Paolo Ardoino: Bitcoin & the Evolution of the Global Financial System

Commodities are at the center of the importance and the center of power when it comes to these geopolitical changes. Japan might sell US treasury to protect the Japanese yen.

You could see like tariff wars you know on top of everything. And then of course there is this you know dispute between US and China on rare earth and other commodities. China is dumping US treasuries and buying gold. Bitcoin is the greatest currency that was ever created. If sorry for the term hits the fan, we need to have something ready. You cannot build things after the catastrophe. You need to build them before so they can spread, so they can work and you can battle test them so that when people need it the most.

Hey Nico, thank you for having me. I'm very excited to be here. I think there is a lot to talk in with the recent events of Bitcoin and hopefully a good fall and winter for Bitcoin.

I feel great that Bitfinex has created something in, you know, 5 years ago that today everyone is jumping on the bandwagon on. So when Bitfinex security started so many years ago, 5 years ago, it feels like 50 years in our industry, the landscape was completely different. Everyone was focusing on altcoins. Everyone was focusing on meme coins. It was 2021. Yes. So yeah, there was a lot of noise in digital assets and crypto. No one really cared about tokenization of real world assets. No one cared about tokenized bonds and equities. And I feel like Bitfinex before everyone else looked at how the world should embrace the philosophy of Bitcoin outside of Bitcoin. Notwithstanding that Bitcoin is the greatest currency that was ever created, but what we can take from Bitcoin and apply to something that would anyway continue, right, of stocks, bonds that will continue to exist even if Bitcoin will be completely successful. So how we can use the same ideals and ideas and technology to create more access and democratization of the rest of the financial industry and so that basically what Bitfinex security did and today seems obvious but you know it's we put a lot of heart and believe in it and we are seeing the fruits today.

Well, I think that there are two parts that we need to consider. The first one is the fact that tokenization has a broader meaning, right? So people decide to tokenize. So in this moment you could see a lot of efforts to tokenize anything and the low-hanging fruit for tokenization is actually the tokenization of Apple shares or Tesla shares or Google shares that is what most of the companies most of the crypto exchanges are focusing on. Basically most of the crypto exchanges are looking at the traditional finance that traditional finance is looking to enter crypto or enter bitcoin and this asset industry and so the crypto exchanges are like well if traditional finance come into crypto crypto has to go in traditional finance so what is the easiest thing we can do oh let's tokenize Apple shares well that is fine but I think is not adding much to the equation of course you know well adds the fact that you can trade the 24/7 Apple shares, great fine, but it's truly not going in a direction of the Bitcoin philosophy and ethos. I think the beauty of Bitcoin is that Bitcoin created a currency that would open up the financial industry to everyone and would work for payments, would work for savings. And the beauty of the block time of Bitcoin is that it's so slow because it takes 10 minutes on average to mine a Bitcoin block that allows everyone even with the worst connectivity to internet to be able to download a block every 10 minutes that is like you know between 1 and 4 megabytes and just subscribe to it and then participate and send transactions because it's slow enough so that everyone can really truly participate into it and I think the same concept related to traditional finance would be how we can take the same idea of financial inclusion that Bitcoin created and how we can expand it to how we can include companies and people and opportunities coming from everywhere in the world that never had the opportunity to be on the financial markets and how we can bring on the financial markets and so that is a completely different story that's where I think tokenization real world assets makes sense and because create more accessibility so just to give an example the parallelism with bitcoin is if you are like in Patagonia and you want to transact in bitcoin and you want to subscribe to the Bitcoin network, you can do that. And now you can download a block every 10 minutes. You can send transactions is easy. You can have like an antenna to do it. But the same thing if you are the greatest company in Patagonia or in Buenos Aires or in countries that historically are underserved when it comes to the capital markets. Well, how you can have the same opportunity to the guy that lives in New York? And that is where I think to tokenization and adding the blockchain technology on top of it in order to foster accessibility comes into play. And so that's what Bitfinex security is trying to do. How we can create the same opportunity for the guy in Buenos Aires than the guy in New York. The guy in New York can access to trillions of dollars of liquidity for any of his ideas. The guy in Buenos Aires have access to 1,000th of that liquidity if he's lucky. So how we can bring this to an equal playing even playing field that is the mission of the Bitfinex securities.

