Uniting digital assets with traditional financial services to create the most trusted banking platform (recording)
How LevelField Financial is building its digital asset management capabilities with Metaco Harmonize, on IBM Cloud.
Watch the recording of this Metaco webinar discussing how to tap into new markets at the intersection of traditional banking and cryptocurrencies.
We discussed the story of LevelField Financial, a U.S.-based financial services firm who is building a banking platform for digital and traditional assets that leverages the strengths of the U.S. banking system, relies on a solid foundation of security and regulatory compliance, and draws on its management team’s expertise across traditional banking.
To launch its digital asset offering, LevelField will use Metaco’s Tier-1 bank-grade custody and orchestration platform, Harmonize, helping enable clients to securely store, trade, and settle digital assets. This technology is deployed on IBM Cloud Hyper Protect Services.
- The Digital Asset Market Opportunity
- Investment in Technology and Strategic Considerations
- The Highest Possible Security and Agility
- Uniting Digital Assets with Traditional Finance
Build and launch your digital asset
Chief Technology Officer
Michael has a 35-year career in capital markets technology spanning four continents and institutions such as Deutsche Bank, Credit Suisse, JP Morgan, AIG, ING, BBVA, and Standard Bank. He has managed large global teams both for custom software development and the integration of vendor packages for a variety of trading and risk management solutions. More than once he was called on to lead teams through difficult circumstances, overcoming substantial obstacles to deliver innovative systems. Despite holding senior roles, Michael maintains hands-on involvement in the technology and mathematics of cutting-edge finance.
Head of Digital Asset Infrastructure
Peter is Global Head of Digital Asset Infrastructure Solutions at IBM, which focuses on confidential computing technology solutions that further secures institutional custody, exchange wallets, and tokenization use cases, which require advanced the most secure private key management. Peter is responsible for market development, technology roadmaps, and building sales and services infrastructure. As a certified design thinking facilitator, Peter also helps clients enhance their solution’s capabilities by leveraging IBM’s Hyper Protect Services on premise and on the IBM Cloud. Peter is a regular speaker at blockchain, crypto and enterprise architecture conferences.
VP Strategic Alliances
Seamus has extensive domain expertise in investment banking, wealth management, commodities and crypto markets that spans market structure, regulations and technology. He spent 20 years building and managing trading operations across all the global financial centres with JP Morgan, Deutsche Bank, Barclays and Bank of America Merrill Lynch.
Subject Matter Expert
Catherine is a seasoned crypto & financial innovation expert, with a strong ability to bridge strategy with execution. Previous to joining METACO, Catherine was Blockchain & Digital Assets Lead at National Bank of Canada.
*Disclaimer: The accuracy of this transcript is not guaranteed. This is not investment advice. This is not investment advice, and any opinions expressed here are the sole opinions of the individuals, not of the institutions they represent.
[00:00:08] Catherine: Hi, everyone. Thank you so much for joining us again in this METACO webinar. Today we’ll be discussing LevelField journey. It is a US-based financial service, which is building right now a banking platform for digital and traditional assets. They’ve been recently announcing that to launch this digital asset offering they will be partnering with METACO. Our tier one bank grade custody and orchestration platform Harmonize will be deployed on IBM Cloud Hyper Protect Services to launch their solution.
I’m really pleased, and on behalf of all the METACO team we’re really proud to have LevelField as a client and to have Michael Clayton, the CTO of LevelField, with us today. Thank you so much for joining us. As well, we have Peter DeMeo, Head of Digital Asset Infrastructure at IBM, and Seamus Donoghue who is the VP Strategic Alliance from METACO, and myself, Catherine Guay-Chenard, Subject Matter Expert at METACO. Thank you so much all for joining, and let’s jump right into it.
Michael, could you please tell us a bit more about LevelField, where you got this started, and the value you’re looking to bring to the financial space with this?
[00:01:41] Michael: I can’t take credit for the original impetus; that belongs to our CEO Gene Grant, and our president Steve Helmholz. When they decided to this company, they were convinced and are still convinced that the future of money is digital, but that it would require the same rigorous management and regulatory compliance you find in a bank. Not under a bit license, not with a trust company, but a chartered bank. In fact, Gene’s spending most of his time now searching for the bank that we will shortly purchase. He’s also preparing to apply to acquire that charter.
