Next Global Digital Asset Summit 강연 II 및 대담

Hello everyone. Thank you to E today and Tiger Research for organizing this day. Thank you for the minister for the opening remarks, and just a quick update, the game is still 0-0. So hopefully South Korea is going to win by the end of my panel. So as we talked about, we're here to talk about coordinated market, but just real quick background. My background is I started my career at Citadel, which is one of the largest hedge funds in the world, and then moved to a trading firm called DRW. But in 2014, I left because I saw an opportunity to change how financial markets work, and we started Digital Asset. And the question is, a lot of times people are surprised when I say that I started Digital Asset to create Canton already 12 years ago, and why are we hearing about Canton just today. And my view is that although a lot of people in crypto thought that just publishing a white paper can change the whole global financial system, my view as someone who practiced and actually participated in capital markets was that it's going to take a long time to shift how financial markets operate and behave.

And in 2014, we left to start this journey. We actually wrote the white paper for Canton only in 2016, but as you see, we only launched the network in 2024. And the reason is that we believe that in order to run financial markets on chain, there's a lot of features that today don't exist in public chains. So you'll hear a lot of people talk about privacy today. Today suddenly privacy is cool. In 2016, we already said that privacy is a must. People talk about how to permission assets and control who gets to touch these assets. In 2016, we said that that is a must. So it takes time to build these networks. But as you will see throughout the presentation, I think there was a remark earlier that until the Clarity Act, banks will not be able to use public chains. That is not true. Banks are already using public chains. They are already using Canton today, and we'll talk in a minute why and how.

So why is everybody so excited about crypto? And we hear a lot of times people talking about 24/7. The number is incorrect. Crypto markets have went down quite significantly since, I think it's about 2.3 trillion, but when we look at the opportunity on the right, this is why people are interested, right? This is just in capital markets, commodities, fixed income. We almost have a quadrillion dollars worth of trading a year. In payments, we have two quadrillion. For those that don't know, quadrillion is a thousand trillions. So the numbers that we're going after are significantly higher than where crypto is today. And therefore, I think the opportunity is still extremely exciting and is worth me investing 12 years of my life so far to go after this journey. So what is blockchain trying to solve? We talk a lot about 24/7, and one of the issues is that today there's a lot of friction. When we talk about securities or bonds or payments, they don't exist on the same rail. So when we want to settle bonds against cash, there's a lot of intermediaries in the middle that have to bring these assets together. And that friction, as you can see on the left hand side, is estimated at north of a hundred billion dollars a year in costs to banks, exchanges, and all kinds of market participants.

Now the problem is, we call them legacy chains. Traditional blockchains have taken the approach that there is no privacy, that everything is permissionless. And we're here in Korea, a country that has grown quite significantly, but since the financial crisis in the 90s, there's very strict FX rules, for example. So this idea that you could just move assets in a permissionless manner doesn't work with Korean regulations, as just one example. This idea that you could just move things in regulated markets in a permissionless manner without privacy just doesn't work. The other component is how do we govern these networks? So if you are going to put some of your significant infrastructure on some of these networks, you as a regulated organization need to have a lot of trust that the way that these networks will govern themselves is something that you can trust. That's why, for example, Korean banks trust the SWIFT network even though they don't control the network, but they trust the technology because they trust the governance of that network. So when we launched Canton and we started thinking about it already 10 years ago, our view was that the world is just not the same. The rules that exist in Korea are not going to be the same rules that exist in the US. They're not going to be the same rules that exist in Switzerland, and they're not going to be the same rules that exist in many other countries. And therefore, having one single network that is just going to be fit for everything is not going to work.