Well, first of all, when we started you know the London or New York were completely out of the game, right? So remember that until 2024 you had Gensler as the head of the SEC. So nothing would be actual possible. I mean any idea would be that was related to digital asset was immediately shut down. So only Kazakhstan and then El Salvador were courageous enough to look at these new opportunities. It usually happens that smaller countries with more newer regulatory frameworks are more prone to change. By the way, change does not mean taking shortcuts or making things less secure. I think that the regulatory framework that both El Salvador and Kazakhstan have are incredibly solid. They have built something that is truly resisting to the test of time. You know, in the last 5 years, we had multiple opportunities to engage with them and to be also subject to heavy scrutiny from their side. And I think it worked out very well. No one wants including especially between securities we don't want to see really bad events happening with low-quality offerings happening but at the same time we want to see a regulator that understand the technology and the world is moving forward there are new opportunities and actually people that live in their area like the Kazakhstan is at the center of the CIS region that is a huge enormous area for business you have a lot of mining fields oil fields there are rare earths coming from there there are so many opportunities in Kazakhstan in all the CIS region that includes Georgia and Azerbaijan and similar and on the other side in El Salvador is becoming the center of the economy of Central America and I believe is showing leadership also for South America. So I think smaller regulators or you know smaller countries regulators are indeed more prone and have the biggest interest to attract liquidity, attract investors in their areas if they move faster and with more flexibility again not in terms of safety but in terms of adjusting to the changes of time compared to other jurisdictions. I mean probably the US and London will praise the fact that the regulatory system is intact since 100 years. I don't think it necessarily is a good thing.

Yeah, I mean the larger countries will follow for sure. We are seeing that again in the United States and even UK. You could see that there is a fear of missing out now from these big regulators. They want to not miss on the train of digital assets because also they understand the importance. I mean people want to interact with digital assets. People want to interact with tokenized assets and so people want to have access to more opportunities. I think that you know the limitations of the system are clear now. We are seeing most of the liquidity in the United States well and also elsewhere concentrated on couple of stocks like the name SpaceX, Anthropic and Open AI that are attracting the majority of the liquidity that is not good for the broader financial markets. You don't want everyone betting on couple of companies. What happens if those companies will fail? I mean they are overlevered and they are unprofitable companies in this moment. And so you want actually to have investors looking at all the opportunities coming from every single part of the world, not just the most hyped couple of companies. And so I think that even the regulators in the bigger countries are going to look at this technology as a way to create more access and also create a more even playing field because now if you are like a farming company in the United States, it's very hard to raise money when everyone is putting money into SpaceX. So you want to have more avenues for the buy side and sell side to connect and you want that to be extremely accessible compared to the past. You want it to be more efficient. Of course, this comes with the idea that if you are a company in Argentina, if you're a company, a smaller farm or farming company in the United States, you cannot pay the exorbitant fees that any bank would charge you to access the capital market. So you want the same level of quality, a good level of scrutiny, but at the same time you want the fees and the cost for smaller companies to access this liquidity and capital markets to go considerably lower. So that I think is the trend that we need to see and that is I think what success means to me. So if and in the end even just Bitfinex securities will not be able to slash over time the cost for smaller companies to get online and raise capital then I think we are not doing our job well enough.

Well, let's start, you know, like connect to what I was saying in the beginning. putting Apple shares on chain is fine but and definitely creates additional efficiency for the market. I think it's great that we get 24/7 markets. I mean otherwise you get Asia first and then Europe coming online and then United States. There are so I mean humanity is trying to go to Mars and still we have like markets that only work 7 to 8 hours per day and they are very scattered and they close they open they you know maybe the trading is disallowed in certain jurisdictions while there are news coming out for specific companies that's not great I think we should have 24/7 markets great but you could do that without blockchain by the way you could do that without tokenization it's in my opinion tokenization of Apple shares is just a hype I mean saying Apple shares just to make an example but it's just poor hype to create a new narrative but you know you could do that with just the database I think the real tokenization of real world assets means in a certain way is what USDT did we took the dollar we tokenize it and made it much more accessible than you know the current dollar system and you want the same thing with stocks you want the same thing with debt that are issued by companies that can actually get to have that level of access while they never had it before so the threshold is not 24/7 versus 8 hours. The threshold is are we going to open up these markets to more people both on the sell side that are the companies that need to find liquidity and on the buy side that are people that live everywhere in the world that want to look at opportunities that come from everywhere in the world. So that is the huge distinction and I think not only is a matter of semantics or similar also is a matter of philosophy is a matter of focusing on what actually matters in the world rather than trying to create yet another hype soup. So if we are a company as Bitfinex as a company is really rooted in the ideals of Bitcoin. If I look myself in the mirror, I should try to do something that is meaningful for the people that don't have the right level of access versus trying to make another scent creating a product that is yes useful but could be created without so much hype and noise.

