Blockchain Innovators - Conor Svensson and Julio Faura

Hi, it's Conor Svensson here,  founder and CEO of Web3 Labs.   This is a conversation I had with Julio  faura, co-founder and CEO at Adhara.   Julio is a technology innovator at heart having  started his career designing microchips after   he obtained his PHD in Computer Science before  obtaining a MBA and heading up R+D at Santander   bank for a number of years which he ultimately  left to help found Adhara. In our conversation we   cover a lot of ground including how he approached  innovation at Santander and managed to get them   looking at blockchain innovation opportunities  over five years ago. We also discussed how he sees   the wholesale money markets evolving off the back  of technologies and initiatives such as central   bank digital currencies, his involvement in the  Enterprise Ethereum Alliance at its inception   and, of course, his journey with Adhara.  Given Julio's deep knowledge of technology,   finance and innovation, I found this conversation  fascinating as he really understands the inner   workings of the money markets and how blockchain  can benefit them. I'm sure you'll find this   conversation as insightful as I did. Julio, it's  an absolute pleasure to have you here today.   My pleasure. So we hosted you recently at  an Enterprise Ethereum Alliance Meetup and   you described how through your company Adhara,  you've been able to marry your technical passion   with finance. Before founding Adhara you were  a head of R+D at Santander, when did blockchain   first appear on your radar and at what point  did you really start to take it seriously?   Gee, this is back in time, I think this was 2014,  I think it was, maybe late 2013. At that time   all the talk in the industry was about bitcoin,  that was a new thing, and I think I was one of the   first people, at least from banks, interested  in actually the potential of the blockchain   technology underlying bitcoin. Now it seems quite  obvious but at the time most of the things, most   of the talk, was about how bitcoin, crypto assets  and trustless assets, are going to disrupt banks   and all that. But, I did see the the potential  for blockchain technology to to serve right as   a transformation vehicle for the financial  industry. It's funny because I think it was   in 2014 in the summer, I remember, I'm an MIT  alumni right, and I was advising a startup in MIT,   so we commissioned a small study to actually think  about the potential implications of blockchain   technology for banks, this was 2014. So that  that was picked up by the press and they got   a very serious call from our PR department at  Santander because the words Julio, bitcoin and   Santander appeared in the headlines in Phoenix,  everybody was like 'Wow, Santander is going big on   bitcoin!' It's like 'No, no, no, no, no, this is  not about that!' So that was fun, that was 2014. But certainly as well, Santander was one of  the banks that really stood out as making   headway early on and clearly there's a  reason why, as you talk about here, but   as you said, you saw that there were applications  beyond the cryptocurrency side. Was that   because you'd been spending a lot of time  in the years prior really looking at areas   like settlements and payments and these sort  of areas, that now everyone talks about, but   in those earlier days it must have  been quite a different perspective?   Yeah, so at Santander I did start within capital  markets and investment banking. I was not really   specialist in settlement items or  in capital markets, I was more like   the chief of staff. Previously, I had  worked for McKinsey for six years so   it was more like a top management consultant  type of topics but I'm an engineer at heart,   using computer science so I've always loved  technology in a very practical manner.   So I was involved in money, I was involved later  on in operational items, in nineteen operations.   We used to do a lot of integrations and a lot  of technical work on the banking side. So, yes,   I did have the opportunity to experience the  inefficiencies and the issues there. Santander   is an example of a bank that is built on  an independent subsidiary model which means   that you have a lot of different entities  that have to connect to each other somehow.   Connecting banking systems is a very  difficult thing right, and it's a big it's   blocker of innovation. Banking systems have  been built to be secure, not to be interactive.   Whenever you want something to be secure,  what you do is you put it in the safe   with core banking systems, and I'm very  happy it's that way because it's our money,   safe keeping right! So when you try to use these  things to actually do new payments or capital   markets applications but you need all these  systems to talk to each other it's very difficult,   you need messages, you need reconciliations, you  need all kinds of cybersecurity mechanisms to make   sure that all these things are secure, you need to  treat authentication in very, very serious terms,   right? So suddenly the idea of having a shared  computer, a shared computing paradigm like smart   contracts on top of blockchain was really amazing  because you could essentially connect once to the   shared platform and then start building things to  model these workflows between all these different   entities and branches and clients and all that. So  the idea of having an interactive shared computer   or computing paradigm on top of which to develop  all these things, starting with digital assets   but then going into applications, was very,  very appealing. It's not like I have been   suffering a lot of operational issues at  banks but I did know them and that was a very,   very interesting reason to explore the  space. As you say, these problems of   integration and security that it solves very well.  