KoreTalkX #5 with Andrew Bull
Dr. Kiran Garimella
Chief Scientist & CTO
Dr. Kiran Garimella
Chief Scientist & CTO
Kiran Garimella, Ph.D., is the chief scientist and chief technology officer at KoreConX, leading the strategy and development of blockchain and machine learning solutions. A sought after speaker and author, Kiran has more than 25 years experience in information technology, consulting and financial services. Previously, Kiran held roles such as global CIO and chief architect at a General Electric company and vice president and chief evangelist for BPM at Software AG. He is also an advisor to the Alliance of Merger & Acquisition Advisors and the MidMarket Alliance, principal founder of iKnowCentral and co-founder of CognitiveWorld.com.
Bull Blockchain Law
Finding Bitcoin in 2011, I have a deep knowledge of blockchain as a technology as well as how the current regulatory framework applies to the industry. As a result, my legal practice aims to help businesses and individuals be regulatory compliant regarding cryptocurrencies and blockchain technology.
Dr. Kiran Garimella 00:47
Hello, good afternoon, Andrew. How are you? Doing?
Andrew Bull: Well, Dr. Kiran, how are you?
Dr. Kiran Garimella: Absolutely wonderful. Hey, thanks for joining us. And welcome everybody for a fabulous session. I’m sure we’ll have a lot of fun. Talking about today’s topic, let me introduce myself. I’m Karen Garimella. I’m the Chief Scientist and CTO for KoreConX. And I get to do all the fun stuff, you know, when people are talking about all these different, you know, ideas and other business models, and so on, you know, I get to do all the really cool stuff with all the new technologies and stuff. So Andrew.
Andrew Bull 01:24
For sure, yes, my name is Andrew Bull and I’m a founding partner of Bull Blockchain Law. It’s a law firm based in the United States and we represent clients across the blockchain, cryptocurrency, and obviously securities and tokenization contexts. So I started on the tech side originally in the crypto industry, running a crypto mining company and an investment fund, but then transitioned to the legal side years ago and had been fortunate enough to see the different changes in regulatory approaches from not only the US perspective, but also other jurisdictions in terms of how they’re categorizing tokens, and so on and so forth. So, yeah, but happy to be here. And thanks, KoreConX, for hosting, as always, and yeah, happy to weigh in on any aspect of it.
Dr. Kiran Garimella 02:06
Oh, yeah. And so you started this journey on the tech side, and hopefully, you get you were able to save a lot of the Bitcoin private addresses. I have a friend, you know, who did a lot of good stuff from the early ages, early stages of Bitcoin, back in 2010 and 2011. And he tells me that every time they, you know, solve the puzzle, you know, he would get like 50 Bitcoins, believe it or 50 Bitcoins, right. And he had seven kids and put all of them to school and, and I said, you know, Hey, when did you sell this stuff? Yesterday, I sold a few for like 30 bucks. And I said, Have you not saved even a few? And they said, well, some of the addresses, I just don’t have them anymore. So it’s really a sad story. Right? It is amazing. So it’s interesting, because, you know, I come from a traditional finance background. So my background has been mostly in the traditional finance, and I will say, a global CEO with the AG, finance company within GE. And you know, so I used to train myself, on the corporate side on many things, and I personally have been a trader myself, you know, used to trade futures and commodities and options, and little things like that over the years. For my own account, of course, you know, I was not a professional trader. But to that end, I kind of learned a lot. So it’ll be interesting to kind of compare notes with you on the evolution and where this is going. And one of the things I’ve noticed, Andrew, and maybe you can, you know, give me your color on this is, you know, when the crypto community came up there’s a ideological bent to the crypto movement, in the sense that we don’t want intermediaries we don’t want you know, big brother watching us and finding out what’s going on. And now, of course, when the scam started happening, and you know, they lost money, guess what they did? They just went back to Big Brother and Uncle Sam and Cigna Health, what happened? Right? So I’m gonna be curious about, you know, your take on how people are viewing this whole crypto phenomenon. You know, when I look at regular investors like us, you know, in our age range, you know, people have real money and, you know, some experience under the belt, you know. I think we tend to care more about the safety and security of our investments or not so much about, you know, who gets to know about it, right. I mean, what’s your take on that?