And the reason for the name Canton, just to give you a bit of an explanation, for those of you who visited in Switzerland, Switzerland has this concept of canton. So Switzerland is broken into many cantons, and these cantons even are not spelled the same way. Canton with a C is more in the French side of Switzerland, like Geneva. If you go to Zurich, they would spell it with a K. They have different languages, different taxes. Yet when you take a train from Geneva to Zurich, you're still in the same country. So the idea of Canton was to create a global network of networks where every network can have its own rules, its own sovereignty. So a Korean canton can enforce FX restrictions, can enforce all kinds of privacy rules. But whenever they want to interoperate with a US Canton, they could do it as if they existed on one network. You could have configurable privacy. You could set what people can see, what they cannot see, and you don't lose this global connectivity. And that to us was an extremely important feature as we were building this global network. So when we think about Canton, the way I kind of try to describe it in a very simple way is: if you have composability plus privacy with the right aligned economics, you have effectively the three key components, in our opinion, to build a very successful global blockchain network.

And earlier it was said that some of these features like privacy control are table stakes. Table stakes means if you don't have those as a minimum, you will not be able to get regulated financial institutions to use a public or a blockchain. Then there was a comment that they don't even use public blockchain. So I would venture to say that that is incorrect. These are some of the organizations today that are already using Canton. These are, as you can see, some of the largest financial institutions in the world. DTCC manages a hundred trillion in assets and have selected Canton as the first blockchain to put US equities and US treasuries on chain, and we're actually in July will have the first set of trades, and the system will go into production this October. JPX, the largest exchange in Japan, just announced together with Mizuho and Nomura that they're going to tokenize JGBs, so Japanese sovereign bonds, to actually do collateral management on Canton. LSE, which is the largest exchange in the UK, is taking tokenized deposits and putting them on Canton. Circle is doing USDC, but you're seeing also some of the largest financial institutions in the world are already using Canton. And we can talk in more detail on some of these use cases. But again, to me, what I'm trying to say, and it's really where I started, is when we started 12 years ago, our view was that there is a very big opportunity.

A lot of times when you think about crypto, you think about the narrative of Bitcoin. Crypto will liberate the retail and we'll get rid of banks and exchanges. And we've seen that that just didn't happen in crypto, and in my opinion was not necessarily a good promise to make. Because at the end of the day, when we think about our money, we want to use companies that are regulated, that will be held accountable, and that manage our financial assets very securely. We actually thought that the bigger opportunity is how to enable these large institutions to actually manage the financial system in a much more efficient, much more fluid way. And as a result of that, we the consumers will benefit from having better products. No different than when Apple created Apple Pay, we got a much better product. It's not that Apple Pay as a technology was to the end consumer, but the end consumer at the end of the day benefited from having better technology offered by these large organizations. So very similarly, what we think will end up happening is we will see much better products being offered to the retail because these large organizations can run their businesses much more efficiently and much more real time.

So what does this mean for Korea, for example? Just thinking about Korea as a market. I personally am an investor in the Korean market. If you think about what is happening in recent years with geopolitical, I think the whole situation between US and China have made the Korean market and the Japanese market extremely attractive market. So when you look just at Korean manufacturing, Samsung, the whole boom in AI, the defense industry in Korea is creating a massive opportunity in the world. Now again, accessing Korean markets today is not very efficient. It's not as smooth. There's a few ETFs in the US, but again, the exposure to the Korean market from the outside is not very easy. Also, when you think about Korea as its own standalone market, it is quite a significant market. So when you just think about, for example, the repo market, how banks finance each other in Korea, it is a fairly large market. Yet, the settlement of Korean treasuries is not real time. You can't move Korean treasuries in real time. And that's just an example of one very big opportunity. Wholesale settlement, again, moving bank wholesale settlement, and I know the central bank here is thinking about opportunities of how to introduce CBDC. That's another great opportunity. But then as I said, how do you connect Korea into the global markets more efficiently is just another very large opportunity. So we've recently, Digital Asset has been very active. Just recently we signed an MOU with Hanwha, who actually also participated as an investor. Last week we announced that we did a very large investment round with Andreessen, and Hanwha participated, but also the foundation signed with KB, with Shinhan, and a few other organizations that you'll see in the coming weeks. So we're very excited about some of the opportunities that exist here in Korea.

