RWA's capital markets is where it's at, and I actually think that that is going to be the last cycle. We either get it right, or in my opinion, I'm done.
You think it's the last cycle for everyone if it doesn't go right?
Never say it's the end for crypto.
Crypto knows how to live.
Knows how to live, exactly. The crypto industry have done a very good job promoting words that are not even true in the same industry. When you start thinking about a stablecoin on a smart contract chain, if you want to be MiCA compliant or GENIUS compliant, you can't be decentralized. You have to have some kind of centralized authority. Not everything just needs to be decentralized for the sake of decentralization. Decentralization to an extent has value. When it goes beyond that, in our opinion, given what we're trying to solve for specifically, it actually starts creating negative value.
I'm sitting down with Yoni Assia, the co-founder and CEO of Digital Asset and the team that's building behind Canton. Yoni, welcome on.
It's great to be here, Jacqueline.
Great to have you. Last time we spoke was at SALT Jackson Hole. Different environment today, but...
Yeah, yeah, yeah. Rocky Mountains. You have mountains here, so...
Yeah, there are mountains here. That's right. Yeah, okay, fair enough. I mean, you've spent years building at the intersection of technology, global finance, etc. If you could look back to your early days and where you are today, what would you say you see differently from then versus now?
Well, first of all, I would have waited six years before starting the company.
Yeah, why is that? Because now the momentum is here.
You know, I think when we started Digital Asset, our view was that the really interesting use case for blockchain is capital markets on chain. And you know, we had to survive the ICO boom, then the NFT boom, and probably whatever other booms that happen in this space.
And now suddenly, you know, RWA's capital markets is where it's at. And I actually think that that is going to be the last cycle. We either get it right, or in my opinion, I'm done. Like I just think. So, you know, it's been a long, long journey.
You think it's the last cycle for everyone if it doesn't go right?
Never, never, never say it's the end for crypto because it's an industry...
It comes with forks. Yeah. And also it knows how to live.
How to live, exactly. It knows how to invent the next thing for, you know, a few months. So, but I actually do believe that there's a lot of value from on-chain finance. And I think that capital markets are going nowhere. So, if we can actually merge those two together, I think that that's the holy grail.
Has your founder journey panned out as you imagined when you started Digital Asset?
Absolutely not. Like I said, I think first of all, you know, I heard... I promised a person that I will never name because it was an event that you couldn't attribute. It was at the Fed in DC. And one of the Digital Asset guys from a very prominent bank said, 'You know, we would have had 30 internets now if the internet came with a token.' What I haven't appreciated is how challenging it would be to kind of like build something while you have a thousand same things all claiming to do the same thing, even though a lot are doing very different things. And then, you know, now you're like, it's not only like you need to build technology and prove the technology works, you also need to kind of like substantiate your technology in the marketing side.
Because there is a financial gain associated by the, you know, usage of the technology. And that's not only by the token holders, sometimes the customers hold the tokens.
So, you know, that's probably something that I wasn't counting on when I started the company, but you know...
So, you mean the market you operate in is very crowded. How do you think about differentiating Digital Asset and Canton and making sure, you know, as the operator of the business that it ultimately succeeds?
So, I think that, you know, because we've been very focused on capital markets from day one, a lot of the requirements of Canton were very, very different than all the other chains. Extremely different. We could have just done what everybody in the industry did, which is never challenge the assumptions of Ethereum, and then just come up with a new name, either fork Ethereum, come with a new name, come up with a new consensus mechanism, and really just kind of like stay with the status quo.
We chose to go a very, very different route, and you know, we said from day one that privacy is non-negotiable, and not to be mistaken with anonymity.
So, when, you know, the RWA cycle suddenly showed up, suddenly privacy became, you know, the hottest topic, and I think in the last year privacy is kind of like a very important feature. It's also having a lot of the ideas of products to build, and being involved with some of the biggest players in those products that have helped us a lot. So, you know, I still think that even most chains that are saying they're going after institutional finance, primarily a lot of their activity comes from meme coin trading.
So, I think that's where long-term the advantage will play out is that at the end of the day, you said it's a crowded market, that's true. My view is the technology can never be your differentiator long-term. I just don't believe. At the end of the day, this technology is all about network effects.
And you know, I think that institutions will come where institutions are.
It's all about the liquidity. It's where you can drive the most utility from your assets. So, we can ride the technical differentiation for just so far. At the end of the day, we need to deliver products and as a result of that create a much more interesting environment for the next institutions to come and play.
Yeah. There's a few follow-up things I want to ask on that front. The privacy part has become a very, very popular topic of discussion recently. Why do you think that is now more than ever? Is it because, you know, banks and all these other institutions really wouldn't get into this space when everything is recorded on a ledger and it's public for like a more watered-down version of what it actually is, you know, or is the privacy something that has been overlooked and now as the space becomes more mature, it's a necessary thing for us to move forward?
No, listen, I think that a lot of the chains have made money from retail. I mean, that was the primary source of income. Still today, in my opinion, it is the primary source of income. And I think now that a lot of these foundations sit on big sums of money, you know, they're doing the right thing, which is looking where is next? What's the next destination?
And if the next destination is RWA and trying to do institutional finance, it's not just that banks will not be okay having everyone be able to see the information even in a pseudo-anonymous manner, which is really no privacy.
A lot of corporations that are not regulated would not be okay with this, right? Like a publicly traded company would not be okay with the whole world being able to see how much money they move. You know, Visa and Mastercard in my opinion would not be okay if everybody could see how much, you know, payments they settled at any given point in time. So, my view is that privacy is a must-have in the institutional space. It's non-negotiable.
And I would even venture to say that at the retail level, if there was an opportunity for retail to be able to trade crypto and move money with privacy, they would prefer that over no privacy.
