Custody is the Key, A Fireside Chat with Polysign CEO Jack McDonald and Linqto COO Joe Endoso

Fireside Chat with Polysign CEO – Jack McDonald

Fireside Chat with Polysign CEO - Jack McDonald

Custody is the key to...  Jack McDonald, one of the Legends of the industry in Custody, joined Joe Endoso, COO of Linqto, for a fireside chat about Polysign and the state of digital assets and custody. Custody is such a misunderstood and unknown part of the digital asset industry. Everyone takes it for granteer4q12d, but it is vastly complex and immensely important. Ok, let’s all admit custody might not be very sexy, but custody is the foundation that underpins the management and safekeeping of assets. 

The world of digital assets is growing and maturing at tremendous speed, and, as such, so has demand for digital custodian services; institutional investors need trusted custody and trading solutions on par with their requirements for investing in traditional securities. Custody is the glue that brings the broader crypto industry together, without it you can’t have tokenization, you cannot have smart contracts. So, what’s the market context? Well over the last five years, the number of blockchain wallet users worldwide has skyrocketed from 15.2m to over 81m today. In the past year alone, global cryptocurrency adoption has jumped over 880%, particularly driven by usecases in emerging markets. And whilst crypto has captured immense interest from retail investors, the role of custodians in the institutional cryptocurrency ecosystem cannot be underestimated. Institutions have to deal with much greater solution complexity due to compliance and regulatory controls over fund movements, the need to interface with established legacy systems, reporting requirements, and a load more. A better platform for custody and fund administrations is essential to address this challenge and aid accelerating the transition from traditional finance to decentralized finance. 

Polysign is a regulated qualified custodian so they custody the key. It has a native blockchain at its core, which is key from a security and a regulatory compliance standpoint. Polysign isn’t trying to be a silver bullet solution (many crypto firms attempt to be an exchange, brokerage and custody house), instead they focus on one thing and do it really well: custody-based services for institutions. It’s just acquired MG Stover, the ‘go to’ in fund administration around digital. They also have a subsidiary called Standard Custody and Trust, which has patented tech for securing secret keys, it provides custody and escrow services for institutions. The strategic imperative of putting those businesses together is to compliment custody from all angles. 


Welcome everyone we are all here to Deep dive into all things poly sign um for those that don't know it's a company that's built really transformative Financial Tech that provides institutional investors with blockchain enabled infrastructure in support of digital assets across both the capital markets and payment sector and we're talking really critical Tech in helping accelerate the transition from traditional Finance to decentralized finance custody is kind of the foundation that underpins the management and safe keeping of digital assets it's the the sort of the glue that brings the broader crypto industry together and we are all here to find out more so it is a great pleasure to welcome Jack McDonald the CEO of poly sign prior to poly sign he was CEO at Conifer financial services for decades um there he grew assets under management from 5 billion US dollars to 125 billion culminating in an exit in 2016. prior to quantify his service MD and head of West Coast equities at UBS he was named one of the 20 rising stars of hedge funds um by Institutional Investor magazine and inducted into Global custodians Legends of the industry so welcome Jack I'm also now going to hand over the reins to our very own CEO Joe endoso who really needs no introduction so Joe over to you to kick this whole thing off thank you so much Irene Jack we're really privileged to be in your company today we've got so many of our folks very excited to hear and learn more about poli-side we've explained to everybody and you know as Irene had said what you're doing there is building infrastructure that is absolutely necessary for mainstream institutions to adopt digital assets as an investment class and you know to a lot of folks that may seem almost like a boring use case but we are uh really excited because we think not only is it very technically challenging to be building what you're you're building but we also understand that it's got profound implications not just on the future of digital assets but the future of capital markets as a whole so um this morning Jack I I like for you to shed more light on poly signs Mission what you've achieved so far with the company and what significant developments you see Over the Horizon and let's kick off by maybe you sharing polyscines Genesis Story how has the company started what was the rational behind it what what did you guys from the earliest days feel you wanted to do and that's great and before I I answered that first I just want to say thank you for the opportunity uh to be here this morning Irene if you ever decide to um you know give up your day job and want to come join the uh marketing and strategy team over at Poly sign we'd love to have you love the enthusiastic intro there and you get it you get the uh the core function of what we're doing so I'm really excited it just doesn't aside to be a part of the linkto family I candidly did not know much about linkedo up until about um six or eight weeks ago and you know I've really enjoyed getting to know you Joe and the rest