The Pomp Podcast - Talal Tabbaa, Co-Founder of Jibrel Network: How He Convinced the Saudi Prince to Buy Crypto

Episode Date: February 8, 2019

Talal Tabbaa is the Co-Founder and COO of Jibrel Network. In this conversation, Talal and Anthony Pompliano discuss how he convinced the Saudi prince to buy crypto, what the regulatory and startup environment is like in the Middle East, and how tokenized debt will likely become more popular moving forward. ----- 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

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. Talal Tabah is the co-founder of Jabril Networks. In this conversation, we discuss how he convinced the Saudi prince to buy crypto, what the regulatory and startup environment is in the Middle East, and how tokenized debt will likely become more popular moving forward. This conversation was a lot of fun, and I hope you enjoy it nearly as much as I did. purposes only. All right, guys, I am super excited to have Talal here. We've got a ton to cover. Talal and I met actually in the Middle East last year at a conference. So thank you very much for

coming on there, buddy. Thanks. Thanks, man. Pleasure to see you again. Yeah, we met at a conference in Kuwait, actually. It was one of my first visits to Kuwait. It was a pretty good conference. You don't get too many of those. I think the conference scene got a bit saturated over the past year. But yeah, I got to meet you and I'm very happy to be on the show. For sure. All right. So maybe let's go through your background and how you got into crypto for those that don't know before we get started. Great. So I actually used to live in the US. I studied in Purdue University. I did engineering there and that's how I got into crypto. There was a, let's say, community at Purdue that was getting into, there was no crypto at the time, it was Bitcoin.

Then I started working for PwC, so I kind of ditched the engineering thing and got more into finance. After working in PwC for a couple of years in Abu Dhabi, which is actually where we got our first success as Gibral in terms of implementations with banks. So I worked with PricewaterhouseCoopers in the financial advisory business unit. That's where we consulted for a lot of banks, for regulators. And that's when I started figuring out that processes at banks are insanely bureaucratic and that something has to change. Actually, maybe rewind a bit more. My first internship was at the Central Bank of Jordan. And as an intern, my role was to basically look at the self-reporting for the capital adequacy self-reporting that banks do.

So that was the Basel III and Basel IV Convention. And basically, banks had to self-report how much cash they had and whether that was compliant or compliant to the capital adequacy requirements. And then each bank would basically send this PDF file where an intern, which was me at the time, would look at it and throw that PDF file out in a drawer, and that was basically it. And that really got me thinking that the way that we approach regulations is insanely backwards. It's very reactive as opposed to proactive. So going back to, yeah, I mentioned that because it's relevant on why I got into Jibreel. I'm the co-founder of Jibreel.

I'm not actually the founder of Jibril. Yazan, who lives in New York, came up with the brilliant idea. So, yeah, I used to work in Abu Dhabi for PricewaterhouseCoopers. We consulted for one of the members of the Saudi royal family. And I was very upfront and honest with him during my time at PwC so that he asked me to leave PwC and join him. He had about $3 billion of assets. So he's a pretty big businessman. and during the time I convinced him

to get into Bitcoin, Ether this was about 2015 he's about 32 years old chemical engineering graduate as well so sharp guy who also happens to be a Saudi prince so he had let's say strong financial backing

and when I told him that I wanted to quit working for him and do Jibrel like definitely because obviously as someone that bought ether and bitcoin at an early stage obviously have some has some level of attachment to to digital assets just like me and you and a lot of people on the show do um for sure yeah so let me ask this um the idea that uh a member of the saudi royal family is buying crypto is probably not something most people think about

what what's the reasoning is it pure capitalist um you know and just hey i think this is going to appreciate in price and so i want to make more money is there uh some qualitative arguments in terms of uh you know wanting to hold on to sound money or have access to um kind of mathematically verifiable assets just walk me through that that kind of logic as to how you get a prince of the Saudi royal family to buy crypto? Good question. So actually, it's a lot more philosophical than just, it's a very philosophical question. The Saudi prince that I used to work for, who's a good friend of mine as well now, basically inherited a lot from his dad. So his dad was very traditional in the sense that they owned real estate, they owned operating companies, but it

was all traditional. So construction, insurance, and coming in and inheriting that sum of money, you obviously want to change. You don't want to continue. You want to continue in the steps that your father did to build it, but you obviously want to have a stamp of your own. You want to have, let's say, be part of the new economy. And Bitcoin and crypto was the perfect opportunity to do that so when i say he invested in bitcoin and ether that doesn't mean he only invested in that he invested in a couple of ai startups yep uh he he invested in yeah so basically um i don't know if you want to call it web 3.0 or one of the fancy new acronyms but you you get the hang of it you want to invest into things that are non-traditional let's say yep non-traditional assets that have

some element of technology and innovation it sounds like exactly exactly so all right people say saudi prince it's a bit intimidating but he's a businessman uh profit oriented just like most of us um so yeah it was it was good i worked for him for about two and a half three years and then when he hasn't he hasn't actually went to the same high school that I did. And when I heard about his idea, I was like, listen, I love it. It's way better than my idea. I had an idea at the time. Yeah, this is interesting. I sold a couple of aircraft for the Saudi prince. And selling a private aircraft is one of the most tedious processes you'll ever go through. So at the time, I thought, all right, I like blockchain. I went into the aviation field

the bit and saw how, let's say, fractured the process for selling an aircraft is, it makes sense to put aircraft registrations, all the maintenance records and stuff on chain for the different eight parties to verify. So I wanted to start working on that idea when I bumped paths into Yezen again. I was like, yeah, Yezen has a way better idea than I do and a lot more interesting. So, Jibrel actually started off as something called Hawala. Hawala means transfer or money transfer. So, when Yezen came up with Jibrel, it was actually supposed to use crypto as a form of remittance.