By the way, that doesn’t mean that we’re not excited by digital assets. We think they hold great promise for a number of use cases. Maybe we’ll get to talk about some of them today. But we still believe you start with proper finance. At LevelField, we start with cash flow diagrams, not blockchains. Tech follows finance. If any product, traditional or digital, doesn’t make economic sense for our clients and pass regulatory scrutiny, then we’re not interested. My business colleagues would probably have better answers, I’m the tech guy. But I think that lies at our core.
[00:02:52] Catherine: Great. Are you looking into serving retail, institutional, both? Where are you going with this market?
[00:02:59] Michael: We are looking at the full spectrum of customers. If I can work backwards through your question, we believe that institutions will appreciate our deep experience in capital markets. We speak the same language or the same idiom, if you know what I mean. We’ve been many of the same places, and we’ve run our business in a way that we think they will recognize and trust. But we also have people on our team with deep banking experience, and they know how to acquire and care for those high touch, high net worth individuals who are looking for a range of products and services. But absolutely, we are interested in retail customers. We believe that the ability to buy, hold and trade digital assets, and to see those positions alongside checking, savings, credit card accounts, should be very attractive, especially when you consider that all that activity will take place in a bank. Our CEO, Gene Grant likes to say that people may complain about their banks, but by and large, they trust them.
[00:03:59] Catherine: Very true. That’s interesting, you’re bringing a very unique view for an early financial startup to go with digital asset and traditional finance. Why did you see that that’s such strong value for you to go after?
[00:04:19] Michael: Well, we don’t see digital assets as being different from traditional financial assets. A thing is worth what someone will pay for it, and it requires systems and processes and risk management to make that product available and to make it profitable for the company and the shareholders.
One answer why we do combine the two is that they have different economic characteristics, and therefore they have different utility for different customers. But again, I think that the real reason for us is that we believe that clients who want access to digital assets should be able to enjoy the same safety and range of services appropriate to their experience and risk appetite that they have when dealing in dollar denominated financial products.
By the way, I think our model is gaining ground. Certainly it wasn’t favorable to a lot of people few years ago, but we’ve never understood why it should be unique. It’s always been obvious to us that assets are assets and belong under the same management and regulatory compliance framework.
[00:05:23] Catherine: Absolutely. Where are you in your journey of offering such a product? What’s expected as a first product, because there’s many challenges behind that?
[00:05:38] Michael: Well, the reason we’re live this morning is we don’t sleep. We are hot on the heels of a soft launch, meaning a launch with a smaller initial set of customers. We want to do that in mid-August. We’ll open up the customer base after Labor Day – that’s after September 5th in the United States, after the unofficial end of summer. Our initial products that will be an on-ramp to purchase and sell digital assets are the usual suspects; the higher capitalized one, Bitcoin, Bitcoin cash, Ether, Ether classic, like coin, lumens. We’re big on the stellar blockchain. USDC, some others that I can’t ever remember.
The on-ramp will come in a couple of flavors, a very easy to use app that can run on the web or on your phone, retail oriented easy trading application. We will also have a high performance trading platform. But we will also give the customer a consolidated portfolio summary. My colleagues call it the dashboard, but it’s really a launchpad from which you can launch other applications and other services, including our retail trading app, leverage trading, the ability to earn interest on digital assets. Both of those are for credit and investors.
All of this will be supported by the same type of confirmations, statements that you’d expect from the best financial firms. We expect to be up and running, opening the doors to the larger audience after Labor Day.
[00:06:57] Catherine: That’s really exciting. What’s the unique value proposition that you’re going after to win this market? I think how to differentiate, how to position yourself, is always a big part of starting a company like this.
[00:07:15] Michael: That’s a hell of a question, we’ve been thinking about it for four years. It’s very tempting to go on and on, but I will focus. I’ve touched on the safety that’s afforded by doing business with the bank, let me touch briefly on simplicity and security; LevelField safe, simple, secure.
Simplicity isn’t just providing that easy trade application. It’s the months we spent leveraging our decades of experience on designing a user experience that is uncluttered, free of excess screens, visual clutter, and to make sure that our trading platform and applications present exactly the information the user needs to take informed action if any, or to fully understand their economic position with our bank. On top of that, we spent hundreds of hours and a fair bit of cash with an external design bureau, making sure that there’s a uniform look across our platform, that is in my opinion is very fresh, very clean, very contemporary, and we think it’s going to appeal to a wide range of customers.
