In my view, the question
of regulation is
a super-interesting issue.
That's really the starting point.
You come from KPMG,
KPMG.
But coming from KPMG ...
Just a moment, I remember now.
I had a job interview with KPMG.
In ... I was about 25,
something like that.
So, 21 years ago,
I went to KPMG
in Milan, opposite the main
station, on the left.
- Looking to the left of the station.
- Via Vittorio Pisani, yes.
- The offices were there, right?
- They're still there.
They're still there?
I went for this job interview.
All I remember is that I couldn't
work out what KPMG did.
My problem was:
but what do you do?
Consultancy ... but about what?
Everything. They do everything.
Everything, but in which sectors?
Any sector.
I really couldn't work it out.
And in the end ...
They saw I wasn't quite sure
so they probably said:
"It's best if he doesn't come here".
And I was very unsure too.
But what's it like coming from somewhere like that to the
crypto world?
Like changing from being the
driver of a prime minister
to going into Formula 1.
- Really?
- Yes.
- It's a totally different world.
- It's completely different.
But what's different?
Well ... you have to think that a big four, but it could be any other company
that has been going, KPMG at least has been in Switzerland for 100 years,
Remind me who the big four are: Deloitte ...
Deloitte, Ernst&Young, PricewaterhouseCoopers and KPMG.
Ok. By the way, there's a book
out now about the big four.
Really? It may well be, they've got up to some pretty rum things.
Anyway, you're in a highly
... structured environment.
Yes.
Formal.
Where you have rules,
the internal procedures
governing the way processes are managed are huge tomes.
Ok.
And you know exactly what your job is.
You've been employed to do
this, period. Ok?
To a company where, overnight,
the approach changes.
Where you get up in the morning and ... ok, in KPMG too I got up in the morning
and I didn't really know what
I was doing because I had to see
what would happen with the clients.
But here you really are ... you say ...
You get in and there's the first problem: someone who's done something
and doesn't know whether it's
right or wrong. But no one knows,
because no one has ever looked
at the problem. So you try to put
procedures in place from
scratch, in a world that's never
had procedures.
- Right.
And where ... well, when people say to me: "write the procedures", I say ...
What do I write? Not even I know
what to write. We have to work
and as we work, we'll realise:
"Ah, that way is wrong,
so let's do it this way. No,
this way creates this problem,
so let's try that. Ah, but
then there's this other thing ...".
So, step by step, as you gain
experience you learn and
you set up these procedures. So you
move from a world where the soup
has been heated and reheated
thousands of times, there's nothing
almost nothing that can surprise you.
- The only thing is: "Ah, yes, this ...
Small variations.
Yes, small variations, or big ones... but you know how to do the job.
- Sure.
- To ...
here we really are preparing
a new soup, putting in
ingredients no one's used before,
I don't know, if I put in this
ingredient, if the soup will come out wrong.
And what sort of relationship do you have with institutions,  the regulators,
when there may be an issue to
discuss, and you say: "Hmm".
How can we resolve this situation?
Who are your interlocutors
on the other side?
Well, it's very personal.
Sometimes, we find interlocutors
who listen and understand us.
Others are very, the Germans
say "stur", in other words, very,
very closed inside their environment.
- Obtuse.
- Obtuse, exactly. Thanks for the translation.
My experience is ambivalent, sometimes
I'm satisfied, I think:
"Hey, that was a really
great discussion, we talked well,
I can see they understand us,
and sometimes you come back really
disappointed: "I can't believe it, it's always..."
It's as if you'd gone back 100 years
to having to show people
that cars can replace horses.
And that you don't need ...
you know that when the first automobiles appeared
on the scene, you had to
have a man in front of the car
waving a red flag to warn
people that a car was
coming. Ok?
Here we're ... sometimes I feel
like the man with the red flag.
That reminds me about the
time I went to the Italian parliament.
They called me for a hearing.
It was on the peer-to-peer question.
Napster had come out, and no one
understood a thing, so I went along
to a parliamentary hearing
to explain the concept.
And I'll never forget the MPs' faces,
they looked at me as if I were
talking in Aramaic and above all
the questions they asked me
afterwards, if I had filmed them,
today I'd have a YouTube
channel with billions of views.
There were some incredible things.
On the other hand, people
outside this world have
a load of prejudices, don't they?
Yes, that's the big problem.
Especially in our world, where,
I have to say, the press, at first ...
What was the story?
Ah, there's an anonymous currency.
- Anonymous, who uses it? Criminals.