Andrew Bull 04:32
Yeah, absolutely. It’s a great point and great question, and really the, especially the cyberpunk movement of the 80s, and 90s, that really spawned kind of that mentality to being like, Oh, I’m so standoffish to any type of regulatory oversight, or anything along those lines. I think that in the early days, for sure. When I was doing the mining and running the investment fund that was at the core of everyone’s mentality, and everyone’s kind of coming to the table and saying, Hey, this is a major motivation for why we want to participate. Well, one of the limitations back then is the amount of applications that Blockchain and crypto actually had produced by that point. And obviously Bitcoin kind of being one of the only iterations of it. And so now fast forward to today, and we have so many different avenues in terms of the application of the technology, that I think that that mentality has definitely been kind of marginalized or compartmentalized a way to certain applications. And within that, and when we think about kind of the larger topic today, as well as, in my opinion, we I’ve seen regulatory adoption over time. Now, in certain circumstances, there hasn’t been enough. And in certain circumstances, there have been too much. And I think that within that context when seeing the development, in terms of kind of what’s going to happen in the future, we definitely see more and more from an educational standpoint, because I think that’s what it comes back to is that once somebody solves their educational hurdle to understand how the technology works and understands its potential use case and applications, they start to realize that there are all of these different iterations, well beyond kind of this traditional privacy ability to transfer funds. And so within that, especially in the United States, we have many regulators that have become much more educated and weighed in in terms of how the regulations should be addressing the industry. And so going back to kind of like your last point, as well, when you have the more traditional investor context or industry that is trying to evaluate whether their investment opportunities or what type of technology, iteration or application Blockchain could bring to the table for them, in comparison to their traditional industry, there’s definitely an increasing level of comfortability that we’ve seen for sure, because we represent a lot of hedge funds in the industry that they’ve done. They do traditional assets, but they also do crypto assets, but then they also do assets in terms of investing in companies that are utilizing the technology, and so on and so forth. And so within that we kind of have a layer of, oh, this is approved and has to really follow certain standards depending on the jurisdiction that you’re in. And as a result, that is really what creates kind of more legitimate entities in the space for lack of a better term. And so we’re seeing that develop more and more. And I really see kind of the next phase, especially in the security, token context, I was actually just having a conversation about this the other day, when thinking about the private equity industry, and how much it’s already been disrupted by Blockchain and the digitization and tokenization of assets, I think of we are very much on the cusp of seeing an expansion of that type of implementation of the technology in the public markets. And I think we’re gonna see that over time in traditional markets, like the New York Stock Exchange, and so on and so forth. And, and that’s really going to be giving that bridge of comfortability to a traditional investor, but also utilizing the technology simultaneously.
Dr. Kiran Garimella 07:38
Yeah, you actually wrote a very interesting article way back a few years ago, in Forbes. I think what I think one of your main points was, it’s not so much as either it’s a traditional finance or it’s a crypto, but it’s a synergy between them bring the best of both, right? I mean, there’s the the the traditional finance of, you know, being very solid, secure, verified, safe, recoverable restorable digital assets. So that’s one aspect of that. But the other part is that to be much more fluid, and very innovative in how these assets are owned, and traded, transferred, and moved, you know, across borders, right. I mean, so I found that actually very eye-opening. I think it is that, you know, marriage get the best of both worlds.
Andrew Bull 08:26
For sure, yeah. And I try to reiterate this point to as much as I can, is that, especially when people are coming from the traditional finance perspective, it’s, we’re not changing the asset itself, we’re just implementing a more efficient technology. And we’re making the process and of itself more efficient in that context, because you think of some of the inefficiencies around cost or say there’s fragmented third party service providers. And it’s not all in one ecosystem, for example, just the transference of information in and of itself is going to be stagnant in those contexts. And so I definitely see, especially in the security token, iteration and our application, an example of hey, we’re really maraging, this traditional industry, traditional asset, making sure we’re still regulatory compliant, seeking very age old applications in terms of the Securities Act of 1933 in the States, and so on, and so forth. And so, I think that that’s something that I always want to emphasize. And I think you emphasize that great as well is really trying to bring to the table this. Hey, we’re not changing the entire investment structure that exists in the traditional industry. It’s just KoreConX making it efficient from that perspective.
Dr. Kiran Garimella 09:35
Yeah, you know, when we have conversations, and I’m sure you have to, you know, people ask, you know, someone like me, for example, you know, they look at me as a technologist, and they ask this question and say, Can you do this, or can I do this, or can we do it like this? And my answer is always going to be standard. It’s going to be, we technologists can do anything you want. That’s never been the problem. Okay. But the question is, is that the right thing to do for a resume. So I would love to hear your thoughts about, you know, suppose we have an entrepreneur who is now setting out to raise capital. And, you know, they’ll say, You know what? I can tap into an ecosystem of the crypto investors? And could we make this thing happen? What do we need to watch out for? So I mean, as a technologist, of course, they can do whatever they want. But of course, we always defer to the lawyers, right? We will say, you know, hey, just make sure you get clearance because they protect your best interest. So from that angle, and from that perspective, what advice would you give to entrepreneurs who say, you know, we want to expand, but we want to be regulatory compliant, we want to avoid any scams or even the illusion of a scam? And what should we do when we want to, you know, tap into the crypto markets for our capital raise?