of the team and as we've been pushing ahead towards you know how we might be able to work together outside of Simply an investor on on our cap table quite excited about what I'm learning in terms of your own mission and and look forward to to continuing those conversations poly sign let me just maybe Orient everybody I've got my standard custody logo over my shoulder here in my fake Virtual Office that often people think are you really there it looks like a cool office we do a cool cool things going on but um poly sun is the parent company where all of our Equity has been raised uh poly sign was started about four years ago by Arthur bredo I'll tell you the story there we have a couple different subsidiary organizations that are 100 owned by poly sign so as a investor in in poly sign you own the same Equity that I own we own 100 of these different subsidiaries as well as all of the IPS so the way you can think about the corporate structure and I'm sorry not to address the the question head-on Joe I just want to orient people for a moment um poly sign owns all the IP parent company of two different subsidiaries right now one of them is standard custody and Trust which is our New York qualified custodian we can talk a little bit more about that later what that means but it's a very coveted license to have from the highest regulator in the land to be a qualified custodian for digital assets and then more recently we bought the leading fund administrator in this space of digital assets called mg Stover that business has I think 120 clients or so about 35 billion of assets under Administration very symbiotic relationship between custody and fund Administration in the same way that the bny melons and state streets of the world think about this and so we were not actively looking to buy an administrator when the opportunity came along there by far the number one in the space uh but but that opportunity when it comes you have to pay attention to and so we were very excited to uh to acquire that asset and then we've got a third project I'll call it right now a little bit of a Skunk Works Campaign building a broad-based settlement layer uh also powered by a proprietary blockchain just as our custody businesses uh we're currently calling that polynet and I think that could have some very interesting implications for what you are doing in the in the kind of private company investment platform and your mission to democratize as I understand to democratize finance and to allow uh more retail-oriented investors to come into private company investing so those are the three in line businesses parent company so why did we start poly sign and what's the what's the story there um Arthur Britto was one of the three co-founders of a company called Ripple which has been around for 10 years they are in the news of late in that they are at the crosshairs of an SEC investigation it's a good thing I think around whether or not got the sale of a specific cryptocurrency called xrp is deemed to be a security or not and they have spent I heard the CEO speak last week Brad garlinghouse at an event and they have spent a hundred million dollars fighting the SEC on this and just recently have filed summary judgment motions to determine whether or not the um whether or not they're going to ultimately Prevail I mentioned that because it's a very um leading company in the in the cryptocurrency and digital asset space that that business basically is premised on building cross-border rails for financial institutions to exchange value and Arthur Britto was really the core Mastermind of building the technology for that company fast forward Arthur left uh after I think about six years or so because he wanted to focus on other projects and initiatives and a fellow investor in Ripple came and asked him to consider starting a custody business because at the time there were really very few custody businesses for digital assets that would meet any sort of institutional demand or threshold let me just pause that for a moment I had been running as everything you'd mentioned a company called Conifer that had both a broker dealer and and we did custody in trading and a fund Administration business so also puts into perspective why we've done what we've just done and this is a model that that I'm familiar with after this successful exits of of Conifer uh we split the business we sold a broker dealer accounting company we sold the fund administration business to ssmc I was looking to do something else and met Arthur through a uh an investor who turned out to be one of the seed investors in poly sign who suggested I meet Arthur to hear his vision for the company to see if I'd be interested in helping him Arthur is a world expert when it comes to cryptography and blockchain Technology I know a thing or two about Capital markets and so we decided basically to lock arms and start this business together really to bring forth an Institutional grade platform that would allow institutions to ultimately invest in and Safeguard their assets in the digital asset industry we wanted to focus first on Capital markets though a lot of what we're building is very relevant to the Global Payments business and Parker has a lot of experience there we wanted specifically to be a qualified custodian which is a requirement for any institution in the U.S managing more than 150 million of regulatory capital and the traditional world you could either be a broker dealer regulated by finra you can be a Futures commodity Merchant renovated by the cftc or you can be a Trust Bank regulated on a state-by-state basis in digital assets finra has not allowed any broker dealers to custody digital assets so that's and not an option if you only want to support and