So, blue-collar workers in the UAE and the GCC in the Middle East in general pay a lot to the likes of Western Union and others to get money sent back home. So, what they do is they use something called the Hawala system. Hawala system is an unofficial way of sending money back home, where I come to you, I'm like, listen, you have family back home in Jordan, give me cash now, I'll make sure that someone goes to your family and gives them the equivalent in your local currency. Yep. So it solves the last mile problem. It solves the insane rates that these companies charge, not only per transaction, but also on the spread for the Forex. so when when we wanted to do the system that yazan had created we realized that crypto was too volatile of an asset to be used immediately for remittances when something that is is extremely volatile it becomes very challenging to use it as a unit of measure so that's when

victor our cto came up with the idea of crypto depository receipts crypto depository receipts are basically asset-backed tokens. There's several acronyms that people use these days to describe them, but they're basically an on-chain representation of a traditional financial asset. And when we say a traditional financial asset, we mean cash, debt, commodities, real estate.

And ever since that idea came through and Victor created and deployed our first rider or first crypto depository receipt of the US Treasury bill, He actually created it and deployed it on Ropsten in early 2017. That became the core mission of Gibralt, is to tokenize financial assets and move them on-chain. So, yeah, that was the story of Gibralt. So, from the beginning, you guys looked at this and you said, you know, blockchains are simply transaction settlement layers. And if we can take traditional assets, stocks, bonds, currencies, and commodities, tokenize them, and allow them to settle on chain, there's just a massive market opportunity there.

Does that sound about right? Yep, that does sound about right. That's actually spot on. Okay. And we started with cash. Okay, I was going to say, so explain kind of the early steps of what you guys did. Once you have that idea, you start the company, and you initially go with currencies first. Why did you choose currencies and then how did you actually launch those?

Great. So we registered, Jimbrell AG is a Swiss registered entity. And in Switzerland, as you might be aware, there's sound regulations or as sound as possible when compared to other jurisdictions for digital assets. We became a licensed financial intermediary in Switzerland that allowed us to launch JUSD, JDP. So the digital euro, dollar, pound, and Korean won. The reason why we started with cash is because cash is still king.

Even if it's digital cash, it's cash. And what I mean by that is today, if I wanted to... So when people say tokenized cash, people often think of Tether. Our token is quite different from Tether in the sense that you could retrieve the underlying asset, So the underlying dollar through Jibril. And so we had to give away a bit on the decentralization element. Today, our Jcash token can only be owned or held by whitelisted or approved users. Okay.

This was an important decision that we took that, all right, we are giving up a bit on the decentralization element. But that means that we know every user that is holding the Jcash token, and that means that we can be compliant, which is the primary reason why we were able to convince regulator banks and other, let's say, more regulated entities to work with. Got it. And the thought process here is eventually you would love to get to everyone using it, but you want to start with the most regulatory compliant folks first that you can actually monitor and kind of audit or goal to keep it only on that white list as you move forward. No, no. So it's like a stepping stone, I guess, because at the end of the day, our U.S. dollar, our digital U.S. dollar is not going to be the de facto U.S. dollar used globally. But I can tell you comfortably in 10 years down the line, the U.S. government are going to have their own digital dollar in circulation. And then we'll obviously use that.

Our Jcash product is to facilitate stable outputs of smart contracts. Today, smart contracts in the way they are today, they could make a lot of our businesses more efficient. However, no business is going to accept Ether or Bitcoin, not any business, but most businesses, especially when divesting them is not as straightforward. Whereas if you have a JUSD, that JUSD is directly backed up with an underlying dollar at the custodian bank. Got it. So really, the way that the way that you're thinking about this is the J cash is a part of, you know, a short term solution for a problem you guys had, but eventually the stable value of yacht currency just tokenized. You guys would use that when that's created as well. Yep. Yep, that is correct. And so that's more on. It's interesting that you're starting with a pretty regulate a regulatory compliant approach. Talk me through what the regulation environment is like in the Middle East. Right. Because you kind of have a unique experience in that you've lived in a couple of different countries.

You obviously travel quite a bit throughout the Middle East. What are you seeing and kind of hearing from regulators and startups there in the Middle East? Great. Very interesting question. And I think that probably actions speak a bit louder than words in the sense that we spoke to every regulator possible. I mean, we went to countries that I probably couldn't pronounce properly. So we really went regulator shopping. We spoke to over 18 central banks. and then I moved to Dubai. So I currently am a resident of Dubai. We registered two entities there.