So back then, you reference smart contracts, was   Ethereum on your radar at that point or was it  still more about bitcoin as well? I know that the   network didn't launch till the following year,  but it was obviously the white paper was there   and people were talking about it. No I didn't know  about the the white paper. I'm very practical. I   never had the time to read these things or to do  a lot of research on the stuff. So at the time,   yes we were looking at bitcoin, never really  deeply from a technical perspective, I mean I   did that on my own. But the whole construct, you  know that bitcoin does have a smart contract but   they're very primitive, the type of things I can  do with that are very, very simple. At that time   actually, we're talking again 2014 late 2014,  Ripple was very promising. Ripple technology   that was a lot about tokenization of assets, they  were all IOUs at the time, I'm sure you remember,   and then they were talking about a smart  contract. There was something called   Codius that supposedly was going  to be a smart contract capability,   Ethereum type let's say, right on top of that  - that never happened and we did try to deploy   that technology privately at Santander, it was  open source at the time. That's before Ripple   pivoted into the new technology architectures  that they tried later and definitely before they   focused so much on XRPs and so on. So just talking  about technology, we tried to use that. It was   it was impossible, it didn't really work, it was  not fit for that purpose. So then Ethereum, as you   said, appeared a little bit later that was 2015.  It was difficult to use it in the beginning for   permission use cases because this was the public  construct, which was amazing, it's a work of art.   So we did have a lot of fun adapting that  to do our own like permission networks and   all that. That is really what fuelled all the  potential that we started to see and very soon,   we started to share our experience with other  enterprise actors, other banks and so on,   and we ended up funding the Enterprise  Ethereum Alliance with the purpose of   fostering the creation, or the adaptation,  of this technology for enterprise users   particularly in the financial industry but also  beyond the financial industry. That's where   things started to get more and more interesting  progressively over the course of the next years.   Yeah, and I certainly wanted to come on to the  Enterprise Ethereum Alliance. So you were the   original, well you were the Chairman there  for a period of time before founding Adhara.   More from an enterprise innovation perspective,  there's some key things that happened at Santander   that many other organizations probably could have  tried to do similar things if they'd really been   thinking with enough of an innovation mindset. As  you said, you got to this point where you were,   no doubt, getting a degree of business interest in  the underlying technology but then also managing   to collaborate with other financial institutions  and companies that ultimately were founding   members of the Enterprise Ethereum Alliance. How  was it that you were able to take this thing, that   to most people is unheard of or they just they've  heard about bitcoin maybe, and actually convince   them that it's worth spending time looking at  this technology even though, at that point,   there wasn't really products and services - it's  nothing like it is now - right? So how were you   able to do that and how are you able to reach  out to other banks and all these sorts of things? Yeah, I don't know. I would say, it's mostly  Santander's merit, Santander's a great place.   It's really a great place where if you  want to do something, you can do it. I mean   it's a big bank, we have all kinds of procedures  and compliance rules and all these things, but   if you really believe in something you can  find people that will help you. It has to   make sense and you have to have the right  sponsorship and that sort of thing, but   you know it is possible. I know many other  institutions where there's just so many Chief   Prevention Officers along the way. It was also  very much on the agenda of the top management,   that would listen and also I was quite senior  in the organization so I kind of earned my right   to propose things and do things provided that I  would not break anything! So it was good. Also,   I did have the possibility to understand and  even fiddle with the technology myself. In fact,   the first little platform for tokenized money  and cross currency payments use cases, the first   piece is actually a program by myself. So I was  suddenly reporting to a Senior Vice President who   was reporting to the Chairwoman. I was writing  the code on my computer and going giving demos   to these people and to the board at that kind of  level. So the idea of having people with knowledge   and with the passion to make things happen  quite close to the top management, I think   that's a very good enabler  for this type of innovation to   happen, right? I was really privileged to  be in that type of situation and I think   Santander was really a great place to do that.  In terms of reaching out to other institutions,   well everybody was looking around, there was a big  call of attention with the appearance of bitcoin.   Later on it was even more so when when Libre  came up into the market, I know that's a lot   farther away than the line but yes, it was a  huge, huge call for attention as well. So people   got the importance of getting into collaborative  mode because it was, a whole financial system was   going to be under attack, not really a competitive  situation. So people started to be quite enthused   about this idea of competition, like lets  cooperate to build the industry utilities and   the different infrastructures that we'll need in  order to be able to carry on our jobs and compete.   There are many other examples. On that thinking  for example, it was what was behind the creation   of the Utility Settlement Coin that later became  Fnality. This was three of us in Deutsche Bank   and UBS and Santander, we then invited people  from the Bank of New York to do that. And again,   nobody would see this as a competitive thing  or as a collusion thing or anything like that.   It was more about collaborating to create utility  type infrastructures that could be used by the   industry in order for everybody to first of  all get efficiencies and second, be able to to   compete and develop new businesses and products.  