And then again, just something that is worth thinking about in terms of where is Korea located from just a regional position, not just global position. The opportunity just in Asia is enormous for the Korean market. And again, I think that one of the opportunities that is worth for institutions here in Korea to think about is how do you actually connect yourself more efficiently into the local APAC region. And I think that Korea again, Korea and Japan will have an unfair advantage as a result of some of the transformations that are happening in your local economies. And again, what we're seeing is on-chain cash. So the idea that a lot of the banks here are thinking about both CBDC, tokenized deposits, and stablecoins represents quite a significant opportunity. If you look at some of the structuring of most of the conglomerates here, they all have offices or businesses in Singapore, Indonesia, Vietnam, Japan. And therefore there's quite a lot of opportunity on creating much better connectivity locally in the region. Similarly speaking, again just on the asset side, there's quite a lot of opportunity to bring and tokenize some of your local assets, whether it's treasuries, securities, to allow better collateral movements across the region.

So again, just to recap, to us, a lot of times when crypto networks have been talking, they have described let's just put everything on one ledger. And not only that, in my view, there were comments about scaling. Even NASDAQ today does not have one single matching engine. NASDAQ has many matching engines. They have many, many matching engines and they can spin more matching engines. And the reason that they do that is because parallelizing is a much more powerful way to scale networks. Even the internet today, when we talk about the internet, although it sounds like a singular word, the internet is not a singular network. It's actually a network of networks. When Netflix showed up on the internet, they didn't go to the internet foundation and say, hey internet, can you become bigger? No, they just added more servers to the internet and they were able to scale the internet. So this idea that we can run the global financial system on a single ledger is just not connected to reality. Physics just doesn't agree with it. So there's many reasons why we want to have a network of networks. One is scalability. One is the ability to have different rules by different jurisdictions and use cases. But the ability to have one single protocol that connects all of these networks to give the same user experience that we get with the internet today. So when you click today on a browser and you go to a website, your browser actually fetches information from many different networks. Your user experience gives you the sense that you are on one network, but really under the hood, you are connected to many networks. And that's really the user experience we wanted to create with Canton just with respect to the movement of value. So here is again just examples of some of these network of networks. So what we are doing with DTCC, or for example with iCapital, is we're introducing already a hundred funds that exist on Canton. But tomorrow when JP Morgan goes live, which is going to be its own canton, you'll be able to settle some of these iCapital funds using JP Morgan money. So again, it's these applications that run on independent cantons but can interoperate with one another as if they existed on one single chain.

So where is Canton today? We have been in production just for two years. I don't even think two years. We today process close to 10 trillion of value every month. Just to give you a bit of perspective, because we talked about crypto in the last 24 hours, crypto processed 80 billion of value. We do 10 trillion every month. And the reason is that we're not going after crypto trading use cases. We're going after large institutional use cases. Just one single client on Canton is moving close to $300 billion of value every day in repo transactions in the US. And as a result of this very long execution cycle and really thinking about some of these features, we've seen a very, very fast organic growth to the network, and I think you're going to see many more very exciting announcements on new entities that are joining, but more importantly, some of these use cases and how adoption is happening today. Canton processes the highest number of fees a day from any network. We do about two to three million dollars of fees being processed on Canton. This is higher than any other public chain, and we expect that to grow to five and 10 million within the next 12 months.

So just real quick, just wanted to give a brief overview on two very exciting use cases to kind of demonstrate why I'm very excited about what we're doing and what is the opportunity. So as I mentioned, in July we're going to have the next set of trades, but in October we're going to have the go live. So DTCC got an approval from the SEC in the US, a no action relief to onboard the top 1,000 market cap companies in the United States, and they selected Canton as the first network to do that. So in October, any market participant would be able to move a US equity and a US Treasury in real time 24/7. I can tell you that most Korean brokers are in the process of connecting to the DTCC project. I'm pretty sure we were working with every one of the major Korean brokers, and I just want to give again, I said these institutions are the ones that are connecting, but I just want to explain why this is exciting. So the Korean market, if I'm not mistaken, is the largest retail investor in Tesla, if I'm not mistaken. But today, if you wanted to lend your Tesla stock, you are beholden to your broker going through what I would call an agent lending desk in the US. And those agent lending desks take a big part of how much you would get for lending these stocks. And where I get excited is that what I think we're going to start seeing is that you're going to be able to hold your Tesla stock in your wallet and you're going to have things like Aave or Morpho or the equivalent of those things where you would actually be able to pledge your Tesla stock directly to a person that would want to borrow it, where you would get directly the yield of lending those stocks. And again, like I said, this is not necessarily that it's going to be offered to you through a service provider, but you as the customer would be the main beneficiary of that technology. So we're seeing today on the DTCC project already 50 software vendors that are building new applications on top of the DTCC offering, all the way from securities lending, for repoing securities, NASDAQ is building a new exchange for tokenized equities. We mentioned New York Stock Exchange. So we're seeing 50 different vendors that are going to build new applications on top of Canton when DTCC goes into production in October, and I'm extremely excited. Again, the US equity market plus the US Treasury market, if I'm not mistaken, is close to $70 trillion in size. So we keep on talking about TVLs in the billions. I think we need to readjust kind of the numbers that we as an industry are shooting for.

