Investing in digital currency and blockchain technology

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In Part 1 of AMS Crypto Investing Special, Elizabeth Rossiello, AZA Finance Founder and CEO Adam White, Bakkt Chairman join Zack Guzman of Yahoo Finance to discuss investing in digital currency and technology blockchain.

Video transcript

ZACK GUZMAN: And I just wanted to start this one off with a look back at how far we’ve come since the early days of crypto, and maybe more importantly, how far we need to go here, because I’m sure a lot of people watch that think that they may have missed. We’ve seen Bitcoin really climb here over the past few years. And I don’t know if it’s true. So let’s dig it in here.

And Adam, we can start with you, because I know Bakkt published a recent survey that was quite interesting to watch here among American consumers. And you found out that almost half said they invested their money in cryptocurrency here to kick off the year, which perhaps seemed higher than some of the other surveys we’ve seen. But what have you seen in, I guess, the demographics of who’s most excited to get involved now compared to, I guess, years past, and really, where is that excitement?

ADAM WHITE: Yes, it’s true. So let’s just come back to take a second to explain what we’re doing. We allow consumers to put all of their digital assets side by side. So your crypto will sit, and sit, right next to your airline miles, hotel points, gift cards. And we are adding more and more digital assets every month. What’s so exciting is that it demystifies this idea of ​​crypto.

And what we did in that job was we went to talk to consumers, we talked to potential users. And we asked, hey, how do you think about crypto? How do you plan to use it? And some of the really interesting data points that we’ve found are, like you said, we’re still ahead. There is always a growing interest. 32% of people we spoke to haven’t bought any crypto and plan to do so in the first six months of this year. It’s really exciting.

We also found that almost 24% of people said they plan to use crypto for digital online purchases. There is therefore also a real utility behind these assets. But also, we have found that we still need more education. 40% of the people we spoke with didn’t know they could buy a fraction of the crypto, meaning they didn’t have to buy a full Bitcoin for $ 43,000. So even though we like to think so, wow, crypto has come so far in the last 10 years, I still think we are very early in the process.

ZACK GUZMAN: I still hear this too, people are surprised that they don’t need to buy a full Bitcoin here. And it is very important to stress. And I guess Elizabeth too, when we think about some of the concerns people might have when it comes to investing in crypto, volatility is one of those things as well. Adam, in your guys survey I think a third of people said they didn’t want to get involved because of too much volatility. But Elizabeth, you just pointed it out by focusing on Africa, even the currencies there are sometimes a bit more volatile than what we’ve seen in crypto. So talk to me, maybe when we step back and watch a world stage, how important technology is.

ELIZABETH ROSSIELLO: Well, first of all when we talk about AZA Finance we are actually talking about creating a forex market in all frontier markets. And when you talk about foreign exchange, you have to talk about cash and settlement infrastructure. And going back to what Michael said about Grayscale in the previous segment, we’re really on the verge of building this on-and-off ramp between the old financial system and the future of finance.

So, in our basket of over 100 currency pairs that we trade, digital currency pairs are right next to it. And when you think about the needs of frontier markets, these are very volatile assets. So we have to talk about risk mitigation. We need to talk about real time settlement so that we don’t get behind settlement which adds to the volatility. And we have to be able to negotiate around the clock.

So when there is a public holiday in US dollars, for example, in North America, we do not need to trade to stop in West Africa or South Africa or to trade between l ‘Africa and China. Thus, digital currencies really provide a necessary solution not only for investing in a future asset class, but also an infrastructure for the regulations of foreign exchange and border markets and markets that do not necessarily fully correspond to the North American markets. or European.

ZACK GUZMAN: Yes, let’s leave that there for a second too, because we may have heard from a lot of people here in the US who are involved in traditional financial institutions – I know you’ve been involved in prime brokerage before. order – who saw the inefficiencies here in the US and switched to crypto just because things are quicker to sort out. But when you maybe look at the things being built in developing economies, Africa in particular, I guess I remember how India and other developing countries jumped in, even needing it. of fixed lines, passing already to mobile phones. If there’s a potential benefit in being able to showcase it alongside legacy legacy systems maybe that not only gives adoption a boost, but I guess what the future for some of these developing countries?

ELIZABETH ROSSIELLO: 100%. And when we look at an era in the world of post-Bretton Woods monetary policy, we can’t talk about settlement through the US dollar, which settles over SWIFT all the time. When we are trading between continents that do not involve the dollar, why should we use existing dollar infrastructure? And it might sound drastic, but it really doesn’t make much sense to trade from West Africa to the United States and then back to South Africa in almost a triangle.

And the World Bank was cited as lending in rupees in India or in pesos in South Africa, but the loans in Africa were always in US dollars. Thus, monetary systems, settlement infrastructure, banking system across the African continent have been heavily dependent on infrastructure that simply does not meet its needs. We are talking about double-digit exchange margins between South Africa and Nigeria, two of the continent’s largest economies. We are talking about 7 to 10 days to settle between the francophone monetary union, which is the same currency. So we really need to think about the future of financial infrastructure. And that includes digital currencies, which can be settled in real time around the world with interconnected counterparties in a way that traditional infrastructure simply cannot and never was designed.

ZACK GUZMAN: And Adam, I mean, when we see institutions taking an interest in crypto for that, I know you work closely with institutions to provide custody here, and I’ve seen a big boost. That seems to be what really led to part of the price appreciation that we’ve seen this year is the involvement of institutional investors. How important is that compared to what Bakkt is trying to build here? And what have you seen of this influx of, I guess, excitement this year?

ADAM WHITE: Yes, Bakkt was launched a few years ago. And the first product we came up with was regulated custody for financial institutions. And we did it through our partnership with ICE, a Fortune 500 company that operates some of the world’s largest exchanges like the New York Stock Exchange. But this regulated and reliable financial infrastructure is at the heart of institutions entering this asset class. Beyond that, things like Elizabeth was also talking about technology, it’s fascinating. This is incredibly opportunistic growth for space. But right now where we see most of that institutional interest is having asset exposure to assets like Bitcoin. This is therefore the heart of what Bakkt offers.

And I talked a bit about the consumer product that we have, but Bakkt also offers this regulated custody in these futures contracts that allow institutions to enter this asset class in a way that they feel is familiar and that is fully regulated by regulators here in the United States.

ZACK GUZMAN: Yeah, and when it comes to that too, I mean, I guess there are security issues. Well, we’re going to take a short break here, but I’d like to discuss some more with you, Adam, in regards to security on this front, because that too, I guess, would be one of the issues that could maybe prevent some people from coming here. But how much improvement has been made there to really guarantee custody here compared to some of those early days? I know people remember some swap hacks before, how far we’ve come.

ADAM WHITE: Yes, we have come a long way. Crypto reputational debt is still very crowded. The first question they ask is, how do you protect my crypto assets? And that’s the right question. But now we are seeing some incredibly sophisticated financial institutions in this space. We see startups that have come a long way and have great technology themselves. So, I think of whoever is operating in space right now, I think security and compliance are two things at the forefront, and certainly what we take most seriously here at Bakkt as well.


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