My apartment's in Dubai. So I guess the Dubai ecosystem and the UAE ecosystem was appealing to a degree that we were like, all right, one of the co-founders or one of the core team members has to move there so that we capitalize on this rush of appetite from public and private sector

for blockchain development. The crown prince of Dubai, Sheikh Hamdan, launched what's called the Dubai blockchain strategy. And that is not a single strategy. So, for example, they have a lot of other government strategies that complement it. One of them is the paperless government. So they have a deadline towards the end of 2020 when the last government physically printed paper will be out. so obviously moving everything digitally helps enable moving things on chain um so yeah i guess when when you when you say dubai or when you say uae there's a lot of regulators there's the

central bank which which we're in touch with there is dfsa which is the regulator for difc the dubai international financial center probably the biggest hub in in the middle east and um part of Asia, I guess. And you have Abu Dhabi Global Markets, which is the offshore regulator in Abu Dhabi. You have ESCA, which is the Securities and Commodities Authorities. I just listed the four that we currently work with. There's several others in Saudi Arabia. We also work with the Central Bank of Jordan. So I guess your question was about the regulatory landscape in the Midwest, there's obviously a lot of appetite because they don't want to be left behind.

But at the same time, this is not something that can work when only the regulator is pushing. You have to have appetite from the regulator. You have to have appetite from the private sector, as well as the user base. So all of these have to come into play, as well as the startups, obviously the ones that are innovating. all of these different stakeholders have to be on the same page for something to happen and i personally believe that something as uh let's say radical as this has to come from the top down it's not gonna come uh because some union is trying to push for it it has to be

coming from the top level of the country and then enforced across so yeah and and Let's talk about, so once we understand kind of the regulatory environment in the Middle East, you know, when you guys started Jabril, really the thought process was that every stock bond currency and commodity would be digitized or tokenized, right? Obviously people know that I tend to believe a very similar outcome will occur here, but has that vision shifted at all, right? After all the work you guys have done, and we'll get into some of the tokenized debt stop here in a second after everything you guys have done is the vision still the same and do you still think that that's likely to happen or um are there some changes great great great so this

question we received from a lot of doubters in your case it's not i know i know it's in your case it's kind of a lead-on for me to explain and you're not actually a doubter because i know that you truly believe that everything is going to be digitized um but if i refer to uh one of the my favorite speakers in our industry, Andreas Antonopoulos, and his idea of technology infrastructure inversion. Infrastructure inversion is something that's very interesting. And one of the things that we are currently living, and I'll explain how that came into play with the Sukuk transaction that we conducted on chain. Technology inversion is basically when you have new technology infrastructure being built on old infrastructure. A quick example would be when horses, when

when cars were came to replace horses these cars were driven on muddy uh roads that were not paved the doubters were saying that yeah cars are useless let's just go back to horses similar to how people are saying yeah digital securities don't work let's just go with paper based security um internet when the internet first came the internet infrastructure was being or the internet was using modem and using phone lines, which were actually built for people to communicate and not for data and for as internet infrastructure. So what I'm trying to say is today we are building innovative solutions

using smart contracts, but we are porting these solutions so that they fit with the current financial infrastructure. So there will be a point where basically the infrastructure becomes suitable for everything to be conducted on chain um i'll use another example from the days of or another comparison with the days of the internet is in the 90s you had information being created offline or in paper-based brick and mortar traditional format and then moved online you had newspapers that were in printed press and then moved online in the 2000s and today information is being created online

and it never sees paper-based if you see paper-based it's usually as a collectibles item or similar people use Kindle, Audible all these sorts of digital ways of receiving information that never makes it offline

this is relevant to assets because today we are moving traditional assets on chain we are taking a traditional bond and moving it into tokenized formats Down the line, assets will be created from scratch or from the beginning, they'll be created on chain. So, yeah, I guess I hope that answers your question. Got it. And so let's go into the tokenized debt, right?

Because my general view here is that currencies are already being tokenized, right? So you've got everything from, you know, Bitcoin, kind of a decentralized deflationary model to stable coins. And, you know, people are starting to tokenize other international currencies, etc. But tokenized debt seems like the next best asset to tokenize, right? And so maybe talk us through why you guys chose tokenized debt, and then we can get into what you guys did in Abu Dhabi. All right, great. So I think not only did we look at tokenized debt, we tried to be a bit more specific and we looked at Islamic fintech products or Islamic finance products in general. So today, the biggest risk in tokenizing assets is that the underlying asset is no longer there.

Let's say you are currently sitting in Manhattan, the MetLife building that I can see behind you. Let's say we tokenized all of that. And now Anthony Pompiliano owns a token that represents that. The real owner of the building goes off and sells it. What happens to your tokens? They're essentially deemed worthless. And then you have a mess. So whenever there is not a clear link between the underlying asset and the token representing it, you're going to end up with a lot of issues where as in debt, you don't really have that problem. Because you're primarily concerned with the cash flows associated with the debt. Plus, the advantages that can be achieved today from tokenizing debt are not something that you gain down the line. I'll walk you through the list of advantages that we put for Al-Hilal Bank to convince them.