- Sure.
In fact, we have the proof.
Look at Silk Road, look at this,
look at that.
And unfortunately this
has given a bad name
to everything to do with cryptocurrencies.
I'll be honest, I'm the first to admit it,
for years I wondered, when
I heard people talking about bitcoin,
I always thought:
"What sort of idiot
would contact some Mr Nakamoto
in Japan to obtain
a cryptocurrency they can't
spend anywhere?"
Ok? But when ...
What was it that convinced you
to go over to the other side?
It's a good story. I did
a job for a client.
a traditional client. The client
was pleased with the work,
and invited me to
lunch, as his guest.
So we were talking about this and that
and he said: "Laszlo, there's
something I want to tell you.
After everything I've seen in
the world of traditional finance,
and you saw the work
I asked you to do,
all the complications, etcetera,
I've decided to change business.".
I said: "Goodness, what are
you going to do?". And he said:
"I've moved into FinTech".
FinTech at that time, the first publications were coming out;
also from the public sector, the
government, about FinTech.
So I seized the opportunity
and I said:
"So tell me,  because everyone
here is talking about FinTech,
honestly speaking, what is FinTech?
Because I've read about it, but
I don't understand what's so
innovative about this FinTech".
And he told me something that really
opened my eyes, I had blinkers
on, he took them off.
He said: "I'll tell you a secret:
FinTech is bitcoin.".
And at that I said: "Sorry?
That thing being sold
by Satoshi Nakamoto
in Japan to the criminal world?".
He said: "No, if you like,
I'll arrange a meeting for you
with someone who'll
explain how bitcoin works."
Okay.
And at that point when I
said: "Okay, arrange it",
that's when my life changed.
Right, at that point. Of
course, FinTech is a huge
macro world, of which crypto is ...
Exactly. For me FinTech,
I've tried to provide a definition
of FinTech, because I think
lots of people talk about FinTech
without even knowing what it is.
In FinTech I see:
blockchain technology,
Big Data analysis
and Robo Advisors,
artificial intelligence.
These 3 components,
put together, allow me to
create an eco-system
which, autonomously and
automatically, without any
human intervention, can
be a substitute for financial activity.
That's what FinTech is for me.
The fact that there's this prejudice
about the regulation issue today,
if I talk to someone,
a man in the street, and ask him:
"Do you think the crypto world
is regulated, yes or no?",
the answer is: "No,
it's a pack of thieves
who go round with
their crypto things
and spread through
the ins and outs of the web
and distribute and trade
their bitcoins.".
The fact is that not all countries
have regulations today,
but some do.
I was just talking to
Natale for the group
that does Eidoo, you
have to comply with a load
of requirements, laws,
standards. It's no joke
and so there's a
lot of regulation
in some sectors, for
some businesses.
How does it work today,
if you had to paint
a true picture?
Well, truly, it depends
a bit on the country.
Some countries like
Switzerland immediately adopted
an approach they call
"neutral FinTech".
Okay.
They say, we'll take laws that
already exist, perhaps laws
that were already around
before the advent
of blockchains and
we apply them to a new thing,
okay,
totally new, to blockchains.
On one hand, this
gives you juridical security,
because you have
laws  you can apply
to something completely
new. On the other hand,
it has its limits, because while
we were all happy at first
because 50, 60%
of the business
was regulated,
now we realise
that there's a 10, 20% that's
completely unaccounted for.
The law we have isn't sufficient.
That's why now Switzerland too
wants to bring in a
law on blockchains.
Other countries didn't
take this initial approach
of neutral FinTech,
so they may have had
greater difficulties at first,
because no one knew
how to regulate
these operations,
but now they're
bringing in specific
legislation, blockchain
laws, laws on
digital assets and what have you,
Malta for example,
or Liechtenstein,
which will create this
juridical security, so
as time passes,
more laws will be
introduced and this helps me,
it facilitates my business.
The problem is that,
once again, the regulator too
is drawing up laws
without a full understanding
of the technology.
We see this.
We see that sometimes they
talk, but they don't know exactly
how it works.
In your opinion, which country
is the most advanced, enlightened,
and which countries are
living in a sort of Far West?
The most advanced and
enlightened, I really like
the legislation in Liechtenstein.
It's written really well.
Malta, too, has got off
to a really good start,
its laws are good,
but Malta,
Liechtenstein is a
small country too,
but Malta is a bit isolated,
I'm always a bit worried
about what would happen
if we all go there.
