Epicenter - Learn about Crypto, Blockchain, Ethereum, Bitcoin and Distributed Technologies - Adam Vaziri, Frank Schuil, Mark Lamb & Peter Smith: CoinSummit London – Panel: The Challenges of Operating a Bitcoin Business in Europe

Episode Date: August 7, 2014

CoinSummit London Conference Series – July 10 and 11, 2014 This episode features a panel discussion called “The challenges of operating a Bitcoin business in Europe”. Peter Smith, COO of Blockchain.info, Mark Lamb, CEO of Coinfloor and Frank Schuil CEO, of Safello provide their insights on some of the challenges of running a Bitcoin business on the old continent. These challenges include regulatory compliance, establishing banking relationships and establishing trust with consumers. The panel is moderated by Adam Vaziri of Diacle. Episode links: European Banking Authority EBA opinion on “virtual currencies” This episode is hosted by Brian Fabian Crain and Sébastien Couture. Show notes and listening options: epicenter.tv/coinsummit-london-03

Welcome to Epicenter Bitcoin, the show which talks about the technologies, projects, and startups driving decentralization and the global cryptocurrency revolution. My name is Sebastian Couture. And I'm Brian Fabian Crane. On July 10th and 11th, we were in London for the Coin Summit conference. This two-day event gathered approximately 250 investors, entrepreneurs and developers to discuss some of the most important issues facing the Bitcoin and cryptocurrency ecosystem. In this episode, we talked to Olivier Janssen's, a Bitcoin. an early adopter and investor, and his associate, Andrew Turner. And we discussed Olivier's recent $100,000 bounty to replace the Bitcoin Foundation, why he chose Mike Hearn's Lighthouse project as the winner of 40% of that bounty, and the effect that Lighthouse could have on Bitcoin core development funding. We also interviewed Michael Jackson.

He's the former chief operating officer of Skype and currently a venture capitalist at Mangrove Capital Partners. We talked about the recent European Union. banking authority opinion. We talked about his experiences with the regulation of new and disruptive technologies from his days at Skype. And we talked about investing in Bitcoin companies.

Okay, so we're here with Andrew. Olivier. And you guys are investors, I guess. Can you tell us what kind of companies are investing in right now?

Well, I don't have like a sits target, you know, so I'm open to anything. Obviously, Bitcoin or cryptocurrency related. I'd say that we tend to invest in, as Olivier says, cryptocurrency or Bitcoin related or web technology related, where we can bring some form of value added. So we tend to look for companies in an early-seat, pre-seat phase where they're looking for a ticket size around

100k US dollars and where we can bring some form of value added in terms of management or development skills. We have a pool of about 50 developers that we have split across Europe and what we like to do is try and invest cash and at the same time bring some management skills across sometimes very active, sometimes more in a sort of a non-exec kind of way. or and or bring on development skills at the same time. Combination of using Olivier's rather, let's say, public profile to promote the investments that we do. So typically we look for instead of just pure only cash investment, something where we can bring at least some form of value added.

But it's optional, of course. I mean, it's not required to, you know, if they're sure on developers or management, and we can always help. So you also created quite a bit of a stir, I guess, about a month ago, maybe a bit more. When you made a post on Reddit, kind of setting this $100,000 bounty to replace the Bitcoin Foundation with software, right?

Can you perhaps tell us about what motivated you originally to do that? Well, I guess, Me and like a lot of other people got increasingly frustrated with the Bitcoin Foundation. And for example, my current was making more and more posts about the Corps as being underfunded and I totally agreed with that. So I was thinking like how do we solve this and I started analyzing the situation. And my conclusion was that we need to find an alternative for the Bitcoin Foundation because Bitcoin is decentralized and non-political.

And I think the organization is making it political, which I think is very bad for Bitcoin. So that's why I decided to post a bounty and see what people would come up with, find an alternative. So, I mean, you ended up giving, you know, most of the bounty to Mike Kern and his Lighthouse project, you know, which we've had covered on top podcasts with Mikeern extensive before. But was the idea of funding the core development, was that? your initial main motivation when he started it or not really it was much more open at the beginning because i just want to see what people would come up with but in the end my conclusion was that i think the most important thing to focus on is the core devs so that's why i decided to also fund the

platform which could among other things from the core divs which also has already a bit of support from a core devs um and and i think we can do a lot of other things we the platform crowdfunding lobbyists or or sky's the limit basically you know if you want to crowd fund your own bitcoin conference on then just propose something to be basically a kick starter but for for bitcoin and of that bounty which you gave a good chunk of it to my kern are there other people who come forward with some interesting proposals that uh yeah there were many submissions um but most of them wants to have its remain secret so i couldn't publish any of it. Maybe a couple, but then I had to contact everyone individually, ask permission.

So it was a lot of work. I think around 30 or 40 submissions. And yeah, the most interesting ones were like, like, a lighthouse. And then also areas from the three guys who made it. Yeah, sure. So Ares is basically running on Ethereum. And it's probably one of the first implementations of the full, or the range of possibilities that the Ethereum can realize. So basically what you can do with it is they created the first software platform to really run on Ethereum, where you can start the distributed autonomous organization, Dow, which is all the first lately.