So let me talk you through the Al-Hilal Bank project briefly. We participated in the Abu Dhabi Global Markets FinTech program that's led by a VC in San Francisco called Plug and Play. So Plug and Play and ADGM have this partnership to bring leading FinTech companies from across the globe to come work in the UAE. For me, it was pretty easy because I was in Dubai and Abu Dhabi is just an hour drive. We went down to meet the ADGM and Plug and Play people, and they paired us with Al-Hilal Bank. So you need a progressive bank that is willing to hear you out for you to be able to execute such a project. We were blessed that the Al-Hilal Bank team, all the way from the CEO to the digital transformation team, despite being a fully government-owned bank, by the way, they are owned by Abu Dhabi Investment Council. So you're not talking about a small mid-tier bank.

It's a government bank that's fully owned by Abu Dhabi government. So they have amazing ratings. It's one of the leading financial institutions in Islamic finance in the region. So we were very happy to work with them. We pitched the idea of conducting a Sukuk transaction on chain. And they were like, we are sold. We want to try it out. But you obviously have a million and one obstacles in order for you to do that.

First of all, we wanted to do a completely new issuance on chain. The first thing that we faced was that you have to convince, obviously, compliance and risk departments that your project mitigates risk as much as possible. So actually, the first part of our Hilal Bank project has an insane amount of limitations. These limitations are limitations that we acknowledged and we drafted along with Hilal Bank. And in phase two, three, four of the project, which we basically signed phase one as mostly it was a live transaction. It was not, I don't know, a test or some type of sandbox initiative. It was a live transaction, but it was done with a good amount of restraints. These restraints include the sukuk not being transferable.

That was probably the major constraint that we put there, so that the bond or the debt is held until maturity by the investor. So Al-Hilal Bank already have $500 million worth of five-year senior unsecured sukuk. and for those who don't know sukkuk are islamic debt products um this in specific is called i was just gonna say explain what that means uh with the nuances of kind of the uh sharia compliance um you know relating to the islamic debt all right so without going to too much detail and going off topic what we did is a murabaha transaction murabaha means profit driven the direct translation from Arabic to English is profit-driven.

I'm not the best translator, but that's basically what it means. In Islamic finance, interest is not allowed. So anything that is interest-bearing is not sharia-compliant. So what that ends up, so the way they actually facilitate the loan is that a commodity is purchased from a third party. that commodity is then sold for a profit and then that profit is the equivalent of what would be the interest in a traditional sense yep so unfortunately that leads to the process being insanely convoluted and one of the processes that could be disrupted most by smart contracts because you have a lot

of repetitive transactions that could be automated when moved on chain um so yeah that's basically what a murabaha transaction is. And so when you tokenize this debt, right, let's walk through from the issuer side, what are the advantages to the issuer in the issuance process and also in the governance of the debt while it's outstanding? Great. So, all right, first of all, I want to split between two things, the front side or cash flow facing element, which is the bank and the investor. So if you want to draw a line in the middle where the bank is, and then you have on one side, the investor, the investor that's going to buy this sukuk. And then on the back side is where you have the banking transactions that the bank have to do in order to facilitate

this Islamic transaction. And that usually means buying Sharia compliant commodities, equities, et cetera. So what we did for Al Hilal Bank is the front facing side, at least in this phase. But going forward, we want to expand through the full spectrum and have an end-to-end solution that is all done on-chain. But let me first start by explaining the front-facing part, where the investor sends the funds to Al-Hilal Bank, receives the JHB Sukuk token, and then holding the token essentially means that you will receive these programmatic cash flows whenever there's a dividends payment so i'm sure everyone listening to the show has has a proper understanding of blockchain and its advantages but in a more specific manner

when we took when we talk about debt the efficiencies that come with moving it on chain is clearing and settlement efficiencies the industry could save billions in dollars by applying blockchain to the clearing and settlement of cash securities. Risk exposure reduction. So settlement risk exposure can be reduced by over 90%, 99%, which drastically lowers capital costs and systematic risk. Also, there is no counterparty risk as the settlement happens in real time. So this is the second one.

The third, I'd say, is the cost of issuance reduction. um today when you remove third-party intermediaries and the fees associated with them the administrative burden the amount of lawyers that come into play uh with processes that are largely manual um and the multi-step processes would essentially be reduced so the cost of issuance goes down a lot the transaction costs uh you have lower costs of acquiring and maintaining users plus whenever you have to do the dividends payments those are done in an automated manner as opposed to the bank doing them manually second uh sorry number five you have uptime and availability i need this to say blockchains don't have labor day weekend or new year's

saturday they're up 24 7 and there's no single point of failure um today i'd say euro clear have a pretty strong control over the over clearing and imagine in the whole middle east we don't have a proper clearinghouse everything goes through euro clear or stream clear which for me i think is just insane because we or in dubai we work from sunday to thursday and brussels where euro clear where euro clear is operate from monday to friday so you have uh plus with the time difference, you end up with only a minimal time where you can actually do work. Finally, and most importantly, depending on how you look at it, is transparency, traceability, and auditability. I usually intentionally leave this advantage as the last advantage because it could be a