It was a great time and then, I'm not seeing a   big change on that frankly in the past  years. I think collaboration is still strong,   it's growing stronger and stronger. I think  technology is also a good enabler of that,   now it is a lot cheaper to do these things. Now  you have cloud computing, most of the enterprise   blockchain technology like Besu, Quorum, all these  things, they're open source and they are quite   reasonable and quite cost effective to use and now  you have good people providing enterprise support   whenever you want to use it. So when there is not  a big need to put a lot of investment money into   creating these things, that also helps a little  bit and also regulators are quite happy with   that happening. So I think that the  climate is quite good for collaboration   so that's more or less what I found. That's  fascinating to hear that, as you say,   there was almost a recognition all those years ago  that this technology is going to be so impactful   that everyone needs to pay attention to it  and there was that sort of awareness there   because certainly that's not commonplace in all  industries. I think certainly people generally   have got mixed views on the world of finance,  myself having come from that background as well,   I certainly know the innovative mindsets and also  just how much people do want to innovate be it,   financial products or find new efficiencies and  so on in what is a complex space. It's always   something that's been very stimulating about  that world so, it's amazing to hear that even   back then, you had all these people saying 'yeah,  there's got to be things we can jump on here'.   Yeah, I mean it would change, would vary let's say  between institution to institution, but largely   that was the case. In terms of exploring  conceptually and all these things,   that was easy. In order to actually do things and  produce things that would then need to be shared   as in IP sharing or stakes and having stakes in  JVs or things like that, things get obviously   progressively more complicated but the spirit is  still there. I mean it's always difficult to pull   JV but I think the level of collaboration and the  level of progress that we saw in, for example,   when we launched the Enterprise Ethereum Alliance  in the beginning is amazing. We would get so   much done in so little time, right? A lot of it  was as well how ConsenSys were instigating the   whole thing. So Joe and Jeremy, particularly  Jeremy, they were very, very good and very,   very adamant in a very, very good way and it had  the right level of transgression, let's say. We're   there, we were fighting, let's say, for the common  good and making it happen within our corporate   centers and it was possible. Of course, it is also  good when you deal with other people that share   the same sensitivity to corporate issues like  confidentiality, privacy, risk management,   compliance, and we need to understand this.  Something I don't believe too much in is   getting or trying to drive innovation through  people that are not insiders from the financial   industry. In many other sectors this is perfectly  possible but within the financial industry the   sensitivity you need to have with these topics, I  think, is very high. There are things you cannot   do. There are things you'll have to explain  and you'll have regulators, board members,   auditors and all these people to understand.  So you have to know your your boundaries. You   really need to know your limits so you're able  to do things that ultimately will work. So,   I think we did a good job in understanding each  other and making it happen and everybody was so   excited and so generous and so uncollaborative  at that time, I think it was really good. Yeah,   I remember when I saw the announcements,  I was in Sydney, living in Sydney at the   time. I was so excited for it because when  the Quorum announcement happened in November   2016, I was like 'oh this is really cool,  JP Morgan's getting behind Quorum' and then   next there's this thing, the Enterprise Ethereum  Alliance and 'how can I get involved?' It was   really good. It was one of those pivotal moments  for me in terms of seeing all these big names   really getting behind Ethereum and saying 'we  think this technology is very legitimate, it's got   a lot of applicability across our places'. You've  got all these heavy hitters coming together and I   think it's an amazing thing. That's true, yeah,  yeah, absolutely. I remember when Quorum was   announced. It was a blessing. I mean, my life  until then was using the public Ethereum client   and mining with synthetic ether that nobody  really needed, right? Everything was low and   it was impossible to permission, to make up a  permission network and it was a few transactions   per second and of course, there were all kinds  of memory leaks and it would fall down like every   six hours to go back again. It was quite difficult  to use and still we were experimenting with that   based on the transformational power that we sensed  it would have. So when JP Morgan released that,   it was really great and then you would call  them, you would ask them for support, for help,   for clarifications, and it would be so open and so  generous and so responsive. At the time, it was a   really big thing. It was really, really amazing,  so much fun at the time. It was wonderful. So then things carried on moving  forward. With Santander, no doubt,   having seen everything that's been going on, we've  spoken to John Whelan previously on this podcast   and he brought us up to speed with  how it's continuing to drive forward   a lot of their digital asset strategy  and blockchain related initiatives,   there must have been something pretty compelling  that made you decide 'okay, I want to move away   from Santander doing all this great R+D and  leading a lot of blockchain stuff into actually   getting something off the ground', which was with  Adhara. When was it that you said 'yeah this is   the right opportunity, I'm going to make that jump  now'? Obviously, you haven't looked back since.   Yeah, so I was really happy at  Santander, I only have good words for   Santander and we'll always have good  words for Santander. I was not frustrated   or anything. I know people, not particularly  at Santander, with other large organizations   it can be a quite stifling, a different type of  environment. In my case, that was not the case.   I could do whatever I wanted, whatever I really  believed in I would have the possibility to do it,   would have the channels to top  management, all the way to the top,   and whenever I wanted to do - if it  made sense obviously - then I would   do it. I would contribute, like publicly  speaking on behalf of Santander, work   groups of the European Commission or the  BIS, the CPMI, the Financial Stability Board,   so you know, I was quite happy. But, this thing  about entrepreneurship - at some point you have   to respond to it! You see, I always wanted to go  back to just a small company and build my company   and pursue my dream. I tried to do it actually, I  did try to do it in a collaborative fashion with   Santander but you know, this process  is for spinning off ideas and all that,   it was not - at least at that time - it was not  well worked out, so it was it was difficult to   make it. But, I would have done it if that were a  possibility. So anyway, it was just that it was my   desire to go and build and pursue my dream.  