So they made the first good implementation, in my opinion. That's why I chose them because I think there is also a really nice possibilities which can decentralize a lot of things, not only a Bitcoin foundation, but corporations and governments. So I guess would the goal be in the future that there's some sort of voting as well, perhaps, because, you know, I guess if you wanted to replace the Bitcoin Foundation and the core thing is that they have a board of directors that doesn't work and, you know, can be able to replace that. Maybe you can have it elected in a different way or control more of them a bottom-up way. Do you, and it like a seems much more limited, right? It's more targeted.

Do you, did you go more in? that direction because you think it's more important or because you feel the other thing is maybe technically not feasible yet i'm sure i'm sure it's possible technically to recreate the foundation completely virtually online with like virtual voting but i i chose not to do that on purpose because i think voting and democracy will entail politics again and and then there will be leaders elected in a new virtual foundation i think is just like uh over which is necessary. I mean, if you look, if you take everything away from the Bitcoin Foundation and look at the core aspects of it, it's running the core devs, it's running lobbies

and doing a couple of other things. But those things can be done perfectly without a political organization, maybe the Bitcoin Foundation or something virtual that's recreated. So I chose not to recreate a political system on purpose. Okay, okay, that makes sense. So you feel like You know, even if that had been recreated in the same way, it's just that the nature of it would become politicized. Yeah, exactly. And I think now people can sort of vote with their money. And if they see a demand for something like, yeah, like all chains, which is highly demandant from what I heard. You mean, side change.

Side change, yeah. So they can just, I mean, as the developers or developers can, can, can, the core devs can make a, a proposal for the next three to six months that this is their goal, right? This is their program like on Kickstarter. And they can have like extra goals when they reach this amount of money. So they hire more development developers like that. The Bitcoin Foundation isn't really doing that. So I think it's I really hope that once the core devs really start working on this

platform that Bitcoin development will be streamlined again. And I think that's definitely doable. And I think there will be a lot of support from community to fund it. I think sidechains would be perfect for this kind of thing, because it's essentially public good. I think it would be hard to make money from it, right? It's something that like a lot of Bitcoin holders probably would like really like to see implemented in Bitcoin and not like Ethereum or some other currency.

Yeah, I agree. So I think that would be perfectly suited. Yeah, and maybe a lot of other things that people are asking for all the developers have in their mind, but they never got around to doing it. I think Bitcoin has so many. extra stuff built into it that people don't realize it because there's no money for developers to actually implement it. So for example, like multi-seek only started getting traction in the last half year to year. Thanks to among other people my current was sort of focusing

on it and people then see the possibilities like oh Mount Cooks could have been avoided completely by doing multi-seek so it's having a role of repercussions that it's underfunded and we have like disasters happening because of that you know so i think it's very important that we get it funded properly so what is your ideal uh to you and what what is the ideal scenario moving forward um for bitcoin development to but bitcoin core development to continue to progress well ideally i think that the developers propose um their their their schedule for the next three to six months with bonus goals and people can then, you know, fund it. And I think they should also listen to the community.

So if community asks for something specific, unless it's not in line with the constitution, which in my opinion is like the Satoshi paper, they should always like keep that into account and not change the core principles of Bitcoin's like the 21 million limits and stuff like that. They shouldn't touch that, right? But like anything which can be built on top of it, which is not like negative.

I think they should consider. But then if you look at the white paper, there's already like a one CPU, one both thing. I mean, some things are already. What do you mean? Well, one CPU, one vote. Obviously, you know, I think this conference is sponsored by the H.LIO. Right.

Well, there's also, I think, something which can be solved. But I think, given, talked about that, right? So it's also community awareness, how they mine, but also maybe something which can be solved in the protocol. I don't know. So I've kind of been thinking a lot about some issues, especially with transaction fees, and some other sort of fundamental issues as you've become. And I'm someone wondering, you know, is it possible actually for Bitcoin to adapt? Or is it there's too much interest economic interest that makes it just so hard to coordinate to something else.

So I'm wondering, do you see that as a risk that Bitcoin might be replaced with something else just because it cannot adapt if problems do arise, maybe scalability issues in the future? Well, I think that it's very important that the developers, like, yeah, I mean, the community, there will always be altcoins, right? And it also puts pressure on Bitcoin to keep self-competitive. On the other hand, Bitcoin also has unique properties which are very valuable to it. So if it ever changes those, I think it will become or risk become worthless. For example, if it suddenly says like, okay, we're not going to hold the 21 million limit anymore.

That's like, you know, that's a disaster, right? Like it's the end of Bitcoin. Or if they change critical aspects, which are bad to change, I would never support that personally. I think we should keep the core of Bitcoin. But we should look at other coins and learn from them, right? Like the alt-chains, I think that that's something which is okay. And I think Bitcoin has a lot of possibilities like becoming a central ledger for, I don't know, like real estate, you know, like replacing notaries or something like that. That's this huge, right?

