 One more minute maybe or half So let me start by saying welcome to the first call this This in 2023 a lot of things have gone down a lot of very interesting and very almost existential crisis have erupted in banking as this Seems to be the norm every 10 years or so And there is a theses by mince key which says that there is an instability in Capital markets financial markets instability theses Which you know he did a lot of work on many years ago, but Obviously some of this Presentation that you're about to see is addressing that instability in the heart of the system in some ways anyway and Two things one is we are operating under the Linux Foundation code of conduct Which says that you can disagree with the whatever the speaker says But you can't be disagreeable That is the first thing You can have a nice sort of Debate about things but don't descend into You know being one of our Evolutionary ancestors The other the other Well descend or ascend I don't know what what that is at this moment, but the other code of conduct thing is that we are operating also under the You know trust a loss of United States, which or wherever you are that means You know, we are obviously not conducting these Under a cloak of secrecy so that we can take over the world this this are the two things and without Holding you guys up too much more We are going to go straight to Tony and Tony will Tell me to make up, you know do the presentation I'll share my screen and he'll ask me to advance or retreat or whatever number of you know the Share number this sorry the The slide number he'll he'll tell me to go to the other Point is he's You know, he's busy in many ways so He is going to be able to answer your questions when When you when you ask him But we are gonna have like let's say 10 or 15 minutes of questions After his presentation or even more maybe an open discussion would be a better way to move this conversation forward Since Tony is involved in this up to his neck. He's probably got everything At the tip of his fingers the So Tony is a managing director as the slides will show in city So obviously he's under some certain constraints, which of course he'll Elucidate this So Tony shall I start sharing the screen? Sure? Thank you all right and Please excuse me if I'm Using Libre office instead of Microsoft all good. Oh, this is not it Sorry, this is this is fine. Isn't it? It takes a Let me see why is it showing up on the Google Chrome? The question I need I need to you know how it is Yeah technology Google Chrome this is the Libre office and I'll go into the slideshow part of it You can see you can all see it now, right? Yeah looks good Okay, so Please Tony Yeah, thank you very much for the introduction people and Thanks everyone for for joining today I'm glad I'm glad we've got an intimate small group because we can have a conversation and get everyone involved in the conversation And you'll excuse me if I have I have a little coal so I make sneeze from time to time If I do so rather than subject you to my sneezing I'm just gonna like the screen goes blank for a second and It just it's just I've turned off my camera in order to sneeze And But otherwise looking forward to the conversation. So to introduce myself I'm Tony McLaughlin. I work in the payments business at Citibank I've been working in payments for 30 years with Citibank since 2004 but previously with HSBC AP and Amro Bank in the Netherlands and also in Barclays and Yeah, I've been at a very very career always in in payments and so The perspective that I will share today comes from you know from that background as being a practitioner in the in the payment space So in this Discussion today, I'll try I'll try to share with you You know what my journey has been Through this through this space what which conclusions that I've reached And as VPN, I think alluded to There's no reason why you should You know feeling to agree with my conclusions I'd be very happy for further to be significant levels of challenge and disagreement about the conclusions I'll try to state my assumptions and my biases, you know clearly and hopefully Demonstrate that my conclusions do flow logically from You know my observations and my and my starting position So with all those caveats, you know VPN said that I'm a managing director of Citibank So I'll have lots of constraints that try to find them try to find my constraints So I mean I'll try to speak as openly as possible And answer the questions as directly as I possibly can So let's go to the first the first page VPN if you don't mind the next slide so And I've been I've been I've been following the development of You know cryptocurrencies and blockchains almost from the beginning When I first read the Bitcoin white paper many years ago, I thought it was a staggering You know work it really challenged some of my my Assumptions my fundamental assumptions about what money is and what money should be And ever since then and you've all lived this journey as well But there's been this Thesis that I developed which I call the sometimes called the tokenization thesis or the DLT thesis, which is You know, some people would have you believe that in the future And all or much of the financial system is going to move towards this kind of technology Indeed You know large parts of the digital economy might move towards the adoption of this kind of technology And that thesis is something that I am very interested in and very interested in testing that thesis And I can certainly see That there are attributes of the technology which are which are advantageous But but one thing that I've never been comfortable with is Almost positioning the technology as the antithesis of the traditional financial system now I'm perfectly aware That the ideology in the Bitcoin white paper is About really decoupling money from the nation state and I guess the founding Belief is that you can't trust governments with money and Therefore there should be some kind of digital money which is independent from the nation state and Independent from, you know rent seeking intermediaries such as the commercial banks and others So I understand that being the origin original ideology and clearly there's a huge amount of The technical design in in Bitcoin and thereafter in Ethereum Which is designed to bring out about this You know trustless way of people interacting. I see that as baked in very very deeply into the Into the philosophy of of blockchains but nevertheless, there are aspects of the traditional financial system that I think Do have value and should be preserved and so the work that that I'm engaged in is Is is really to ask the following question. Is there is there an intersection? Is there an intersection a Kind of super set of benefits where we take the the best of blockchain and Again coming to that list of what is the best of blockchain is is is subjective but can Can we take the best of blockchain the best of banking and combine them in such a way that we get the best of both worlds and At the same time perhaps Emilia rate or eliminate the downsides of of each so that's the If you like that's the space that I am exploring is that potential that potential intersection So if we just move on deep into the next slide and that you'll just give me a Small break to go off screen for a second and and