Then I found a couple of very good friends that   are the best companions that I could have, like  Edward and Pete is my co-founder. Also ConsenSys   was very helpful because they provide the seed  funding that we needed to get started so that avoided the need to go into months of pitching.  As one venture capital told me once, 'having to   kiss a lot of rocks', we didn't have to do that!  And also the opportunity, you know blockchain   is a distributed technology and it's good for a  combination of institutions to do things together   so we should not belong in one institution.  It should be more syndicated and distributed.   So I thought it was a better home to do the type  of things we're doing now in building essentially,   technology for banks. So it's not the best way  to do it from within a bank so, I sensed that was   an opportunity. It was definitely my desire from  the very beginning to do it, it's been there for   years. I've found or I've tried to find ways to  do that in different moments within Santander but   in the end you have to respond to the  call I suppose. Yeah, yeah. That's what I   did, I don't regret it obviously but  yes, I do miss some of my friends there.   John, John is absolutely great. Actually,  John is one of the persons that responded   to that little study about bitcoin, well  the blockchain, that I commissioned into   2014. I knew him, he was one of the experts  that responded to that. Years later, we kept the   relation there and then brought him into Santander  and then he became Head of Digital Assets and   Crypto Investment Banking. So it's absolutely  great, we had a lot of fun at Santander.   Absolutely. So moving on to Adhara, as you say,  you build these solutions looking at the banking   sector but you've got a number of different  products spanning like treasury functions,   interbank payments, CBDC's, payment liquidity  tracking, is there a common theme or problem   that these solutions collectively address?  Because, of course, there's got to be a fair bit   of commonality between parts of the technology or  parts of the solution there rather than building   up lots of different silos of products, right?  So I'd be interested to hear more about what   it is that ties these things together. It makes  sense to have these different product offers.   Yeah, well first of all it's important to  recognize that these things that we are doing are   fairly specific and they're fairly focused  or specialized in wholesale banking topics.   And often we get quotes and requests and things  like that from people trying to do retail CBDCs or   crypto wars or things like that, and I say  'look we're very specialized'. Specialized   in a very boring thing which is also banking,  the bowels of the large bank treasuries and   financial markets and cross currency payments.  So, there's people for everything as we say in   Spanish! So it's quite about that. The common  theme, as you said, is the use of digital assets,   particularly tokenized cache as a key enabling  factor for a new operating model at treasuries.   That's really the thing. You see when you get into  a bank, even commercial banks, all banks need to   manage their treasuries for example, when they do  payments on behalf of people like clients. They   have to have some accounts in some special systems  like in correspondent banks or in RTTS systems   in order to be able to process payments  and the same when they have to process   and they have to settle transactions in  the capital markets on behalf of clients.   For example, if I have a bank, you have a bank  and I have a client and you need to do a payment   from my client to your client. Essentially I will  take the money from him and I need to pay you as   a bank. So you need to have money in one account,  either in your bank or in an RTGS system or in a   corresponding bank where we both have a an account  somewhere. I need to settle with you to give you   money so that means that I have to have some pot  of money, some some liquidity in order to be able   to do that. Now today, the problem is that  that pot of money, the trading instruction,   the payment instruction, all these things are  completely separated and they don't really   work in real time. So I send you a message, you  queue that message then you have to reconcile.   Then later on you'll find out how much money I owe  you or you owe me. You see, all these processes   are not well weaved together. They're all  separated, they work for messages and that leads   to inefficiencies. First of all, I end up  having a lot of those accounts where I have   to put a lot of money. So I need a lot of  liquidity to make my bank work and that's   very costly because the opportunity cost of money  is high. Second, that money doesn't move quickly   because I never know how much money I need to  sell until one day or two days later, after I   do all these reconciliations and all that. Because  of the lack of ability to actually move that money   quickly and also know in real time what's  going on, again I need higher levels of   liquidity profoundly in those accounts to make  the whole thing work. So it's quite inefficient. Instead of that, if I could have those accounts  just built with tokenized money, which is a   digital asset, something that inherently works  in real time. Now we can put together payments   processes, we can do trading processes and we  can build them as well on top of blockchain.   That means that the process themselves are coupled  with the tokenized assets so then everything   suddenly works in real time so I don't need to  pre-fund all this money. I can just fund whatever   I need, when I need it and therefore I can reduce  a lot of the levels of liquidity that I need   in order to run my bank. That can make me save  hundreds of millions every year in internal costs.   