Andrew Bull 10:59
Absolutely. And it’s such a good point about the technology component of it, because realistically, any of us could go into token in a day, right? But that doesn’t necessarily mean that we should, or that we’re not going to break any rules doing it. So yeah, I think of that kind of as a nice jumping off point into this timeline that especially early entrepreneurs can evaluate from the perspective of what to do from a strategy standpoint for their business. And one specifically is thinking about the jurisdiction. And this is really where we have kind of implementation of traditional legal regulation in terms of where your securities are going to be potentially offered, obviously, but also a technology that, again, you can do almost anything within that context that truly is borderless, and we saw in the ICO boom and 2017, a lot of these companies went out. And they use this border list technology. And as a result, potentially ran afoul of a lot of securities regulations and restrictions that are put in place from a consumer protection perspective. So when I’m advising somebody who’s thinking about, hey, how do I actually integrate this technology to make my business more efficient, in the capital raising context, I’m saying really narrow in what jurisdictions you’re going to be targeting. Because not only from an investor perspective, but whatever your business is, or product perspective, those are going to have impacts on not only what type of say regulatory exemption you use, say you go down the private equity context in the United States. But also on top of that, what type of investors you’re going to be able to access. And so when I think of some of the general regulatory exemptions that exist, say reg D, for example, right, limited to accredited investors under 506 PE, or 506 C. And that in of itself is an important consideration, because you’re thinking about who’s going to be able to access the asset, comparatively to say Reg CF, right, with crowd funding, open it up to these more retail investors. Now, this is where I want to just reiterate, maybe the earlier point that I was saying is that these are all traditional exemptions that have been being used for the jobs act, right. And we have this expansion over time of the amount of companies that are utilizing them.
And really, we’re just layering in this now token component. So instead of somebody getting a representation of their share of ownership in the company, they get a token that represents that share, right. And I think that going back to kind of those two points, not only where you’re going to be offering the ownership within your company, from a jurisdictional standpoint, but also who you’re going to be offering it to, is really going to start to narrow in your options, and thinking about the exemptions, but also kind of thinking about the larger context. We have a lot of clients that are international, and they have different considerations, because when they’re thinking about if they’re going to offer their asset and a lot of jurisdictions that aren’t United States. Okay, well, there are definitely regulatory considerations, but maybe they’re not as stringent because obviously, the US kind of stands at the top in terms of their consumer protection rules, especially security standpoint. So within that, and really navigating kind of the technology slashing legal consideration of this overall equation. It’s like, we know that utilizing the technology, we can put it anywhere in anyone’s pocket anytime, yes, but narrowing that in with like, what your regulatory risk is, is half the battle. And I think that’s really what I would over emphasize to somebody who’s considering going down this path. Is that you’re going to see the very real world benefit of the ease of administration or the ease of transfer of assets or the ease of ownership representation, or the ease of secondary trading of an asset that has been traditionally held in the private equity context, which might not necessarily would have had such a substantially large amount of secondary market liquidity. But now, because all those benefits are an option, you really want to make sure that you’re navigating this path and considering which exemption to go down and or which jurisdiction to really launch it.
Dr. Kiran Garimella 14:49
No, no, absolutely. You know, there are all these loaded terms like cryptocurrencies, security, token securities, right. And people kind of get confused, and of course. They’re just digital assets. And one of the interesting challenges that I’ve had, and you know, not, you know, not just an IT guy, but guy who has actually done some trading and you know, stuff like this and been involved in the financial markets for over two and a half decades now. You know, one of the things I have to point out to people really is that you know, securities are not bearer instruments. And, you know, I think people don’t really understand what that actually means. I mean, cash and currencies are better than instruments, right? He will he who possesses those on set, but that’s not necessarily true for securities, right? I mean, there was, in the initial days, I think securities were treated as some payments, but the potential for fraud. Money laundering is rampant with that approach that they have now made them illegal in just about every civilized country. Right. So I think, I think that’s what many people don’t understand. But, Andrew, I think the the narrative now, I believe, has to shift from these overloaded terms of securities and coins and cryptocurrencies and more towards true digital assets. And, you know, I’m thinking of, you know, when I say digital asset, I’m not talking just electronic records, obviously, that’s digital, but that doesn’t make it a digital asset, right? The digital asset has to come the with some foundation in the structure, about, you know, how it can be traded, what does it actually represent? What are the safeties and securities built into these records and recovery behind it? And so on? Right, so how are you? What’s your opinion on? How the definition or the maturity of this entire phrase digital assets, and its relevance to entrepreneurs? How is how do you think that’s maturing?