And then as you can imagine, today we're very excited that we have Circle, but I think that one of the things that again, in order to have institutional adoption and as a result of that really good consumer benefits, is that today although stablecoins are still becoming popular and they are still being accepted in different places, they are definitely not accepted as much as banks or Visa or Mastercard or those type of networks. So having the likes of JP Morgan, HSBC, Lloyds Bank, and now recently Visa selected Canton to build a payment network, having those type of institutions issue money on chain is creating a very unique opportunity. And hopefully in the next couple of months we will share a very exciting update where one of the largest companies in the world will actually start using tokenized deposits with treasuries on Canton to start managing their treasury. So they're actually going to start managing their balance sheet on Canton in order to drive better utility for themselves. But again, I think we're also going to see a lot of very exciting consumer use cases where again if you just take and think about, let's just imagine, let's say Shinhan did tokenized deposit. Imagine you'll be able to pledge your Tesla stock into a lending protocol and in real time get Shinhan money into your wallet which you could use in real time. Those are the things that I think we're going to see in the very near future as a result of us bringing all of these assets on chain.

So, it's been a long journey. Like I said, I got into crypto in 2012, 2013. I left in 2014 to start the company. And like I said, it's been pretty interesting cycles, a lot of assets, but I think what we're seeing is where we're entering right now is this idea of coordinated markets. We are now starting to have very interesting assets globally, and we're going to start seeing these transactions going across networks, and we're going to see these markets being coordinated in a way that we haven't seen to date. So if I want to just leave you with one thing, because I know that people need to focus on the game and listen at the same time, is that the way that we think about Canton is having this global composability, 24/7 atomic value exchange with privacy, and again, aligned incentives, how people actually get to participate in the market, is really the three components that you need in order to create a very successful global blockchain network. Thank you.

Almost 12 years. Not 13, almost 12.

Yeah. So our thesis generally speaking is that crypto networks, the way I think about a successful crypto network is like a distributed company, right? And the reason why I say that is at the end of the day, the value of a crypto network should be at the end of the day as a result of the utility it generates. And it saddens me to say that when you look at most crypto networks today, they are valued like a meme stock. The valuations that they have do not match the utility that they create. And there's maybe one single example in the last few months, which is Hyperliquid. Whether you could like it or not, you could say that it's a casino or not, it's gambling or not, it actually generates revenue and it takes that revenue and it burns tokens. So when I think about that, well, what does it look like? It looks like a public company that is generating profit and is saying, I'm going to take this profit to buy stock back. And if that were to happen, the value of a stock should go up, as long as you believe that they're going to continue to generate profit. When you look at most crypto networks today, their valuation is so disconnected from the actual dollar that gets spent on these networks. And that to me makes no sense. And it's actually a very bad outcome that we kept on convincing retail to buy these things. Because what is happening right now in my opinion is, physics is winning, gravity is winning. Things do eventually come back to where they're supposed to be. If you made promises and you didn't deliver, guess what? It's going to go down and it's eventually going to go down to zero. So having that ability for us to be very consistent, and as a result of that, unpopular to be clear, right? A lot of the things that I'm saying right now is not usually what you would hear from a crypto founder, right? What I'm saying right now, and it has caused me to be very unpopular. If you find me on X, there's enough people that don't like me there. But it's done very well for us with investors, because being consistent over 12 years and having a very, very similar narrative and very similar execution and sticking to what you think is the value...