Our group is in Malta
but we're among the first,
so we still manage
to handle things, but
if this law were to attract
huge numbers of companies,
I don't think Malta has an eco-system
that would hold up.
A bit like Ireland previously,
with the hi-tech giants.
Exactly.
Liechtenstein is small
too, but at least
Liechtenstein isn't
surrounded by the sea,
it's surrounded by other
countries, where people can live
and then move to Liechtenstein.
The United States ...
In Malta you could put
all your employees
on offshore boats ...
there's a project now
to set up these tax-free
eco-systems, in the ocean.
Okay.
Anyway,
- the big countries, USA, China?
- the USA, the USA
are moving in the best
possible way, I think, because
internally, my impression is
that they're doing a lot to
help the eco-system.
We see applications,
companies, which do things
that would be very
difficult to do in Europe.
Why?
Because in the States they
know that this technology
will bring them big
economic benefits.
They understand this so
well that the US banks
are trying to block the
expansion of this eco-system
in other countries. One
of the biggest problems
we have is setting up
relations with banks.
And when I talk to banks, they say:
"What you do is really interesting,
we're convinced you are
the future. But if I accept you
as a client, in the questionnaire
of my US correspondent bank,
which I use for
transactions in dollars,
there's a question,
if I have clients,
if I open accounts for
clients active in cryptocurrencies."
And if I say yes, then they'll
run an additional due diligence
on me, and I could
lose my American
correspondent and lose
my transactions in dollars.
That's how it is. So, internally,
the Americans accept
everything. Take a look,
the largest crypto companies
are in America. Externally,
they're fighting them.
Okay.
Right, so in my view,
this is, call it a signal,
- interesting
- that they really believe in it
- and push
- believe in it and push
- they don't want to create a competitive advantage.
The other country you
don't hear much about ...
is Italy.
No, sorry.
I was just waiting for that.
It's France.
- France?
- France.
France is really opening up
to the eco-system, they're
introducing laws ad hoc,
they've got ministers
saying in public
that they want to
introduce laws to help ICOs,
laws to help cryptocurrency funds,
etcetera.
The question about
France is whether
these laws will be so innovative
that they overcome
this initial resistance.
And over in Asia, China?
Well, as a European,
obviously I don't have many
contacts with Asia.
I have some Asian
clients, I think Japan
is moving in the right direction,
you know yourself, they were
among the first to regulate
exchangers, to recognise
bitcoin as a currency
for payments. Whereas
in Korea I think it's
more of a muddle. In fact,
I have a lot of Korean clients
who come to Switzerland
for their ICOs.
Okay.
They know that doing
them in Korea, Korea is very ...
in Korea, perhaps, society
is very attracted by
crypto, but the government
hasn't managed to
channel this movement
inside a clear regulated structure,
- well defined.
- My feeling
is that probably, today,
a company that works
in this field, has
to have a presence
in a number of countries
in order to operate correctly.
To have a licence
perhaps in one country,
to have another country
that helps you for
online banking.
In any case, this is a problem
for financial companies in general.
It isn't really restricted
to FinTech, in fact FinTech
can deal with this
problem in part.
In London, we have billions of
FinTech companies.
The idea is that
if I go into FinTech,
I offer an application
that people can access
from anywhere in the world.
In traditional finance,
if you want to open a bank account,
you have to move, and
go and meet the broker.
Of course, now
traditional finance too
is gradually going online.
But there's this idea of movement.
Revolut, billions
of online banks.
If I go and advertise
in another country,
obviously I have to
have a licence
from that country.
If you're like a Revolut,
Revolut relies
heavily on word of mouth,
I have never seen
a Revolut advertisement
in an airport. Advertising
for Revolut will come to
airports, but for now
it's word of mouth.
There was the TransferWise
money transfer service,
if you have to make
international transfers
they offer you better
conditions than banks,
it's British and
they advertised
in the airport in London.
British in London is fine.
British on British.
But I've never seen
them elsewhere.
If I as a Swiss company
wanted to take our wallet
for example, our exchanger.
I want to advertise
our exchanger
in Italy, I can't rule out that
Consob would say to me
"Ah, but you're targeting,
you're offering a service in
Italy to Italian investors or users,
you're not regulated in Italy,
you're not even regulated in Europe,
(ok, now the exchanger is in Malta
so it would be regulated in Europe)
anyway you have to have a
passport, you don't have one,
so I'm not going to let you,
you've breached some regulation.
- Right, right.
- That's the risk,
because financial activity is highly
regulated, to protect the users.
