Jesse Lund, Head of Blockchain Solutions at IBM: How Fortune 500s Treat Crypto

Jesse Lund is the Head of Blockchain Solutions at IBM. In this conversation, Jesse and Anthony Pompliano discuss enterprise blockchains, how IBM is using the technology, what their customers are saying, and what Jesse sees as the most important things for the future of crypto. ----- This show is sponsored by The Grove: thegrove.co/pomp Your branding and website are the first things your customers will see. You never get a second chance at a first impression, which is why it's so important that your website is sending the right message to the world. Luckily, you have The Grove to help you with that. The Grove is a full service creative and design agency that helps new and established companies tell their stories. The Grove firmly believes that a brand is more than just a logo - it is the entire essence of who a company is. That's why The Grove works with companies on every aspect of their marketing, from brand identity, to web development and design, to SEO, to specialized graphic design projects. The Grove has helped grow companies like Tiffany and Co, Bloq, AAA, The Red Cross, and the Chamber of Digital Commerce by amplifying their branding and web presence. Get big results today, and visit thegrove.co/pomp. ----- Join the Off the Chain newsletter. Pomp's daily email analyzes the crypto market for institutional investors. Simply, it’s the best crypto newsletter delivered to your inbox every morning. No frills. No bullsh*t. Just everything you need to know in a 3-minute read. https://offthechain.substack.com/ ----- If you enjoyed this conversation, share it with your colleagues & friends, rate, review, and subscribe. This podcast is presented by BlockWorks Group. For exclusive content and events that provide insights into the crypto and blockchain space, visit them at: https://www.blockworksgroup.io

• 0:01Speaker 00

  What's up everyone, this is Anthony Pompliano. Most of you know me as Pomp. You're listening to Off the Chain, simply the best podcast in crypto. Let's kick this thing off.

• 0:13Speaker 01

  Jesse Lund is the head of Blockchain Solutions at IBM. In this conversation, we discuss enterprise blockchains, how IBM is using the technology, what their customers are saying, and what Jesse sees as the most important things for the future of crypto. This conversation was fascinating, and I hope you enjoy it. Before we get started, I want to talk about one of our sponsors, The Grove. As many of you know, branding and online presence is crucial to the crypto space. With so many damn scams out there, it's tough to tell who's legit. The Grove, however, is a full-service creative and design agency that will help you amplify your brand with the perfect website, logo, collateral, or custom design project. Branding isn't just about looking pretty, though. Dot, dot, dot.

• 0:58Speaker 01

  Like me. The Grove understands it's about driving revenue. If you want to check out what they're doing, you can go to thegrove.co/pomp. Again, that's thegrove.co, not .com. C-O. New age stuff. Thegrove.co/pomp. Let's crash their servers and light up the webpage. Let me know when you do it, and I'll shoot you some fire emojis on Twitter. Thegrove.co/pomp.

• 1:25Speaker 00

  Anthony Pompliano is a partner at Morgan Creek Digital. All opinions expressed by Pomp or his guests on this podcast are solely their opinions and do not reflect the opinions of Morgan Creek Digital or Morgan Creek Capital Management. You should not treat any opinion expressed by Pomp as a specific inducement to make a particular investment or follow a particular strategy, but only as an expression of his opinion. This podcast is for informational purposes only.

• 1:52Speaker 01

  All right, guys, I've got Jesse here. I'm super excited to have this conversation because everyone hears about IBM and blockchain, but nobody actually knows what's going on. So Jesse is here to answer all of our questions. Thank you very much for joining.

• 2:07Speaker 02

  Good to be here.

• 2:08Speaker 01

  Absolutely. All right, let's go through kind of your background real quick so that everyone has an understanding of your perspective and then we can get into how you got into crypto.

• 2:17Speaker 02

  Sure. Yeah, so I'm, I've been with IBM two years now, just almost celebrating a two year anniversary. It's coming up here in a few weeks. Prior to that, I was a banker, 18 years at Wells Fargo, did a little stint at Union Bank, and have had a variety of roles around a commercial side to the consumer side, to the wealth management side, technology side. So I've got a real good, I think holistic perspective of banking, which is what I think really attracted IBM to this, to the potential and the group that I came here to build.

• 2:56Speaker 01

  Got it. And then how did you first come across, whether it's Bitcoin, one of the other cryptos, or blockchain? Walk us through that initial experience and what you thought.

• 3:05Speaker 02

  Yeah, so one of my roles at Wells Fargo was managing the enterprise innovation lab. And so I was managing an R and D portfolio, and yes, banks do have R and D budgets, of a number of things, in addition to kind of managing the overall lab and the lab infrastructure. And cryptocurrencies, in particular Bitcoin, came across the project list right around 2013, 2014. And it was the capital markets group within Wells Fargo that was trying to understand what this thing was and wanted to write a paper about it, kind of a position

• 3:47Speaker 02

  paper for, you know, for their institutional investors primarily. And so we ended up doing some experimentation with Bitcoin. We actually bought nine Bitcoin way, way back in the day, 2013, 14 timeframe. It didn't cost much. And, you know, we were, we were brand new as a group of about three of us just playing around with it. We didn't really have a full appreciation for, you know, key management and cryptography and how that all worked. And so I'm sad to say that we lost those Bitcoins.