Proposition gives investors a lot of confidence. We heard people talking here about privacy and control, where two years ago it was all about permissionless and no privacy. This zigzag of the industry, these changing narratives, is what you're seeing now in the market. At some point the consumer gets tired from the stories. There's just so much that you can accept these stories and say I still believe you. For us specifically, being very consistent with our story, going after the same clients with the same architecture, not changing the narrative, allowed us within the last 24 months to almost 3x our valuation. And the reason for that is because we are continuing to execute on what we're doing, and it's 3x the valuation in a market that has been down like 40% over the last year. To us that is kind of what has been 2024 to date, and we are extremely honored to have ended recently this round with incredible names like Apollo, CME, HSBC, SoFi, SBI in Japan, Hana in Korea. We might surprise people with more Korean investors. To us that has been extremely exciting, but we still have a lot of work to do to execute and continue to deliver on all of these exciting projects that we're working on.

So let's just start with putting things in perspective. Canton right now, if you look at how much dollar fees it generates annually, is trading at roughly an eight multiple compared to the fees.

I just want to put it in perspective.

Yeah, gas fees compared to the value of the network is roughly 8x. Now I'm just going to give you the understanding. Cardano trades at roughly 10,000 multiple. Ethereum trades at roughly 2,500 multiple. Solana, I think, trades at roughly 1,500 multiple, just to give you a sense. So I think we're in a healthy place. Can our multiple be higher? Sure, maybe. But I'm actually okay with where it's at. At the end of the day, I believe that as long as we can increase the utility on the network, things will take care of themselves. Digital Asset as a company is very profitable. I mean our revenue is in the hundreds of millions of dollars already, and it's grown in the three digits for the last few years.

Well, you should look at the only two networks that have gone up in the last six months.

Do you know why GPUs became so popular for AI? Sorry, it's maybe a bit out of left field why I'm answering it, but do you know why? The reason why GPUs became the perfect answer to AI is because graphic processors, what they allowed to do is run many, many processes in parallel. So the whole idea of a GPU was rather than running one core that can just run a process through, it was this idea that you can run multiple cores all in parallel, and that was why Nvidia was number one in graphical processors, which when you do graphics you can do a lot of things in parallel. Generally speaking, the world today in technology has showed that having things run in parallel is just much, much more superior to running things in a centralized thing.

Now, Solana has done an incredible job scaling, but even Solana during the meme craze when Trump launched Trumpcoin ran out of capacity. So to think that you could just run the entire world financial system on one ledger is crazy to some extent and it's just not connected to reality. It just doesn't work like that. And there is no financial system today that runs anything on a monolithic architecture. There isn't. So why would blockchain be the one that does it? That's just to me insane. The internet doesn't run on a monolith network. Matching engines don't run on monolithic networks. AI doesn't run on monolithic, but crypto should. I mean, I know we think we're special, but we're not that special.

Sure. Maybe I'll pose a question to the audience if they're all here, because it's a test to see who's listening to me and who's looking at the game. So who here would be comfortable with their employer telling all of your colleagues how much you're making every month? And then also to show everyone in the world how much money you spend at any place in the world. Like who would be comfortable that everybody would see all of their money and everything that they do with their money?

Cool. So hopefully some agreed with me and some are still just watching the game, but nobody raised their hand. And the reality is that I think that to some extent people say that, but then I would go and ask the people that are being kidnapped in France because everybody knows their crypto holdings and know that they have a lot of money, and I would ask would they have appreciated having privacy, and the answer is yes. But the reality is whether we like it or not the regulation says financial institutions must have privacy for their clients.

So I actually think on a personal level I find it a bit ludicrous. Every one of us wants to have privacy in some cases. In some cases, we're okay not to have privacy. Sure. Do I want to show everybody my NFT? I personally don't have any NFTs, but yeah, if you want to show off your NFTs, cool. There are certain things that we want to show off, you know, some social status and whatnot, but there are many things that we want to have privacy. So again, I'm not necessarily like this privacy zealot. I'm not this person that says everything needs to be private, but having the option to have certain things private is a good thing. You could build things on Canton that are not with privacy that everybody will be able to see, you could do that. But you could also build things with privacy. So I actually think it gives much more optionality to the consumers.