So there's many possibilities. And we can stay up to date and remain competitive without touching the essence of Bitcoin. I think just to answer your question, there's one or two things which I remember was at the Amsterdam conference, what was that? Like, yeah, two months ago. And it's the first time ever I heard Gavin Andreessen talk about a hard fork in the Bitcoin Core Protocol. I understand why he said that. I mean, my only concern, the only time that I've been concerned about whether or not Bitcoin is capable enough of adapting, as you said, was at that point in time because a friend of mine explained some of the technical challenges to me, namely that there are a number of, let's say, core attributes in the way that Bitcoin is mined. and a number of core values, which if you change them,

or if you change the way that they're implemented in the protocol, could potentially invalidate all ASIC based mining hardware that's out there today. That, of course, is an economic disaster for anybody who has vested capital in mining. If you basically get to the point where you need to argue a change, change because you believe that the future of Bitcoin requires that change. But the downside of that is that all existing mining hardware will be reduced to junk. That's that's that's that's the kind of crux point, which I think we'll be a cross point where some cost to do because they have the power, right?

Because they have the power. Maybe in the interest, uh, of Bitcoin in the long term, there's no way you can have to be. The miners I'll never do it. But on the other hand, I mean, it'll be interesting to see how the whole ecosphere develops. Because, you know, if that kind of problem ever does sort of arise, you might get an alternative, which gets a lot of traction. It'll be interesting to see how the Bitcoin community at that point of time reacts. But these are all things that are far away.

That was one of the things which I thought was, you know, extremely interesting sort of technical. ecosystem issue, which at some point in time might really drive a sort of stake into the ground and influence how people might react. But that touches a lot on what Mike Hearn was saying, where there's a lot of internal conflicts in the quarterback team. We're talking about disagreements, which are not at, you know, hard fork level type stuff, but just, you know, small stuff. you know, software level of stuff. So, you know, if we're not able, if the core development team isn't able to agree on just basic things like that, I mean, like, how can we ever implement these larger ideas, like side chains and things like that?

What are your thoughts on that? Well, I think it's, consistently, shall we say. I think we first should get developers from it properly and I think it will really help a lot. I might be wrong, but I think it will. We should what? that once we get the developers from it properly, it will really start helping. So we'll see what happens. I think we should look at it again in like half year to a year and see if it's been sold or not.

But I think it will really help streamline everything. Also, you'll have more feel with the community once they start doing that, which might also resolve some issues. Right now, yeah, there's a Bitcoin Foundation and what do people really want. I guess they can sort of guess it, but it's still not as direct as like, working through a crowd funding platform. I think you'll start to see evolutions like, I come from a telecommunications background.

If you look at Bitcoin, it sort of appeared out of nowhere. And then some people, I don't mean any disrespect here, decided to start a foundation and said, oh, well, we're the foundation and we'll represent what Bitcoin is. That's, I guess, a noble idea and has brought along all the complications and misery that went with it. But I think you'll start seeing that turned around. Now you're getting more and more companies who are venture capital funded

or running a business or doing whatever, who have vested economic interest in the continuity and future of Bitcoin. And I think you'll start seeing industry associations being created by representatives of these companies to agree on technical specifications, on what's best for everyone multidisciplinary, so with representation from minors, from service companies, from intermediate companies,

from API developers, all sorts of people, which I think is a much healthier kind of evolution where you see people from various sectors with vested real economic interest in the whole thing, doing well, basically, instead of just some guys standing up and saying,

right, we've created something, we'll need some sort of association, here we are. It's much better if you get, let's say, more technocratic approach, at least, where you have people who are really day-to-day working on this stuff and saying, we need to get together and discuss how to tackle all these issues.

I think that's, I think that'll be a part of how things can move forward. And then, of course, as Olivier says, you have to have proper funding. I mean, nobody works for free. And I think that's a great effort by Olivier to work on at least starting a solution for them. But I think that you'll see that kind of evolution moving forward. Why aren't you ready to fly? I tell you about it. Yeah, no, I agree.

Maybe let's, before we end, let's come back to one topic and curious about it. So since you've been, I know, I've been born, because of a long time. When did you originally get in war? I saw it in 2010. Oh, 2010. Yeah, it's a long time.

I'm curious, what do you think is going to be the most important area of development, maybe in the next year or two years, especially when we talk about adoption and startups in this kind? Not like software specific, but just in general. Just in general. I know sometimes people, for example, say, I don't believe so much in the payment system.

I believe in these other applications. Some people feel like it's going to be developing countries more. It's interesting to hear how people view this differently. I'm kind of curious what you're both your perspectives are. I think the biggest development will be that people start realizing the potential, which is almost limitless. You know, so I can't really point one out, but I think that's really the realization that Bitcoin created a new, new world almost of possibility of decentralization. I mean, it's truly a revolution, you know. After the Internet, I agree with Roger that this is the most important invention.