• 4:18Speaker 02

  You know, there was no such thing as wallets. So, you know, somebody was carrying around the, you know, the, the private key. And it just got swept up by the, you know, by the janitor on the, the sticky note that it was sitting on somebody's desk. So there's nine unclaimed Bitcoins out there that Wells Fargo once, once owned and are now lost forever.

• 4:39Speaker 01

  Got it. And what was the general kind of sentiment internally, right? It, were people intrigued as they learned about this stuff or maybe even saw some of the stuff you guys were doing? Were they scared of it? Just walk me through, maybe not the people directly in your group, but others in the organization. What was that reaction or sentiment like?

• 5:00Speaker 02

  Yeah. So it, you know, interestingly, it varied from kind of a, a polar perspective, very similarly to the way it does today. What I've noticed that there's very few people in the middle ground of crypto supporters and, you know, crypto deterrents. I'll call them. There's believers and there's, there's unbelievers and they were believers and unbelievers way back then. Inside the bank, all the way up, you know, to the top of the house. And so that was really interesting, really interesting to see. I don't think there was a fear amongst the, the non-believers, I'll call it.

• 5:39Speaker 02

  But there was certainly skepticism around this notion of a store of value that had no central authority behind it, kind of the same things that we still hear about today. And there was also, you know, the misconceptions that we still hear about today that, you know, oh, it's only going to be used for, you know, nefarious activities. It's only going to be used by, by criminals. I didn't have as clear and I think as pointed of a perspective back then than I do now. But, you know, it's, it's kind of the same sentiment and rhetoric that we hear today that we did back then.

• 6:20Speaker 01

  For sure. And so, obviously, it's pretty cool that that early on, you guys even got approval and were willing to kind of jump in and interact with Bitcoin and crypto at Wells Fargo. What led to the move to IBM and kind of walk me through maybe some of the stuff that you guys are doing at IBM now?

• 6:44Speaker 02

  Yeah, so it was really that, you know, activity at Wells Fargo and just reflecting back on the excitement that I think a few of us had as we really continued to dig into Bitcoin and not so much what it was. I mean, because there were always some clunky parts about it, but it repped it and the future that it held. And so, you know, I continued to manage the digital currency kind of assessment strategy and what became the distributed ledger technology strategy for the bank. And of course, I had a lot of interaction with IBM because IBM and Wells Fargo are really

• 7:27Speaker 02

  long time, longstanding, you know, customer vendor relationship there. So it was kind of a natural progression. I ran into a guy named Jerry Cuomo, who I would say is sort of the godfather of blockchain here at IBM, a distinguished fellow here, a super smart guy, and we ran into each other at Money 2020 and just started kicking around, you know, ideas and opinions about crypto. And at some point during that conversation, it just dawned on me that this was no longer a friendly conversation, but was kind of a job interview. And the rest after that is sort of history.

• 8:08Speaker 01

  That's awesome. And so maybe, you know, talk through some of the work you guys are doing right now around, you know, working with clients and even internally utilizing blockchain and different crypto technologies.

• 8:24Speaker 02

  And so the, I think, and you've been following this for a while, so you know there's there this kind of reaction that to Bitcoin that has been precipitated by a few, you know, kind of prominent personalities in the industry and banking industry and so forth, led to, you know, a divorce of what I'll call, you know, some of the enabling technology, i.e. blockchain, from, you know, the Bitcoin value proposition itself. And I think in some ways that was a good thing, in some ways that was a bad thing. It was a good thing because it spawned over the last several years, a sizable amount of investment

• 9:07Speaker 02

  in blockchain technology and, you know, by IBM, by a number of others. And so IBM has been using blockchain technology proper as an emerging technology to really streamline and improve all sorts of, you know, existing operational business processes, supply chain management is and provenance related use cases are the most prominent, right? Where you want to be able to create and form permissioned networks very, very quickly that, you know,

• 9:49Speaker 02

  embody that whole distributed compute and consensus and creating trust among parties who otherwise would have to take a really long time to kind of trust each other and to build to build networks together. So, so the group has coalesced around that. We literally have, you know, over a thousand blockchain professionals working on hundreds of projects around the world across a whole bunch of different industries. I was brought in really to lead the financial services industry and in particular to build out a portfolio of solutions where IBM is recognized, technology is not only transformational to

• 10:29Speaker 02

  or for its clients, but it's also transformational for itself in terms of how it engages with its clients. So. And what I mean by that is IBM now as a, you know, a technology partner, but also, you know, a software provider, a global system integrator, and, you know, a multinational company with operations literally in much every country of the world, we have a lot of delivery credibility. And so we now have the capacity to be involved in some of these projects in developing new types of networks and new types of solutions. And so I was kind of hired to, to come in and, and develop that, that model and that portfolio for financial

• 11:13Speaker 02

  services specifically, which is the, the single largest, you know, operating segment of, of IBM as a whole.