Warehouse Futures you could certainly get a cftc license and be a Futures commodity Merchant but if you wanted to support a broad range of digital assets you have to become a trust company and so we went to the highest regulator in the land New York and got that Trust Company license a little over a year ago so let me just pause there was a long answer to your question but I thought it'd be helpful just to give some context at the outside maybe segue to uh one of one of the questions I I had Jack which is that you had made the point that prior to polish sign you pretty much spent your whole professional life in the in the traditional Finance world right you're an investment banking Investment Services of one type or another um what was it in that conversation with Arthur that made you decide to shift to this vision little asset world and maybe now that you've got experience operating blockchain company what are some of the more important things you learned in in the Trad fire world that you're now bringing into digital assets and poli-site it's an excellent question I think and I will confess I could wing wing it maybe to tell you the difference between blockchain and Bitcoin at the time I I joined Arthur to start but I you know just being a student of the tradify industry certainly felt like there was an enormous amount of friction in the industry that the incumbents are loath to really change because that friction allows a lot of middlemen uh if you will to use expression to have their hands in the cookie jar and to make a living off t plus two settlement uh for example when the technology I knew existed for instance settlement and having a sense of the paypals and the venmos of the world working a whole lot quicker and faster than going down and and you know writing a check or taking out money from your your local bank branch and walking across town and handing it to Joe if I could just venmo them or PayPal him instantaneously to the user experience even though there's still some friction at the back end there that that was exciting to me and I had a belief that less about cryptocurrency but it was more about the underlying technology and blockchain that there would be this evolutionary sort of integration between the old and the new world that would have a profound impact and some really smart people that I met in that Journey were focusing on this space uh specifically Arthur as I learned more about him I just thought it was fascinating and the opportunity to work with him I thought would be really unique and I would learn a ton I also met in that courting phase a fellow by the name of Tim keaney who ran all Asset Services globally for bny Mellon for about 10 years or 12 years and he had agreed to be on our board literally they were at the time of his retirement from bmyml and they were the largest custodian in the world I think responsible for custodying some crazy number like 26 or 28 of the world's assets and so he very much understands the importance of custody but also the surround sound of other services like fund Administration that he was responsible for being why melon and I had some connectivity to at Conifer and so I thought this was just too great of an opportunity and looking back on it I thought it would be a very binary sort of outcome and that within uh a year or two I would know that it was either going to be a rocket ship or it would be a dud and um here I am four four years later and I'm I'm have more conviction that it's going to be a rocket ship but it's it's taken time to to play itself out this whole industry I think has gone through um a little bit of a bits and starts around the um thesis that institutions are plowing into the space and they're going to really transform digital assets as we know and that that Stampede of Digit lasts of investors coming into the space I think has been slow and steady but it's been less um intense than many had hoped for or projected and we can talk a little bit about you know kind of where we are in the in the uptick of the industry yeah in terms of lessons go ahead I was gonna say you know a couple of the lessons learned that um were I think hunches that I had uh when we started that have been reaffirmed number one the importance of custody it's really really important and Irene mentioned at the outset that everything's in around asset servicing really starts with custody and so there's a lot of attention being placed on on custody having a license uh around that um and being a regulated entity is also very important you know we're I think of what we're doing in in the in the industry that poly sign sits in as we are really rewiring a new operating system for Capital markets and there are players that are regulated and there are players that are not there's smaller companies larger companies we've taken the path of being Conflict Free I.E we don't want to be an exchange in a custodian at the same time because we're somewhat Tethered to the old world s that institutions have Gary Gensler seems to see it our way he's spoken repeatedly about that segregation of Duties between exchanges and custodians as opposed to a coinbase or Gemini that actually have kind of a joint model to them it's not per se wrong it's just a belief we have that there will be that segregation of Duties we think regulation and being licensed is really important we welcome regulation it's a lesson from the old old world if you will that I think is going to be very important as institutions wade into this space um I also think a lesson around the underlying technology um and then the importance of settlement but the our ability to provide a settlement and a custody solution that is built upon a proprietary blockchain I think it's going to address a