As for security, that’s my greatest concern. That’s where I spend the majority of my time and effort. I believe we’ve chosen best of breed data and technology partners to ensure we have the best available compliance, cryptography and cybersecurity in defense of our customers and their assets. But again, it comes down to, we have the experience to know what a financial product looks like, to know what the systems around those products should look like for our customers, and we know how to choose our partners to make sure that we ramp up quickly, efficiently and effectively.
[00:08:59] Catherine: Yeah. The technology partner is definitely an interesting remark. Do you want to expand a little bit more on how do you look at these partnership, and what’s your approach in building those partnerships in creating the most secure platform possible?
[00:09:14] Michael: Absolutely. We avoid unnecessary creativity and effort. We’re committed not to wasting our shareholders’ money on things that we don’t have to build ourselves; that we can purchase and orchestrate, that we can purchase and integrate. When it comes to much of our core technology, we purchase and orchestrate. When we do build, it’s because we believe that our experience can create value added applications and products for our customers on top of those platforms.
METACO and IBM are great examples of those types of partners. They have both offered us platforms that you wouldn’t want to build and really couldn’t, unless you had extraordinarily deep pockets and more time than we have to get our products to launch. For example, METACO has spent millions in research and development bringing policy driven compliance to digital asset management. At first it was little things that attracted me to METACO, like how you decompose the blockchain, explore into a proper transaction blotter. When you see something like that, you recognize the DNA of the company. you think, these people are in digital assets, but they’ve traded. They’ve done their time in capital markets. But then when you dig deeper into the platform, when you look at the M of N compliance capability that it brings, when you look at the rigor that it places around the movement and management of digital assets, we felt it was best of breed. It is our gateway to IBM’s Hyper Protect HSM offering. When we’re talking about IBM, we’re talking about a company that for decades has been involved in cryptography and cybersecurity. I’m proudly American, and IBM has secured a fair percentage of my nation’s military and intelligence assets, meaning they do serious work. What they’ve offered is a complete cryptographic system, hardware, software, mathematics built by cybersecurity zealots. We all know that security is not just building a bigger moat. It’s the moat, the curtain wall, an armor Drawbridge, an inner keep. It’s multiple layers, it’s thinking about multiple attacks and blocking them.
IBM, METACO take so much of the pressure of safely and securely moving and managing our customers’ digital assets. The added benefit of never having to worry about exposure of the private keys, which is what IBM presents us, means that we we’ve chosen the right partners, and gives us a great platform to build on top of our value added applications.
[00:12:04] Catherine: Great. Seamus, that’s a good opportunity to line up on this and maybe expand a little bit on how we’re supporting LevelField, and these objectives align with how METACO can support and help launch this this platform.
[00:12:25] Seamus: I think we can stop there, Michael did a great job of explaining! Thanks, Michael.
Michael, and as Katherine introduced, we’re going to be using Harmonize, which really is a foundational stack to manage the private keys, the orchestration of all your processes, whether it’s cryptocurrencies or digital assets, anything that comes in token form. We do believe eventually everything sits on chain, and it’s about managing those processes. We partner with the IBM Cloud infrastructures to provide an unparalleled package of security and agility.
From the start we’ve really had the same vision that Michael talked about, where I think the market’s gone through phases where it’s been talked about bit licenses. It’s really been about FinTechs building the space. FinTechs come from the Silicon Valley ethos, where it’s all about moving fast, ship code, break things, don’t worry about it. Where if you’re building to get a bank charter, you’re not allowed to break things, because you’re part of the core. This is the financial system. You have fiduciary responsibility to people of those assets, of those clients you’re holding.
The process is critical. Security’s critical. In the digital asset space, agility is critical. These are key USPS that the market comes with perception that you need to have tradeoffs. Typically, the FinTechs will deliver one type of custody, and it’s all consumed as a SAS. They want to make it easy, so you compromise on processes. Typically, they may manage processes for you. They might manage part of your keys with you. As Peter constantly reminds me, if not your keys, not your coins. In the institutional side, these are not tradeoffs that are acceptable.