So just realization of possibilities, in my opinion. Yeah, I completely agree. I mean, it's been said by various smart people that Bitcoin is the Internet of Money, let's say. And I'd say that as an extension, it's cryptocurrencies as, let's say, a concept and a protocol suite, which are the Internet of Money. And just like you saw in the Internet boom, I mean, as I said, I've come from a 15-year career in telecommunications, so I've seen it go from nothing to world-encompassing, mega businesses, which you just can't imagine don't exist anymore. But 10 years ago, companies like Vodafone, they didn't even exist or they were tiny, let

alone other companies which do more fancy stuff. So I think you'll see it move in all sorts of directions. And just like, you know, in telecommunications space, you had competition for various protocols. One that was referenced today in the conference was like, yeah, everybody was always saying, oh, Ethernet's rubbish, you know. It doesn't work and it's useless. And who thought of that?

And token ring is much better. Well, token ring died and went away 10 years ago. And Ethernet has become the prevalent layer two protocol for all telecommunications. Just because it got traction and it got weight. And everybody put their shoulders behind it and said, our economic reality is vested in Ethernet. And as long as the cryptocurrency community continues to say, our economic reality is vested in Bitcoin, it will thrive, survive, and continue to evolve

and defeat the odds, and people will find ways around the problems and because they want to succeed. And I see exactly the same thing happening. I mean, many people have made the comparison and it's completely correct. I mean, it's the weight and the power of many. I think if I have to pick something, I think it will be the development of free society online. And I think Bitcoin will make it possible to create a complete society without government. So also the political aspects, organizational things, voting. Yeah, I think people will for the first time be able to live their lives completely online, free from any government. So basically, if they want to, yeah, they will still need a physical location, but they can just do everything

there will be like decentralized courts, decentralized companies, everything will just go online and like I say on my Twitter like I think the revolution will be virtual. I mean it's like yeah we're creating basically a new society online which can take over the existing world. Thank you so much. Thanks. Okay so we're here with Michael Jackson who is a managing partner at Mangrove Capital and before that he was CEO of Skype. So hello. Hi. Thank you for taking the time to speak to us. So perhaps, can you tell us a bit about how you first heard about Bitcoin, how you got

interested in Bitcoin? That's a good question. How did I first hear about it? I first heard about it some time ago, I guess about 18 months ago, something like that. I'm going to suggest it was like that. And it was obviously an interesting thing. I've been always interested in the payment space. it's been something I've been involved with

with billing and payments and back-end systems and that kind of thing in telephone companies for many years and then I thought Bitcoin became a payment method, simply a payment method. But then I could see more in it suddenly. One of the side projects I worked on at Skype, it was one of the three or four of us working on it, was a way to pay for media

using something called Skype credits, which was the stuff you use for buying phone calls. And at the point, we built in a, we built a nice demo of how you could access a web page and then pay for that web page with a click. And that would take a microtransaction away from your Skype credit. It never was published. Really? That's interesting.

Yeah, right. And it was one of the idea was to take it, you know, it could have been very interesting for the media business because, as we know, it's really difficult to pay for stuff. Micropayments on the internet are really quite difficult. And so the first time I saw Bitcoin, I kind of thought, well, this could be a handy thing for this. you can do this micropayment person to person, not really involving too many people in the transaction, which naturally keeps the cost right down.

And that's what I still see as the vision for Bitcoin is in fact around micropayments, or one of the main... Why did that Skype thing never get implemented? It just never did, you know, how these things happened. It was a project, we did a sort of a weekend project around it. You know, there's probably only 20 of Skype, even though we tried it.

It was just a side project. Yeah. We got running for fun. I've got a video of it somewhere on YouTube, and that's the end of it. And so when you first heard about Bitcoin, you were already venture capitalism, investing in tech companies. Just, you know, as for contextual purposes, what are some of the companies that you had already invested in? So, Mangrove is invested in a lot of e-commerce companies. We have the largest e-commerce company in Russia, for example, Coupie VIP,

e-commerce companies in Germany, invest in media companies, music companies, core computing software companies, consumer brands, many different things. We also have about a third of our fund invested in automotive product as well, which is quite interesting,

a completely different area. Yeah, and evolving very fast. Evolving extremely fast, yes, exactly. So what about the Bitcoin space? I think you have not made any investments yet. We haven't yet made any investments in the Bitcoin space, not at all. Not through not looking. We haven't seen anything that we liked yet.

There are obviously a number of companies that are doing very well. We've seen some massive amounts of money put into some sort of landmark deals at the moment, huge amounts of money, which is bold moves from three or four of the last. largest venture capital companies and we are wow so they're really betting hard on that so some spaces i think have been taken uh people are trying to put a stake in the ground to own certain sections of the infrastructure certain sections of the consumer wallets like wallets yeah like wallets like um yeah coinbase for example circle these guys people earning what they're trying i think these guys are trying to be the place where people go to for wallets bit pay for payments and stuff like that

That's what I think the investment's going towards. I think we'd be, from our point of view, we'll be interested in services that sit on top of the network. No infrastructure, but probably not. Yeah, I mean, this thing, yeah. Like what? I don't know. So we talked about services to do Bitcoin payments for media industry,

for example, just to say something. Or services that use the blockchain to certify documents, this kind of thing. Another interesting thing I see is the ability to create an entire new market, which is the certification of original digital art. So you can imagine buying the first pressing, like you used to in the vinyl industry, of a song. In other words, it would be the song that when they...