lot of the inefficiencies that that help to make a living for all of us in the old traditional Finance world I think it's going to be really profound the impact that that has in in this new world order over time uh Amen to everything you've said um Jack starting by the way with your statement about you know custody so I mean it it's clearly an important impetus for the discussion we want to have with you about being our custody partner because we're now uh called 153 million or so in assets as as of this morning and growing by the day and at a certain point despite the fact that these are not level one Assets in our private restricted stock that need for custody and especially if we we have regulated institutional Partners um working their Channels with us that custody requirement is going to become ever more important and when the day comes where we we turn on our blockchain implementation and we digitize all of these Investments that our members are making into Securities tokens by golly at that point it'll be absolutely impossible to operate without you know a good crypto custodian right right purely for operational reasons never mind regulation so um I'm super excited at what you guys are building and I think um it is going to be critical to the future of companies likely to and everybody else in the market space that's great having said that you know you've been now you've been in the trenches for four years right you've obviously had more than your Lion's Share of talking to institutions about the story and why they can why polycline can help them make that leap into this new class of assets what have you learned in terms of maybe the biggest hurdles to full-on institutional adoption of digital assets I think there's three factors that institutions by side institutions are are weighing that they need to get comfortable with before they'll they'll invest meaningfully and I should say I was on a panel with with someone um at the mainnet conference on Friday in New York and the topic was institutional adoption specifically of defy decentralized finance and as you'd expect a lot of these conferences people talk their own book and and she was saying that they've onboarded over 250 or 300 institutions to their product and I asked how she defined an institution and she said any organization with more than one person so that's not my definition of institution just to come back you know we talk institutions that could range from uh organizations like yourself pensions endowments hedge funds could be a private Equity Firm uh or fund that invests in in private companies um those are the sort of you know it could be rias multi-family offices or family offices but it's not two guys in a garage um I think the the three factors that are constantly being reviewed by these institutions in no particular order of importance first and foremost are education understanding how digital assets work what the risks are what the benefits are really wrapping your head around it second and very much related to that are regulatory concerns it's still unclear what the taxonomy of all these different assets are the Securities of the Commodities are they currencies are they other and The Regulators are not helping us gain any Clarity on that there's there's kind of cryptic messages that come out from time to time or vague messages saying well Bitcoin is a commodity and ethereum likely is but there's no guidance on the rest of classifications for these assets and that's that's the fight by the way that Ripple is fighting on behalf of the industry they've got the resources that most don't to really take this all the way to the top against cscc and fight for Clarity on whether or not these assets are deemed to be Securities or not and if so does the Howie test which is 75 years old does that still apply or should there be different considerations in a different lens through which you you analyze these assets so Education First regulatory Clarity second and then the third is infrastructure which is the the you know the pond that we're fishing in if you will where institutions even if you get comfortable with the asset class and sorry we're going to start to buy some Bitcoin in our fund and we're comfortable uh around the licensing of that and the regulatory considerations do we as a large organization have confidence in infrastructure and if I have to go into a completely different architecture to invest in these assets is it worth it does it create operational risk that we're not comfortable with Etc we're used to dealing for example with the segregation of Duty between exchanges and custodians we custody with Bly Mellon or State Street or Goldman Sachs we executed the NASDAQ and we executed the New York Stock Exchange and the ftse overseas we're used to t plus two settlement we're used to tax reporting we're used to a fund administrator who understands the assets we understand how the audit process all those sort of things here's our order management system here's how trade entry gets done and all of a sudden now I go into this Market where if I buy IBM I go to my Bloomberg machine at the end of the day at 401 PM eastern time and there's only one price for what IBM closed at on the New York Stock Exchange the only place I can buy it is on the New York Stock Exchange we all agree what it's worth today simple straightforward standardized Bitcoin you can buy Bitcoin 24 7. it exchanges all over the world there might be 80 or 90 different exchanges that you can buy each one of those exchange has a different price and what price are you going to take that's going to trickle down into your fund what are you going to tell your auditor at the end of the year Etc so there are all sorts of different considerations not