"The macro world is conspiring to make crypto successful" | Interview with Nicolas Cary

Hello. I'm here today with Nicholas Carey from Blockchain.com we're very excited to speak to him to learn more about what's going on in the bitcoin blockchain cryptocurrency spaces. Hi Nicholas, how are you doing today?

Very well, thank you for having me.

Fantastic. Would you like to just introduce yourself briefly, maybe explain the various roles and various hats that you wear?

Sure. So. Well, my name is Nicholas Carey. I'm one of the Co founders of Blockchain.com I was the author of the Future is Decentralized and I was also one of the founding commissioners of the Blockchain Commission for Sustainable Development. I also helped support a nonprofit called SkystheLimit.org that helps first time entrepreneurs get mentors, advisors and access to funding.

Wow. And when do you sleep?

Not much, but I try and get a little bit more than I used to.

I was going to say that's, that's a lot on your plate. Okay, fantastic. I mean, we had a really interesting discussion last night about, you know, the way in which the world is going and the role that blockchain and crypto is going. But of course you have quite an affinity with the uk.

I do.

And I was just wondering how would you see the, the approach of the regulators in the UK right now to the cryptocurrency, to the blockchain space?

Yeah, it's a good question really. The regulatory landscape is a hot and present topic basically in all the key jurisdictions around the world. So we've seen momentum within the American administration, the Biden administration, seeking consultations across all the key departments to explore the regulatory impacts of cryptocurrency. For there. The EU is doing a whole bunch of work right now and the UK basically not to be left behind. Recently as last week came out with some kind of interesting ideas which for the first time, after years of sort of staying on the sidelines, I think are actually kind of progressive. So for one, they've taken a keen look and a consultation looking at stablecoins and are considering adding those basically into their E Payments regulatory framework, which I think is good for stablecoins. The Royal Mint is going to make an NFT now, I'm guessing. It's got to be.

Is it going to look like this?

I don't know. I don't think it'll be quite as colorful. The Royal bear maybe. And I'm wondering, like that's the big question mark now, is it going to be of the Queen for the Jubilee? I think you could probably see something in that direction, but who knows, Maybe they'll make NFTs of pints or something else, or Big Ben. Now they're also going to do some more advanced work, actually, on the legal status of decentralized autonomous organizations. And that's actually pretty interesting because no one that I've talked to is really thinking that far ahead. They're really still wrapping their heads around, well, how do we deal with sort of the basic consumer protections when it comes to digital assets? Obviously there's concerns about how funds flow between different entities and KYC and AML and all that. And so the European Union is basically far along on a path to have a fairly, I would say, restrictive type of overview with their. With their regulation. Now there's a bit of a negotiation happening and we're hopeful that more industry consultation will happen, but there's definitely a pro innovation position. But they also, in the context of everything that's happening in the world today, want to also move quickly. And so there's a bit of a challenge there because crypto is sort of difficult for many regulators to wrap their heads around. They find it very intimidating. And it's because it really combines a lot of things that are sort of tricky about technology with a lot of things people don't understand about money. And when you marry those two things together, a lot of people don't feel comfortable asking questions that don't make them look like they're on top of what's happening in the world. And then they see and NFT collection dropping on OpenSea and they go, well, I don't even know what that means.

Yes, exactly.

So there's still a lot of work to do within the community and basically to educate our policymakers so that all this stuff heads in a proper direction, proper guardrails for consumer protection. But I think beyond that, we really need to create an innovative culture and I'm hopeful that the EU can do that. I think Germany's doing a good job. I think the UK could be a real dark horse in Europe.

That's the thing. Right? So, I mean, we've seen the EU ruling regarding KYC and wallets, and that seems to be like heading towards a big no, no from the EU regarding crypto in general. I mean, to what extent does that represent an opportunity for the uk, particularly as you use the words there, UK and progressive. This is.

I know.

Music's my ears.