sneeze. I'll be back with you for the next slide in about one second Okay, sneezing sneezing break over. Thank you for bearing with me so in order to Elaborate on this idea further about examining this intersection. I want to double click into the world of money and It's start by reflecting that We we are living at a remarkable time in the history of money where Physical money that we've had for thousands of years is coming to an end and in the future all money will be digital but as we embark on that journey the question is well, what type of digital money will we be using and To my way of thinking again as a payments person I can see five alternative types of money of digital money and They're listed on this page and sometimes for dramatic effect I Like to think about it as a good old format format war. I go to good old-fashioned format war and This format war is probably the most consequential we'll ever experience in our lifetime much more important than VHS versus beta max or Nokia versus Apple or you know Kodak versus Digital photography etc That this format war For money is really foundational to the whole economic system Because you know money serves such a vital purpose in enabling commercial transactions to take place to be agreed for the whole price discovery system to work for the execution of commercial agreements and the Settlement of the obligations that arise in those commercial agreements. I can't think of any format war That's more important than that this race between different types of digital money Now the way in which I categorize The different types of digital money come from the bankers perspective So when I think about money The the first reality of money for me as a banker is that money is a liability meaning in and this is the traditional sense of money that the money in your bank account Is your asset, but it's the bank's liability So you're essentially making this kind of loan to the bank and the bank promises to give you the money back Whenever you demand it and so you have counterparty risk against the bank and So I categorize money in terms of the kinds of liability it represents. That's that's the that's the base You know nature of of money Well, it certainly was until Bitcoin came along But let's start walking through these five different alternatives The first alternative is is central bank money Now, I'm sure all of you have some central bank money, but only in physical form up So you've got some notes and some coins but the the the CBDC wave the the massive number of projects by central banks looking at central bank digital currency Really represents the ability for economic actors like you or I to have an account of the central bank and the type of money that we would be hoping we would be holding in those wallets is Central bank money namely a liability of the nation state a full faith and credit of the sovereign That's an interesting type of money because if the sovereign owes you the money, there's no counterparty risk and secondly When transactions are made within central bank money, they usually have this Attribute called finality of settlement, which is that the transactions cannot be unwound through bankruptcy proceedings so central bank money is Compelling type of money in today's economic system your you or I we can have access to the paper form But we can't have access to the digital form City bank and commercial banks. We've got Accounts at the bank of England the Federal Reserve already. So we already have access to those reserves so the question here is is why shouldn't everyone have access to central bank money and and then it's worth thinking about What kind of economic system do we end up with if the majority of people decide to keep their money at the central bank? So I'll leave that question hanging for a second for the purposes of getting through the five different alternatives but the first alternative is Central bank money in digital form the second alternative is the You know, it is the blockbuster. It's the Kodak. It's the incumbent which is commercial bank money When you or I think about how much money we've got we're thinking about how much money we have on the balance sheet of a commercial bank and Recent events have uncovered some of the nature of those liabilities but commercial bank money is by far the dominant form of digital money on the planet today and Again, it's a liability of a commercial bank and commercial banks have counterparty risk So it's not a risk-free form of money and the fact that those counterparty risk against the commercial bank is Not a bug of the system. It's a feature Sorry deep in if you just stay back to the previous spot in place Your finger clicked for some reason. Oh, so this is the right one So, yeah, the the fact that there's counterparty risk against the commercial bank is not a bug. It's a feature and The reason for that feature is what we call money our deposits on account of a commercial bank are the raw material for the creation of of risk assets and Risk assets obviously come with with risk So if a bank gets its assets out of the balance sheet wrong then the bank is at risk of the If the borrowers don't pay the money back So commercial bank money and moves around in increasingly instant ways Most countries have developed instant payment schemes You know visa mastercard keep getting better Believe it or not Swift keeps getting better. I can give you some evidence of Swift getting better through Swift GPI So the plumbing for commercial bank money is getting better and better But the question is is it enough is are the improvements taking place in the commercial banking system enough To meet the challenge of of digital payments the third type of money is Issued by a regulated non-bank so think of this as being paypal type money and the fact is that over the past 10 years There's been a lot of talk about crypto, but all the action has been in this type of money You know, literally hundreds of millions of customers and businesses around the world are using PayPal Or Paytm in India has hundreds of millions of customers Alipay WeChat pay Mercado Pago M. Pesa. I could go on and on regulated non-banks issuing Virtual representations of fiat currency now those monies When you give your money to a regulated non-bank into their wallet That regulated non-bank puts the money into a commercial bank So it kind of ends up being back in the commercial banking system But you have a liability You hold a liability of a regulated non-bank So that's what electronic money is Now I'm going to pause here for a second Because the three types of money that we've just described is is one family unit and That family unit is the sovereign currency system Because whether the money is issued by the central bank The commercial bank or the electronic money institution There those liabilities those types of money are all authorized by the nation state They're issued under license by the nation state and in fact, they've got a common core which is It's a promise to pay you back your money on demand at par value meaning one to one in national currency units And if you think about it the whole structure of financial regulation Is designed to make sure that those promises are kept And that you get your money back So this is the sovereign currency system made up of central bank