Andrew Bull 16:48
Yeah, for sure. I think that it’s maturing, but it’s not maturing at a super-fast rate in the context of there are definitely some misunderstandings around it to your point. And I think that because especially when there’s no outright regulatory clarity from regulators or legislators, obviously, then it’s all left to the stakeholders of the industry, eg you and I, to communicate this information to people in who are potentially utilizing it. And as a result of that, there’s not any set term that’s defined. And so security token really came about once the SEC categorized tokens as securities back in 2017, starting with the Dow report, but since then, obviously, we’ve seen this massive expansion in not only the use case of the types of digital securities that could exist. But also who’s actually accessing them as the ability to actually invest. So I would agree 100%, with this context of, we need to create this larger emphasis on digital assets. Because it’s not necessarily akin to saying, having a token, like you would in a traditional cryptocurrency context, of course, there will be limitations in the way that you can say, own that or transfer it or something along those lines. And those are very real world important considerations that need to go into any type of consideration for an entrepreneur, but also somebody who would potentially invest in it as well. And so for me, because we’ve seen kind of a transformation, especially over the last two years, like it’s been almost that recent. Where we see a massive shift or movement towards, hey, we need to start creating some type of standardization, not only from a compliance standpoint, but from a definitional standpoint, so that people can be clear. And also just over emphasizing that point that when we think of, hey, if there’s a digital representation of ownership of my equity in a company that carries a royalty rate, or a dividend payment, right, or something like that, right? That’s going to be very different from me having a fractionalized ownership of real estate. And so we have these very, very different iterations that can be all-encompassing under the digital asset definition. And as a result, I think that I’m hoping this is what we’re really working on, especially with legislators these days, it’s been happening more and more, not only in DC, but at the state level as well. We’re really trying to make this push to hey, we, we need to work together in order to create some more clarity in the industry. Because there are people that have this misunderstanding of, oh, if I launch my security token tomorrow, I can go put it on Coinbase. It’s like no, there’s the disconnect. You’re not fully understanding what its purpose is so on and so forth. And solving that educational hurdle I think is half the battle so I’m hoping faster.
Dr. Kiran Garimella 19:31
Oh no, absolutely. And you know, to complicate matters, there’s all this innovation going on with NFT’s and stable coins and stuff like and you know, this it’s very interesting but in you know where I come from in Tampa, Florida, the very first real estate NFT house was launched here. So a house where you know, they created an NFT for a house and put it on the market for sale. And it happened right here in Tampa The very first time ever, right, which is really, really fascinating. There was actually supposed to be open house, and you can actually go and look at the house and everything. We didn’t have time to do that on the weekend. But it’s really fascinating. Just a few months ago, you know, this happened. And we were seeing more and more of this happen. Right. And, you know, it’s amazing that you know, with the SEC taking on a certain stance around this, and, you know, some people claim they haven’t offered clear guidance, and some people say how much more clear that can then you can get is pretty simple. Right? And now there is NFT’s and stablecoins. And of course, the the whole fiasco with Luna and the terror, that it’s amazing. How do you see this market boiling? I mean, it’s it, there’s a whole bunch of new things happening, I’m gonna have my view on this one too, of NFT’s and stable coins and in what would actually make them sustainable and provide true value in this in this financial ecosystem. But kind of wondering to see, you know, from a regulatory and legal perspective, you know, or what are you hearing on these?
Andrew Bull 21:04
Yeah, so especially in the we’ll start with NFT’s first, because they’re obviously such a hot button topic to discuss these days. But the The nice thing about an asset that is technically non fungible is that you can’t really tie the expectation that someone’s going to make money off of it with the direct actions of the issuer. And as a result, you have these potential applications, like in the representation of real estate context, that might not necessarily would be the same. If say, they were to NFT the shares in their company, because that’s not necessarily the same thing, right, we have a difference in terms of value, and the distribution of value. Because I always bring up this example of, if you have one, if you have a pool of tokens, and all those tokens can increase in value and decrease in value at the same exact time. Right? We’re in a very, very fungible world. That is a large consideration from the SEC perspective, and general regulated regulatory perspective as well, other governmental agencies like FinCEN, and FINRA, and so on, and so forth. So within that kind of difference we have in the non fungible context, and I will go back to actually a point you made about a representation of ownership in the digital asset context. Well, an NFT really can serve as that’s really all that it’s doing on the Blockchain and of itself is that it’s proof of record, I bring up the deed to a house, that’s really a really good example, to start to understand how some of the iterations of NFT’s can even work, because it’s more about that representation of ownership versus say, like the you actually owning a pixelated image that’s stored on a central database. So yeah, I mean, there’s, there’s an advancement that’s going on there. But also the larger current context, NFT’s in the industry, is a bit concerning. From my perspective, honestly, it’s there’s there’s been a massive expansion explosion in the use cases. But what comes with that similar to what we saw in 2017, are a lot of projects that are trying to create some type of iteration with this technology, that doesn’t necessarily make sense or isn’t necessarily going to drive true value. Because if we go back to the NFT sale in Tampa, right, we have a very real world hard asset that we can point to that has value when we know how to create or evaluating that value. Right? Well, that is that is different in an irrational market where everybody has access to the asset. And also when you think of the expansion of traditional cryptocurrency assets and of themselves over the last 10-15 years, then that is creating this additional complexity around the irrationality of what the true value is. So that’s my hesitation around saying, oh, NFT’s are going to change the world, like I definitely think that they do and are and are going to even more in different iterations. But at the same time, I think similar to the ICO boom, where we saw a lot of projects trying to capitalize off of a use case, that there’s going to be a lot of them that are going to fall by the wayside.