Well, savings accounts are extremely rare in the emerging markets. So, people in the emerging markets don't have savings accounts because they don't have bank accounts. the fact that the reason that why they don't have bank accounts is because their average salary is so low that they cannot afford to pay $100 per year in fees to keep a bank account open that would allow them to get maybe US treasuries exposure and also if you are living in emerging markets it's not even given that your bank will give you US treasuries exposure I think it's important to give the same tools to people living in emerging markets because they have the same problems as people living in the western world they want to save enough money to get to give a better life to their children and I think that having access to interest accounts and having access to products that they can hold on their smartphone through their digital wallet is extremely important and I think in this moment this is exactly the use case that we should look into. So the reason why USDT became successful is we brought the dollar to the hundreds of millions of people and billions of people that don't have access to bank account. Then the next phase is how we can generate an interest out of savings accounts for the people living in those markets. And so I think that is what tokenized equities can do. Tokenized bonds that should create an additional level of access that is more like an even playing field access and more like financial inclusion level of access to these products will give opportunities. I mean you say $1 $1 is if think about the average salary of a person in Africa is $2 per day. So if they could put $1 aside per day and get and invest them in US treasuries for them would be incredible, right? So they already use USD for that purpose because of course USDT does not give a yield but at the same time for them is good enough for the huge inflation that they suffer from with the local national currencies. But of course, if they could have a broader set of products to choose from, that would be incredible for them because, you know, they could over time not only look at US tokenized US treasuries, but then look at a new startup that is raising like a bond in their own country. For example, like Nigeria is an incredibly growing country. There are so many people there, like 300 million people there. It's a digital first. There are so many developers. There are so many startups. There are so many fintechs that are starting from Nigeria and the capital markets in Nigeria can become more efficient if there is more access and there is a way for tokenize the opportunities there and made it available and accessed through a digital wallet. That is something that is I think a low hanging fruit and that can be open up through Bitfinex securities and other solutions like this one. So this is exactly what we should be focusing on. $1 is extremely important. It's actually much more. If you had $1 million, you would find hundreds of opportunities and you could open any account in the world. If you have $1 is where is this the problem starts?

They got right the necessity of bringing their companies online into the financial markets of course well Kazakhstan has a stock market but El Salvador doesn't but of course the Kazakhstan stock market is much smaller than you know many like the New York one and so for Kazakhstan although they have a stock market their interest is to attract more liquidity they're actually you know they have plenty of very good companies also fintech they are a digital first country, right? They have Astana that is basically the financial capital. They have sandboxes that Astana is a special economic zone. So they actually they have been at the forefront of exploring new things similar to what also UAE with Dubai and Abu Dhabi what they did but I think Kazakhstan is really a huge country with lot of resources and at the same time a lot of fintech. So the opportunity there is clear how we can make Kazakhstan a boutique when it comes to fintech but also at the same time commodities. So they have this lack of having both and be very good at both but they want to attract more buy side and so in order to attract buy side you need to find new avenues new transport layers for exposing the good things that your country is producing and that's basically why they were so interested. On the other side, El Salvador, El Salvador never had a stock market. There is not an official local stock market. So, how they can set themselves up to leapfrog the last 40 years when you know almost nothing happened from the financial markets point of view in El Salvador and what they can do to use the newly created technology to leapfrog that time and then attract interest and attract players in the field and I think that they did exactly that. Right. So with Bitfinex we moved to El Salvador our headquarters with all standards that follow the same trajectory and that also is creating the opportunity with new regulations to create basically almost like the official onchain El Salvador stock market that could become in my opinion the biggest stock market for all Central America. That is the actual opportunity that is so real for El Salvador and I think that is so exciting for all the participants in that economy as well.