So in Adhara, what we do is really the  solution that banks would need in order to   make the best use of digital assets and really  transition into a real-time operating model   that is not based on messages. It's not based on  a forecasting cycle in the morning then I don't   know anything until the end of the day when I have  to settle whatever I have to settle because if I   do it in real time I'm able to really optimize  a lot more than all these liquidity levels and   all that. So, yes, we have solutions to build  a digital asset for example, that's what we   do. You can do that for central banks and all  that, but the real business is the pieces that   the banks need in order to connect to these  things and to make use of these things and   put together a new target operating model  that works in real time and is a lot more   efficient. I mean, for large banks they already  have quite substantial operations in treasury   weaved with all kinds of messaging layers and  it's a big, big mess so this can be a very   interesting transformation opportunity and would  be a really huge project that could make them save   a lot of money. For tier two banks, so banks  that have some regional complexity and some   operations in different currencies, in different  countries and so on, this is actually a very good   opportunity for them to go into an operating  model that is the good one just from the   beginning because they don't have all this mess  and make them really save a lot of money. Also   it enables them to put together new payments  processes that are much, much better. They're   even similar to really big banks. Many of the tier  two banks will not have good corporate payments   capabilities or cash pooling or things like  that so it's a great opportunity to catch up and   be able to reap very, very interesting benefits.  So that's mostly what we do. I think the main   motive for the whole thing is the use of these  license and particularly tokenized money. Yes, we   build these facilities but the really interesting  part is the tools that are used by the banks to   better manage all this liquidity, to fund this  liquidity, to make use of that and also use it in   cross currency and international payments which  is a big, big pain point today in the industry.   And given the complexity of these banking systems  and the fact it's a new technological paradigm   that they need to move towards, you must be  looking at fairly significant time horizons   in terms of you're going to be working with people  for a long time initially just to prove the stuff   out. But then where it's actually going to  become a core piece of the infrastructure,   do you have ideas in your heads in terms  of you think there'll be good progress - in   the next five years or maybe it's more like 10  years - because it's very complex infrastructure   as you were saying earlier. These are  systems almost built in safes within   these banks so it's like you've got to dig the  safes up, you've got to open them up and then   convince everyone that we know it's secure but  they need to be convinced it is as well. Yeah,   I guess the answer depends on the exact  institutions or the type of institutions   we're talking about. Really large banks, yes,  this will take time because of they've invested   a lot of money into trying to cope with all  that complexity. Smaller banks that don't have   that mess, I don't see a reason for waiting like  five years or ten years to actually adopting that   new way of doing things like that new operating  model. In terms of readiness of the technology,   well this is getting better and better every  month for every quarter, right? The evolution   that we've seen in enterprise grade blockchain  technology, I think it's been phenomenal so   this actually is never really a consideration  in all the conversations we're having.   So I think this is already beyond any  reasonable doubt. So people are not,   three years ago yes, they would say 'but  this isn't matured, it's not scalable,   you cannot support privacy, it's very difficult  to do permissioned networks with the adequate   level of security', but now I think many of  these topics have been addressed. I know we   have mechanisms for all of these. Definitely  permissioning is very simple to do these days. Now we have interoperability mechanisms  as well, maybe not the final ones but   at least we have good enough ones to be able  to do atomic swaps between different chains,   even different chains of different  flavours or different technologies. So   I don't think that's going to be the major  battle at least for the use cases that we are   focused on which are linked again to wholesale  banking. We're not talking about doing merchant   payments or card payments or something like  that on blockchain, not yet, but also markets,   definitely everything related to CBDC's  things like that. To my knowledge it's   more than ready or more than capable, let's  say, to cope with that sort of complexity.   Most of the, let's say, potential objections  or things that need to get addressed   are more about on the accounting side for  example, so making sure that's tokenized money.   It can be treated really as yet another  regulated liability like a bank account or   something like that. There's a quite interesting  short paper written by Tony Mclaughlin, from Citi,   that talks about the regulated liabilities and  he's displaying that there are only four types   of money in the world, either cash, central bank  reserves, bank money or electronic money. The last   three of those are regulated liabilities,  it's just money that the banks create   on their balance sheets. If they do it against  credit, that's bad money. If they do it by the   central bank discounting assets or whatever that  is RTGS money. If they use an omnibus account and   crypto card or whatever it is, then that  is electronic money. But actually using   a smart contract to record those regulated  liabilities, it's just a technology choice.   We're not doing anything new, it's not a new  asset, it's just another database instead of using   the core banking system database which is using  a smart contract. So if that is true then the   accounting treatment of that should be that of a  normal regulated liability like any other current   account. Well, that's something that people  will need to understand and accept and that's,   for example, one of the topics that I think will  need acceptance in order for this to go forward.   So, I don't know, based on the conversations we're  having, I don't think it's a matter of five years.   