So how do you get through,
find your way,
with the thousand and one different laws in a thousand different countries
in so many sectors where perhaps
the right law doesn't even exist.
What advice would you give
someone in this sector so
they avoid making mistakes?
Well, first I want
to point something out.
I read a KPMG study recently
- Ok, you only read KPMG studies.
- No, I read them and others ...
which said that nowadays,
company leaders, the CEOs,
make decisions based
on their gut instincts,
because the world in general,
forget about the cryptos, in general,
the world has become so complex
that even an operator
in the traditional world
active in, I don't
know, in trade,
with all the laws that have to be complied with, becomes confused
and at a certain point takes
decisions based on their gut instinct.
With us, as you said,
it's even more extreme,
because the laws aren't there, more
precisely, you have to apply laws
that weren't introduced
for activities like yours
and you never know whether
they will apply them or not,
- There's a lot of interpretation
- There's no practice.
There's a lot of interpretation,
but no practice that lets you say:
"If I do this it's wrong,
if I do that it's right."
You do it that way thinking it's
right, hoping it's right.
So my advice is to reason
in terms of principles,
to forget about your
function for a moment,
and to put yourself
in the user's shoes,
or even the regulator's
shoes, and say:
"Ok, from an ethical viewpoint
is what I'm doing
right or wrong?".
If it's right from an
ethical viewpoint,
if you say: "I don't have any
problems and I wouldn't have
any trouble going on television to
tell people this is what I'm doing"
- Ok.
- You're probably on the right side.
If you start saying: "No,
thinking about it, telling everyone
that this is what we're doing,
perhaps I'm not so comfortable",
then you may be doing something
that could be described
as incorrect.
Next year, more or less, more
regulations will be introduced.
What do you think will be the most highly regulated
area of the crypto world ...
- Well,
or what needs to be more greatly
regulated, if there is a need?
Earlier, you said you had the feeling
there wasn't any regulation,
but you've realised that in
fact there is regulation.
What I expect next year
is a more ad hoc type of regulation,
what I was saying to you earlier
we began from a generalist
approach, one size fits all,
and now we have to
say, no,  careful,
cryptocurrency and blockchain
have processes, which, moreover,
are on the side of the users,
which is the exact opposite
of traditional finance
because I no longer have an
intermediary, there isn't anyone
holding my assets on my behalf,
and if this someone with my assets
does something wrong, goes bust,
I don't know what, I lose my money.
I have my money, it's mine,
it's in my centralised wallet,
I have control.
So in this case
I think the laws have to change,
they have to take this
situation into account
and adapt to this situation,
I expect almost an easing
compared with traditional finance.
Then we could also
have a situation
where instead of having
a decentralised wallet,
I have a centralised wallet, so
it's like traditional finance
but with the cryptocurrencies, right,
but the fact that cryptocurrencies
for example are traceable
can facilitate all the requirements
relating to money laundering,
so there too, perhaps,
more ad hoc laws.
The fact that cryptocurrencies
tend to become anonymous,
now with the Lightening Network too,
perhaps more ad hoc laws
on what to do there too,
because countries will never
allow anonymous transactions.
So if the transaction becomes
anonymous, then another element
will have to be identified,
I'm fairly convinced about
this, not because I want it,
but because I think countries
will not allow this to happen.
And how do you think
traditional finance is reacting.
your colleagues,
your former colleagues,
who perhaps work in that
area, how are they reacting?
Do you see greater change or do
you still see strong resistance?
Well, the first time I went around
talking about bitcoin and cryptocurrencies in traditional finance
to be honest, I saw curiousity
mixed with incredulity,
people said to me:
"What do you mean, why?",
but it was clear they
were thinking: "He's ill",
- Lazlo's had a brainstorm,
- Right, he's got sunstroke.
And then when I said
I was leaving KMPG
to join Poseidon, you can imagine!
He's gone mad, a breakdown.
But I have to say I receive
increasing numbers of requests
from people who want
to enter this world.
Last week, a former client of mine
who traded for himself
came back to me,
"Ah, do you remember, we
tried to work together?
I'm here because now we're
doing very little with bonds
and we've got into cryptocurrencies
and we really like them."
So that's what's
interesting, we see
that when players in
traditional finance
move into cryptocurrencies
they help to create
an eco-system
which is what's missing
now, there are still
too few of us to enable
the institutionals
to come in. But every
day, there is one more.
I saw people laughing at me
because they saw
cryptocurrencies collapsing.