• 11:20Speaker 01

  Got it. That, that makes a ton of sense. And maybe let's talk about the, the clients, right? The, the people out who have these technological challenges. How much of the blockchain work today is push versus pull, right? Are they pulling you guys in and saying, hey, you know, we really need X, Y, Z type solutions and we think blockchain can be it. Can you help us? Or is the majority of it, you know, you guys have identified certain business segments that have, you know, areas where blockchain could improve and you're going out and you're educating them and, and really showing them the power of the technology? Where does it kind of, that balance lay?

• 12:00Speaker 02

  Yeah, well, it's definitely, it's definitely both. You know, because there are, you know, big, big companies and IBM, you know, is a, is a, is a vendor for, for a lot of companies around the world. And a lot of these

• 12:14Speaker 01

  Sure.

• 12:15Speaker 02

  large companies have big R and D and innovation teams. I mean, it's, it's kind of in vogue, you know, for big companies to have a chief innovation officer. And so we get a lot of calls because they're, they're reading the same news that, that we're reading. And, and we're making some of that news, you know, too, with the, the technology that we're investing in. So it is, there, there is a lot of pull. There's a lot of pull from, from companies across different industries that have, you know, a need to Optimize business processes. They've got some pain points, you know, and so they're pulling us in. Invariably, though, we do get involved in in education.

• 12:57Speaker 02

  And, you know, the one thing I told my wife when I first started at IBM is I felt like I was a pretty smart guy, you know, coming out of Wells Fargo. In most of the initial meetings I I was in with the internal folks and all of the engineers and IBM research here, I always felt like the dumbest guy in the room. So there's a lot of really smart people at IBM who really understand this at a really detailed level. And that's important because it still is kind of complicated technology, right? And I think, you know, that's where in some areas, and, you know, believe it or not, it's I would say it's been a little bit more of a push with the the client segment that I represent

• 13:41Speaker 02

  with, you know, with the banks and the central banks and and financial institutions than it is with other industries, which I actually find really ironic and was a little bit of a surprise to me. But I guess it shouldn't be because, you know, these financial institutions are conservative by nature and they've got a lot invested into their existing, you know, IT portfolios. And so the introduction of of net new technology like this is something that, you know, any prudent CIO is going to proceed with caution. And it's so brand new. That's the thing is, you know, the the market is so, I don't know, impatient with a lot of things.

• 14:23Speaker 02

  But what I've seen is so much progress, whether it's us kind of evolving it like we have been doing a lot in, you know, in the payment space, in in financial services, because we see that and particularly international payments is some some low hanging fruit. But, you know, it's it's people want it want it now. And sometimes I think the industry forgets that blockchain's really only been around proper for, you know, three or four years and Bitcoin prior to that, which was the catalyst of all this, you know, only for 10 years. And for the first five years, everybody ignored it, right? So it's just an amazing time, honestly, a really exciting time. And, yeah, it's it's I'm so excited to be here.

• 15:09Speaker 01

  For sure. What is the most interesting use case that you've seen somebody try to apply blockchain technology to and work with you guys on? Because the reason I'm asking this question is you guys have incredible reach on a global basis. So you see different jurisdictions, you see different types of companies, but everyone is somewhere in the IBM orbit, just given your size and how long you guys have been around. But what's those interesting use cases that you've seen that have surprised you?

• 15:41Speaker 02

  Well, I think there's some really novel ones outside of my industry. And I want to hit one that maybe is outside of my industry and then focus on the ones that are inside financial services that I'm really excited about. But I think, you know, I first came here, there was, there was an application that the company was already building to track the movement, the ownership of diamonds from, you know, like from the ground, you know, to the vault, to, you know, the ring on, you know, someone's finger. And I always thought that was really cool because, you know, you go buy a diamond, I don't know if you're a married guy. I remember when I was buying my wife her engagement ring,

• 16:26Speaker 02

  I thought, you know, I don't, I don't know this thing from, from anything. I don't know where this has been. I don't know if this is a piece of glass that's been, you know, that's been in the street just outside, you know? And I thought it was really cool that these diamonds, which are oftentimes engraved with serial numbers can now ultimately be tracked, literally from, you know, their discovery to their current state, and then even beyond that, to the initial sale and to the resale. And I thought that's really cool. That could apply to a lot of things to, you know, like works of art, wine, and could avoid, you know, counterfeiting and all sorts of really cool things. So I think when I first got here, that was, you know, a big aha moment that, wow, this has really

• 17:08Speaker 02

  much broader applicability than I've really been thinking because, you know, here I am kind of a banker, a financial services guy by trade. But where I really get excited about it and what we've worked on, I would say the most exciting thing is the work in and around the central banks. So here you have, you know, the elite of the establishment or the epitome of the establishment, right? The entities that are defining monetary policy that are literally, you know, creating money and, you know, creating the rules around, you know, how money is created and managed.