I think it's much less than that. At least for the  initial use cases, particularly the ones in the   wholesale markets. I think those are a lot easier  because they have a lot less complexity in terms   of the last mile with the user and the security  and the usability and what we do with the keys and   that sort of complexity which is always a lot of  fun. But at the institutional level, I think we're   going to see a huge progress in  the following months. And, no doubt   from a cost-saving perspective as well, there's  some very big numbers that could be demonstrated   to these organizations when they cut out these  reconciliations and all this data that they've   got to exchange right now with independent  other participants they're dealing with   yeah? Yeah, I agree. Again, you can  see that all throughout the industry,   it's not like the industry is broken or is not  working, it's just that all these systems were   built with another purpose in mind and also  they were built where we would not have all the   widespread connectivity we have today. At the  time, when I started building all the systems,   everything was about point-to-point connections.  It was about messages, it was about some   instructions peer-to-peer but they didn't have  the internet. They didn't have a big decentralized   communications capabilities. So it only took  20 years to develop the distributed way of   restoring value, intersecting with values.  We're just digesting and trying to find the   first ways for that, the first uses for that.  But, it's a new tool and this could be a good   cornerstone to actually tackle the transformation  of the industry. That's what we always thought.   Yeah and then certainly with all of the  interest there is right now with different   monetary authorities with central banks with  respect to central bank digital currencies,   it certainly seems like there's a very positive  response from governments and so on about the   transformative potential of this. It seems that  there aren't really any know major central banks   not interested in the technology so to speak  and you have those who have really kind of been   jumped ahead like the Bahamas with their Sand Coin  which they've actually put out there. China was   actually trialing some within Beijing and the  Bank of England as well, they've kind of got their participants who are advising them. So  that's an area of course, that Adhara and you   have got a lot of interest in from the wholesale  perspective as you say. But I'm interested as well   to think about where we're going to in terms of  the future. I guess it's a given that blockchain   and decentralized ledger technology will  simplify the landscape for these organizations,   and so there's those tangible benefits that  I think are pretty clear. But then there's   this other stuff that's happening in the the  public domain where you've got what started off   with ICOs and all the tokens and utility tokens  and so on and then sort of evolved, and you've   got everything that's happening here with NFTs and  DeFi. I think where it becomes quite fascinating   is that once you could argue that when you've got  a jurisdiction say offering a retail CBDC then   people could potentially treat that  retail CBDC kind of like they treat a   utility token right now or a crypto asset  by bitcoin or Ethereum or whatever else.   I often wonder is there going to be a  bit of a divergence down the line where   the retail CBDC's, people start to look at them  almost fungibly with crypto assets in that they'll   have some money tied in with these retail CBDC's  because they want to get all of the benefits that   come with being invested in that currency being  domiciled in that country, getting public services   because they're paying tax. And then you'd  still have these other utility pieces where   it's much more about the cryptocurrencies. I'm  curious if you see this world spinning up where   you've almost got these retail CBDC's almost  start becoming a bit like cryptocurrencies   are now because they're underpinning them is  the same technology but instead of it being   like a project team that's created, it's a  governmental central bank controlling them. Well, so first of all, I'm a really bad  futurist so you should not trust me!   I'm keen to hear though, I think you're closer to  the ground than most people on the wholesale part.   Yeah, i'm very bad! One thing I would say is  that the wholesale world is very different.   So something I don't believe in is that  repurposing retail CBDC or even crypto   assets for the use in a wholesale context.  No. The same way retail people cannot have   deposits at the central banks and they cannot  trade directly with that large institution.   Sorry, this is separate worlds and that's why  we have a fraction system and with new roles for   banks and central banks and people. I think it's  quite frankly quite separate and quite different.   I think in terms of wholesale CBDCs, the driver  is that. It's getting efficiency in the use of   equality and being able to settle  transactions, move collateral fund accounts,   manage bank assets, what you do - activity on  behalf of clients, and be able to do that more   efficiently. So that's a whole thing and  also you can use that to put together new   products and services. Meaning  better prices, faster payments,   more information, real-time processes, real-time  knowledge of what's going on, which is mostly   what corporate treasurers want. They just want to  know rather than really move money in a matter of   seconds like in the movies. I think it's a  much more boring topic than the other one!   In terms of retail CBDC's and the  convergence or divergence from crypto,   I think the debate is a little bit too noisy  at the moment. On one hand, I can't see...so   you know what is the point, right? The point is  providing better usability and programmability   to money so people can access the money and  can plug applications and we can innovate   and do things. 95% of the money in the world  is bank money and that is already digital.   That already exists in a detailed system, it's a  number in a database in a banking system somewhere   in a data center. That's 95% of the money. The  thing is that that piece of data in that database,   it's not accessible to you. Not to you,  not to anyone, not to cyber criminals,   obviously. So you have to go through bank APIs  and banks who are not going to open the API.   