And I said: "No,
every day someone else
comes into the cryptocurrency world,
a player bringing real value."
So what they didn't realise is
that it's not the prices of
cryptocurrencies that drives uptake,
it's how many people are
really beginning to come
into this field. And the
number continues to rise.
This is what gives me
the optimism to say
"We're almost at a point where
all the institutionals will enter
the cryptocurrency world."
- Incidentally, if you look
on the technical side, I was talking
to a friend who's a developer,
he was saying, it's incredible
that until now
if you developed something
for a platform like, I don't know,
Facebook or Twitter
or these names,
yes, you developed your
app, then one day
Mark Zuckerberg wakes up
and says: "No, stop, we're closing
access, we're closing the APIs",
and you close your company.
Whereas he said that when
you develop for Ethereum
and for a particular
initiative related to
the blockchain world,
you are a part
of the benefits
and there isn't a central
body who says:
"From tomorrow
you're out of a job",
but in fact you have an
interest in developing,
in having parts of that cryptocurrency linked to that initiative
and every interest in
the success of the project.
- Exactly.
- So I have a distributed advantage
and if the developer is involved, an entrepreneur arrives too,
because they say: "Ok, I'll set up a business around this",
the investors come on board because the entrepreneur's there... and you're off,
so this positive force
is created.
Exactly, I'm certain
there's going to be a cultural
shift in the next generation.
I can see it already
with my children:
the first thing to change
is the concept of property.
We were born, at least I was,
with this idea, you wanted to own,
to have, I don't know, the
latest T-shirt, CD, car
scooter, it was your scooter, your
car, you could do what you wanted.
Today, in music, my
kids don't have CDs,
in my day we had cassettes, but
they don't have ... they listen ...
- Cassettes were great, the tape ...
- The tape, which you had to wind
with a biro.
Today you listen on Spotify
The music isn't yours,
you just download it.
Same thing with movies.
And cars? Uber.
I'm sure that when my
son grows up,
one morning he'll
get up and say:
"Today I'm going to hire a
Fiat Punto to go to work
because tonight I have a hot date
and I want to hire a Porsche
so I can be a blagger
and show off to the girl.
- A wagger?
- A blagger.
A blagger, that's great.
Well, these are
Swiss-type things.
This Swiss jargon ... blagger?
- Yes.
- Blagger, I'll have to remember that.
... so the concept is changing.
Exactly. The second
is what you said,
decentralisation.
We'll be moving ...
it's much more complicated,
because trying to get my parents
to understand decentralisation
is a mission impossible.
So getting people
to understand that,
being part of a
large mechanism
that operates without
a central body,
is much better than being
controlled by a central body
which, as you said, if something
happens to this central body,
overnight I lose everything, this is a very difficult mental adjustment.
And it was for me:
it took me a year
to understand what
decentralisation meant.
- Right.
- Some people
will never manage to understand
what decentralisation is.
It's almost, I honestly see it as
an evolution of humanity too,
moving from a centralised society
to a decentralised society.
- Sure, but once again
you decentralise if you're sure
that things work, you
know that the rules are clear,
you know what the rules are,
that they are applied correctly
and so all the legislation
and regulation
is of fundamental importance
from this point of view.
Exactly, but what I
see in particular is
that these rules are drawn up
among private parties.
In other words, think
about blockchains,
or think about the bitcoin
blockchain, the bitcoin protocol:
it's the users who tell you,
who all have to agree
to change the protocol,
ok?
- Sure.
So what we'll see in the
decentralised world
is that we'll have rules
governing use of decentralisation,
which, in the centralised
world, is the contract:
the contract
I make with you
will be a contract among several
different parties, with everyone.
And all of us will use
that contract.
Then the regulator will
introduce laws that say
what the limits are of the contracts we can make amongst us.
For example, they'll say:
"In these areas, KYC is mandatory".
They'll say: "You can't do,
I don't know, certain activities."
You can't sell
certain goods.
You can't market
drugs, for example.
They'll establish limits.
- Yes, a framework.
But in that world, how
do I write that framework,
I'll write it myself,
in decentralised contracts.
That's the big difference.
I'll have the confidence
not because I have a contract
with you and I believe in you,
but because I know
there are a hundred of us
taking part in this
decentralised contract
and I think there'll never be
be 51 of them in bad faith.
The majority will always
be in good faith
and will comply with the
contract. That will be my security.
- Laz, I'm going off to be a blagger.
- Off you go, go and be a blagger.
