where to turn to. Graham, it's always an
38:51
absolute pleasure having you on. Absolutely massive
38:53
congratulations for what you guys are doing.
38:55
Like I say, you guys have been around for a long
38:57
time. The first FCA regulated... company to do
39:01
what it is you're doing. Real pioneers. We absolutely
39:04
love having you on and hopefully we can have
39:06
you on in a month's time to talk to us about
39:07
what you guys are up to again. Thank you very
39:10
much, Graham. It's always a pleasure. Yeah, it's
39:12
been great. Thanks for having me.