For us, we’ve always been focused on the tier one use case, which is really the big global banks where they can’t be any tradeoffs. It’s this idea that there’s tradeoffs are required to get going, is a false economy. You can have your cake and eat it too. It’s about having security, compliance, the same time with agility and flexibility. That’s really why we deliver our solution. The use case that Michael described is typically how we see a lot of our clients go to market with, let’s say simple use case cryptocurrency on-ramps, off ramps for a number of the digital native assets. But as that scales, the client types may change. Retail and institutional client types will change. The use cases will be added onto that. Very quickly, the simple use case that everybody can serve will scale to multiple different types of use cases. You may have different business lines, different client types, and complexity becomes part of what you need to adapt to on a regular basis, not to mention the complexity of the evolution market.
That’s one of the key things we deliver to LevelField. They can start small, start easy. I love the idea about safe, simple, secure to the clients. Under the hood, we make sure all that’s done in a secure and scalable way, and we can continue that scalability to any use case they come up with. It’s about delivering no tradeoffs, and an infrastructure underlying that has no single point of failure. These are the USPS that will be the foundation for LevelField’s journey.
[00:15:32] Catherine: For sure. You mentioned tier one banks being the starting point for METACO initially and what METACO is being designed for. But at the same time, here we have LevelField, that’s really a challenger bank at the beginning of their journey and everything. Do you see that METACO will be servicing both of these segments, and is there different requirements that will be needed for each? How are we planning to adapt all of this?
[00:16:00] Seamus: If we decided to start with the FinTech space, we have one solution that we hope fits all, but of course we know one size doesn’t fit all in the space. We’ve got to start at the other end of the spectrum. For better or worse, the tier one use case is complex to start with. When we say complex, it’s really about having all available options. It may be in cloud, it may be on prem. You may want to start as a SAS, then the client may want to move on-prem. They may want hardware based security, they want it may MPC, they may want both. They may want to run all these things in parallel, but need a secure way to orchestrate these. They may want to work with sub custodians.
I think one of the key USPS, as well, we started as an on-prem company and now we adopt that to cloud, which is very hard to start from cloud and then move on-prem. We deliver the optionality for whichever way. What we see is tier ones need all these options. For a challenger bank like LevelField, they can start simple and have all the benefits of that scalability at any use case that tier one would have. We are able to seamlessly scale there without re-platforming in that process. They can have hardware based security, they can have MPC. They can have both, and maybe Peter would talk about that. They can start as a SAS and then move it on-prem. To make things easy, we have prepackaged. Michael talked about the policy driven framework, they can prepackage policies for all the processes.
One of the critical things for LevelField’s ambitions or a tier one is IT sovereignty. This is your stack. It’s modular. You can build on it. We get your fast to market and you can build that and compose. Ultimately, you look at things like DeFi, it’s all about composability. We have the same approach; you can build on top of our platform, and it’s your platform. It’s not just our roadmap. We’re building with a client, but clients can go their own way as well.
[00:17:49] Catherine: For sure. Maybe that’s a good point to bring Peter in the conversation, on how do you look at these partnership, how they work? How does IBM reinforce the unique selling point of course METACO, and by definition, LevelField in this case specifically?
[00:18:09] Peter: Thanks, Catherine. Maybe Seamus won’t agree with this, but I see IBM, METACO as a partnership of equals. What other public cloud has connections that we do, that I do?
We’ve been in this space since 2016 with the open sourcing of Hyper ledger fabric and blockchain, enterprise blockchain, what have you. Custody key management since 2018, we’re building tech. Back when we first came across METACO, I think it was 2019. Is that what it was? You guys were a competitor. But then we realized that we weren’t going to do thing, because if anything went bad IBM would not anything. We stuck with just the infrastructure.
We were fortunate enough to over the years become a lot closer to METACO, because I think that there are a number of ways that we complement each other, if you will. Both sides, if you like, we can walk the talk and we can bring the opportunities. There are just a number of instances where things that we’re working on, I think we have eight or nine deals right now concurrently, half of them are ones that IBM brought to the table. It’s really been a fruitful one.
The thing about any kind of partnership is it’s all talk until you actually have that first deal. Then it’s like, well, who brought that? Then the other, they can’t bring another deal. I’s like confidence building steps over time. It’s taken a while, but I think we’re definitely seeing the benefit of this, because our focus has always been the enterprise, the institutions. Same with METACO. Quite frankly, everybody is after either the retail space or what I call the lightly regulated space, where you just don’t have the same fiduciary responsibility that we would if you’re going to do something with Harmonize.