Well, Bitfinex, keep in mind that Bitfinex is a Bitcoin exchange, right? So, we from 2012, we have been focused on Bitcoin first. We add a few other tokens for sure but also our philosophy our ethos is always going back to Bitcoin first and we have seen the trend of Bitcoin treasury companies. I think that there are very interesting opportunities and products that are derived from Bitcoin. I personally have been involved in 21 that you know is not one of the listed companies will might come soon but I think there is always the interest from the bitcoiners to look at what else is being created in the space. I personally always advise for people to understand Bitcoin first to understand what Bitcoin means in its purest form. But the reality is that people want to trade, want to have exposure to other assets and I think that we have seen that with MicroStrategy, we have seen that with 21 and all the others that we listed because it's fair people want to have access to volatility. They want to have access to dollar exposure to also Bitcoin. We have futures. We have derivatives. So it's important to if we are like a Bitcoin first company, we need to give exposure to all Bitcoin products and Bitcoin derived products. So that's basically our motive mission.

Yeah, exactly. this is always going back to our mission is creating access to the people that don't have access right so because the people that always had access to the financial markets they don't have any problem in life right so again it's a matter of what is your daily order like a dollar order of magnitude if your daily dollar order magnitude is $1 is very different than you know at $100 to $1,000 per day and so the more of course money you have the less you can always find you can even fly you can even travel right so people that become wealthier they can afford to leave their country and live wherever they want but the reality is that that is a niche the 99% of the people in this world cannot they cannot afford to relocate themselves to other countries unless you know unless you know very painfully and so because they have roots they have families it's very complex maybe they have older parents they cannot leave and so they are live in countries where the national currency is devaluating so fast against the even just the US dollar. You mentioned Venezuela and you know I really very well remember your story that is you know and the story of your family. Venezuelan the Venezuelan currency lost 99.8% of its value against the US dollar in the last 5 years. I was talking to some people and they said well lost already 99.8% cannot go another 99% down. Yes it can. you can still lose another 99% from after losing 99.8%. So that is the thing that people don't understand there is always there is no bottom basically there is no you know floor yeah the floor is zero but then basically the country has is like Argentina defaulted five times I don't know how many times but they defaulted many times and it can default again and you could see now the Argentina Peso is at the bottom of it this current cycle of when it comes to its value against the US dollar and so you know the I think Bitfinex should be working for these people, right? So, because it's we are a successful exchange is profitable. We do we have a long history. We have a great team. We don't need to work for hype. That is not how we feed ourselves. I think there is no glory in doing what everyone else is doing. And maybe there is a short-term a bit more money or revenues but and in the end all that will become a commoditized. every single crypto exchange now will offer tokenized stocks tokenized you know New York stock exchange stocks sure great but then what happens when we are all equal when we offer the same thing yes maybe then we have to fight a little bit on the user experience then on the fees then will be a race to the bottom on the fees and then basically like it's going to be like uniformity you'll never have anything that is different and more inspiring so that's what we're trying to create like you just cut through the noise and do our own thing.

I think in this particular moment in time we are seeing a lot of uncertainty from the macro perspective. Right? So we see a lot of uncertainty because of wars that are happening because of just global instability currency wars and all that and one thing that has become clear is that commodities are becoming extremely important again. Right now we see a lot of battles on oil for example, but also given the amount of data centers that are projected to be built and all the other applications and robotics and all that and plus you know the industrial applications, commodities are at the center of the importance and the center of power when it comes to these geopolitical changes. And so I think the ability of tokenizing commodities and tokenizing access to commodities is very important because that is something that will become over time more and more important. Unfortunately I don't see a relaxation of this global uncertainty. I mean look in these days Japan might sell US treasury you know the yen to protect the Japanese yen. You could see like tariff wars you know on top of everything. And then of course there is this you know dispute or like fight between the US and China on rare earths and other commodities and you see China is dumping US treasuries and buying gold. And so there's so much to pay attention to when it comes to commodities that I think Bitfinex Security is starting to look at tokenization of commodities and companies that actually produce these commodities and hold these commodities is a way to also create an hedge and create these new opportunities and make them accessible again to people everywhere in the world. And so this is the fact that we got the biggest capital raise related to a commodity business I think makes total sense in the especially in this particular moment in time.