So you have to go through the banking  applications or the portals for the   mobile banking application, whatever it is. So  you cannot really make use of the deeds or money   even though it's digital because they cannot open  the interface to you, you're not free to use it.   But if we create bank money using token contracts,  just using the blockchain as if it were a database, just a smart contract instead  of a conventional database then suddenly   you could open it for use by the people. Imagine,  it's a completely hypothetical and critical case,   but imagine that my bank account in my  bank is going to be implemented on a   smart contract on top of the public Ethereum  ledger. It's still controlled by the bank,   so you can still do KYC and everything to qualify  people but suddenly I can just join the network.   I can start to transact with my money and  pay and or pledge or whatever I want to do. So that's a very interesting thing, but  the purpose is giving people access to the   money without having to go through the banks.  That doesn't change anything, it only fosters   innovation and the possibilities to the couple,  the bank systems or the bank channels from the   money itself. You could start using, I don't know,  MetaMask to operate your bank account for example.   But that sort of thing, you could be doing.  So that's one purpose. I find it absolutely   fascinating and it has a lot of possibilities  but that is different from starting to create   money by the central banks for the people because  that's not the way money is created today.   Money today is created against credit.  You go ask for a mortgage, the bank will   annotate your mortgage and will create the money  for you in your account and you will pay the money   someone else and that's how money is is created.  So if instead of doing that you are going to be   doing it from the central bank then the question  is who gives the credit right? Is it the central   bank? Are we going to create a big central  bank that's going to manage the whole economy?   That's changing absolutely everything,  including removing the role for banks.   The point is marginalizing the use of physical  cash and attributing identity to that. So putting   in more controls from that because cash is a  problem. It's inefficient, it's expensive and most   importantly it's very bad, it's very problematic  for counter terrorism financing measures. So if the point is marginalizing cash,  that is fine, but then (and yes you   can do it through a retail CBDC) you have to  decide what level of control you want to do,   in the case of China for example, the  control is huge. In the case of others,   maybe less. Even with thresholds for example,  you would have some thresholds for anonymous cash   versus others that need to go through okay  with the processes and that sort of thing.   But if that is going to lead into a situation  where the two or three percent that physical cash   represents today grows into 30% or 40% or 50% then  you're changing the whole system again you see.   Banks are not going to be happy and central  banks are not going to be happy as well because   they will have to do KYC, they will have to create  credits. The whole economy is going to change. So,   I don't know if there are ways to do this in a  sensible manner. I think that's what many of the   central banks are exploring right  now. It's not really a technology,   it's more about the monetary implications and the  broader implications for the economny in the end. The answer is 'I don't know, I frankly  don't know'. I don't think we have still   enough information. I don't think people have  devised yet a system by which that can be done.   So I don't know. At least in the wholesale world  it's very simple and it's very clear, it's very   ring fenced and that's it. Retail CBDCs, we'll  see and all that again I think is separate from   crypto. Crypto is... bitcoin is great as a digital  goal, it's another asset, right? It's a new asset   that is like gold, something that is scarce,  it's anonymous, it's not controlled by anyone,   fine it can be used as that. Frankly,  I personally don't find many reasons   to use something like bitcoin as the new  money to change the financial system. Why?   What is the problem with today's money? The  problem is the accessibility because of all   these bank APIs and all this disconnection  and fragmentation of ledgers and all that.   We can solve that with regulated  liabilities on a tokenized basis using smart contracts on blockchain. So if that is  the point let's use the technology and that's   it. We don't need to change the nature of the  asset because that's not the problem. If that   is the problem, then the conversation is  different because if the point is making   a financial system that is not controllable by  central banks or multilateral organizations then the implications are just staggering. So anyway, I  don't think I have the answer but that's what I'm   observing in the industry and I'm very keen to  see how it plays out. In general Adhara are not   too much focused or concerned with retail CBDCs.  If they become somehow a reality then yes, banks   will have to work with them and we will be there  obviously to provide them with all the technology   that they need in order to use it. That's  another digital asset, like financial assets,   like positive CBDC's, like bank coins, which is  what we really do for a living. But we're not   really pushing that agenda proactively. Well,  while you claim not to be a futurist as such,   at the same time I think your understanding though  of the realities of how the wholesale markets work   and how they fit into the retail markets is quite  key for being able to see how this can progress,   given there's good reasons why it is the  way it is, so to speak, and it's taken   hundreds of years to get to this point. Yeah,  particularly around anti-money laundering and   terrorism financing. We collectively as  an industry, we haven't spent a lot of   money in making it very hard  for criminals to do all that so it's something that cannot just go away. We're  going to innovate in order to reduce our ability   to stop those things. Frankly, this is not gonna  go far and if the point is avoiding taxes then   it's not going to be sustainable. I don't know,  maybe I'm too conservative or too old now, but... Absolutely, with the the regulation, as  you say, this is such a crucial point and   like with the default industry right now  and crypto more broadly, there's still   a lot that needs to come into place.  