disadvantage. Today, when you have a single view of records being maintained publicly and anonymously, it allows for a seamless audit process regulators can play a secondary role only intervening as needed as opposed to micromanaging the whole process but today the ethereum blockchain for example has a huge disadvantage or a huge challenge is smart contract platforms have a trade-off between privacy and functionality. ZK-SMART, for example, is often talked about as the solution for privacy, but when I have discussions with more technical people,

they always say that there is a huge issue with implementing complex smart contracts if you implement ZK-SMARTs, because the first thing a smart contract would do is it will refer back to the original address to retrieve information. If that address is anonymized, then that forces you to give up a lot of the functionality

that comes along with the smart contract platform. So that is an advantage, and it could be also considered a disadvantage. So the full transparency... Go ahead, go ahead. So the full transparency is not something that traders, investors want to do. I'm sure as a professional trader,

you'd appreciate that you don't want all your trades being publicly announced so we believe at gibral that the current setup of blockchains allow you to um automate a lot of processes but it won't allow you to reach critical mass and uh disrupt the likes of euro clear and stream clear where uh privacy is still intact i guess in terms of because investors don't want to give that up I mean, privacy is not something that, especially when it comes to financial transaction, they don't want their transactions to be publicly recorded in a transparent manner, I guess. Got it. And so as you're doing this, it makes a lot of sense why the issuer would want to use tokenized debt. what's been the reaction from uh others maybe that weren't involved in this transaction but

you know potential investors in these types of uh instruments i'm guessing that there's a lot of excitement but maybe you could kind of shed some light on on the more nuanced reactions yeah good question so today it's very easy to move stuff on chain the supply side is not the issue You need the proper buyers, the black rocks, the people that actually buy these debt instruments to be able to transact on chain. And that's not going to happen overnight, which is why you have to start with, I guess, more pragmatic, sequential, with a more pragmatic, sequential approach. In our case, we put our money where our mouth is. We got the investors for the Hilal Bank Sukuk. We participated ourselves, plus we got private investors from the UAE.

That is not something that is very scalable because today you have lead arrangers, basically. So most banks around the world deal with the likes of Deutsche and institutions of that size to help them sell their debt across the globe. So a small bank in Malta or Dubai or any other country is not going to go around the world getting investors. They are going to go to the lead arranger who then in turn helps them get investors. But as we've seen from the ICO craze, there is a lot of potential in basically, but that also comes with its challenges that I'll go through in just a bit. But today, the method of fundraising, whether it's an ICO or whether it's a bank, is slowly but surely being disrupted. And what I mean by that is, today, the minimum ticket to buy a bond for Al-Hilal Bank or any similar bank in the UAE is $100,000 to $200,000.

And that is for three main reasons. The first reason is the regulators want to protect retail investors, and that's not something that we're addressing by moving stuff on-chain. But you have the cost of issuance and the cost of monitoring. Today, if you came to Alilal Bank and told them, hey, I want to buy Sukuk for $1,000, they're not going to entertain your thought because the legal fees associated with that $1,000,

the tracking of your profits so that they send you your profit every six months just is not worth it. But once you have that in tokenized format, you automate a large amount of these processes and you then make it feasible to drop your minimum tickets to a much lower size. And when you do that, your target addressable market goes up by several folds. It's also very important to stay realistic in a sense that these large institutions, Deutsche, JPM, and the likes, they still control, or they still have the, not the final say, but they're a lot stronger than getting, I don't know, a few thousand retail investors. But that process is changing slowly but surely, and the dependence on these ranges is not

against it here overnight but you'll be able to have alternative routes i guess got it and what what are the concerns with um tokenized debt right because there's a ton of advantages both for the issuer and for the uh the investor but if you had to point out what are the maybe some downsides or negatives to uh to moving to this tokenized debt world okay so you have i'd say four things some of them i already touched on so i won't bore you with the ones that i discussed but i think the most important one is cross-border enforceability okay so today if i hold a debt token in jordan and i bought sorry i'm i'm staying in dubai for example and i bought a security token in mexico and that security token i only purchased a thousand or two thousand dollars worth

let's assume the bank defaults, and I don't get back my money. It's not feasible for me to hire a lawyer to go to Mexico to do arbitration and such, because I've already invested $1,000 or $2,000. So figuring out cross-border enforceability is something that is insanely important and will remain a limitation until it is addressed. So I think that is definitely something that, this is not only for debt token if you buy so i'm sure you've heard the acronym sto a million times over of course yeah so if i invested in a company in yeah since i use mexico already let's say mexico and i supposedly own 10 equity of that company um today when you're still running on old infrastructure the process of distributing dividends still happens in a traditional sense