We'll see. So the direction of travel right now is basically all entities that service crypto users will have to apply to, basically, KYC and AML on all transactions regardless of their size. Even unhosted wallets as it's written in today. Now practically this is very difficult to implement or enforce. My hope is that the carve out for non custodial wallets can be implemented so that self hosted wallets and individuals basically taking full control over their own funds are exempt from these regulatory obligations because enforcing against them would be very weird. It'd be like trying to enforce against someone buying a cup of coffee with five pound note with their wallet from their back pocket. And that's sort of the mental map that we need to have well addressed. But the UK I think, you know, if we were to take sort of a strategic viewpoint, they you know, pursued the path out of the EU and Brexit went through and there's obviously been a lot of people that have strong opinions about that, but it actually happens. And so now what? And if I were in charge of strategy for the United Kingdom, I would think deeply about how to make the UK the most competitive place in Europe or maybe the world to build companies. And we now see this incredible investment in Web3 which is really just saying we want to keep building better technology for the Internet, better experiences in entertainment, better ways we interact with our fans and customers, more financial assets and basically building tool sets that make it possible for more people to do things online and collaborate, exchange information and exchange value. Now I think there's an incredible opportunity to invite all of that innovation and build a property rights, like a legal property rights mechanism within the UK to support it. And in doing so they could change the tide overnight in terms of being the home for all of this innovation globally. And so there is a really big opportunity. I think it takes a sort of change of tone at the top and some leaders leadership to lean into that. But no, there's still time for the UK to really come out as a leader in this space.

Yeah, absolutely. I mean it's, I think it's as you say, an opportunity. And now for someone that's been in this space as long as you have, you know, it's over a decade now that you've been in bitcoin and then crypto and blockchain and you know, you've written, you seem to have covered all areas of the space. What is it that keeps you going? What is it that keeps you motivated? What is it that keeps you still interested in this space?

Yeah, it's a good question. I think if you're honest about it, everybody's motivations over the duration wax and wane a little bit. But when you start working on something that you care a lot about, it gets a lot easier. And that's why, even though they're really annoying and you hear all those high school graduation speeches about pursuing your passions, when you actually find your passion, it's less work and you can draw on some deep wells of motivation. And so for me, the thing that really keeps me going is just how interesting the evolution of money really is in the context of the future. We now have tools that make it possible for us to completely reimagine how we interact with each other and trade and exchange wealth. And humans have tried all kinds of different things in terms of different forms of money. We used to trade seashells and feathers and cigarettes and coins and fiat money. And it seems really obvious that money will become digital. But if you really think about what the future of money starts to look like, it's so exciting. And so we were here in Paris yesterday, there was a giant conference all about NFTs with some of the world's most famous artists talking about how they're going to use this new medium to express themselves, to connect with their fans, to share their views with the world. And those types of things have me deeply encouraged about all the potential that's latent human potential that just doesn't have a way to interact with other markets or other communities. And so long in the long term, over the next decade. The reason this continues to be so exciting is just there's so much to learn, okay, and there's some 16 year old kid in, you know, Birmingham dreaming something up. And there's a 19 year old girl in the Bonneville in Paris that has an idea and now she's got a tool set that enables her to go pursue it. And that wasn't the case five, ten years ago. If you didn't, if you weren't born in the right jurisdiction with the right, you know, social status and the right access in the market, in the world, you are never going to get access to credit, you are not going to get a loan, you're never getting access to a bank account. And so to me, you know, we still are in the early stages of really democratizing and accessing financial services for the masses. So that's why this regulation in Europe is so critical to get right. Because if Europe takes a pro innovation position, they can massively expand the market. They can provide more financial services to more people because it's faster and easier to do this at scale on crypto technologies. And on top of that it fits neatly with values that are deeply important to Europeans. Open source technology, access to options, fairness, even playing field. And I think those are, you know, we need to lean more into those things actually, as opposed to thinking about, well, how do we just control it all. So I'm hopeful that the regulators and members of parliament that deeply study this, take that pro innovation, sort of slightly more patient perspective. There's so much opportunity here to build a more even playing field for everybody. And so let's do that. And also reduce the cost of transacting. Yeah, this is probably the most important one. If you reduce the cost of doing all kinds of payments on the Internet in the real world, you will increase economic velocity. And when money flips around faster, yes, it can be taxed more regularly, but also it increases, everyone's standard of living grows, the market provides more opportunities for entrepreneurs. It's a win, win, win for everybody.