Did you... Because a friend of mine did the project. Oh, well, he's been writing that white paper and stuff. Okay, I haven't seen that. Q-Lect. Okay, no, I haven't seen that. In Amsterdam, too, they had this, like, innovative projects thing.

But yeah, exactly that, actually. Yeah, that sort of thing could be interesting for us. It's more manageable, if you like, owning the entire infrastructure of the Bitcoin infrastructure would be. So what's the reason you haven't invested yet? Is it that you're more interested in that area and you haven't seen anything interesting? Or do you feel there's starting to be maybe too much competition?

to high prices. Yeah, all of the above, really. All of those things. I mean, we have to find projects that we like that my partners are going to like. We always, in any venture capital company, make decisions as a consortium on these things. So obviously this is... Your partners are also on board with Bitcoin? Some are, some aren't, right?

I mean, as you know, the whole world's pretty divided on this thing. It doesn't matter who you speak to. They've always got two opinions on it. So some of the guys go like, this is just a crazy, hyped up, whatever. And others say, no, now I've been at this for... 18 months, probably 18 months ago, they said you're mad. Six months ago when I was at this event last year, they came back and they said you're still mad. And now maybe they're thinking, oh, maybe, maybe you're, well, you are still mad, but maybe that bit didn't change, but the rest of it.

You know, we mentioned investments and how that's been growing obviously. And I think there was a figure that was mentioned earlier at the conference where about 200,000, 200 million. dollars in VC investment so far and only 5 million in European companies. Now, what we were talking about a second ago is that the infrastructure is being built and all of this investment is going in infrastructure and mainly in the U.S., do you think that perhaps we're going to have this sort of situation where all of the infrastructure is based in the U.S. and European companies are basically left to this other higher-level stuff?

services built on top of Bitcoin? I don't know. I don't see there's any reason why that should be so, first of all. I mean, that's how it is now, right? Coin-based bid pay, everything's in the US. I'm not sure everything's there, but certainly a lot of it's

there. I think the high-level stuff is much more I think the high-level stuff can come into Europe on some of the facilities on top of it, some of the exchanges and things like that. There's tremendous activity here. The regulatory framework in Europe can arguably, the regulatory framework in Europe can arguably be much more conducive to Bitcoin than in the US.

I think so. Yeah, I do think so. Especially after the recent European Banking Authority paper. Well, the EBA, what they said is that they don't recommend that financial institutions hold Bitcoin. That's what they're saying. They're saying as a commodity, it's just not secure enough. I mean, in the end, the banks hold client funds in general, and they don't consider it. just too volatile, too unreliable, too risky,

and also fundamentally risky the whole thing. If, for example, there was a flaw detected in the protocols, the whole thing could be worthless tomorrow, in theory. That's getting less and less likely with time, but nevertheless. And I think that's their position on that. What they're not saying is don't use it. And they're just saying banks should not be holding large quantities of this for the time being.

But if there are services built on top of Bitcoin, or people using Bitcoin for transacting. That's a totally different discussion. So you feel from there, when you're talking about the report that came out last week, right? Yes. So has that changed your view on regulations? Because me personally, I felt it was kind of worrying.

No, not at all. It didn't worry me at all. It actually kind of made me okay with it because they're talking about, we have to split the thing into it, if you like three areas. We have to split Bitcoin into what you might call, the commodity side of it,

you're dealing and speculating or what have you on the value of the underlying asset and the refunds and stuff doing that. And then you have Bitcoin as the, if you like, the payment mechanism, which is half of what it was built for. And then you have the third generation services that sit on top of that. And those third generation services are not touched by regulation. If you want to use Bitcoin to certify a document, for example, nobody gives a shit. I mean, that's not...

That's true. That's not interesting. I mean, who cares? If you're using it as a commodity, that's a different thing. if you're trading in it. I think the industry itself is very, you know, I meet a lot of computer programmers in the industry today or computer experts who've suddenly become experts

in world finance and world economy and macroeconomics and things like that when really what they know best is, you know, it's programming. Yeah, that's true. And you do tend to hear a lot about, you know, how central banks work. And the guy from the central bank, yeah, but that's wrong.

If you speak to me, he goes like, It's not even right what you're saying. It's not even how we work. It's not even how we think. And many of the stories we see about Bitcoin, you're disrupting this and helping that. It's just totally irrelevant. The value of the currency is approaching that of a minor currency now.

They say, yeah, of course, if you look at it one way, you could argue that, but you have to really work your numbers in a strange way to even get close to that being a thousandth of the correct. Yeah, so it has a potential for disruption. Absolutely. The idea is not that it is disrupting, but that it does have a potential potential. I'm not sure. And if the EBA and other government bodies and regulators are starting to look at it,

it's also because they perhaps see it. I think they're looking at it. I'm involved with these guys. We have a working group. I can tell you more about it in a second. We have a working group in Luxembourg across the entire financial industry, the spectrum from the regulator right through to startups. Where we discuss openly.