money commercial bank money and e-money issued by regulated non-banks Now then along came the novel forms of money starting with bitcoin the public cryptocurrencies And bitcoin is a radical is a radical notion. I mean, maybe Bitcoin, Ethereum, whatever. What have you these are a very radical notion because your bitcoin says Money doesn't belong to the nation state You can't trust nation states with money The digital world needs a digital native form of money which is not subject to the rent seeking behavior of intermediaries and can flow frictionlessly across computer networks And that's the that's the thesis of of bitcoin and and money should not be a function of trust So we have to build some kind of infrastructure where we know what everyone has got in their wallets but no one needs to trust each other and hence a lot of the um, the machinery of bitcoin is constructed around delivering on that on that thesis and delivering on that ideology And and therefore bitcoin clearly is not a liability Because you if you want to have a trust less um economic system You don't build it upon someone's prop one person's promise to pay another person um bitcoin therefore is a kind of commodity form of money and at the at the moment the accounting treatment of bitcoin is actually as an intangible asset now you can argue whether That accounting treatment is warranted or not, but that's currently the accounting treatment that people have to use when they put bitcoin for example on their corporate balance sheets is accounted for as an intangible asset It's accounted for largely in the same way as goodwill is accounted for Um, which means it's it's subject to impairment accounting Um, which is why you essentially you don't market to market You kind of market to the lowest value that it's achieved in the previous reporting period so bitcoin Hasn't become Uh, you know the peer-to-peer method of payment. It hasn't primarily become a method of payment or medium of exchange It's become this kind of speculative asset Um, not the original intention as you know of the the designers of bitcoin, which is essentially to build a payment system And It you know, it is where it is, you know, some some countries obviously like El Salvador have have made it legal tender We're currently in crypto winter. So You know, who knows what the what the future path of Of bitcoin price will be and whether it will ever become a mass market method of payment but in the meantime Due to that lack of stability and the the volatility of bitcoin prices Along came the stable coins and the stable coins Are this kind of we are, you know, kind of weird frankenstein's monster Which is a combination of the the crypto technology But slaving that technology to the the values created by the fiat currency system So pegging these instruments to the us dollar and other fiat currencies Which again, if you go back to the original Bitcoin ideology seems a A strange place to reach if you're a if you're a bitcoin maximalist But what are the stable coins? Well, again They they're meant to trade at par value on exchanges. They're meant to Stay at one to one Are they a liability? You know, good question. If you hold a tether token Do you have a contract with tether? If you have a usdc token, do you have a contract with circle? I you know, some some of the holders perhaps do you can you can sign up They've got their terms of conditions, which tells you the redeemability Um, but it's not like it's not the same kind of legal relationship That you have with other issuers of electronic money like if you've got a paypal account You've actually got a contract with paypal. It says that they'll pay you the money back if you've got a bank account You've got a contract with the bank that says you'll pay them. They'll pay you the money back So the stable coins at the moment are outside of the regulatory perimeter Not clearly regulated And are controversial for a number of reasons one of which is stable coin issuers do not know the end user And so how does a stable coin issuer know for example That the instrument that they have issued is not being used by Russian to avoid us actions in the context of the ukraine war and the the russian aggression against ukraine so These are the runners and riders in this in this great game. These are the contestants in the most consequential format war we'll ever see in our lives because think about the Think about the the contestants in the field You've got the central banks competing against the commercial banks competing against the fintechs competing against the crypto map crypto community competing against potentially the big techs and what they're all seeking to do is capture those transactions provide The method of payment that will be most suited to this rapidly burgeoning digital economy And the to me again from a banker's perspective The the bright dividing line here is between sovereign forms of money and non sovereign forms of money You know bitcoin ethereum stable coins. They are not issued under license by the nation state And and here comes the real question. This is where I have to put my cards on the table It's this question which was put in my mind by reading the bitcoin white paper originally Is money The prerogative of the nation state Should the nation state have a monopoly over the issuance of money and the granting of licenses to other people who are able to issue money And my answer and this is just my personal answer And I would say this is my personal answer and my answer from a professional perspective is that Money is the prerogative of the nation state And the reason being is that it's one of the monopolies That citizens grant to the nation state as part of the social contract So in the same way that we grant the nation state the monopoly over creating law And the same way that we give the nation state monopoly over essentially violence through the military and the police That money is one of those natural monopolies of the nation state and therefore You know each of us has to answer that question and and that also I think helps to Show the reason why the Libra proposal was so unacceptable to nation states You know before Libra came along central bankers didn't really care too much about bitcoin They didn't think it fulfilled the functions of money But then Libra came along and Libra Was something remarkable in in terms of the audacity of the proposal It was essentially saying that a big tech company could have its own central bank and its own sovereign currency Bringing to itself the an an important instrument of national power And that's the reason why nation states Bulked at that idea rejected the the concept and that's the reason why Libra and dm Um, you know suffered the fate that it did But no matter where you are on that ideological debate is money a prerogative the prerogative of the nation state yes or no one other clear dividing line on this page Is that the novel forms of money the bitcoins and the ethereum's and the stable coins Are are utilizing a particular substrate Are utilizing different varieties of blockchain And the sovereign currency system is not The sovereign currency system If you think about the structure of the databases So think about this if you're if you're visiting the earth from if you're an alien visitor to the earth And