• 17:52Speaker 02

  And the idea of a central bank being involved in the creation of a new type of digital asset, you know, a new type of digital currency that's inspired by something, you know, like Bitcoin only 10 years ago is really profound. So, you know, we've been in and talking with, you know, dozens of central banks over the last couple of years. One meeting I remember with Reichsbank, which is the central bank of Sweden, which is really cool because it's the oldest continuously operating central bank in the world.

• 18:32Speaker 02

  I think last year they celebrated their 350th year of continuous operations. And they have this really awesome vision around digital currencies and a cashless society. And, you know, I just think, you know, I have kids now and I have, my son, you know, was my youngest, was born into a world that never knew the world without the internet. And so I just think about, you know, paradigm shifts and transformations. And here I'm living through one. He's not going to be able to remember what it looked like before, but I am. And being able to be on the cusp of that where money goes truly digital,

• 19:16Speaker 02

  you know, where those barriers break down, where, you know, money moves as easily as emails or text messages move today is profound to be able to think that not only is that coming for real, but when it comes, it's going to be, you know, here to stay.

• 19:35Speaker 01

  Absolutely. What is... The central banks view, I think most people would find it not surprising that they're excited about blockchain technology, right? The technology itself, I think, is fairly well-accepted across the financial services. But central banks in general, and I don't know if you've had these conversations or not, but with Bitcoin, right? Because it's kind of the more edgy, you know, less-accepted application of the blockchain technology. But have you found that they are relatively receptive to all applications? Do they want to focus on specifics, like, you know, more enterprise blockchain-type stuff? Or is there openness

• 20:18Speaker 01

  to Bitcoin and some of the benefits and what it may even be able to do for them?

• 20:22Speaker 02

  Well, again, it varies. So if you read, you know, there's papers that are coming out all the time, you know, the BIS, the Bank of International Settlements is really, you know, an entity that's owned by the central banks. And so, you know, they produce a lot of work. And I think, but, you know, some of the opinions expressed, certainly the central banks are being cautious in their progress in this space. But what I've discovered, you know, having talked to a lot of central banks, the big ones, you know, the big three

• 20:59Speaker 02

  or five, some really small ones in Asia, in the South Pacific, the sentiment really varies. There was a, we were in a meeting with the deputy governor of one of the central banks in Asia. And it was just a profound moment where this deputy governor, who I think was responsible for monetary policy, and the chief economist, by the way, of the central bank was in the room too. And she made this amazing comment. She said, you know, first of all, their intentions in looking at it was the technology in general,

• 21:39Speaker 02

  and Bitcoin and this concept of cryptocurrencies, was what she called the noble task of improving the life of the migrant worker. And I was kind of inspired by that right off the bat. But, you know, then she said, we're actually looking at and being faced with this

• 22:02Speaker 02

  This this challenge with two equally unacceptable options. On the one side, it's like ignore cryptos, ignore Bitcoin completely. And on the other side, it's, you know, it's make them illegal. Right. So and she's like, we know we can't do either of those. And so we know there's some something in between. But I do think that, you know, and even there's been some economic papers. I'm kind of going way back, you know, even into my, you know, early, early years before, you know, I was doing anything more than, you know, playing baseball on the corner. But there there's an economist named Hayek, who who I've since recently found has published

• 22:46Speaker 02

  some works around the denationalization of currencies and this idea of of choices in currencies issued by nonbank or noncentral agencies. Right. And the economic benefits of that. If you haven't read Hayek's stuff, you go go get some of his stuff and read it. But I think it's profound that there are economists that were forward thinking as as early as the as the 70s, early 70s, that, you know, that completely predates even the the fractional notion of of of digital currencies, of Bitcoin, of of things like that. So so it does vary. It varies across the board.

• 23:27Speaker 02

  I won't say any any central bank is saying, oh, yeah, you know, we're going to somehow support Bitcoin. I don't think any of them are saying that. But what they're doing is they're looking at things like Bitcoin, autonomous stores of value, and the balance between that and just a shared ledger, which is, you know, kind of where the enterprise blockchain space is focused, you know. Where I think enterprise blockchain doesn't doesn't include is this notion of a store and transfer of value. And if anybody or any entity needs to be focused on that, it's the central banks.

• 24:03Speaker 01

  For sure. The, the part that's so interesting to me around central banks and Bitcoin specifically is this idea that there is no need for them to do this until there is, right? And what I mean by that is there's only 21 million Bitcoin that will ever be created. And they all seem to follow each other. And there's an element of if somebody somewhere else who I respect is doing something and it's working, then we should at least have a conversation about it. Doesn't mean that we'll do it, but we should talk about it. And it feels like Bitcoin is the ultimate kind of prisoner's dilemma, if you will, or FOMO,

• 24:48Speaker 01

  where people who, if one central bank starts buying and is publicly known, it will lead to others buying more from a defensive position than anything else. I don't know if that's necessarily good or bad, but, but what do you think about that general kind of sequence of events? Is that probable or more unlikely than, than maybe I think?