Dr. Kiran Garimella 24:00
It’s a little bit like, you know, this analogy sprang to mind, and I had to share it with you. It’s like saying an automobile industry is going to change transportation. Well, of course it will, and it does. But you’ll still need speed limits. You need the laws, driver’s licenses, and responsible behavior and driving, right? I mean, it’s the same concept.
Andrew Bull 24:20
Exactly. It really is. And that’s where I get into these conversations where if you go out and you create, say, a line of NFT’s, but then you’re fractionalized all the individual NFT’s and creating pools of tokens, like fungible tokens. Like you’re just trying to circumnavigate the already established regulation that we have in the digital asset context. And so that there’s definitely an attempt by a lot of the some of the stakeholders in the industry to do that. And it’s really a puts an emphasis on making sure that the projects that say you’re evaluating for investment or say you’re working with are legitimate and aren’t trying to go down that path and that they have a real kind of education of what the use case is. Are there going to have value?
Dr. Kiran Garimella 25:02
Yeah, there was one incident that happened many, many years ago, that really got me quite upset. And some of that is playing out now. So you remember Blockbuster, right? I mean, it’s. So you Yeah, yeah. So these people, I mean, it was great family night for us and my kids to go out and, you know, browse the shelves and look at we write like Blockbuster for me, it’s a nice experience. And Netflix was just coming up in those days. And, you know, it wasn’t quite the same as going and touching and feeling and looking at the titles on the shelves, right? So a different feel to it. But I got a gift card for like, $100. I gave it to my kids to spend, and it’s a blockbuster gift card. And within a month of doing that, Blockbuster went belly up. And we said, okay, fine, you know, just get our money back of the $100 gift card. And they said, Well, we can get your money back. And we said, why not? I mean, it’s a I mean, this is for using but you can’t use you’re going belly up. So just give us the money back. And the woman. And what I found out is that the receiver for the bankruptcy proceedings, there’s, you know, apparently, around what happened is that Blockbuster used those funds, the reward point, the, you know, the gift card points for the operational expenses, right. And so there’s nothing now to refund and apparently, the, the judge also waived that requirement, and that really, really got me upset, and I was going wait a minute, this is something that you should have put in escrow, and you shouldn’t have you it’s a liability. Sure, put in escrow, you shouldn’t have been using it for operational expenses, and then you know, the whole thing vanishing, right. But now I can see some of that history playing back again, when I look at stable coins today. I’m under all kinds of stable coins, right. Algorithmic and so on it that’s what caused the lunar fiasco. But, you know, what, what is the stands? You know, from your sort of legal standpoint, when something is a stable coin? Wouldn’t you expect that the stability of a stable coin is actually backed by escrowed? Real Assets somewhere? Wouldn’t you think so?
Andrew Bull 27:15
Absolutely. I couldn’t agree with you more. And I’ve been kind of outspoken about it since the the launch of usdt in the industry, for sure, in terms of making sure that there are audited financials that show actual real world assets that back it, because that’s the other thing. And this actually dovetails right back to your earlier comment about you can do anything with technology, I can launch a stable coin tomorrow, I’m sure right, but doesn’t have stability. And the tariff situation is really bringing that to light on a massive scale, which, obviously, we don’t, aren’t going to be happy that that happened. But at the same time, a positive outcome of that is this overall question or at least more people getting on board with questioning, where’s the stability comes from. And because the base technology of stable coins is ingenious, in my opinion, to be able to move assets in that context, without having the potential volatility right of the traditional crypto markets, amazing processing of payments, I mean, it’s going it’s changing the financial system as we see it in real-time, however, right, who’s behind the stable coin is having consideration as well, because and, and we’ve seen countries that have been piloting these different types of programs over the years, and none of them have caught massive success, or at least, they’ve just been really hesitant to full-on launch them. And I think we’re gonna see that in the future, for sure, from the stable asset perspective. But the interim is definitely going to have a lot of these private company iterations that exist in the industry. And especially with an example like usdt, where we have a very small cohort or contingent of group of individuals that are dictating a very, very substantially large supply that impacts all of the secondary market components of cryptocurrency, that that makes it much more centralized. And, and not to say that we need to get to this full decentralized node or mode or function or anything along those lines, but at the same time, it does put a lot more control in the hands of a very, very small amount of people. And so when we work with say, FinCEN, Financial Crimes Enforcement at work, or say, any real governmental agency that is concerned about kind of the banking considerations. And laws behind this, that’s always at the forefront were like, where’s this coming from? Who’s providing this? And are they proving that they actually have some back to it? Because if they can’t, then you should be inherently suspect of that for sure.