let's say the owner of that company doesn't like me and did not send me my profits what am i going to do to address that am i going to hire a lawyer and send them to mexico the whole profit that i'm going to get out of a two thousand dollar investment is let's say i don't know a thousand dollars assuming they distributed 50 dividends which is not the case for most companies but for any company actually these days but the point that i'm trying to say is that cross-border enforceability is something that is very difficult, and it will only be addressed in two potential ways. One is when you have different regulators coming on the same page. For example, there's this initiative between London, Singapore, Dubai, Abu Dhabi, Bahrain,

and I think 10 other regulators to create, let's say, shared jurisdiction where regulations they have like shared shared regulations for fintech companies such initiatives are i don't know difficult to materialize but if something like that comes into life then i think that could be a good solution for cross-border enforceability the second one is obviously a new way to incentivize people not to do that that I'll go into detail in into more detail later but the second challenge is the current the current technology stack I mentioned that smart contract platforms have a trade-off between privacy and functionality that is

something that needs to be addressed for us to have let's say large-scale issuances of that on chain thirdly is third is kind of related to number one which is regulators keeping up in terms of clear-cut processes for dispute resolution. If you have a clear dispute resolution process that removes from your need to do cross-border enforceability. Fourth, which is the most important one, is figuring out the demand side. but this is something that happens with with with time so going back to the initial point that i said about technology infrastructure inversion when electricity for the in in in the paris fair the mayor of paris said that yeah electricity is just a fad as soon as this paris shows over

the tower will be shut down in terms of the electricity being used and electricity will be a fad. And the reason I cited is that who is going to use it? This only works if a lot of people use it. This information is also applied to tokenized securities. Today, it's the same. People say, yeah, not too many people use it. So therefore, it's not going to be successful. Reaching that critical mass does take time. And yeah, I guess the Bill Gates quote here is relevant, where he used to say that we always overestimate the amount technology is going to have on our lives and on the world of business in the coming one to two years, but we underestimate the effect that it's going to have in the coming four to five years.

For sure. What do you think the future looks like, right? So, you know, we're talking right now about kind of where we are today and what the promise of this technology is, but what would you say 10 years from now is the actual impact of this, right? Where could we get or what is the potential for tokenized securities? All right. So the potential is unlimited and it's very difficult to predict the future, but there's two things that I think will happen. First of all, regulations will no longer depend on human decisions to be enforced. Going back to the initial point that I talked about capital adequacy ratios and banks doing self-reporting. When the bank does self-reporting, you are essentially depending on the bank's, let's say, acting in accordance with regulations.

The Treasury Department of the bank has the ability to break the law and not self-report, assuming the bank is not acting as a, let's say, honest actor. So today, regulations are extremely reactive. What we'll see 10 years down the line is regulations being proactively enforced in an automated manner. So you don't even have the option of breaking the law. I remember you mentioned this point earlier where the Fed will have significantly lower costs of enforcing regulations when the regulations enforce themselves. So we call this module Adjibril Smart Regulations, and we work with several law firms to translate some of the most problematic regulations into Solidity code and embedding them into our tokens. So the simplest example is our Jcash solution with JUSD. If you sent me, I don't know, 10 million JUSD or 1 million JUSD and I'm a blacklisted address, the JUSD token itself would refuse going into my wallet.

So, yeah, basically the automation of enforcement of financial regulation. That is one. The second one, which is the most interesting one, is we will see assets that were previously unimaginable. So today, the financial assets that we know are due to, I don't know, hundreds of years of financial innovation. And I'm going to use the example of derivatives and an example of a guy called Eddie O'Connor that used to work for the Chicago Board of Trade, which led to the creation of modern day derivatives as we know them. So this guy used to be one of the most prominent soybean traders, and he was one of the co-founders of the Chicago Board of Options. But basically what his suggestion was is that today, or in the 50s, 60s, they used to use chalk, blackboard to write prices of assets, commodities, and financial assets, basically. And his suggestion was, why are we using chalkboard? Let's move it to an electronic screen. People said, no, it's a cosmetic change. It's not going to have much of an effect, but fine, we'll do it.

After that happened, there was a change in how quickly a price is updated because you used to depend on someone going in, erasing the answer, and then writing it again. So when it became an electronic automatic feed, that allowed people to come up with financial derivatives. If you had financial derivatives based on a chalkboard system, that wouldn't be possible. So I guess the point that I'm trying to make is when you make assets programmatic, you could or not you could, we will see the emergence of new financial assets that were previously unimaginable using our existing infrastructure. got it and i guess really the regulators governments and banks although there is somewhat of a threat to them there's also a lot of advantages and it is probably unlikely that they would fight tokenization or digitization of uh securities as much as let's say maybe they would fight a bitcoin a decentralized currency is that your general thought as well i completely

agree with that um you you often say on short bankers i i agree with that except i want to short not all bankers i want to short the banks that are stuck in their old ways um for example a bank like revolute i have huge respect for how quickly they changed uh how people approach retail and consumer banking um a bank like al-hilal bank which is a government-owned bank that in a traditional sense if i if we had this discussion two years ago i would have told you yeah hilal bank no way would we no way would they bite uh because they're government-owned it's a very bureaucratic process but we saw that within i mean the usually business-to-business technology sales, the sales cycle is six to 12 months. With Al-Hilan Bank, I actually spent two weeks