Absolutely. Much better than a high school speech, by the way.

Yeah.

And of course it's incredibly, an incredibly optimistic, positive, forward thinking space. But against that, you know, it's a macroeconomic backdrop which is, seems to be darkening each day. We sat here next to a bear. We're not in a bear market. But you know, there's also inflation figures released yesterday or this morning that, you know, upwards of 7, 7 8%.

Yeah.

It's a tricky space to operate in. You know, how do you sort of manage the fact that, you know, it's becoming increasingly challenging while also increasingly optimistic.

Yeah. So I think the macro world is basically conspiring, in my view, to actually make crypto more likely to be successful. And here are the reasons why I like that. So in some of the wealthiest economies in the world, basically all of Europe, the UK and North America, you have the highest rates of inflation in 40 years. So from the boardroom to the dinner table, everyone is starting to feel the pain of prices getting more expensive on everything from commodities to food to fuel. And so there's this question around, what's happening and why is that happening and what can I do about it? So people are learning about the consequences of printing enormous amounts of money partially in response to the original financial crisis of 2008, but more recently in response to the health pandemic. But regardless, if you make a lot of money out of thin air, someone has to pay the price. And today we're all paying the price. It's not going to go away quickly or easily. So real pain will be felt in the pocketbooks of regular individuals. So this starts to beg the question what can I do about that? Well, maybe I need to find ways to diversify my wealth. I could go buy euros, I could go buy dollars, I could go buy pounds, I could buy equities, or I could buy gold. Maybe I want to buy things like digital gold. They have the same properties as gold, but are built in a way so that you can transact with it over the Internet. And that's Bitcoin, there's Ethereum, there's many more other digital assets that are pretty interesting. And I think that's one of the things and one of the themes that will be explored by households around these markets over the next couple years. Now you've got that happening. You also have institutions that have pension obligations. The largest asset allocators in the world have to figure out how to get income to pay off those obligations. And they're having the same conversation. And now they're investing in digital currencies and crypto assets, not just because they see it as some other trinket to trade, because they deeply understand the value. JP Morgan, Goldman Sachs. Just yesterday, BlackRock invested in Circle alongside Fidelity, $400 million. So the big allocators are also moving in this space in a meaningful way. And also you're seeing a pretty significant attrition of raw talent from those traditional financial institutions to come over into these startups to help build the future of finance. So those are two major ones. And if you'll bear with me for just one more, there's the third rocket booster in this trifecta of things that are affecting the market, and that is the artists, the creators, the writers, the people that make all the stuff that we entertain our time with and consume, are trying to find new mediums to interact with their fans and align incentives that are extraordinarily interesting in ways they were never possible before. So if I'm a musician and I want to make some music, if I'm lucky enough, I get a record deal, they own five of my albums, and I get a small percentage of all of that music royalty, you know, on that package of content. But what about if I tokenized all of my music and all of my fans basically got to be rewarded for being my fan. And for every time one of my songs was streamed, they were compensated for that, too. So now you've got a whole other way for musicians to not only crowdfund, but also build unique experiences for their fans. Mint digital art and more. And so everything from music to literature to artwork, I think is going to be totally changed. And what most people don't understand yet is that many of us grew up finding little things to collect, whether that was seashells or feathers or Pokemon cards. Yeah, Pokemon cards or Beanie Babies or other things. I think it's very likely that younger generations will collect tokens and things they buy on the Internet and show those off in a form of a digital gallery on their phone. And you know, this should not be surprising at all to anyone that's paying attention to what's happening. And so you've got the cultural zeitgeist, the institutions and everybody on the daily basis with their thinking about their paychecks, all having conversations about what the implications of digital assets and the future of finance might be for them. And so if any one of those things was happening, I'd be really bullish. But they're all happening at the same time.