• 25:09Speaker 02

  Well, I, I think you're right about how the central banks, it is, it is a band of brotherhood and sisterhood. They all, it's a closed, it's a closed community and they do tend to, to follow each other. And the little, the little, the smaller nations are often hesitant to do anything that's radically different than what the, the larger nations are saying. I do think though, it's improbable, it's, it's improbable that, that a central bank, you know, and many of these central banks hold, hold cash reserves, they hold reserves of, of other currencies, which is what stabilizes ultimately their currency, right? So they're, they've got, they're pegged to some basket of currencies. I think it's very unlikely that any central bank will, will.

• 25:53Speaker 02

  Will ever hold Bitcoin as part of their reserves. I could be wrong and it would be really cool if I was, but I think in the near term, that's pretty improbable. But I do think that they're going to pick up on some of the functional attributes that things like Bitcoin offer, right? Which is the ability to efficiently store value and then the ability to transfer it quite seamlessly and quite quickly without the need for intermediaries. And as central banks begin to adopt that, they have a back channel into some initiatives

• 26:34Speaker 02

  that many of the bigger central banks have been thinking about anyway, which is how do we open up the national payment system? I mean, that's one of the primary functions of a central bank is to manage these really important, you know, highly fault tolerant payment systems that support all of the commerce in the country and in and out of the country. So the real time gross settlement system, the wire system is obviously one of the most important ones. And as central banks look at issuing digital currencies, digital denominations, crypto versions of their own fiat currency, what they effectively do is create an extension

• 27:12Speaker 02

  of the real time gross settlement systems that they have to, for use by the public domain, which has traditionally been a domain that, you know, only banks have access to. And I think they're more worried about the implications and, you know, precipitating some unnatural digital run on the bank because, you know, they might think that you or I, if the Fed issued, you know, a Fed coin that operated a lot like Bitcoin does, that was as easily accepted and readily traded as Bitcoin is, that people would rush to take their deposits out of their banks that they don't trust, you know, and just hold them

• 27:56Speaker 02

  in a digital form essentially on central bank balance sheet. And that's problematic. So I think they're thinking through the mechanics of all of that stuff. But I don't think it's likely that central banks are going to jump into the crypto space beyond using the capabilities of crypto to issue their own assets.

• 28:18Speaker 01

  Got it. And I guess here's a, and I don't have an opinion here, but I'm interested to hear how you guys have thought about this. As you're working on a lot of these blockchain technologies, right? You can go and you can service what we'll just call kind of enterprise clients. You can go and you can work with these central banks or other more government type or large financial service companies or organizations. But how much focus does a large corporation like an IBM put on using the technology internally? So actually, you know, building things to be deployed for either efficiency or security sake internally versus using it as a, as a tool to go out to clients with?

• 29:04Speaker 02

  Well, quite a bit. I mean, I think it's really compelling when, you know, a company who's the inventor of a technology kind of eats its own dog food by using its own technology. And that's certainly the case here with IBM with blockchain from some of the early, early days. We, we did deploy an early supply chain application that kind of helped reduce the collections of, of, of payments in, in and amongst all of our suppliers. I think we've got a demo of that, even a really cool explainer of it out on the, the website. But, you know, as it relates to going to cash specifically and payments, especially for big multinationals,

• 29:49Speaker 02

  it's a big deal. You know, I mean, they're, you know, IBM, take IBM as an example. IBM operating in more than 160 countries. You know, we're making payroll and, and all of those places. Cash management, you know, across the corporation is a pretty serious activity. And if we can make that easier so that we're, you know, able to, to move money across borders and, and perform FX activities in more real time than the days or weeks that it takes. It eliminates a lot of heading and a lot of expense and a lot, just a lot of inefficiencies. So yeah, it's, it's as important for, you know, big corporates as it is for, you know,

• 30:33Speaker 02

  banks and central banks.

• 30:35Speaker 01

  For sure. What, um, what would be the one thing you see from your seat that you wish a large majority of people knew that maybe they don't know? Is there something that kind of is surprising to you, um, whether it's in the corporate world or even maybe even personally, but you just have a very unique seat? And so what's something that, that you wish that everyone would learn?

• 30:55Speaker 02

  Well, one thing that I'm to find that, um, that I, I keep reading about too, is, is sort of the, and you're, by the way, you're, you're a great guardian of the truth in this regard, I've noticed, but I, but I, I've, I've noticed that a lot of people tend to want to write about Bitcoin and write about cryptos as though they are the preferred tool of criminals, right? And I won't say that criminals aren't dumb, but we should encourage criminals to use Bitcoin more because that's how we're going to catch them. Okay. So that, you know, this notion of, um, of crypto being, you know, more attractive to nefarious activities than cash is, is a really bad sentiment.