straight in Abu Dhabi because we created like a full team that compromises of the treasury department, the treasury operations department, risk, compliance, security, yeah, a total of 12 departments actually. And we worked very hard along with our development team to translate a big portion of their 207-page prospectus into Solidity Code, and we were able to deploy the smart contract that mimics the actual Sukuk transaction. Plus, we were able to get an investor from Dubai

to put this all into action because you could translate all the bonds in the world into code, but if no one's going to buy them, then what's the use? um so yeah and i guess really the the big thing here that fascinates me is this idea of the code governing as not only law but also as a regulator right an element of law how do you think that evolved right how far can we go with code actually governing um you know significant portions of our lives rather than um maybe having code as an important piece with human oversight right like can we get to fully automated um processes or or will there always be a need for those human

uh that human oversight okay so i think vitalik has a famous quote that says code is law and i agree partially with that but i'm a lot more pragmatic when it comes to saying everything will be disrupted so even in the world today if you take a look at payments okay you have payments that are done in cash you have payments that are done through check you have payments that are done with travel travelers check debit card barter um so yeah all of these came at very different times Barter has been there since the beginning of time. Cash has been there for a very long time. Debit cards, not too much. Wire transfers online. So what I'm trying to say is that some portions of regulations will be automated and some other parts will still have to depend on human intervention and more subjective, I guess, decision making. um so yeah it'll it'll be a mix and it'll be a a process where the most program all right so you have the most problematic regulations and the easiest regulations to enforce the if you draw

a venn chart and see the intersection between those those will be the regulations that are moved on chain first yep it's fascinating i mean this to me is such an exciting part of of this entire industry and you guys are obviously at the forefront um so it's uh it's really cool to hear your perspective as to uh you know what's going on why people are doing it and then obviously you guys have done it um and hear kind of the pros and cons so i appreciate uh you doing that before we wrap up though i'd love to ask a couple of rapid fire questions um the first the first mean what do you think the most controversial thought you have in crypto is right if you if you share that thought with a whole bunch of people uh many of them would disagree what is that one thought

so i'm still not very sure about central bank issued digital currency and i've done quite a bit of research on that front. And actually, this is not a controversial point, but it'll be a controversial topic once it's there. When we see the world's first central bank issued digital currency, that will come with a lot of fraud, a lot of money laundry, because no one understands it. No one understands how it properly works. And it will be the first of its kind. So I'm really excited to see when that comes into play. I think one other very controversial point is that people say that we want to automate, let's say, regulations, but that comes with you giving up a lot of privacy. So the way the GDPR has been set up is very interesting

And it'll be interesting to see how other countries adopt similar or different regulations for information security and privacy, because that is very relevant to automation of enforcing regulations, I guess. Got it. And then what do you think is the, other than Jabril, you can't say Jabril, but what do you think the most important company in crypto is? oh good question uh so that's why i'm here i only ask good questions obviously yeah so the most important company at the moment one could argue is coinbase okay uh all right so coinbase facilitates what are people interested in today when you come to crypto people are mostly interested in buying and selling and making some quick bucks making some money getting their feet dirty in this or hands dirty in this industry um people still don't use crypto for remittance people use crypto oh wait back to the most controversial thought um the

biggest use case for crypto today and i'm willing to i guess bet with anyone on that uh is that it is used to circumvent capital as capital control measures so we'll get to the uh second question but i'm going back to the controversial one where the biggest use case for bitcoin in specific and other crypto today is escaping capital controls when the turkish lira collapsed i don't know not too long ago when uh there was political turmoil turkey jumped from i think number 150 in terms of globally, the percentage of people holding Bitcoin to the number one in terms of percentage of population holding Bitcoin. So it'll be very interesting to see how Bitcoin evolves with the potential collapse of some fiat currencies globally. I'm not saying the collapse

of the dollar because that is too radical and I'm not a big fan of conspiracy theories and such, but there are some uh emerging countries that might have difficulties or will have difficulties maintaining their own currency and it'll be great seeing how bitcoin is used then people move money from china all the time using bitcoin turkey morocco venezuela so yeah that is the biggest bitcoin or crypto use case today and got it and and if you could wave a magic wand and change any one regulation what would it be so you can change or improve it okay so i personally think that the u.s market remains or the u.s consumer remains the most important uh i don't know single factor in the world economy um so the the the ability for

foreign blockchain companies to come in and work in the u.s has not been uh great so i would definitely change the regulations in the u.s because you have companies such as i don't know binance mentioned that they wouldn't be entering the u.s other companies we haven't operated in the u.s yet because the regulatory landscape is still not yet clear but we want to work in the u.s because it's not an economy that you can just say, oh, I'm not going to operate in Italy. If you don't operate in the U.S., you're essentially giving up the golden goose.

And that's why Yezen, our CEO, and the rest of the team work out of the New York office is because our midterm strategy definitely involves us working in the U.S. Got it. I think that's fair. And it is probably a sentiment that is echoed by many people internationally. So hopefully we can keep moving forward on that here in the United States.