you're investigating our banking system you look down on the earth and you see There are about let's say 25,000 institutions 25,000 banks around the world And each of those 25,000 banks has their own data center And within those data centers they have their own database So that's the structure of databases in the existing banking system And then you will further observe That those banks make payments to each other by sending electronic messages And essentially what the messages are the swift messages the visa messages the a ch messages There are messages moving between different bank databases asking each other to make debits and credits On separate ledgers And you contrast that to the the blockchain ecosystem And you come to some interesting conclusions and the conclusion I come to again coming back to the original Discussion around the tokenization thesis the question for me is Is there is the resynthesis? Is there a synthesis between the sovereign currency system And the best of blockchain Now if you're a crypto maximalist you're screaming at this point you're in a rage. I apologize But I'm going to continue I'm going to continue down this path and again feel free when I finalize my comments to To let rip so if you don't mind going to the next page so um I believe that there could be a thesis I could be a synthesis between The sovereign currency system and the blockchain And and what would that look like and well it would look like it would not look like cbdc Cbdc you have to understand in the context of Libra Um central banks didn't like Libra and they don't want any challenge to the sovereign currency You also fully recognize that The money issued by the the central bank To the to the citizenry Is being used less and less And that's why the thought process is well, let's have a cbdc. Let's put central bank money in digital digital form And that's one way of protecting the sovereign currency system Well to to my mind That's a very narrow frame Of analysis because the fact is that most economic actors don't only use central bank liabilities They don't only use central bank money for most of us We use commercial bank money or PayPal money It's all regulated. It's all sovereign. It's all a liability of a regulated institution and and the question that I asked myself was If we're going to adopt blockchain technology in the Sovereign currency system, why would we limit the scope to central bank money? And so the idea of regulated liability network is You have to imagine that there is uh, some kind of shared ledger some kind of blockchain And in that blockchain What kind of money do you put in it? And the money that you put in it if you care about upgrading the sovereign currency system is Central bank money commercial bank money and e-money And in the future if stable coins are properly regulated, you could even imagine stable coins being in that network So the regulated liability network is the idea of A common infrastructure a common substrate that can process the liabilities of different regulated institutions But it's important to Understand that this is this is as much a legal structure As it is a technology infrastructure So this shared ledger this blockchain Needs to operate in the context of what's known as a financial What's known as a financial market infrastructure? A financial market infrastructure is a regulated value transfer system And the reason why it needs to be inside an fmi is because this thing this Payment system needs to be able to achieve finality of settlement And finality of settlement is a legal construct It's not a technology construct construct. It's a legal construct and that legal construct is brought to life within an fmi So In blockchain land. I know that a lot of people have this phrase which is code is law And it isn't you know law is law And so if we're trying to bring together the sovereign currency system and blockchain technology We've got to bring together the code and the law to make Um, you know make a unit make a structure that works together hand in hand the technology and the law So this is the the idea of the regulated liability network What it really is is a change of the structure of the databases so Just you know go with me on this journey in the 19th century You had lots of different banks and they had paper ledgers So if you went to that bank and you gave them your deposit They would write in their ledger i.o john smith a hundred dollars And then in the 20th century computers were invented relational databases were invented and so Each of those institutions they scrapped their paper ledgers and migrated their record keeping into Data centers and relational databases in those data centers So that's when you you get this market structure or this database structure where You've got 20 25 000 banks on the planet And every one of them have got their own data center and inside those data centers are their proprietary books and records And that's where we are today and then payments are made by sending messages between those different islands of data In this concept of a regulated liability network We have a shared ledger And and that's the that's the key difference between What we have today and what we have in regulated liability network is a common substrate Which contains tokens That represent the liabilities of the participating institutions and all of those all of the participating institutions are regulated So there's no bitcoin on this network. I'm afraid there's no unregulated stable coins Everything is a liability of a regulated institution And then if we move to the next slide and this will be the wrap up. I'll I'll tell you about The the proof of concept we're doing in the us. We're doing proof of concepts of this idea in other places as well But before christmas, we announced a 12 week proof of concept That's involving um 10 of the largest banks in the us. My slides have gone a bit crazy. The names of the institutions are not appearing You can find them on the internet because the crash release was issued I put them out on the on my You know email It's okay It's fine. Good. It's fine. I mean basically we've got 10 of the largest institutions in the us. We've got the new york Fed innovation center participating in simulated transactions on this regulated liability network concept um, I cannot give you a preview of the The results, but they will be coming out in early may and I think we've made some very interest We've drawn some very interesting conclusions about this paradigm shift from moving from a situation where everyone's working on their own proprietary ledger and database to having this shared space And we've explored the possibilities of using this shared space For for the settlement of transactions between the participating institutions There may be further work for the proofs of concepts. We'll talk about that in the papers when they're when they're published Um, but I guess if I if I can summarize You know what we've been Trying to do in this work Is to ask yourselves whether we can take shared ledger blockchain technology and apply it to the regulated financial system In a way that upgrades national currency now. I I perfectly understand that there may be people on this call Who don't think that's a valid project who might think it's a frankenstein's monster Who think