• 31:38Speaker 02

  We, we got to realize that, that even with Bitcoin and with some of the anonymity it built in there, the movement of cash and the, the movement of money, the transfer of value is, you know, ultimately publicly and, and eternally traceable, right? So, you know, if there's any nefarious activity that's linked to any, you know, input into a Bitcoin account, you can follow that money. You can't do that with cash. You really, you really, really can't. And so that's one thing that, that I hope, um, you know, the detractors of crypto either start to learn more or to start talking more honestly about.

• 32:17Speaker 01

  Yeah. It's one of these things where.

• 32:22Speaker 01

  You know, the US dollar by far on a volume basis is the choice currency of criminals, terrorists, money launderers, you know, 100 yards. And I think on top of that, you've got a world where law enforcement has a unique perspective in the sense that they would rather you, if you are going to commit a financial crime, do it with your hands on a keyboard, right? It is so much easier to track this stuff. What I do wonder is how the regulatory or law enforcement officials across jurisdictions will start to work together, right? Does it become easier or harder as people work in a more global environment

• 33:06Speaker 01

  and now have, you know, financial products or services that can operate kind of more freely between those jurisdictions? The impact on how those regulators cooperate will be very interesting and we'll probably see, you know, some that continue to work together very, very closely and others that just say, you know, look, we're not friends and make it more difficult, but I don't think we have that answer yet.

• 33:30Speaker 02

  Yeah, you're right. But I think, you know, for those, well, I may be lumping you into the category of my sentiment, but I mean, for those of us who would really like to see more transparency in the world in general, you know, particularly in politics and in finances and things like that. I think in some ways, the advent of crypto kind of forces parties to work together, right? Because they're working against a data set, if you will, that's publicly visible, right? I mean, so the transparency is so much better with some of these things. Now, I realize there's cryptos that are designed to kind of obscure

• 34:13Speaker 02

  transparency. And, you know, that probably wouldn't fall into this category. But to your point, I actually think, you know, this technology, you know, is based in and around kind of promoting trust and transparency. And that is just, generally speaking, a good thing for everybody.

• 34:34Speaker 01

  For sure. What, um, as you talk to the financial services clients specifically, right, in banks and things like that, where do you see the biggest opportunity to start applying some of this technology and the, um, you know, the kind of transparency that you're talking about? And I'll give you something to compare it to. I was having a conversation earlier with somebody about what would a bank look like if you took all of the components and replaced it by a blockchain solution? Not even saying it would be successful, but that would be pretty radically different. Where's kind of the first step or two if organizations do want to enter into this world that you really see the benefit or the, um, the opportunity?

• 35:20Speaker 02

  Yeah, well, it's a great question, and it really leads into an area of investment that my team has, has been making the last, you know, year and a half, which is around, um, you know, payments and international payments. But to kind of build up to that, what you were saying in that analogy, or that hypothetical of a, of building a bank around, you know, blockchain or distributed ledger technology, think about it, a bank really is just a giant ledger or a set of interconnected ledgers. And one of the more efficient, inefficient areas of banking is when you need to coordinate, um, you know, debits and credits, accounting

• 36:02Speaker 02

  entries, which represents essentially payments, the movement of money between counterparties, across different ledgers that don't talk to each other. And the banks have, and, you know, and the central banks have facilitated and gone to great lengths over, you know, hundreds of years to make this process more efficient of connecting the individual ledgers of individual banks with each other. And nowhere is that more, you know, is the inefficiency more pronounced than in international transfers than in cross-border payments where there is no central bank, there is no bank of banks involved because you're, you're crossing jurisdictions, right? So there is no central bank of central banks that exists.

• 36:44Speaker 02

  This today, I don't know if it's a scary thing to think of the prospect of that happening. You know, one central authority that controls all the banks in the world, that's kind of scary. But what if it was a one decentralized but trustable distributed ledger that provided that capability? I think that's, that's really practical and, and very realistic. And so we are actually seeing central banks and involved in activities with central banks that are doing just that, right? So they're, they're facilitating the, the movement and, and the exchange of, of currency between their their two jurisdictions, between the two banks by simply sharing a distributed ledger, right?

• 37:27Speaker 02

  And then it just becomes ledger entries on this common ledger as opposed to all these machinations that you have to go through to, you know, kind of quote unquote, move money across border, which is facilitated today through this hugely inefficient thing called correspondent banking, right? Where one bank holds, you know, foreign deposits with another bank and exchange creates foreign deposits for that bank. And if you think about that too, banks have this unique and maybe in some ways kind of unfair and kind of scary way of, of creating money in that sense where, you know, if one bank in, you know, in Europe says to another bank in, in the US, hey, I want to have, you know,

• 38:11Speaker 02

  a hundred million US dollars in the US and the US bank says, hey, no problem. Well, we'll just create a hundred million dollars for you on our deposit system. And, and the offsetting entry is, well, you got to create a hundred million dollars worth of, you know, foreign currency in your deposit system. You know, they just essentially created money in two different places in the world without doing anything. And I'm not sure that's cool, but I'm not an economist, so you know, I, I can't go much deeper than that. But, but I think really, it would be really awesome. And where we're investing, you know, tangibly investing is in that cross-border payments optimization space. And I think that's just a stepping stone to, to optimizing more things.