There are certain things that I will want to have no privacy and there are certain things that I will want to have privacy. But most importantly, it actually allows these institutions that I showed on the slide to actually build something. Because today, imagine if the internet had no privacy capabilities. Meaning if you wanted to build a bank connected to the internet, everybody would be able to see all of your accounts. The regulator would never allow that. So my point is, I think like I said on a personal level, it's a bit of a ludicrous discussion to be had, but really in practical terms, some of these regulated institutions, if you want them to use a blockchain, you need to be able to solve for privacy.

Oh my god, I wish everything went well. A lot have gone wrong. When I posted last week when we posted about the round, I said you know we've made a lot of mistakes, we had a lot of fails, but what I'm very proud of is that we haven't under pressure caved to what could have been very easy things to do. I'll give just an example. As I said, I launched the company in 2014. In 2016 we already had our first round led by JP Morgan. We had Goldman and Accenture, BNP, CME, ABN AMRO, the Australian Securities Exchange. I can keep on going. Deutsche Börse, big institutional names. This is 2016.

In 2017 was the ICO boom. For everybody who remembers, anybody who's been in crypto in 2017, do you know how easy it would have been for me to write a white paper and raise a ton of money and just walk away and be rich and never deal with this? Would have been very easy. But we were very, very honest with what we were trying to build. And we didn't. We didn't launch. We didn't do an ICO. Do you know in 2020, 2021, the era of premines, we had even more investors, even more impressive. Now we had already success, we had people using, I could have done a premine and we didn't. And the reason we didn't is because we felt the technology is not ready, we're not ready to launch the network to do all the things that we were trying to do.

And by the way, even when we launched the network, again this is not a very typical thing for a crypto founder to do, the founders didn't get any token allocation in our name. And the reason for that is a few things. One thing is when you work with regulated institutions, it's important to lead by example and make sure that your actions speak louder than your words. And what I mean by that is if I say I have this big vision of changing capital markets and I want to change the world for the better, which is what crypto has said in words all the time, but then I have this massive crypto position that I can liquidate at any given point of time, what kind of signal does it send for those that want to work with you?

And therefore, we resisted the temptation of doing a premine. We resisted the temptation. All of my exposure to Canton Network is through my equity in Digital Asset. That's it. If Digital Asset is successful and Canton is successful, I will on a personal level be successful. And I have no regrets because again, if you think about the investors that have invested, a big part of the reason why they have invested is due to all of these things that I said to you. Yes, it's the commercial success, but it's also them being very comfortable aligning with us ethically. They feel comfortable working with us as a result of these things.

When we launched the network, we start thinking about governance. Well, how do people get comfortable running mission-critical infrastructure if someone like you can just with a magic wand change everything? So when we launched the network, we took the entire codebase, moved it to the foundation. So we don't control the codebase as Digital Asset anymore. When we launched the foundation, it could have been very easy for me to become the chairman of the foundation. I am not the chairman of the foundation. It's DTCC and Euroclear that are the chairs of the foundation. It would have been very easy for me to make my CTO the chair of the technical part of the foundation. We are not the chairs of the technical part of the foundation. It's actually the CTO of Tradeweb. It could have been the chairs of the tokenomics committee that changes and decides all kinds of things around tokenomics. We are not also there.

And I think the reason for doing that is I've looked at crypto projects over the years and I've seen a lot of people with very good intentions that eventually got blinded by money, and I just didn't want to put myself in that position because although I believe I am not that person, that is not something that I want to test myself with. It's not something that I wanted to even be in that position where I have all this money available to me that I can just have a bad day and just go like, you know, it's just not worth it. Let's just take it and go away. So back to your start, we've made many mistakes. We've lost big projects. We failed on some projects. But I would say that what I am extremely pleased about is that we've never lost our north star and we've stayed pretty true to it.