PwC’s Pierre-Edouard Wahl: Blockchain Can Bring Positive Competition to Swiss Banking Space

So an easy question to start, if you could just tell me a little bit about yourself, your name, where you work, things like that.

So I'm Pierre Dudwal, I'm an engineer by academic. I have been in the blockchain space for several years now. I discovered a bitcoin community that was very ideologically driven and the community drove me to the technology, not the other way around. And I decided to start B2B Bitcoin exchange. Got into some trouble at the time. It was a little difficult. There was no clear regulation around exchange operations and looked for a big banking partner. Unfortunately, at the time, every time you mentioned bitcoin there was closed doors. So that didn't work out. But Credit Suisse asked me if I was willing to join start their blockchain department. So I happily did. I spent three years at Credit Suisse and after that left, thought I was going to go back to startup world and realized I thought that I had an opportunity at PwC to make an even bigger difference than in the startup world because we have a reach that's pretty amazing. Very high level of established business executive suites. So, yeah, that was the exciting part.

How long ago, how many years ago was it when you first heard the term bitcoin?

The first time I heard about bitcoin was in 2010. I dabbled with bitcoin really the first time in 2011, and got full time into the space in 2012.

So you've been in it for a while then.

I feel like it's. It's an industry that has such a huge potential. I wish I could have spent more time there, but yes, I mean, relative to the existence of this industry, I've been there for a little while.

So I'm curious, do you actually invest in the industry? Do you have bitcoin or do you just prefer to stay on the outside?

No, no, I'm fully invested. Yeah. I've asked my employers to pay me in crypto. Hasn't really worked yet, but yeah, I don't only talk the walk, I try to walk the talk.

So the next question I want to ask you is the recent news that 6, the stock market operator, will be launching their own cryptocurrency exchange in the next year. So I'm wondering if you could talk a little bit about that.

Well, I mean, you've read about it. That's. We've been involved in that project and we're very proud to be a partner in this new adventure for Six. We hope it's going to have an impact not only on the Swiss financial place, but really on a global level. I hope other jurisdictions will follow. If they don't precede us, it is possible that a few jurisdictions launch their own, I'd say major exchange before we actually own shares. But we're really excited about it. We think it will definitely provide much easier access to the institutional investors and we can't. Well, I can't wait to see it happen.

So you're expecting like a lot of enthusiasm and energy from the Swiss community for it. Have you seen that as the project has grown?

Well, this project grew from demand from the industry. There was a lack of infrastructure in our financial service industry, like big banks, small banks and a lot of demand from their clients. So it really came from the clients themselves who want to get into the space. 6 is basically belongs to the banks here in Switzerland. So it wouldn't have happened without the approval or the announcement wouldn't have happened without the approval of the major stakeholders and the major banks in Switzerland.

Someone else we interviewed, someone said that companies that have the word blockchain in their name have a hard time getting bank accounts. Do you think that the cryptocurrency exchange opening the country will make that easier in the future? Is that something that you've noticed in this space?

Well, we definitely hope so. Whether it will or not, I don't know. But hopefully banks will be more enabled with more infrastructure to actually start handling those new asset types. I do expect so, but I don't know for sure. I think there's still more clarity needed from the regulators in order for banks to start jumping into it. There's also banks don't necessarily have the right incentives to jump into the space. Some obviously will find the right incentives. But I think the banks have to start, rather than thinking in terms of efficiency gain, have to think in terms of new business models with this technology.

Because another thing is that Switzerland has a very high. Well, it's a big industry for them. Cross border transactions in the banking sector and something like blockchain, you know, the technology behind cryptocurrencies would maybe take some of that money in that business away. So do you see sort of that dichotomy of Switzerland trying to embrace new technologies that at the same time could.

Yeah, I mean it will, I think on the contrary, it can actually boost up business. Then the fees can be whatever fees they decide to apply as long as they're fair. And you know there's going to be competition amongst the various parties who want to provide those kind of services. So I actually Think that it'll be an enabler. Yes, it might hurt their existing business, but that's often the case with new technologies. It's either you adopt them and you think difference as how those technologies are going to actually offer new solutions as well as improve the existing solutions, or you just look at the improvement and then we're all racing to the bottom because it's less and less margins for everyone.

So what does PwC specifically do with blockchain right now?