that actually we need an alternative to the sovereign currency system And not an upgrade to the sovereign currency system Um, but that's not my that's not the plow. That's not the furrow that I'm plowing. That's not the direction that I'm I'm working on As you might understand I have been working for a bank um, but I I do think there's more to be investigated into this intersection between The the best that blockchain has to offer and the good parts of the banking system And I think with that I've spoken for long enough and I'm happy to Um, open this up to questions and comments and you'll excuse me for one second if I turn off the camera and Have a sneeze just a second But you can turn off Tony's When Tony's sneezing You guys should prepare your questions and of course do not hesitate to ask any questions And when the questions from the audience are exhausted when and if I obviously will intervene and ask some questions but I wait for you my co-participants To drive this forward And and feel free to turn off the presentation now and if people feel like coming on camera to ask a question then That would be nice to see you All right here. Uh, looks like bobby's raised her hand I'm going to turn turn off the um presentation Um stopping the share And I can see now the whole Panoply of participants jim and bobby bobby, please Hi everybody, um, I just want to say this is a lot to get your head around It's a magnificent concept huge My question, um, I guess might be a little preliminary but that central Blockchain that everybody's going to be registering the liabilities on how do you see that being governed? Yeah, that's a great question bobby. Um It would have to be governed within and within the context of an fmi Um, there are other large-scale fmi's out there For example, there is um continuous link settlement is a good example. Um, there are many others And those fmi's have to follow rules called the principles for financial market infrastructures That covers the the full gamut of requirements. So the governance is kind of The guidelines for the governance is set up in the principles for financial market infrastructures um now Um The scheme that we imagine is a multi currency scheme So we'd have to be we'd have to have a college of regulators meaning multiple regulators working on it Um, but that's that's a scenario that we've already seen In the example of cls, which is an fmi In the foreign exchange market Now money is asked a question on chat Uh assuming all uh legal technological hurdles are met When would you think a first commercial test net could be built? Um, we've I mean, we haven't got anything live yet. We've got sandboxes. Um, I would say within about three years I mean building an fmi takes uh, it takes years He's talking about a commercial test net. He is he's not even asking about a A commercial test net in the sense. Yeah more than just the participants Who are now registered? I am speaking for money, but I think that's where he's going meaning I know that he you know, he operates a company that has That you know, a small player but very significant player Otis digital and uh, you know, he's been building stuff So he wants to participate obviously If such players have to enter the market, I have to test This concept they have to be allowed in because the 10 biggest banks by themselves Or the 10 biggest players in the payment space Probably will make some Basic mistakes. Let me put that right Yeah, I'm sure you're I'm sure you're correct and um, I think in future stages of work We'll try to be more inclusive of um, other technology partners and other ecosystem partners um, I think very importantly At the moment the sandbox that we've created is based upon a private permission ledger now Look, I think um, this is one of the fundamental questions which is Can we get to the stage where? Regulated business operates on a public network And this is going to be a journey If you think about this from a bank perspective Then using a public network like ethereum Is evaluated like an outsourcing So, you know, if you if you imagine if let's say that you're sitting in city bank in the it department and you say Hey, you know what it wouldn't be great if we closed down all of our data centers and we used aws Then Yeah, it might it might be great. You might save half of the costs of running the bank Um, but you have to go through something called third party risk assessment And you have to figure out whether you can you can move your applications onto aws in a safe in a safe manner so at the moment It's very hard to see how a network like ethereum would Pass muster on on third party risk management or outsourcing requirements that a regulated bank has um, but nevertheless that the question is Imagine in the future that you know real business Migrates to ethereum. I mean be real b2b business and it becomes a commerce platform And in in that future the the money needs to be where the Where the clients are the money needs to be where the transactions are where the real transactions are and so my personal view is that we're at this stage where Private permission is Safer play for the for the banks to investigate in but probably at some point in the future It needs to migrate to to public networks, but there is a point at one major major issue I mean can can you imagine Can you imagine That it's acceptable it would be acceptable for a bank like city bank to be on ethereum And for city bank to be paying gas fees That end up with a north korean validator I mean absolutely not Absolutely. Yeah. Yeah. I mean, I don't think he's asking that question. It's just a very simple thing, which is Basically, when will a commercial testament be available not ethereum not, you know, we're not talking about Public versus private or anything like that. I mean, he's just talking about his own Reality, which is he could but he could contribute Yeah to this In the regulated space, but since he's a small player He you know, anyway, we can go to the other question. Yeah, this is the question that If anyone's interested to know more then please have a look at the white paper of the regulated liability network dot org Has the white paper and reach out to me and we can discuss potential future collaboration but I thought it was I thought it was important to And use that opportunity to to point out that this leap to public chain for the regulated sector Is quite difficult to achieve true um now Jim Mason who now I believe works for dtcc Is raised his hand, but he has also Pushed out a couple, you know a few questions Here, I think the one question is can you discuss the difference between the digital asset? You know prototypes on the fmi's versus the unregulated Define networks of today, but before we go there. Let me tell you that digital assets Was the one who contributed the name hyper ledger Because When they first formed it was, you know, they acquired a company with the name hyper ledger And hyper ledger itself I mean digital assets were a member of hyper ledger, and I don't know whether they still are but group masters was One of our prime movers right in the beginning. So I just wanted to remind you that we have impeccable Credential impeccable sort of provenance Uh, and maybe you didn't know this but this is what why I'm saying it but anyway going back to the