Aside from partnering on proposals and go-to-market events and seminars and all kinds of things, aside from the reach and the lift that we provide, our tech as Michael mentioned, it’s been around for a while. It works. That’s one of the things that an institution wants, is stuff that works and stuff that they understand how it works. There’s a value in improving technologies. I think that our technologies help LevelField scale the number of wallets massively without incurring any additional costs, just because of the way that we do something called master key encryption. We don’t store keys, we store one key and then we use that one to encrypt all these other keys, and in such a way that you could store those in a regular database. That’s a pretty powerful concept, because you’re not limited at all. By the way, you can put those keys wherever you want. If there’s data sovereignty requirements or you want to distribute the key material that is safely stored in cryptogram, you can do all of that. Yet the protections of all them in place are afforded by the technology where someone if someone like James Bond tech comes in with an extra encryption and starts to shoot the hyper security module that encapsulates the master encryption key, all assets wherever they are, are frozen immediately within 100 seconds. And the way that you get them back is that you have a root of trust, that is in another HSMs, in this case smart card HSMs that LevelField has. No one else has. METACO doesn’t have access to any AUC at. If it time, LevelField wanted to just put a pause on things in terms of the operations of the notary services with the METACO stack, they can do that because they can revoke access as well with these smart cards.
The other benefit which can be helpful is that there are now a number of insurers that are looking at being able to write species policies against those smart cards. One of the things that I think that we can safely say with our partnership with METACO, is that we bring the ability to get insurance for hot wallets for the cost of cold wallets, or hot stores at the cost of cold stores, and so forth, because of just the way that we’re able to operate.
I think all of these things together make a really interesting, and successful team ultimately. That’s between METACO, LevelField, and IBM. Here for the long run. That’s the other thing, too. If you go work with AWS and got a problem a year or two from now, who are you going to call? You’re not going to call AWS. They don’t know who you are, you’re just some small bank. But with IBM, we have all our clients, and we have people in our space and we’re growing with you. That typifies the thing that we try to bring to the table.
[00:23:33] Catherine: You’re definitely known as one of the main providers for the largest financial institution in this world, and they have the chance to have this high touch client’s relationship with you. This is great. Do you see that this is a service that you will be able to offer and serve smaller institution like LevelField at scale? Is this realistic for people to think that they will also get this service?
[00:24:02] Peter: Yeah, absolutely. You’re small in the beginning, I expect LevelField to grow pretty fast and become a large institution very quickly. The reason they can do that is because they’ve got the right people at the helm, they’ve made smart choices with respect to the products and services that they’re integrating, and they have the expertise. Well, most banks out there don’t have this expertise.
To your point, one of the things that we’re working on at METACO is to build the as-a-service model with a white glove touch, that enables the smaller mid-market institutions to get the same quality enterprise class custody platform and the ability to manage it, but without having to bring in the expertise. Because then they could just focus on building out other generating functions and capabilities on the platform. We can bring custody in a box potentially, literally, and all of the service model that comes with it, the managed operations and one throat to choke, and so forth.
That’s an example of what the future holds and we can all collaborate. Who is to say that LevelField wouldn’t to be part of that model? Maybe LevelField at some point decide they want extend into helping other institutions get into this space somehow, or something like that. The possibilities are out there. I think we have the foundation from a technical perspective, as well as from a go-to-market perspective to create an opportunity for this mid-market to get service and enter the space in a big way and one that’s safe, and not having to rely on self-custody with others so that you can control your keys, as Seamus said already.
[00:26:05] Catherine: For sure. That’s what you see the next big thing for IBM and METACO partnership, that’s where you see it going forward or is there more to it?
[00:26:14] Peter: I think there’s a couple more. We are currently working on replacing the human element, the human collusion threat, if you will, for cold storage operations, which 90% of all institutions today still use cold storage. The way that works is you’ve got couple people that walk key material back and forth to some offline computer in hopes that they don’t collude, or basically pass on information to somebody or whatever.
[00:26:47] Michael: Cold storage is throwback to pre-public private key cryptography. It’s a throwback to the days when the military had to send out armed guards to distribute key material all across the world. It is not inherently more secure. It does, like you said, open that single attack vector. I trust the mathematics. My interest in IBM is not just where the product is now, but you’ve got capabilities like Mighty Watson Labs behind you. We know there are additional capabilities coming on, different types of mathematics. I’m sure we’re going to be hearing about the inclusion of ladders cryptography, and IBM distant future. I know we’re going to be thinking about different ways of accessing our HSMs, different ceremonies to power them up, power them down.