There's about 20 of us. And we have the head of the regulator in that forum. We have the Minister of Finance. We have the head of the banking institution. Luxembourg is a large banking industry there. 50% of the GDP comes from banking industry. So it's extremely important. And so these are high-level people talking about this

and how we can react to that. So they're very interested in it because their members, the banks are asking what should we do about Bitcoin. Their customers are saying, what do we do about Bitcoin? Their investors are saying, what do we do about Bitcoin? So they have to have an answer. And that's why they're bringing out these papers. They're not bringing them out because they see it as a risk.

and I don't think anybody sees this as a disruptive risk to currency or something like that. That's interesting. So you see the potential more on just the technology and maybe it's use in other areas. You know, say you talk about document certification or something, but not so much as an alternative financial system. Not as an alternative financial system, no. I think it's a question of how you define things a little bit. But exactly the latter is the first thing you spoke about document certification that sits on top of everything.

And then you have the payment mechanism where people can buy Bitcoin, have it in a wallet and pay for stuff everywhere or send it to each other, which is very convenient. We just did it at lunch here, of course. What else would you do at a Bitcoin conference? But, you know, send each other the money. But those mechanisms exist within the existing banking system. Again, I live in Denmark, for example, the mobile banking. application is used by everybody. If we were sharing lunch in Denmark,

we would have shared the bill using the banking app, which was developed by the banking industry for customers. And there's nothing wrong with it at all. It's a perfectly modern, well-functioning system that doesn't cost anything to run. Yeah, but of course, this is a closed system. Then you want to do that with somebody in the UK. Yeah, then you're stuck. Then you're in currency transfer

mode, right, which is a different thing. And that's where you completely avoid in Bitcoin. Of course, in this conference, we've probably got people from 100 different countries or something. So currency transfer is a important thing for us for 99% of the world. They aren't making transactions outside their native currency kind of ever. So we've got to be careful on niche. We're not applying it into that.

But the simple method of doing transactions like that is not present in many countries. In Scandinavia it exists. But if we go to America and I think part of the launch of this stuff is in America, you hear guys, we all hear guys from America coming saying, let me start again. We had a guy at a conference the other day. And he said he was going to fix three. things. He was going to fix

that cheques were a waste of time for everybody. Same day money transfer should be a right and person to person transfer should be free. And he came and gave this talk at a conference in Luxembourg and everybody went, well, we've had this kind of

I mean, I don't know anybody, when in the last day? Have you ever used a cheque? When did you love, do you have a check book? Well, I mean, again, it depends on the country. It depends on the countries. There's from the... In the US, people use checks all the time. It's true.

They don't. I think the banking industry in every country has their own way of functioning. And also, like these apps, for instance. In Canada, I know in Canada I can send email money transfer to someone. In France, it takes three days to do a wire transfer. I don't know.

The end of our ability also between countries in existence. Right. Yeah, I'm... I personally view it differently. I think because Bitcoin is so open and, you know, because it's like, you know, it's like an API, money, kind of anyone can build something on top of it, I think that is, you know, if you talk about this app in Denmark,

you need to have a coordination of all the banks that, like, you can open up, that's just their mess, you know? Maybe sometimes it works, but often it won't, and it's slow and expensive. So I think that openness is enormously powerful. So I personally do see the potential as as a financial, like for money and all

those. I see it as having that running, yes, as an alternative currency, I think no, I think it's going to be very difficult. But the but exactly that, the convenience side of things, is exactly what we want to be doing with this thing, and maintaining parallel wallets and things like that, is going to be fine.

But the regulators and these people, they don't feel threatened by this particularly. In fact, they feel curious about it. They want to know about it. They want to adopt it. The guys I speak to there want to understand how it works. And part of their challenges and part of the inconsistency we see in regulation now,

I'll talk about it later, is that with the industry isn't sending consistent messages to the regulators about what this thing is. You talk to, we all have an opinion about what it was, right? You just said, my opinion, you have your opinion, and everybody has their opinion. So the poor guy, the regulator, some guy shows up and he says, well, I'm going to do this. And I'm, okay, cool. So what is it exactly you're going to do? Tell me exactly what you're going to do, not like what you're dreaming of doing and changing the world and all of that.

But what are you doing? What is your company do? What are the money flows, whatever you want to call it, the transfer? transaction flows within your system. Very few companies in the space can actually explain that. It's perverse. They're all like, la la la, la, it's fantastic. Think about how great it's all going to be when the world is using Bitcoin.

They go, yeah, yeah, don't worry about that. Regulators, I don't want to know. Just tell me how the money goes. Tell me how the money flows. So regarding regulations, in the EBA thing, you know, I guess there was two things. There was this short-term thing, which was like banks, you know, banks leave it alone. You can give bank accounts, and then, you know, Bitcoin do their own thing kind of thing.