Dr. Kiran Garimella 29:38
Yeah, um, and I think the standards need to go up a notch or several notches, but you know where they are right now. It’s a lot of this algorithmic stability behind stable coins at the end of the day, it really really comes down to exchange of various types of assets and kind of moving stuff around you know. Just to you know, take advantage of changes in exchange rates and so on, right, and when it’s almost like, what this was actually anticipated by Ian Fleming in Goldfinger the Bond movie, right? Or a Goldfinger removing stuff, all the gold around, you know, different points in time, you know, to maintenance. It’s a crazy plot, right? It’s fantastic. So we see a repeat of it on some of those things going on here. But there’s one aspect that I wanted to kind of get you to kind of discuss with you too, with all these stable coins and NFTs. If we have a strong digital asset infrastructure around it, I can see a lot of very interesting business models come out, where you would have various ecosystems that are, for example, hobby groups, or restaurant chains or, you know. Subgroups, you know, people are communities covered up to a certain cause a specific vision or a business model, and so on, then they can adopt, you know, their own coin, so to speak, but that’s actually trading, but that’s actually used as a security. So you know, we are talking to one restaurant chain that is going to do something very innovative, right? And but we always say, yes, you can, but let’s make sure it’s a compliant way to do that. And there’s a way to actually, you know, do many of those things. So in other words, if you have a community of people with a common cause, or a common belief, or a common hobby or something, right, the way they actually use the digital assets, to trade and perform utilitarian functions within that ecosystem, and the way all of that should be working very seamlessly. That is a fascinating model. So I’m not sure if you have the, you know, thoughts or, you know, some exposure to some of those kinds of innovative ideas.
Andrew Bull 31:57
Yeah, absolutely. And avoid throwing the Dow example into the context and not overcomplicate things. But I do think that there is an ability, especially from a use case perspective, to collectively bring a lot of individuals to the table in terms of decision making. And I also think about even just what we were just talking about, in the stablecoin context, if you think about a company taking on the role and responsibility of customizing assets, something very simplistic like that, right? We have very overt regulation, it’s very specific about what you need to provide, you have to have assets in the bank that are in comparison to the assets that you’re customizing for customers, and so on and so forth. But very real world considerations in that context, I think of okay, well imagine that same application, but instead of that centralized entity making decisions, it’s more of a collective of centralized entities. And so think of like the restaurant chain example, where everyone’s able to for whatever their contribution is, to the actual network itself, is able to weigh in on okay, what are the assets that are being held in this context that are actually creating stability to the coin? Or what are they going to bring to the table in terms of decision making to try to allocate more rewards within their ecosystem to the consumer? Because I think that there’s right now a very, pretty substantial disconnect between regulation and, say, decentralized finance, or like decentralized lending, or pretty much any type of iteration that is just a series of smart contracts at the end of the day. And there’s, it’s a really difficult play from a regulatory standpoint, because those are so far disconnected from this ability to say, hey, we need to verify who’s using this. Like who is your customer base, there’s very simplistic regulatory requirements that aren’t necessarily feasible for somebody who’s watching, say, a defy protocol. And so that’s really something that I see where, oh, we’re gonna, we’re having this large disconnect, where the regulators are almost standoffish to try to go after those companies that exist in the space because they’re afraid that we might not actually be able to prove our argument, because of the way the technology functions. And I think of a really good example is if I go in, right, and I lose funds, or I’m subject to scam or fraud, that early comment you made in this discussion was, Oh, I could actually find recourse right, whether it’s legal, whether it’s compliance, I still have some entity to talk to. Well, if I do that, in the defy protocol context, where much more the emphasis is on me as a user to make sure I’m implementing proper security measures for my information. It’s it’s a double-edged sword, for lack of a better term, right? Where we find ourselves in a position where we’re not we’re taking advantage of the benefits of the technology, but it puts more onus on the consumer. And as a result, regulators have a more difficult time of putting in those protections and those obstacles that would really check somebody from providing that. So and I think getting back to kind of this larger question as well as super important because as we move down this road, where we’re going to start to get more. Let’s say legislative clarity, where say like, eventually congress, congress will pass legislation that could ostensibly have a digital asset definition that could give us guidance on this type of thing. And maybe that digital asset definition is generated or curated through interacting with all the companies that are working in this space today. And if they do that, because our legislators do that in the traditional industries, for sure, every day in our society. So there’s nothing it’s not an unrealistic, realistic expectation that they could do it in this industry. I think, again, that reverts back to we just need to solve that educational hurdle faster and get to that point where there are more standards and practices in that context, so that people feel more comfortable to I mean, revert that back to the investor discussion that we had earlier around, hey, I’m going to be standoffish to something that I’m much more concerned about the protection of my assets, I don’t necessarily need the end all be all opportunity to buy Bitcoin at $30 and have it go to $50,000. Right? Like, I just want to protect what I have. And as a result, I’m going to be much more risk averse, well, what iterations that we need to put in place to make sure that this technology creates benefit for those types of potential investors. And also, what checks do we need to put on the people that are providing those services to those investors,
Dr. Kiran Garimella 36:20
Of course, and the whole digital asset, infrastructure, using Blockchain as the backdrop technology backdrop for all this makes it much, much more easy to create a very strong immutable audit trail. And, you know, transactionally, also make it non reputable, right? I mean, you cannot say, No, I didn’t do that already, and see that it’s there. And to the extent that, you know, the smart contracts that you can put in place to at least monitor, if not at 100%. And in a very nice way of all these various clauses, and, you know, revenue, share arrangements, and you know, all these things are just put it in a very way. And all of this can be, you know, oriented, step by step, they kind of go back the entire chain, and you can get our entire audit history. I think that that has to be a very powerful, powerful perceived value of digital assets and right compared with, you know, anything else, having looked at decentralization, you know, we all talk about decentralization, but you know, in the Bitcoin and Etherium networks, there are a handful of mining companies that own majority of them. Nobody, I mean, neither you nor me, or any, you know, can mine Bitcoin and, you know, claim that you know, they can’t actually control any of this stuff anymore, right? That’s those, these are totally gone now. Right. Right.