A company like us, admittedly small, admittedly just starting up, we have the opportunity to tap in to that research and development. You don’t get that with prepackaged off-the-shelf cryptography, you just don’t.
[00:27:56] Peter: That’s right. If LevelField needed to have, let’s say a new coin that required a new curve, one example was here in Singapore they wanted Singapore stable coin that required Zilliqa signatures. If you ask AWS, “Can you sign my Zilliqa?” They’ll look at you funny and they’ll say, “Well, wait a minute. Sure, we can do that. Let me go call Tallis. Hey, Tallis, can you do this turf?” “Yeah, sure. We’ll get to it in about five years.”
To Michael’s point, we have cryptographers. We have IBM crypto research in Zurich. We write our own curves. In fact, all of ours have been submitted to NIST and are currently getting evaluated against, just for you to know the curves in addition to the hardware HSM already has. No one else can say that. And there is no supply chain because we make everything end-to-end.
[00:28:59] Michael: I don’t want to nerd out here, but we also have to remember that when you’re running the software that does that signing, the actual software execution environment itself is wrapped in several layers of attack protection. I have yet to see, until I came across IBM, I’ve yet to see a situation where we had software executing that was safe from a system administrator, for example. That’s why I talk about zealotry. When people are thinking about the multiplicity of attack, and are thinking about defense, defense, defense. I would love to meet the person who thought of the hundred nanosecond requirement. I’d love to meet them in a public place, but I would love to meet the zealot who thought that we need to offer that to our clients.
[00:29:48] Peter: Absolutely. We have a new form of cold storage that removes the human element. That’s technically assured, like Michael was talking about. That’s coming to the public cloud, and it’s also coming to the on-prem environment. Look out for that, it’s going to be pretty exciting. It’s going to use a lot of these technologies from the key management side, but also high isolation technologies, which have been certified by common criteria EAL5+, which means it’s five better than air-gapped. We invented virtualization back in 1970s, as well as the data encryption standard, which was the very first that we also invented.
You mentioned quantum. One of the things that we are going to be doing with METACO in the future is to apply, the two post quantum lattice curves that we have submitted are now becoming a NIST standard themselves. One is called dilithium for quantum safe signing, and secondly is kyber for quantum safe key encapsulation. These post quantum lattice curves will be incorporated into the METACO stack, such that assets under custody will be quantum resistant as well as the keys that help create the merkle tree of trust with the mathematical security model.
[00:31:14] Catherine: That’s exciting. METACO team is also excited to learn more and work with you guys on that on that specific innovation. That’s great. I think we can finish up doing another little turn. Michael, any advice on technologies that are looking to build digital asset stack and infrastructure?
[00:31:39] Michael: Buy the core. Don’t build the core, buy the core, build the value on top. If you can’t explain the business value to a customer in a simple sentence, then don’t even undertake the build.
[00:31:55] Catherine: That’s a fair point. Maybe a last point on where do you see LevelField going beyond, in the digital asset place, beyond custody? I know you’re starting with trading and custody. You mentioned a couple things in the introduction to LevelField, but what’s the vision? What’s the roadmap with this?
[00:32:16] Michael: Not long after the launch of our initial product set, we are going to be powering up our OTC trading desk. We’re very excited about that. That’s going to be featuring AlgoTrader’s POEMS, a relationship introduced to us by METACO, for which we’re grateful the way we’re grateful to Peter for introducing us to METACO. That’s another company that works well with this well regulated policy driven environment. We’re also going to be offering more advanced types of custody to our customers. We’re looking at a variety of credit products, such as credit cards whose rewards are paid in dollars or digital assets. We’re interested in the tokenization of various asset classes, such as real estate. We’re interested in white labelling. Peter mentioned us helping others. We believe that our applications do have value, not just for us, but for other institutions. We’d be looking to execute that. Goodness knows what Trey Zeluff (he’s our director of strategy and innovation and a true believer) has on his radar screen.