Yeah, what an answer. I just want to deep dive into the second point there about the institutions because, you know, we've heard it for years now. The institutions are coming, the wall of money is coming. Here we are in the old stock exchange and it does seem to be institutional interest. However, the actual investments tend to be, as you mentioned, by proxy or you know, they're using, you know, the big investment yesterday into circle. Yeah, they're not buying Bitcoin, you know, or at least we're not aware that they're buying Bitcoin yet. But why is that and when will that change? Or will it change?

I do think it will change. So there are a couple of things that need to happen. We're still waiting for that ETF in the United States, which has been severely delayed and dozens of applications have been been been put forward. I think eventually they'll run out of reasons to keep saying no, but they, for the time being continue to do that. Many of these institutions are getting tangential exposure to crypto. They do that by placing equity investments or they buy up positions in funds, but they're not directly taking custody or building their own things. But here's what's changing. The high net worth individuals that all of these wealth managers help provide financial services to are all knocking on the door saying, I want some of this and I want it now. And so it's going to take a little time for them to develop their strategy. I think there's going to be sort of two directions. One is going to be buy something and integrate it into the company and go fast. The other is raise it up and build up the capacity internally, independently. That path's a little bit slower and it requires More consensus to form. But I can tell you without exaggeration, every single time one of these senior leaders in a financial services firm is asked about what's going on in the world, someone is also asking, what is the role of the firm's view on CRISPO assets? What are we going to do about that? And so they can't ignore it much longer. And without a doubt, I think they'll probably dabble in more sophisticated things first before just taking, like, maybe a directional view in a specific asset. But you can see them also doing that with proper risk management, doing things like, you know, with strategies that basically guard against downside and upside, so proper derivatives and options inputs. But I think it's coming. And very unlike 2017, where that was certainly a myth, the direction of travel now is more serious.

Good. I'm glad you acknowledge as well the 2017 myth. Yeah, that was a tricky time. Perhaps as a final question, a bit softer. You know, we've talked a lot about the positives, and, I mean, there are obviously pressing concerns here. What. What's keeping you up at night? What's your most pressing concern in the space?

Oh, gosh. Well, I do think we all have this obligation to. To educate our communities, our friends, our family members, and basically be a bit more patient with it. When someone doesn't understand something or attacks our point of view, it's not necessarily to be vicious right away. One of the things I can tell you, having spoken to many policymakers, is that sometimes they just don't know what they don't know yet. And so they come out with a statement, and then they get brutally attacked on Twitter or across other social channels. I can tell you that is not productive. And the other thing is, it is so important for us to remember the total mission here is to broaden access to financial services for everybody, regardless of the circumstances of where they live. I think the crypto community can be a little too tribal sometimes. So one project attacks another and there's all these false prophets or whatever. If you wanted to set us back, you would divide us all up and make us basically fight each other. And so my hope is to remind us all to have some civility with that. Remember, it's one sort of global mission to improve the state of the world that we inherited. And if we do those things, we'll be okay. But if we fight each other, if we decide develop our own adversaries because we're not willing to be patient and explain the rationale for what we're doing, I think it'll be harder. I'm not saying it won't happen. I just think it'll take more time.

Fantastic. Yeah, I think that's very good advice. You know, be more patient and be more civil.

Yeah, be a little more civil. Even though it's hard sometimes, but I think it's the right path.

Fantastic.

All right. Thank you very much. Great to connect with you guys again and have a wonderful time in Paris.

Thanks so much, Nicholas. Thank you very much. And we'll leave it there. Thank you, guys. I.