Andrew Bull 37:47
Yeah, they really are. And that that transformation over time has resulted in us having to take a different look and different approach to how the technology can be used for sure. I mean, I think that that’s so important because it is there are still elements of window dressing going on in the industry, because to that point. That is potentially going to exist in other areas of or iterations that are coming out in the context of, oh, we now have this new product or something along those lines, there’s this benefit of this audit trail, but who’s actually in control, right, and getting in without getting into public versus private blockchains, and so on, and so forth. There are definitely very real-world use cases that can help solve for those issues. And I want to go back to the audit trail example that you just mentioned because it’s super important, does it create this transparency check on where assets are coming from, I actually bring that up a lot when people bring up the potential fraudulent use of cryptocurrency is oh, well, I mean, how much easier is it to track say Bitcoin in the context of fraudulent use comparatively, to me, being able to like pack a bunch of cash in a suitcase and transported somewhere? Like the crypto context is much, I wouldn’t say, easier, but it’s much more efficient in terms of finding out who’s actually conducting these transactions. So that really does create more transparency. And I think even going back to the larger context of consumer protection, especially in the, say, the traditional securities industry. Just think of the emphasis that we can advocate to regulators of saying, hey, this isn’t here to navigate around what you guys create and what gives you authority. It’s here to make it stronger. It’s here to make it more efficient, and it’s here to create more consumer protection. Because if there is that audit trail, then we’re going to be able to go much farther back than, say we were able to go back and information that occurred in many of the traditional elements of fraud and scams that we’ve seen in the traditional financial context.
Dr. Kiran Garimella 39:42
Yeah. It’s, you know when you look at all the different participants in this space, you have the entrepreneurs, you have the investors, you have the broker-dealers, you’re the secondary market operators, and you have the regulators, and you have the custody problem. Ladders and so on, right? For each of these people, I think there are two key things that it’s very important for them to understand. Number one is that in this whole digital assets and security space, it is a very different market compared to, you know, the open public chain cryptocurrency market. You know, at the same time, it is also a little bit different from the traditional securities. It mimics that, but there is a lot of fluidity and innovation that is actually possible in this space. So, from that perspective, right, I mean, there are two key types of capabilities that I would, you know, look at, and we always talk about this, you know, with many of our partners, and, you know, people like you and everybody else, you know, one is the technology should be an enabler for all this, right? I mean, it cannot be the leader of its a, it’s an innate fast enabler. And the technology is there is that just to say, oh, wait a minute, and we can actually make this auditable all smart contracts, yes, we can make them AI driven, so on, right. But at the end of the day, you know, you have to lead with, you know, being compliant regulatorily. And at the end of them, and I tell this to people all the time, I’ll say, Look, you know, I know some of you hate regulation, some of this can be like, really crazy regulation, I get it. Okay. But the intent, the spirit of the regulation, in part to maintain that the spirit of regulation is protection, right? And that’s what you would want, and so, how, so the regulation needs to do that the technology needs to support that. The technology cannot, you know, disintermediate the risk, you can disintermediate the intermediaries, but you cannot take on the risk? Totally, it has to go somewhere somehow. It has to be handled somehow, right. I think. Yeah. And I think, I think it’s, it’s a constant education, right. I mean, this is, you know. I mean, and you and, you know, many of the, you know, responsible people in this ecosystem. You know, we kind of see ourselves as educators, you know, we’re kind of telling all these different participants, what’s in it for you, as a broker-dealer, as an investor as an entrepreneur. Right. So, yeah, I mean, and the more we can spread this message, and it’s good people, I think the entire ecosystem is going to benefit from totally right.