Uh difference between the dam product types on fmi's versus the unregulated defi networks today Yeah, Jim, I don't want to make the same mistake and and not answer your question Do you want to do want to ask a question? Yeah, sure, uh, so I've sat on both sides of this So, you know, the defi world has been around a lot longer than I've been in it I'll say so my my nephew's actually a committer on the bitcoin network He actually writes the libraries for them. Um, so, you know, that's so in our own family were split. Let's put it that way It's it's like a personal war. I don't give him Christmas gifts. He doesn't give me Christmas. So we're we're fair that way Yeah What's but you've made a few points and I've been in this space and I probably spend most of my day every day working in this space and What's there multiple I'll put initiatives that are going on and rln is one of them obviously the cvdc multi cvdc Sorry swift cvdc project last year was another one too and there's other ones as well But but I will say what one of the things that separated rln in my mind from some of the others I think the concepts behind it weren't so different than the other ones What really separated it was more how it's evolved as a model So to me and I I missed the first part of the session here Maybe you might have pointed that out a little bit But I think one of the things about rln that's different is yes, you know City was alcohol prime driver to the whole thing But you've evolved it to the point that it's an independent organization Which is really one of the critical things That's needed if there's 10 critical success factors to make this thing happen, right? That was one of them. And so, um, you know, that's that's a very good foundation To build on going forward. So you're you're right that you're wrapping up your First phase poc this month and you'll have results in may and kind of like the swiftening I'm sure there'll be additional phases on it and back to Manny's point. I'm sure later phases will look for broader participation as well And it's not a quick thing But if I had to as a Like somebody who sits on the sideline and watching football games and placing bets My bet is it's living in the world of regulated finance It's infinitely easier to take regulated finance and make it efficient and a more open model Easily than it is to go the opposite route and try to make bitcoin I'll put regulatory compliant every jurisdiction that it participates in and offer all the flexibility For settlement and participation I think I have to give Jim his own presentation Yeah, do so You know one of the so I could be being gone No, no, um, because he hasn't asked the question. That's why I'm saying that No, I'm sorry useful. I was pushing back front. Tony actually specifically around the evolution of the rln model itself because I think that's actually a pretty important thing and I I I'm sort of grading it in my opinion. That's more of an a model Approach to the problem than some of the other projects that have been trying to do the same thing So if I actually looked and said here's Libra and here's rln I would say wow What a difference in terms of the establishment of a foundation that could move forward versus one that sort of never had a real shot My dad of the box Yeah, that's true. Jim and um, I'll share with you a small it shouldn't really be a secret but And you know ever ever since the even before even before blockchain came along You will you will not imagine you cannot believe the number of approaches and pitches that I've gotten over the years where The core pitches this Hey, wouldn't it be great if everyone in the world used my platform? How how how much efficiency there would be if only everyone would use my platform? And here's the hundred reasons why my platform is the best And you know when you when you lead with that argument, which is hey, wouldn't it be great if everyone used my platform? um, that that's not the roads to adoption and so In rln in rln the road that rln is designed to maximize adoption and that's why rln is technologically neutral the rln concept could work on um any Private or public dlt the rln concept frankly can work on an oracle database Because really what we're seeing is let's have a shared ledger And that can be implemented in many ways so that so one critical thing is Adoption is the whole of the law yeah Absolutely, and so the funny part of it is there are all these what I call Different dimensions to in a sense the monetary challenge if you will For everything for assets settlement the whole thing all these different dimensions You've mentioned some of the dimensions here the other thing that's really interesting too And we're doing the same thing is everywhere I go All I do is I rip out what I call technology So the stupid thing is I'm a dlt architect. Now, what do I do all day long? Say tony give me that paper Get rid of dlt what but it is no no we're gonna throw it out So I'm the one I'm like a dlt policeman here. So no we can't use I don't use the term hyper ledger I don't use dlt all that stuff stricken from all these documents. They're going but but but I'm like no I am with dlt cop here And so the the reason I'm getting rid of it is we have to be as you say capability focused not technology focused And so I I say things like if you want to put in the concept of shared ledger That can be implemented anywhere you want and it can actually have multiple interpretations But when you start telling me it's dlt you've locked me into something that shouldn't be there So that's a cop is issue tickets to people who are violating Protocol on that stuff We've got a meeting of mines Jim and I think also if you're if you're a dtcc then Let's have a chat because one of the future directions for our own is multi asset and We're very interested in things like the triparty repo market. So Maybe we should have an offline chat Sure, so thank you It looks like mark is mark liberati who's Probably from the other end of spectrum But he's definitely Got a question and I wanted to give him a chance Mark Yeah Thank you. Thank you for being and thank you cheney very much for this presentation I was just thinking I'm in a bit building on Which I'm just said on the capability functionality looking at these other sort of big picture Digital initiatives that really could you know to align with what you're trying to overall accomplish and I was thinking particularly about self-solving identity Decentralized identity digital identity in general Yeah, sort of how you're taking this into your Into your plan going forward over. Thank you mark. That's a that's a great a great question and one of the So one of the things that is in the design of rln is there are no bearer bearer instruments um I don't like In the in the financial system We've been trying to get rid of bearer instruments for the past few decades Um, if you want to know about the danger, I think the best illustration of the danger of bearer instruments is the movie diehard Um, you know, if you think about the end of the movie diehard where this guy who was pretending to be a terrorist He was just the thief and he was breaking into the safe the What was it the nakamoto tower? I can't remember but anyway inside the inside that safe were a bunch of bearer instruments And that just