What's the most important book you've ever read? All right. So important blockchain book, let's say. Okay. Actually, all right, I'll give you two. One of our advisors or our strategy advisor is Don Tapscott. So his Blockchain Revolution book is a perfect book for someone that wants to go in and start understanding the industry. So it gives you, let's say, a holistic overview of blockchain, digital assets.

It even talks a bit about Jibrel as well. So I'm a bit biased there. But yeah, I would definitely say John and Alex's Blockchain Revolution is the book that I suggest everyone reads. This is for, obviously, blockchain. But I think my favorite book of this past year was Sapiens from Professor Yuval Harari. And before that was a book by Og Mandigo called The Greatest Salesman on Earth, or The World's Greatest Salesman. Why did you like The World's Greatest Salesman? is because i i studied engineering and then i worked in finance and i had absolutely no idea

how sales works um and i read that book and i followed it religiously and it's one hell of a book because it changes your mentality on uh on i i really didn't think much of i didn't put too much thought into sales but it's something that is insanely important and no business in the world works without it uh so for people that are either technical or financial and lack that sense of of i wouldn't say charisma but in terms of sales ability this book is perfect it's perfect at you refining your own strategy to sales absolutely um i definitely recommend all right so before i let you ask me one question to wrap this up i've got one non-crypto question uh you've got to admit that there are aliens out there somewhere and uh i've always thought about it in terms of um

there's human aliens right that's the comparison that people make do you think that aliens have pets and are there animal aliens all right so i think it's uh firstly you can't say that so your question assumes that aliens are human because or not human humanized where there's the alien and it's pet where in reality both would be considered aliens yeah so the definition of but it's again a very philosophical question that i like but yeah everyone has everyone uh yeah they definitely have pets aliens do have you think that there's multiple species floating around there sorry i said you think that there's multiple species floating around there yes i definitely do i love it i love it all right what uh what

one question do you have for me hmm what's the most interesting project you've seen so far and why but yeah the other question is when you're going to visit dubai but that we'll address later uh the most interesting project this is uh people will be disappointed when i say this but uh it's still bitcoin i i you know i'm fortunate enough where every single day i get uh entrepreneurs who who spend time to tell me about the things that they're working on they get to show me you know kind of what the future can look like and frankly it's uh it's pretty cool to have this job, but I've got to say that I think Bitcoin is still the most exciting thing to me. One, because it's working, right? Two, it kind of was the first application and so beautifully

designed. And then the third thing, and I think one of the pieces of Bitcoin success that just blows me away, there is no company, there is no marketing department, there is no one person who owns it, right? And it has really had to survive based on the technology and the use case or the adoption. And it's done so in a way that many people who either created it or were there in the early days probably didn't expect it to. And so for that reason, it's still super interesting, intriguing um and uh and we'll see where this thing goes but uh you know the potential of it um is uh is quite overwhelming at times yeah so hats off for that answer uh nothing has even come close to what bitcoin has achieved and and the fact that there's no one behind it

that is publicly facing and doing interviews that i'm doing to to to promote their project or idea And if Bitcoin taught us one thing, that it does not die. It could be beaten up, but it doesn't die. And here's what I would say, right? Look, if you ask me what is the second most interesting space right after Bitcoin, to me, the most interesting thing other than Bitcoin is this idea of every stock, bond, currency, and commodity being digitized or tokenized. It's not because I think that it's the most innovative. It's not because I think it's the most disruptive.

It's because I think it's the largest market opportunity. It's just there's such a large asset base in real estate, in debt, derivatives, and all these things. And so I think people are probably underestimating how large those markets are. But along with that, there's not going to be one winner. right there's going to be multiple people who serve as different parts of the industry different assets you know different regions um and and so it's going to be really exciting to kind of see um who uh who wins and in what ways and i think hats off to you guys for uh for pulling off you know at least what i understand is uh is the largest tokenized debt um transaction so uh

congrats on that and hopefully we're just getting started i mean we'll be back with more thank you thank you yeah we we got pretty good media exposure and that kind of showed us the difference between when a bank and a regulator speak to the media versus a crypto startup like us speak to the media i mean we didn't push the news of hilal bank to many outlets but when they did it it got a bit viral and we got a lot of exposure because of that but in reality we have a lot of similar projects in the pipeline some of them that are in pilots some of them that are in live implementation um we are in 2019 that is definitely a focus but commodities and real estate are two other things that we're also looking at and i'm not shy to say that real

estate is something that's opportunistic in dubai they are working on moving title deeds on chain and which addresses the biggest issue of a token not being linked to underlying assets. So yeah, it's a very interesting... It's going to be epic. Right? It is going to be epic when all this stuff happens. All right, sir.

Thank you very much. I really appreciate you coming on and spending so much time with us. And hopefully, I will see you in Dubai soon. and we'll have to do this again. Great. And I'll see you in New York. I've been a big fan of your show.

So very happy to be on Off The Chain. Have an amazing day and hope to see you soon. All right. Thank you. All right. Thanks, man. See you.

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