• 38:53Speaker 01

  And in that cross-border world, is that done with Bitcoin? Is that on something like Stellar, Ethereum? Where like, how do you think of using the public chains versus maybe something you guys have built? Just walk me through that.

• 39:09Speaker 02

  Yeah, yeah, so I mean, it's it's not a trivial process, right? Because of all of the laws in place in different jurisdictions that are that are really designed to protect, you know, businesses and consumers, right? So there's a lot of know your customer activities that have to happen. There's a lot of transaction monitoring activities to prevent, you know, or to detect, you know, money laundering. And so there's there's a there's a portion of some of the solutions that we're building that is just handling the messaging and the hooks that allow the banks in different jurisdictions to do what they're good at.

• 39:50Speaker 02

  And, you know, that's that's that process of payment messaging, you know, is is a required process that often goes under overlooked when, you know, someone is sending money to another person. But it comes is that process of one bank telling another bank they're sending money and then the actual movement of that money, those all those happen today on separate networks. And whenever you do transactions on separate networks, you've got reconciliation activities, got all this overhead that adds time and costs, et cetera. And so the novelty of what we're doing is trying to combine those two onto a single network.

• 40:30Speaker 02

  And you bet it, I mean, the the way to actually the secret sauce, the magic in the ability to do the settlement piece, the actual money movement piece in real time, as opposed to, you know, kind of add a band and taking multiple days, is to actually transfer a digital asset, right? To actually transfer something that represents a digital store of value. And so, yeah, that that's kind of what we're doing. We are in our solution, I would say, and in our portfolio, agnostic to, you know, individual distributed ledger technologies. We have a really strong partnership with Stellar.

• 41:10Speaker 02

  We think from the standpoint of the creation of digital assets and and the scalability, the transactional scalability of being able to exchange those assets in real time. The Stellar Network and the Stellar Protocol is that you probably, you know, one of the best out there right now. But we also have a very significant investment and commitment to Hyperledger and Hyperledger Fabric, which is a project in there that provides, you know, smart contracts. It's geared more toward permission networks and therefore more toward, you know, private networks. So we'll make use of a combination thereof.

• 41:50Speaker 02

  But, you know, I would say our strategy today is open to others. We've recently kind of joined as an associate member of the Enterprise Ethereum Alliance. Certainly, we can't ignore, you know, the developer community that's over there and want to be able to, you know, to take advantage of that. And so, you know, I'd say Hyperledger Fabric, Stellar, Enterprise Ethereum Alliance, these are all just indicative of an evolving solution story that is really DLT agnostic.

• 42:28Speaker 01

  Awesome. All right. So before I wrap up, I usually ask a bunch of rapid fire questions. What do you think is your most controversial thought that a high majority of other people would disagree with?

• 42:44Speaker 02

  That the issuance of a retail or a publicly accessible central bank digital currency is a long way away. In other words, I think it's coming imminently.

• 42:57Speaker 01

  Oh, you think that it's coming very, very soon?

• 43:00Speaker 02

  I do.

• 43:01Speaker 01

  You want to put a timeline?

• 43:03Speaker 02

  I thought you were going to say, are we going to wager some Bitcoin on that? That's where I thought you were going.

• 43:08Speaker 01

  No, no, no, no, no, no, no. Bitcoin only goes one way in my world. It only comes in, go out.

• 43:17Speaker 02

  Good. Well, so, you know, again, I would say, just to qualify that, it likely won't be one of the big five central banks, but it'll be a central bank whose currency is probably pegged to one of the big five currencies through the reserves that they hold. And I would say, you know, you're going to see some kind of issuance in the next 12 to 24 months. I mean, and I don't think that's a long time, as I read, you know, others that are talking about not going to be 10 years or whatever. So yeah, that's what I would peg on.

• 43:55Speaker 01

  All right. Other than IBM, what's the most important company in crypto?

• 43:59Speaker 02

  Uh, well, I'd probably say Stellar. I think what they're doing and doing it as a nonprofit, kind of doing it transparently is, is, is pretty awesome.

• 44:11Speaker 01

  All right. And then what is the one regulation that you would improve or change if you could?

• 44:20Speaker 02

  Um, I would improve, and we are involved, I will say, in, at least in the US, you know, activities around legislation that seeks to improve the qualification of asset classes in this general category that we call cryptocurrency. I think, I think there needs to be more clarity in asset classification. And I think the SEC has begun to do that with, you know, really kind of digging into a lot of these ICOs. Are they currencies? Are they securities? Are they commodities? I think that's going to be really important.

• 45:01Speaker 01

  What's the most important book you've ever read?

• 45:04Speaker 02

  I like, I like Crossing the Chasm, and I'm dating myself when I, when I do that. But I'd say that's one of the most important books that I've ever read.