So we have a pretty broad service offering. I mean we work with startups, we work with established companies. We offer, I wouldn't say full audit yet because there's still once again lack of clarity. But we do offer, I'd say first inspections to make sure that things have been done correctly and hopefully that will enable us to do audits if the regulators allow us to do that by the end of the year. So for PwC Switzerland, I think we're, we have some of our clients, our big clients who offer cryptocurrency to their clients. So we need to find a way to audit that we're not yet there. We have ways to make sure that the funds are in the control of the right people. But we're not yet at the audit stage. We will be there by the end of the year. We're pretty confident. We also work on the infrastructure level, as you inquired. We work with a lot of ICOs globally. I mean that want to come to Switzerland, but from clients that are all around the world. So yeah, I think we have a pretty broad offering. We offer legal tax services, assurance services, engineering services, some kind of review for code. I don't like the word audit there because as the speaker mentioned earlier, Odit makes it sound like it's bulletproof, which it isn't. It's just reviewed by another pair of eyes. And yeah, we're trying to grow our services every day.

So you spoke about ICOs. I know that in recent years from what I've heard is that Switzerland has actually been increasing regulations around ICOs to make it maybe harder to hold one in Switzerland. So what do you think are the benefits that ICOs bring to the blockchain space?

There's very few, very little regulation here in Switzerland. There's guidelines which are good. I think they're not great yet. Personally, I think there's still a lot of confusion between utility token and payment token. For me the difference is that a utility token with enough liquidity can become a payment token. But there's clarity between asset backed tokens and all the other type of tokens. And I think there's going to be more and more ICOs that use the asset backed classification. I think that's excellent for the industry, the blockchain industry, but also for the existing industry. It's much more efficient, I think, to do an ICO with a security token instead of an IPO or as a way to raise funding in a VC round or in a seed round. Unfortunately, there's been a lot of hype. And so I would say there's a lot of seed, well, early stage companies looking for seed investments that actually receive series D kind of investment. And so it hyped the space. The space is definitely not mature yet and it needs a lot more cooperation between the various developers to establish standards, to have new experimentations in the ICO space. I think a lot of the fund distribution should not happen immediately after the ico, but there should be some kind of smart contracting possibility to enable some kind of cliff for the delivery of the funds based on accomplishments. Vitalik proposed the Daiko. I think that goes into the right direction. It's definitely not perfect, but it's in the right direction for sure. I think there's a lot more to do in the ICO space for it to be right.

Could you expand more on what Vitalik said for those people that hadn't?

So Daiko concept is, on a very, very basic level is enabling the token holders to vote on the release of funds in order to give back some control to the investors. And if they're not happy, they can vote against the release of funds and recover whatever ether has been locked into the smart contract. Yeah.

So as someone that's been in this space for almost 10 years, you mentioned that going from no regulation to some guidelines is already a step. So how have you really seen, even on a global level, regulation changing? When was it when regulators really perked up and started to notice this is something we need to pay attention to?

I may have a very biased version of things because I was in San Francisco in the earlier days, but I feel like a lot of people have been waiting for New York to come out with some guidelines or some regulation. Actually they came out with, but at least guidelines because they have such a big weight on the international markets. And I think when I think it was Ben Loski who came out with a bitlicense, things just trickled after that. I mean there were jurisdictions that were more open to blockchain based tokens, but they were kind of shy, I'd say not really very clear and public about their stance. So I would say bitlicense was probably the beginning of the domino form or follow up is not the right word but the beginning of the chain effect.

So do you think other countries maybe are going to take the cue from the bitlicense? Do you see that being a problem since it's one of the only big this is the law encryptor regulations out there.

So you mean other countries are going to copy the bitlicense? Well, I think countries that are afraid can always use the bitlicense as a reference and countries that are more embracing can do better. But I definitely think it can serve as a benchmark. Unfortunately, New York has such a big weight in the financial industry globally that people have to take into account what the US says.

So what would be your an example of like the right kind of regulation for cryptocurrencies then?

The right kind of regulation? I think it's early to say what's right or what's wrong. I think there's the right approach rather than the right regulation would be to be embracing the community. I really admire the Swiss regulators who went on a roadshow. I had never seen that before and I'd encourage many other regulators around the world to really go on a roadshow, talk to the community members, try to understand as much as possible what is happening with those not only tokens but with those smart contracts. Because most of the regulation right now is around tokens. The real novelty I think is more the smart contracts. The immutability tokens have existed forever. Gold backed dollar was not gold. It was backed by gold. Shares are backed by the company. So these are all some form of tokens. So tokens are not new. The novelty is that with blockchains they're easy to issue, they're very divisible, very easy to transfer, and they have a lot of other new properties. But the token themselves are not new. So I would urge regulators to look a little bit more into actual code because we're building a jurisdiction where code is law. And this jurisdiction in cyberspace will live and will survive any physical jurisdiction. And the regulators will have to regulate the interactions of those cyber incorporated entities with their jurisdiction. And I think we're still very far from that mindset when it comes to regulators. We're just looking at what's right in front of us, that is the tokens.