I just want to emphasize one thing that I’m excited by, is the ability of digital assets to break the back of expenses payments and especially remittances. We’ve lived everywhere. I’ve lived and worked on four continents, eight countries. Not traveling to, but having the residence permit. I’ve seen people working in those countries, expats down the economic ladder, who are absolutely ripped off when they try to move money back to their home countries. We are very excited about what tokenization of various national currencies can do to greatly reduce the costs of those remittances.
To take it just one step further, we have a fantastic Board of Directors in general, but one of our external directors, a gentleman named Stephen Hollingshead, he has a company called ChangeInEx. He’s excited about the possibility of using this payment remittance model to help people who may find themselves in sanctioned countries, but who as individuals are not themselves sanctioned. He brings something interesting to the table. We have all that financial experience; he’s been a deputy assistant secretary in Washington. He brings the government experience to help with those types of KYC and cross border problems.
We’re bringing a wide variety of financial products to bear. We’re bringing a wide variety of technology to bear for retail, high net worth and institutional clients. But the one that gets me very energized is the possibility of doing some good by using digital assets for lower friction payments and especially remittances. Please watch that space, in the next year and a half as we build out our platform, as we do find ourselves in places like Singapore, and as I continue to try to convince my colleagues we need to go to Africa. I haven’t won that battle yet, but I’m persistent. As we move abroad, I think you’ll see that we’re going to be a leading player in the payments and remittances space. That’s it in a nutshell.
[00:35:36] Catherine: That’s great, it’s definitely interesting. Maybe Seamus can speak a word to the alignment that METACO may have with this roadmap and vision. What’s your long term view on the same topic?
[00:35:52] Seamus: Sure. I would just have a little anecdote. I was at a security services, a global custodian conference this week in London, I think with the turbulence we’ve seen in the market, that was just this week, whether it was this month of terror or Celsius, there was a lot of pessimism about the crypto space. When we asked, would traditional custody ever move on chain, 35% of the room said it’ll never happen.
I had to restrain myself because we’re in dialogue or working with a number of those firms. It is very much look to your left, look to your right, all of those firms beside you are going to be announcing plans going into this space in the next few months. I think our roadmap is that whether native crypto is 3 trillion, which it was at a market peak, or 1 trillion now, this is the asset class that’s here to stay. I think this is only the stepping stone to eventually all assets being on chain. Even some of our most conservative clients that don’t want to touch Bitcoin have that view.
The roadmap is, this is not going away. I think the infrastructure the banks have is now built for purpose. This asset is going to be increasingly regulated. The regulators are embracing that and it’ll be a part of whether it’s a new bank like LevelField, or the existing brand banks globally. They will be embracing this. If you’re not, I think you’re very much being left behind and your perception is the wrong one because this is very much becoming a mainstream massive asset class.
I think very much about all assets sitting on chain, I think METACO, IBM is very well positioned to bring the institutional market on that journey. We’re in a new phase of the market, moving away from the FinTech phase to the financial, the regulation, the mainstream adoption of this asset class. We’re very early in that journey, but I think that we’re very well positioned to help those firms build there.
[00:37:44] Catherine: Do you want to expand a little more on, should people expect METACO to see us more in the US? LevelField is one of our first client in the US. Should we expect more?
[00:37:55] Seamus: People know we’re headquartered in Switzerland; we’ve got our office in Singapore. We’ve really followed our clients in many ways. It’s really been about regulation, where regulations encourage banks to move. We’re very excited about the US because we see it now catching up with other jurisdictions. We’ve been very strong in the Swiss market, in Europe, that the footprints broaden across Europe. Asia has been a very strong base for us. Now we’re seeing the same thing with LevelField and other clients. If you watch the space the next couple weeks, you’ll see more and more announcements about a go-to-market there.
We live in a dollar based financial system. The US is critical to that, so it’s fantastic to see the US get its act together, whether it’s around stable coins, bipartisan proposals, rented digital assets, which we’ve seen in the last week. It’s coming to the US, and I think the US can eventually lead this space. Very much, we’re very excited to be part of that. LevelField is a great partner on that journey.
[00:38:51] Catherine: Yeah, for sure. Thanks. Peter, ultimatum question before you, do you see asset class moving on the chain?
[00:39:01] Peter: I do, but maybe a little bit differently than what Shamus articulated, although I do agree with what he did say.
JPMC Onyx really said it best this week, when they said yes tokenizing US treasuries and money market funds means that these could be potentially used as collateral and DeFi pools, with the overall goal to bring these trillions of dollars of assets into DeFi where they can be used. There’s new mechanisms for trading, borrowing and lending, over the scale of institutions and institutional assets.