illustrates that criminals will do whatever it takes To get their hands on bearer instruments so in in rln, we don't have bearer instruments the The tokens represent the liability of an institution towards their own client Now the only way we can break out of that paradigm Is if we have the solutions that you're talking about mark in terms of the self-sovereign identity to verify credentials I believe that that's something that jp morgan used in their project guardian in in singapore um, but if there's a if let me just make it very clear If city bank were to issue a token on ethereum It cannot be that that token is used by a russian to avoid sanctions. It cannot be And that's the danger. I think with the current paradigm of stable coins the issuers do not know the end user And and that is a very dangerous. That's an extremely dangerous situation to be in We are talking about bearer instruments the most Commonly used bearer instruments to avoid all this is the u.s. Dollar And in fact, there are Off the coin off the notes in circulation Maybe 60 to 70 of them are outside The u.s. And probably being used In in certain ways Yeah I've got a response to that point because I hear that point a lot, but there's a Hold on. Hold on before before we go on I'm going to say that we can extend this call by a few more minutes uh, unless somebody else Comes along to claim this very spot. So go go ahead try Yeah, I mean I hear that I hear that counter argument a lot And it there's a But there's a clear difference and the clear difference is that the u.s. Dollar is issued by the nation state And presumably they know what they're doing when they issue that instrument now The the nation state Well, hold on. Let me let me complete. Let me complete my thought The the nation state Issues the instruments that it wants to issue under their sovereign right to do so But what you can't have Is a private mint coming along without a license and issuing their own u.s. Dollars um in the same way that And I'll give you this this, uh, you know tech just because you can do something from a technology perspective Doesn't mean it's legal. So when laser photocopiers were invented It made copying u.s. Dollars easier It didn't make copying u.s. Dollars legal And so a dlt Is a kind of digital printing press It might enable you to print your own u.s. Dollars, but it doesn't make it legal true um What I was saying when I said no, I'm sorry, uh, I interrupted you but what I'm saying is basically These are emergent defects Nobody knew that the u.s. Dollar issued in whatever started issuing, uh, you know 1930 1930. Yeah Yes, before that there were you know a wide variety of them But nobody even uh posted to that 60 percent of that would be so similarly I think that the the thing with technology or the thing with something that is out of the box is that It possesses emergent properties Yeah, and and we cannot sitting here say what what is the so that's why I said no Because yeah, I think that uh, anyway, uh, so I think Money is asked the question again about About jpm coin, which you just briefly touched upon guardian thing Uh, and I had written about it when it first came out. Maybe it was What 2017 2018 2017? Yeah I mean jp morgan, I I really acknowledged their contribution with you know Because they actually took the trouble to do the basic work on quorum and jp morgan coin They've they've they've done a lot of developments on that but At the end of the day A coin issued by a single bank is a casino chip Meaning it only or A disneyland token if you like Meaning it only works within one institution And that's not a market structure that is uh, it's desirable So you can you can think about our len being a multi bank jp morgan coin Or an interoperable network of of coins that are like jp morgan coin But it cannot be the end destination To have each bank issue their own coin as a proprietary instrument So we have um A couple of other Questions, but mostly around the same or similar type of deal, uh, so the The thing about Um, you know the bright line between these two um Types of systems. This is me now asking a question. Yeah, which is uh My observation is that stablecoins really are a uh frankincense monster like you said So in a sense it is the bridge between Between the undead and the dead and the living Yeah, or the Whatever whatever whatever bright line you want to uh want to draw if this is some kind of a Some arch over these two types of systems So in a sense, I I feel that there is a continuum being created not not a compartmentalized system, but Some are more like the others than the other, you know, some of them, you know, so yeah, it's a You're You're right, but you know, obviously in the crypto winter you had the resurgence of the of the bitcoin maximalists and um, I have to say I mean I kind of respect more the people who are in firmly in one camp or another You know, if you go back to the the original bitcoin white paper where it envisages a world without intermediaries I mean is the crypto ecosystem a world without intermediaries? It is not. I mean Talk about rent seeking Yeah, you know intermediaries so I think I've got I've got more time for the actually I've got I've got more time for the bitcoin maximalists Sorry, hold on. Hold on Hold on, uh, journey. I think I for some strange reason muted you No, that's so that's quite okay. It's another you you've got the power No, no, no you that's censorship and this is against the philosophy um But look, I was just saying that I've got more time for the For the folks who are ideologically pure in this and if you believe In the bitcoin thesis or the, you know, Vitalik's vision for ethereum then At least that's driven by a kind of intellectual purity and it's not just about making not just about making money um, so I'd rather people were in I think some of these things in the middle are frankenstein's monsters that cannot be saved um And yeah, that's my that's my view on that one um, well, I have to counter with with something which says that Engineering is all about compromises in the end Because it's not the the purists uh, cannot exist in a dirty world because the world is not You know, it's organic and it doesn't mean that there's something lacking in the world But it's just that it is it is not a mental construct and abstract But that's true. That's true. But some some hybrids work in the world and some hybrids don't You know, I duck I duck and uh, you know a duck and a goose may be able to Produce a successful offspring, but I can't a dog can't Yes, that's true. Um, now the other Thing is you said that the ultimate, uh, you know counterparty is central bank Um, it depends on which central bank Yeah, central bank of zimbabwe is a little less of a Sound counterparty than Yeah, say the central bank Uh the of britain Yeah, you know again shades of You know not like a white but gray That may that may be so but you but What what right do outsiders have to impose? Uh, or provide an alternative to to to the citizens of zimbabwe The the the citizens of zimbabwe and the government of zimbabwe is sovereign in their own jurisdiction And so what right does an outsider say hey? I'm going to provide an alternative form of money to the citizens of zimbabwe Now the the zimbabwe government like them or not Um have the perfect sovereign