And then there was the sort of long-term outlook they talked about, which was to have these governing bodies that improve virtual currency schemes. A lot of those things seem to be, to me, like, literally impossible within a decentralized currency. So it surprised me that you still view this as positively, the overall direction where things are going. Did you interpret it differently? or what do you... I think I interpreted it differently.

I think when they're saying the banks should keep away from it, that's because the bank shouldn't hold this stuff because it's not the sort of thing which is secure enough or reliable enough for a bank to be holding

if they want to give... But what they did say in the report was it's okay to give bank accounts which is really good actually because you need interfaces between the two different worlds and if we go into the Skype word in the telephony world

you had a Skype which was a peer to peer infrastructure completely independent of country boundaries or whatever. Nothing. It has his own name. space, didn't even use DNS, it wasn't relying on the internet protocols except for the underlying transmission, of course. And then around the world, there are various points where that connected into the existing phone system if you wanted to make outbound calls. And these interfaces,

these gateways are something that the Bitcoin world has into the traditional world. And those gateways are, for some perverse reasons, specially controlled. I mean, it's a bit illogical why those gateways should be controlled more than the rest of the things should be controlled, but nevertheless they are. And what we want to be careful of in our industry, in the Bitcoin industry, is to make sure that that peer-to-peer element falls outside the remit of that regulation. And one of the things we keep asking,

I think one of the tactical mistakes we've been making in the industry is too many people are lawyers, and too many people are running to the regulator asking for advice. So you were an article on CoinDest recently making the parallel between when Skype first was released and the possible indications of regulation with telecom and how that overlaps with a lot of what we're talking about now at Bitcoin. Your view seems to be don't get regulated. Yeah, absolutely. So can you talk with more about that?

Yeah, absolutely. So, I mean, Skype had this. A lot of regulation was built into the phone network right from the beginning of the phone network for various reasons, partially because it was based on monopolies who wanted consumer protection. Partially it was based on some of the requirements of law enforcement and stuff like that, that wanted access to facilities and so on. And they were all good reasons. But all of them related to the, and the legislation or regulation was framed around

the existence of big kind of central offices, big, big locations where equipment was sitting and a kind of star-based network where one guy was in control in the middle. And that was fine. And that was great. And all the regulations written and it addresses that environment. So if you then look at the new environment, which is a peer-to-peer environment where you don't have any central control, where you don't have any people running it particularly over the, the rules don't apply.

So I'm not saying the rules, if you wrote the same rules today, you could. make them apply, but the rules as they're written today do not apply. So if the rules that are written today don't apply, then don't try and apply them. Right. Because you're trying to put a, you know, kind of a round peg in a square hole. It just doesn't work. And let's wait for the rules to be written instead of asking them to apply the old rules to the new paradigm. And this is, we're asking much too much them to apply the old rules to the new paradigm. We're going to the regulator say, how do your regulations affect Bitcoin? Too many people are doing that. I feel like that's was exactly my conclusion of an EBA thing,

is when you read that, the last part, when they talk about sort of the long-term future, they exactly do that. It's like, oh, we have all these existing safeguards. And there's this new weird system. So we're going to need to create some new institutions so that that new system, virtual currencies,

kind of complies of all their things we already have in place, which ends up with this bizarre thing. When you need to, yes, I mean, if you're going to have a regulatory framework, you need to have somebody responsible that regulation and in an international environment, I mean, who the hell is responsible for anything? Nobody. Yeah. So this is one of the issues you have with forming that regulation. And there's in normal, even in criminal legislation, there's tremendous discussion about which jurisdiction applies when anybody's, you know, as yourself, if some foreigner is arrested in a weird country, the first thing they say is, well, I didn't do anything wrong here.

I might have done something wrong at home, but I didn't do anything wrong here, so you can't extradite. You're right. There are various people from our parallel industries mavericks of the Internet sitting in various countries today who are not going to be going anywhere because the jurisdiction they believe where they are is safe. So how do you manage that? I mean, and you can't manage it. If you look at what's happened in the copyright industry and the file sharing industry or industry or file sharing, the media industry, their attempts at regulating file sharing have been massive lobbying from American companies from Ireland and the media. towards the governments and stuff, trying to force stuff along. And it just doesn't really work that well. They've been trying to force European countries, France, Sweden, wherever, to impose far-sharing legislation, industry-specific legislation,

which is really, really weird. And it doesn't work. It hasn't really work. It doesn't really work. Because there's nobody to get, right? I mean, they can find the consumer for using the product, which is what they're trying to do in France. They're going to say, if you use file sharing,

then we're going to find you or whatever, or cut off your internet and all this kind of stuff. I think the whole ID thing is a myth. I don't think it actually. I don't know. I've never got a letter. So so far we're okay. In Germany they're sending a lot of letters.

