In this episode of Blockchain Innovators, Conor Svensson, founder and CEO of Web3 Labs, talks to Julio Faura, co-founder and CEO of Adhara.
Julio is a technology innovator at heart, having started his career designing microchips after he obtained his PhD in computer science, before obtaining an MBA and heading up R&D at Santander bank for a number of years.
In the conversation Conor and Julio cover a lot of ground, including how he approached innovation at Santander and managed to get them looking at blockchain innovation opportunities over 5 years ago, how he sees the wholesale money markets evolving off the back of technology such as CDBCs, his involvement in the Enterprise Ethereum Alliance at its inception and of course his journey to helping found Adhara.
Given Julio’s deep knowledge of technology, finance and innovation, this conversation is fascinating. He really understands the inner workings of the wholesale money markets and how blockchain can benefit them. We're sure you’ll find this conversation insightful.
You can watch this as a video on our YouTube channel here.
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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 firstname.lastname@example.org 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.