right to resist attempts for their for their currency to be debased And uh, you know, so so I you know, I would I would respect the the sovereign rights of um any nation states to um enforce Enforce their sovereignty That's true, but the citizens of zimbabwe obviously uh will find other methods to uh either store their value or to make payments Because they do not you know, it's it's in the end. It's a rule of law question And it's whether you trust your counterparty whether you are inside the country A citizen of that country or not Yeah, they'll they'll you know, so there's more adoption for example for bitcoin in They say in Nigeria in Africa In general because of the quality of governance Yeah, because the citizens are Bound to do this they they don't mind bending the law to so again coming back to practical reality Yeah, it's a concrete thing Yeah, so we might end in another four or five minutes, but If you have uh, you know, if before you close I would uh Urge you to have either you or somebody else present on this finished prototype finished, uh, you know, our land findings on this channel if possible Other than that, you know, does anybody else have any other questions? um, I do see Some people talking about Uh, you know, mostly it's not questions. It's statements, but that's fine um Dan You have something to ask Please you haven't unmuted then Sorry about that. Uh, so, uh, interesting very interesting talk. Thank you very much um Curious so from looking at this from capital markets perspective, uh, obviously settlement payment is critical, but So much of capital markets is really shared ledger In odyssey drivers are a great example collateral another It goes on settlement of securities and so on and curious whether So there's an obvious use case for shared ledger um in capital markets Whether people are ready to acknowledge it or not um curious if there's been the beginnings of um Prototyping thinking about how this might evolve um In that way, it's it, you know similarly constrained market. We don't let everybody play Yeah, absolutely. Dan, you know, I I would say that um Again adoption is the whole of the law So So many so many of these Um proposed ecosystems like I mean we we just saw trade, you know trade lens Collapse and Other projects have collapsed so so many of these projects come down not to technology but to adopt to adoption sure And and I and I think whenever you lead with technology and whenever you turn up to an adoption fight with a technology knife You lose Yeah So capital markets have is obviously one where You know Number one you get loads of different technologies driving Which are you know, which are vested interests trying to establish their new infrastructure Thanks nothing So You know clearly I guess the industry has to drive. I was I think you can translate my question is city would be a material participant in the industry driving Are you aware of those kinds of initiatives which Look like they could be the source of some momentum Yeah, I mean I I would look for the use cases that have the biggest potential delta benefit So in rln phase one, it's cross border payments in us dollars in rln phase two It may be triparty repo. It may be intraday repo. It may be intraday effect swaps um, so I I I tend to focus on the On the places where there's the biggest potential delta delta benefit And when you see these reports coming out in in may you tell me if we've identified the big delta benefit I think we have I think we have Last question would obviously be one. I think I'd see derivatives in other Yeah, but please let you know that let's have a conversation offline take it forward Uh, the last question from uh money Who has got his hand raised so I'm going to defer to his question right now Yeah, um, hi, johnny. Thank you again The just want to one clarification with respect to jp morgan coin versus the recent paper on deposit coin Yeah, what's the nuance between those two? I I think simply that jp morgan coin is an instance of a deposit coin You know that that paper on deposit tokens was written by oliver wyman with jp morgan and I think what they were doing was promoting the idea of a token that represents a bank deposit So it's just the generalization of the jp morgan coin And rln is a generalization of the jp of the jp morgan coin concept as well Um, so yeah, that's the that's the that's the context for that one Yeah, we definitely would like to follow up with you as we've been pointed out. We have been working on on security tokens Regulated security tokens for the past four or four and a half years working with players We'd like to you know show what you have and how we can you know be a participant in in your future Absolutely, please please reach out. I mean, I think one if I can just close on this one final comment Which I I think is a is a deep and important point which is a legal instrument Is independent from the technology used to represent it So again in the 19th century, we wrote down these legal instruments on bits of paper And then in the 20th century, we wrote them on relational databases And in the 21st century century, we might write them on a different kind of database, which is a shared ledger But through that through that technology progression, the legal instrument is the same Is the is identical And there's no reason that you need different rules for putting a legal instrument onto a different technology. So Again, I think one of the one of the ways you synthesize between these worlds Is you move beyond this idea that code is law. It's not law is law and code is code And we have to find the synthesis between them. That's how we move forward On that wonderful note We go back to the Sumerians with their marks on the clay tablets which represented the first ledger and then We also come to the code is law and our thesis my thesis which I've sort of put forth as a paper is If code is law, then law should be code Using an autonomous system to control another autonomous system is a very old engineering concept the governance of uh, you know car speeds to You know all kinds of stuff. So, you know, including today's circuit breakers in equity markets, they are all Automated, I mean no human can react in the Speed at which so we have a whole thesis on that money and I also have written a pretty comprehensive paper on CBDCs, okay, and And furthermore, we created in in 2020 a wholesale CBDC in hyper ledger labs called etalar Okay, which which was presented to you know bank of england world bank And they all thought it was fantastic. But of course we are just small players. So You know, it just fell by the wayside But it is still alive and we are going to take it forward probably but Thank you, Tony for showing up and You know in the midst of a great personal Struggle, yeah Yeah, and it's very great to hear you and You know have this discussion this debate Yeah, hopefully by May or June You know, you can also send a Delegate, but someone has accomplished as you Thank you. We've been I appreciate the opportunity and thanks everyone for the engaging discussion Thank you very much very much. Appreciate it. I enjoyed the session. Thank you Thank you, and this recording will be available both On our site and on youtube Normally it's streamed, but Today we couldn't do it Thank you. Thank you again. Bye