That's my assumption. So, I think that really it's because RWAs became such a hot topic, people realized that they have to solve for privacy. The reality though is that for anywhere between four to twelve years, depending when you launched your chain, they've effectively built a model that replicates data to everyone by design.
So, now it's a question, well, how do you achieve privacy when kind of like the root design decision is data just gets sent to everyone, and that's why they're trying to figure out how to put privacy more as an afterthought, rather than kind of like as an inherent property of the chain.
Well, where does decentralization actually fit into all of this and provide value to the financial markets and upgrading the system, so to speak, as something a lot of people say, right? Because there's like a balance or a healthy relationship between like the decentralized world and the traditional financial worlds, or calling it the convergence as I'm sure you've seen, right? What's your take on this?
Yeah. I think as an industry, the crypto industry have done a very good job promoting words that are not even true in the same industry.
So, I think that Bitcoin is decentralized and it's an inherent property of the asset to work, right? You have no issuer. You want to have no control. You want it to be decentralized because decentralization is what protects the asset.
Right? If it was centralized, one single entity can fork it, can do a double spend, and you put the asset at risk. Cool. That's why having decentralization to the extreme is a good thing from a security perspective. But, you know, when you start thinking about a stablecoin on a smart contract chain, if you want to be MiCA compliant or GENIUS compliant, you can't be decentralized. You have to have some kind of centralized authority because you need to comply with KYC AML.
Well, it's a centralized issuer. There's no decentralization there. And everybody celebrates it, right? The two largest earners in the crypto industry are the two stablecoin providers, Circle and Tether. And that's actually a good thing. It's not a bad thing. But the reality is they've been able to launch their product on decentralized chains, but the asset itself is not decentralized. So, not everything just needs to be decentralized for the sake of decentralization. Second of all, when you start going into saying I want to run the next generation of financial infrastructure, look at what's happening now with Bitcoin. Whether you believe that it's an issue or not is not really relevant. I think it's more of the fact that, you know, there are people that talk both sides, which is quantum resilience. Right? So, now think about what we're asking, you know, what we're asking the financial industry: come run your most critical infrastructure on this technology, but if quantum becomes a risk, we're not sure that we'll be able to govern it properly because it's decentralized. So, is that valuable? I don't know. I think the question is, is that valuable, right? So, our approach was decentralization to an extent has value. When it goes beyond that, in our opinion, given what we're trying to solve for specifically, it actually starts creating negative value. And therefore, we think no one entity should control Canton. There should be a good number of organizations that effectively govern the network. We have now north of 40 super validators that all vote on the governance of the network, and they come in all shapes and forms, all the way from DTCC and Euroclear that chair the foundation...
...to Goldman, to BNP, to HSBC, Nasdaq, Visa, Tradeweb, Broadridge. I can keep on going.
Alongside with crypto-native companies...
...that actually brings a very different perspective of where they think the network should go. But we do have a board meeting every two months, and we do talk about what's important for the network, and there are decisions that are being made. So, the network is actually moving forward and is progressing, and if there are urgent things, we can, you know, call on a board meeting and actually govern the network. And it's that element, in my opinion, that gives comfort for the next, you know, institutional player to come and say, 'Well, I'm at least more comfortable with that model to run my business on...'
...than something that I have no clue who governs it. And if something bad were to happen, who knows what happens with it, right? So, that's just kind of my perspective about decentralization. You know, another word that we like to use in this industry a lot is permissionless.
Yes, that's... which I think is a bit jargony, but yeah.
Yeah, I think that again, there are elements of permissionless that are good. Permissionless access to infrastructure, sure, is a good thing.
You don't want to gate the access to an infrastructure. At the same time, an asset that is a regulated asset inherently cannot be permissionless.
Right? So, this idea that a lot of times this industry really likes to do things very binary, so either a yes or a no, but in reality, when we look at the industry, people have been very pragmatic and in order to become successful have taken a pragmatic approach. Yes, I'm a stablecoin issuer. Yes, I'm going to issue my coin on permissionless assets, but there is permissioning in the smart contract because if I find that your wallet is sanctioned for whatever reason, I can actually freeze your stablecoin.
I can permission my stablecoin to do certain things that are not permissionless to the end deliverer.
So, how do you explain your business then?
To institutions that are interested in what Canton and Digital Asset do, do you use these technical terms or do you guys kind of like go more high-level? Yeah, that's what I'm asking. How would you explain it?
You know, if I had to guess, if we were to transcribe all of my meetings with AI and then ask the AI how many times does the word blockchain come up when I pitch businesses, I don't think it would cross 30%.
That's probably not something we hear from a lot of guests. So...
And it's intentional, right?
Right, because are we trying to sell technology or are we trying to sell solutions and ways how customers can make money?
Right? I don't think that us as an industry have done a good job focusing on how do clients make money.
It was always like, you know, we used to call it a lot of Digital Asset blockchain tourism. Let's just do something with blockchain. Doesn't really matter what it is, but let's just do blockchain. And on one side that's a good thing because it is new technology, it is a different operating model, and you want clients to kind of like have hands-on experience. On the other hand, as a result of not focusing on how clients make money, what ends up happening is you do your tourism trip in blockchain land. And then when you go like, okay, well, how are we going to make money? Everybody's like staring at each other, you know, the spider meme. Yeah. Right?
Spider-Man meme, yes. Yeah.
And the whole thing goes away.
And you do that a few times, what ends up happening is you really burn yourself. You really burn yourself because now you've drawn down on budget from a lot of players. And now they're like, okay, I had enough of this blockchain. I'll move to AI. Right? So, when I talk about what we do with Canton, for the most part, it actually starts from the use cases and how clients can make money.