Andrew Bull 42:13
Couldn’t agree more. Absolutely. And also, just having seen certain iterations early on in the industry that haven’t really worked out as they were intended. I think that the other thing, too, is that we’re going to have, we’ll have more clarity over time. I mean, understandably, the Terra Luna situation, like thinking about, okay, they’re, they’re stepping out of their bounds into a completely open-ended territory, and not taking proper precautions, or attempting something and it not working comparatively. The other end of the spectrum is having over regulation like the BitLicense in New York that was created to early on, in the context of some of the companies that were operating in that industry. And then everything in between, I think that will start to get at least a little bit closer from an oh, what is the proper standards and practices that can be implemented to make sure that going back to what you’re saying everyone’s deriving that benefit?
Dr. Kiran Garimella 43:03
Oh, absolutely. And, you know, I’m really looking forward to this very rich and dynamic mix between what technology can enable from one perspective, right, the innovations and stuff. You’ve got this whole data you’ve got is artificial intelligence, the smart contracts, the distributive systems, technologies, and so on, I mean, stuff, you know, stuff that, you know, we take guys, we risk Drupal, right now, zero-knowledge proofs, and so on. And on the other side, and I think many of the people in this space, the newcomers in the space of people who come from the public chains. I don’t think they give enough credit to the amount of thought and innovation that’s been gone into the traditional capital markets, you know. In terms of things like such as the all the derivatives, the options, the, you know, the futures markets, forward contracts and stuff like that. There’s a lot of thought put into standardizing many of those things that people really don’t appreciate as much. So, you know, I think they have to borrow the lessons from both sides. And both those parties need to really come together in this space. Right?
Andrew Bull 44:10
Absolutely. Yeah. And I think that that’s increasing over time, too, in terms of the communication that’s been ongoing. And going back to my earlier comment about the uptick in the last two years, we saw more and more companies within the traditional financial industry starting to take a hard look at the technology a hard look at the industry. I don’t know if anyone’s seen Morgan Stanley’s new website, but it’s very crypto-focused. And you think of like these larger institutional, traditional companies that are in transition in that direction. It’s like, those are byproducts of not rash decisions, that they’re just like, oh, we need to dive in and get in immediately. It’s like, no, they’re calculated. There’s a lot of thought that goes behind that from a consideration perspective, consulting regulators, the number of people that I believe do not and just don’t aren’t even. Where they have the opportunity to do that in this industry is just astronomically high. And I really hope that that starts to decline because there are regulators in this country for a reason. And we need to consult them because we need to see what it is that they’re doing and what they’re thinking about. Because you think about the traditional financial industry, that’s all it is. It’s an outgrowth of clarity. And then, obviously, companies operating within that clarity. And so the faster we get to that point, the more consumers will be protected, or the more advantage opportunities there will be out there for investors, and so on and so forth.
Dr. Kiran Garimella 45:35
I see that we are. I feel that we are in a space right now. Where if you look back at the .com era, right? Where all these really crazy ideas about, you know, Internet, and what happens, you know, and many of those kinds of fell by the wayside. And when the dust settled, all the responsible, thoughtful people were left standing, and they went on to build like, really, really large, and very, very nice businesses out there. And I kind of see this happening right now, in the same way. And I think the whole conversation on digital assets has ensured continues to take on a much more responsible narrative. Right. So, Andrew, and this has been a wonderful conversation with you. I’m looking forward to a lot more that we and others can discuss. You know, because, you know, if we don’t do it, right, I mean, who else is going to do it? I mean, I think we have to, you know, push the narrative forward. So any concluding thoughts?
Andrew Bull 46:30
Yeah, for sure. No, I obviously always appreciate contacts and everyone that the KoreConX team there, which has been fantastic. I’ve had a great relationship with them. But it is so important. from an educational standpoint. I think that you all have that consideration that we were just referencing, trying to get it over the line to a point of larger adoption. I mean, it’s, it’s really all about trying to navigate through kind of that muddy water that you were just referencing in the .com Bubble example where it’s really too many iterations of something that people are trying to capitalize on. And it just can’t work in that breadth of expansion. And so the more and more that we have these discussions and conversations and, and work with all the different stakeholders that I wanted to take a notepad and write down all the ones you listed on your hand because it was great. But I think that that’s such a good example of, hey, there’s a lot of participants in this industry and ecosystem, and everyone has to come together to really have those discussions and start to progress forward.
Dr. Kiran Garimella 47:29
Absolutely. And thank you so much. And, you know, we will continue to educate on our main goal, of course, you know, as a team, you know, you and, you know, all of this ecosystem included KoreConX, you know. Our goal is to continue to, you know, educate and record the value of all this and warn people of all the, you know, targets and what’s the right thing to do, you know, as an ecosystem. So thank you so much. And thanks, everyone, for coming by and giving us the gift of your precious time. Today. Please continue to follow us on LinkedIn and Spotify, and you know, read our blogs, and you know, follow Andrew and follow all of us and we will make good things happen. Thank you once again. Thanks, everyone. Bye for now.