You see it's working, right? And they're frightening people off. No, it does work to an extent. I mean, of course you can use VPN and things. Yeah, if you want to do it, you can do it, right? But you frighten a lot of the normal people off with doing that. And we don't want to be doing that in Bitcoin. If it's going to be being used by normal people,

they don't want to be getting a letter the day out from the financial regulator saying we don't think you should be using this. That would be done. There's one thing regarding regulation that I want to touch on, which is kind of a difference between the US and Europe. How do you see that? I mean, from the way I've been thinking about it,

and I don't know if this is correct, it's that in the US, it seems to be a much more lobby power behind Bitcoin, right? You have big VCs that have put in a lot of money, you know, that are obviously connected, and in Europe, there seems to be completely lacking. All right, and I think

that's an endemic to the US situation. So the US political and regulatory system is the most corrupt in the world. And by that I mean that the guys who make the rules are all in power, financed by the political contributions made into that, made by companies and individuals within the United States. Then necessarily listen to those interests. So when some guy gets 10 million bucks from whatever, some industry, It's going to be listening. Of course it's going to be listening.

I'd be listening and you'll be listening if a guy just gave me $10 million. And that was one of the biggest shocks to me. The first time I ever went to Washington and started to discuss with telecoms regulators about how they were approaching the voiceover IP and explaining to them that we were outside that regulation, which was very difficult because they found it difficult to accept that something was outside their control. The US do not like things to be outside their control. They don't get what it is, but they want to be in control. And the lobby of is, there aren't that many politicians who decide the Senate's relatively small, Congress is relatively small, and it's heavily influenced by massive companies.

So they're heavily influenced by massive companies, includes the banking industry, includes transactional service companies. And, I mean, one of the first casualties, if you like, of a peer-to-peer payment protocol like Bitcoin is the people who live off transactions. Because they're just not needing, they're not necessary anymore. before they were necessary because they had to move a bit of paper up and connected to and send it in the mail and back down again because they said it was 100 years ago. And 10 years ago, it all went in electronic and still the transactions go through these things

because it's the easiest way of doing it. And now they don't. Now they go direct. So anybody involved in transaction processing today is threatened. And their businesses, you know, their billion-dollar businesses and more in the US. So they've got tremendous lobbying power. So to counter that, the Bitcoin interests need lobbying.

What I see in Europe generally is the politicians and regulators and people tend to be more pragmatic and tend to be actually quite focused on futures. Some countries less than others, but in general they're interested in listening to new technology. You know, in the UK, France may be less. Well, no, I think it's been the case because you've had hearings and quite a few European countries

where the local Bitcoin foundations will be invited and speak and stuff. You had that in the US as well, no. Yeah, sure, but in the US, in the end, they're going to weigh down on the side of the existing institutions you pay them a lot of money. And it's a fact. It hasn't happened so far though, right?

So do you think that's something that will come and in the end that maybe Europe will end up being a more friendly place than the US? Yes. I'm completely sure that if we're going to start some peer-to-peer trans-border system, if it's going to come up, it is becoming out of Europe, not out of the US, for sure.

I'm absolutely convinced. Absolutely convinced. Because of that, because there's a pragmaticism amongst European, if we go down the regulatory route, which is a question we should discuss, whether we should at all, but assuming we do, we're going to get a lot of freedom there. They're going to give, you know, they don't want,

they're not geared up. They want people to start businesses and to build up and to do that. It's an entrepreneur thing. Oddly enough, the US used to be like that, it kind of seems to stop. They want people to start businesses here, and they're not putting things in that. They don't consider themselves to be in the way of innovation and things like that.

So they're going to find frameworks where we can apply innovation subject to control. I mean, we do, unfortunately, with money, have this hang-up about sort of anti-money laundering and terrorism, and it's all a big deal. But it's very emotive, all of that stuff today. It appears to be, anyway, whether it's rubbish or not, it's a completely different story. There are some interesting stories yesterday about who, how the terrorism financing was going into Syria with somebody just received $20 million. And sure as hell didn't go through Bitcoin. And sure is, I mean, come on.

I mean, you're going to, if you, why bother with all complicated things where you can just put it in somebody's underpants, right? Let's be realistic. For them it's better. Is there anything you like to end on? Yeah, I've rambled a lot here, haven't I? I see a bright future for the system, for the currency, if we want to call it that. I see great opportunities for innovation going way out into the future with this.

It's something that I think we've been waiting for. I think Bitcoin is something that should have been built into the fabric. of the internet the day it was created. I feel the same way. And it was just missing. Nobody ever thought about payment. We should have had, you know, we have routing.

We have all sorts of other things. I think I read that they actually, they did reserve things in the protocol. Like, you know, there was like placeholders. Right. And they're sort of like, oh, you know, at one point, but I think the idea was actually to have

some sort of payments integrated just didn't know what or how. Yeah, okay, but it never happened. It never happened. And now it can. It's part of the, you know, now we can move video. you know, we can move communications, we can move media, we can move files, we can do all sorts of things. Now we just need to be able to move money and why not? It's like, why not? It has to

happen. It can't not happen. This is going to happen in one way or another. Well, thank you very much. Thanks so much for listening to our coverage of Coin Summit. If you enjoyed this episode, please support us with your donation. It really helps us traveling to conferences and produce high quality content for you. You could donate at eBetprocine.com slash tips. where we have our tipping addresses and also an option for the nation's subscriptions. Your support is much appreciated and special thanks to those generous souls we have already donated to the podcast.