That absolutely rings true to me, because it also is something that other large institutions, BMP, HSBC, who have said when it comes to thinking about, how do I incorporate DLT into my financial services or systems infrastructure, do I integrate it in there like everything else or do I do something different? Well, they’re going to do something different. They’re basically going to have the DLT over here and their traditional financial systems over there, and they’re going to go ahead and take all the assets out of the traditional ones and tokenize them. They’re going to put them and manage then in the same pool as crypto assets and perhaps treasuries and money market all on DLT side.
It’s very consistent when we think about the institutions are thinking. Are they worried about Terra Luna, or trans stable coin losing its peg for whatever? No, who cares? At the end of the day, they’re talking about traditional existing assets being moved across to expand the asset classes that are blockchain native. To me, that’s where the real potential of all this is, and they’re all going to be custody.
[00:41:01] Catherine: Yeah. It’s really about expanding the addressable market in the end, and making it more worldwide. Do you see other use cases where digital assets may be picking up beyond custody, even though custody is really the foundation of all of that?
[00:41:18] Peter: Yeah, I still look at foundation and I just think it’s different areas. We touched a little bit on DeFi, and KYC liquidity pools, are they compound, treasury, these kinds of things? There’s also a big shift towards smart contract wallets, that quite frankly are a little bit sketch. There’s any number of cross-chain bridges that have some issues. I there’s lot of opportunity there as well. The whole layer to the ecosystem as they’re trying to massively ramp in speed and so forth, are going to need different ways of doing key management and ways to scale massively.
I also see, with the advent, this is well-travelled term, but the metaverse. There’s going to be many metaverses: gaming metaverses, Facebook metaverses, Meta metaverses, whatever; but they’re all going to have crypto wallets and NFTs in key management, in some form or fashion. They’re all going to all have to interoperate. Someone’s going to have to service that market. That’s going to be us.
There’s going to be a lot of different areas to grow in this space that still takes advantage of those core capabilities that we bring together here with METACO and LevelField and IBM.
[00:42:38] Michael: It’s interesting that you focus so much on custody. Again, from a financial perspective, we see custody as a service that we will offer our customers, we want to offer our customers. We don’t see it necessarily as a great money spinner. My attraction to METACO, IBM combined was that it offered the same secure key management to movement of assets that it offers to custody. Assets in motion are more dangerous than assets at rest. The fact that METACO Harmonize gives us a policy driven mechanism, takes the idea of the four eyes principle which exists in banking, to an M of N. It’s not just M of N, it’s M plus N of O, or whatever, the idea that you have to have two line managers and an executive aware of that transaction before it can be presented to the notary. I just find it interesting.
You’re right, custody is the foundation in terms of, if the cryptographic security can ensure safe secure custody you’ve got the right cryptography. But we see it much more as providing us with the tools that give both policy and mathematics to securing our clients’ assets in motion. We can argue about that all day.
[00:44:05] Peter: Yeah. We’re in violent agreement. When I say custody I’m really talking about key management.
[00:44:13] Seamus: I think we’re all in agreement. The velocity’s only going to increase and the security tech vectors increase for the market as a whole. The solution here is really about eliminating single points of failure, whether that’s the software and the application from administrators, middle men, et cetera.
[00:44:30] Michael: Yeah.
[00:44:30] Peter: Cool.
[00:44:31] Catherine: Right. Well, thank you. That was a really interesting conversation, I think we’re reaching the end of this. That was a really interesting webinar and conversation. It’s great to see that digital assets are being taken by larger institutions that are really prioritizing security, compliance, transparency, like this great partnership that we all have.
Thank you everyone for attending the discussion. For attendees, the recording of this webinar will be available on our website along with the transcript. We have another webinar coming up on June 21st, if you want to register for this. This is going to be organized together with Synpulse, a leading technology consulting company. We’ll be discussing digital asset opportunity for banks and financial institutions in Asia Pacific, and the playbook for entering market over there. Maybe Michael you want to join!
Simply follow us on METACO LinkedIn if you want to have more of those wonderful webinar that we that we are hosting. Again, a huge thank you to you Michael for joining us today, and to Peter for joining us. It was really great having you in. Thanks, Seamus, for taking a part of this.
Looking forward to seeing you again.