We're still in the early days there and   when that is in place, the landscape could  change significantly off the back of it as well.   Yeah, yeah, definitely it could. Well all I  wish is that when it comes to regulation, we   really distinguish between what is the use of a  new technology to support an existing asset and   existing regulatory constraints versus regulating  the use, the possession and the storage   of new assets that do not come from that  world and therefore they're not subject to   the same relatives really, like cryptocurrencies  or like utility tokens or whatever the next thing   they come up with are! Because it's different.  I mean, the first thing is just a matter of   when we use this technology or not whether we're  happy enough or not with the security model   based on public key cryptography, like in  smart contracts or even cryptocurrency trading   and whether we are happy with the resiliency and   general technical features and cyber security  constraints of blockchain related technology as an   alternative against the conventional technology.  I understand it can be difficult to believe that a   blockchain enabled ledger made completely  transparent to clients so you have your own   mobile banking application, your  web application, whatever it is,   just connect it to a blockchain ledger, that that  thing can be as secure as reliant or even more   than a conventional banking system but  it costs like a hundredth of that, right?   There should be no problem using this and  achieving the benefits. That's really what we are   testing and proposing and building around.  So I just just hope that when we go into   more concrete regulatory actions and all that, we  distinguish well between those things. First, it's   really about the technology adoption and about the  possibility and also the effect that it will have   on the underlying business processes like, for  example, being able to move money in seconds   without doing reconciliations or batches. That  has some policy implications like, for example,   you cannot revert to transaction, you just  settle. If you want to undo it you have to   do another transaction to revert the effect of the  transaction but you cannot erase it. So it would   be really surprising that regulation forces you  to be able to erase the transaction if you make   a mistake or to stop a transaction from happening  just in case someone has a second thought   and says 'Oh no, there was a fat finger!' I mean  there may be some legitimate constraints about   not the use of the technology, but the change  or the speeding up of some of these business   processes. But in any case, all these things are  completely different versus regulating the use and   the possession of completely different new assets  like crypto, ICOs, NFTs, who knows what... Yeah,   fingers crossed that the regulation as you say,  will be kind of appropriate for the technology   in that regard in terms of treating things  like commutability as first-class citizens.   Yeah, I think they're doing a great job,  it's not for me to judge them obviously, but   I've been involved with education dissemination  efforts and education efforts for the likes of   some of those central banks and regulatory bodies  and I think they've come a very, very long way.   The quality of the discussion right now is a lot  better. In the beginning it was like completely   far away topics for them and it was very difficult  to weed out the different subjects that we were   treating - are we talking about the asset? Are  we're talking about the security model? Are we   talking about resiliency? Are we talking  about the mobility aspects with the access?   Everything was changed, you would talk about  programmability and they would tell you about   energy consumption because of mining - No! It has  nothing to do with it, a permission network is   not energy inefficient it's not a problem, this is  ConsenSys, why are we even talking about this? So   I think they've come a very long way  and they're much better informed in   these times. I think they're doing a fairly good  job, I would say, it's very arrogant for me to   say that, but at least that's what I'm seeing. I'm  seeing a very high quality in the dialogue. Take   a look at the Bank of England for example, the  announcement of the policy for omnibus accounts   that is going to enable things like finality, so  well written, right? So advanced in thinking so   people really understand. They understand, they're  really looking for all the implications and   thinking very hard on that so it's not high level  chatter it's actually very specific about it. As you say,   with the people who are defining these and  help them there and it means that you get the   right sort of rules and perspectives in place and  certainly comforting as well to know that you have   Adhara yourself and the rest of the team there as  well helping really drive this industry forward.   It's what you want to hear of the people  building these new platforms and so on because   it's bringing the right expertise to the table.  Well, it's a grain of sand, right? Yeah, we love   to contribute but yes, it's quite exciting to see  the industry collectively working towards this. So   Julio, just before we finish  up here, if people want to   follow what's happening with Adhara or reach  out to yourself, are there specific places   where you're active like LinkedIn or Twitter or  if there's much content going out with Adhara?   Yeah, happy to, you can reach me very easily  is julio@adhara.io so quite quite simple   and yes we'll be doing more communication  dissemination efforts over the course of   the next months. We've not been particularly  active. We were very busy building things.   I used to do a lot of that as you know Conor,  when you live in a startup you need to sell to get this going! So yeah, there is a website  and it will have more and more information over   the course of the next months but anyway very  happy to be reached through email or LinkedIn. Wonderful! Well, Julio, it's been an absolute  pleasure to host you today and I look forward to   seeing Adhara going from strength to strength and  creating that new fabric of the wholesale market   on DLT. Yeah, it's very, very exciting. Thanks a  lot, it's been a pleasure to be with you Conor.