My next question has more to do with cryptocurrency mining because a lot of people say that it could have a really negative environmental impact because how much energy it takes up. So at PwC Switzerland. Is that a question that has come up in terms of promoting blockchain, but also you have to think about the energy aspect of it.

So at PwC we're blockchain agnostic. A consensus mechanism is a consensus mechanism and we don't really care. We just care for it to be secure. And so I would agree that there is an impact on the environment that's undeniable facts. Now I really don't think it's a waste of energy. I think this energy is put to guarantee the immutability. I'm eager to, to see better consensus mechanisms. The one thing I like with proof of work is that it uses energy as part of a consensus mechanism and therefore you can participate in the consensus mechanism wherever you are. It's independent of your stake. You can go to the North Pole and you have access to energy and you can go to the desert in the Sahara and you have access to energy. Energy. And I think that this is an interesting approach to keep it as decentralized as it can be.

Now I have a few less serious questions, but since you say you've been invested in the market for a while, have you ever bought anything with bitcoin like a pizza or a coffee or anything like that?

Well, I try to spend bitcoin whenever I can. I see it as a way to spread the gospel. So yes, I have spent bitcoin. I mean, so in a meetup in San Francisco, the SF Bitcoin Dev meetup, we used to organize what we'd call bitcoin bombs. And we try to. Well, we just, as all the participants go to a bar and ask them if we can pay in crypto if we go on bitcoin and if we couldn't, we'd go to the next bar until the first one would accept.

So how successful were you? How long did it take to find a bar that would accept bitcoin?

I mean, San Francisco's pretty open, generally went pretty quickly. Yeah. And we were crowd so they had good incentives and there, I mean, at that time there was already bitpay. So if they wanted to, you know, receive dollars, they, they could easily get their dollars rather than the bitcoin.

So you don't have any fear that in the next five or ten years bitcoin will go to a million and you're that guy that spent a certain amount of bitcoin on a cocktail.

Well, it will only go to a million. If it gets used, it's cool. If the price goes up to a million, it's not My priority, my priority really is to try to support a world where people have more sovereignty over their digital footprint, footprints have more sovereignty in terms of freedom of speech, freedom of movements. And public blockchains need a token for incentivizing the various parties. And if one of those tokens go to a million dollars, great for the investors in those tokens. But the million dollars is not the end goal. The million dollars just a means to an end. Public blockchains need a token.

Do you see a future where companies will start having their own tokens? You know, Facebook coin or Walmart coin or something like that.

They do Starbucks have their vouchers, Amazon have their vouchers. They're a form of token, they're a centralized token, probably existing on an SQL database. They're just not blockchain based or decentralized. But, but yeah, they exist and they've always existed and they will continue to exist. You flew here, you probably got a few miles yourself, it's true.

But do you see them moving forward to putting those things on the blockchain?

I don't necessarily see the purpose of moving this to a blockchain. It would just increase their operational costs as long as it's only used internally. What they might want is to enable their holders to be able to cash out. Most of those tokens only allow you to spend it internally and I think that's done on purpose. There might be in the future users that are more sensitive to that and feel like they should be able to swap it for another shops token. And in that case I expect the companies to move along and have tokens that are exchangeable either through an exchange or directly over a protocol.

So in Zug there was recently a municipal vote held as a trial on the blockchain.

Yeah, I'm just, I'm as aware as you are. I have nothing really to say. I think conceptually it's an interesting experiment. I'm still not convinced that blockchains are, are the right platform for voting. I think there is something really interesting about voting on blockchains, but I think the exciting parts are really the cryptography, the kind of pseudo anonymity that you have. But I think you need to be able to analyze your constituents votes. So I see voting on a blockchain more as a small scale board meeting kind of vote rather than a national way of voting. I would expect more of tamper proof black boxes that record the votes, leveraging some kind of cryptography from all the participants. And at least you can do a lot of querying on the data because you want to know who's happy, who's unhappy, and categorize your voters in order to better respond.

Cointelegraph like subscribe and Hodl.