• 45:14Speaker 01

  All right. That's, I think that's a very fair answer. All right. I usually ask one non-crypto question and then we'll wrap it up. And I let you ask me one question. So think of that question while we talk about aliens. What is the probability that aliens exist? What is that number?

• 45:34Speaker 02

  Sentient beings or just life elsewhere?

• 45:39Speaker 01

  Ooh, good, good clarification. Most people don't clarify. Sentient.

• 45:45Speaker 02

  Uh, I'll go with a safe answer and say 50%.

• 45:50Speaker 01

  You think 50?

• 45:51Speaker 02

  Yeah.

• 45:53Speaker 01

  That's, that's low. Why so low?

• 45:55Speaker 02

  Well, I, you know, it's an expansive universe and, and I know we've only been here a short period of time, but, but we have, you know, well, except for maybe, you know, Roswell, New Mexico, we have no real, you know,

• 46:07Speaker 02

  tangible things to point to that might suggest otherwise.

• 46:11Speaker 01

  All right. That's fair. Lack of evidence. I'll, I'll buy that. Um, all right. What, uh, what one question do you have for me?

• 46:18Speaker 02

  Um, what, what's your favorite crypto besides Bitcoin? Today, and I realize it can change.

• 46:25Speaker 01

  Oh, man.

• 46:29Speaker 01

  You, you already know my MO that I answer every question with the same answer. Um, my favorite Bitcoin other, or my favorite crypto other than Bitcoin. So I'm going to caveat this and say it's not necessarily my favorite. I don't have favorites. I think I have, um, things that I think bring value and things that I don't think bring value. If I had to, um, if I had to pick another one, I, I think I would go with Ethereum as, uh, the crypto that is the second most important is the way I would frame it. And the reason is probably a little bit different. Most people will, uh, likely focus on the technology and what exactly it can do.

• 47:11Speaker 01

  Uh, I'm much more interested in, uh, the amount of intellectual capital that is being focused on it. Right? So there's just a ton of really, really smart people who, uh, believe in it. They want to see it be successful. They're actively building all kinds of things, both, you know, improving the actual underlying, um, network, but also building all of these, uh, daps and things on top of it. Uh, and then I'll cheat a little bit and I'm going to add a second answer here because it's a project that it's not really a, a cryptocurrency, uh, per se, but, um, Lightning Labs and the Lightning Network, uh, are fascinating to me.

• 47:51Speaker 01

  I mean, these people are building something that if successful will change the way that money and value moves around the world. But they're also building something that is incredibly young. It's literally less than a year old and could fail at any point. And so I think that anytime you have those asymmetric type opportunities or events, it's fascinating to watch who's building them and kind of what the outcome is. So I think that that would be my two answers there.

• 48:25Speaker 02

  Awesome. No, that's great. I love it. I'm not far off in agreement. Have you ever had Joe Lubin on your show?

• 48:33Speaker 01

  We have not had Joe. We just had Sam, who is one of Joe's very early partners there. And it was a fascinating conversation. So maybe we'll release Sam before you. So nobody knows that Sam is coming. We usually don't tell anybody who's on the way.

• 48:51Speaker 02

  All right. Good. Good. No, I was just curious because I've gotten to know Joe fairly well, the last, you know, year or so. And I think he's a really interesting guy. He'd certainly like your answer. So that's, that's really cool.

• 49:04Speaker 01

  Yeah, I am. I need as many allies in this, in this business as I can get. There's plenty of Twitter trolls.

• 49:13Speaker 02

  I hear you. Well, you're doing a good job, man. I love, I love reading your, your stuff. And I think you're spot on and, and very objective, always positive. So that's really cool, too. So thanks for what you're doing.

• 49:26Speaker 01

  Life's too short, man. I appreciate it. Jesse, thank you so much for the kind words. I appreciate taking the time to, to do this. I am cheering for you guys and let's, let's do this again soon.

• 49:36Speaker 02

  Awesome. Sounds good. Thanks, Pop. Take care.

• 49:39Speaker 01

  All right, guys. I appreciate you listening to that episode. I enjoyed it and I hope you did, too. Before we go, I want to remind you that it was brought to us by The Grove, a full-service creative and design agency that has worked with companies like Block, Chamber of Digital Commerce, AAA, and the American Red Cross. You can check out more of their work at thegrove.co/pomp. Again, that's .co and not .com. Thegrove.co/pomp. Go check it out and let me know what you think. Hey everyone, Pop here. If you liked this episode of Off the Chain and want to help us take crypto to the top of the Apple, Spotify, and other podcast charts, please do us a favor and rate, review, and subscribe. To review, simply go to the Off the Chain homepage,

• 50:24Speaker 01

  scroll down until you see the five blank stars. Taking 15 seconds to fill those stars in and leave a quick review goes a long way in helping us take the entire crypto ecosystem to the top of the charts. I appreciate you listening and see you next time on Off the Chain.