to mention the fact that to buy your Bitcoin as opposed to IBM where you call up your broker you say I want to buy a thousand shares of IBM and you've got today trade date plus two in order to deliver your currency to purchase the shares and the seller has today trade date plus two to deliver the shares and then you you clear and settle the trade when I buy my Bitcoin I have to pre-fund the account at the exchange so I go to coinbase and say all right I'm going to buy a hundred shares of Bitcoin today I have to get my money to The Exchange before the transaction happens the seller has to move the shares out of their custodian unless they're at coinbase to The Exchange and then we instantly settle that trade so it's a very very different operational flow and our view in it at Poly sign for both standard custody and mg Stover is to streamline that process as much as possible because we believe that institutions will evolve we preach Evolution not Revolution and to the extent that we can build systems that integrate with their current systems to the extent that we can work with their current service providers Auditors other custodians other fund administrators lawyers Etc we want to do that because we want to lower the barrier that it's going to take for institutions to get comfortable we have a lot of institutional pedigree and DNA in our leadership team we come from this perfect balance we think between the tradify expertise people like Tim keaney myself and then you've got the the digital asset cryptography blockchain expertise Arthur Britto I should have mentioned David Schwartz who's a leading cryptographer he's the chief cryptographer at Ripple he's on our board he's an advisor to really have this blend of talent that we believe is very unique in the industry foreign it's it's interesting as you described some of the uh the elements of infrastructure right that um populate the traditional Capital markets today Jack how if you're going to be evolutionary and not revolutionary and you've you've got to take some of those things make them much more efficient using blockchain technology but not necessarily supplant them or replace them right there might be other things though that will be replaced like t plus two settlement right which doesn't have to be t plus two and with the right kinds of linkages you can do atomic settlements on chain and instantaneously settle without incurring any form of counterparty risk right on that clearing of settlement process so um as you look at that broad landscape clearly you're you're saying okay custody that's an old world thing but that's something we can carry over into the new world what what other things do you think get carried over and what things get killed I think that's it's a really good question well let me just tell you by knee-jerk reaction which is not relevant to poly signs but I can't stand Title Insurance it drives me crazy you you've you know we we're home we bank with First Republic we have our mortgage there we did some construction had to move to a construction loan so we had to refinance even though it stayed within the Walled Garden of First Republic it's not first Republic's fault I had to go back to Chicago Title pay an extra five or ten thousand dollars for them to affirm what we already know that first Republic and I own the home we do our construction then we convert it back to a traditional mortgage and I have to go back to Chicago Title to confirm what we already know which is I still own the home with with First Republic and each time you know ten thousand dollars um you know racks up whereas if that was all stored on a blockchain the title anybody could go to the county clerk website and see if there's any liens on it and it would just live on this immutable golden copy of the truth it really is I think blockchain technology replaces trust with truth and so if you think about that just as a corollary into Capital markets cap table management you know will be transformed in terms of how data lives on a blockchain I think the whole settlement process will shrink over time whether we get the instant settlement I think it's inevitable we have to but there's a lot of of incumbents who don't want that to happen I think a lot of the record-keeping that's manual goes away because it's going to live on chain I think that um a lot of the treasury and collateral management um processes will be made much more efficient because one will be able to see you know I think the ability to pledge assets the same asset to various places that have brought down you know hedge funds and and Banks you know from time to time I think that will that risk will be materially compressed if I've got you know 10 stocks in my portfolio and if I pledge them to Goldman Sachs that should live on a chain so Deutsche Bank wouldn't be suckered into making the same um you know transaction or loan against Social Security that's already been pledged somewhere else that transparency is really critical yeah but custody as a function remains absolutely because you have to more than ever uh store these assets securely and I think that a fund Administration also will always remain because there needs to be an accounting and reporting to investors for pooled vehicles whether it's a hedge fund or a private Equity Fund Etc but you're but but it's going to be much more Cutting Edge modern custody and fund management administration because you're going to have tools that don't exist in the tread file World which are provided to you by the new world that's right now blockchain technology so for example solving the problem of rehypothecation of assets right you you can solve that much more cleanly and easily through a mutable ledgers no questions I I completely get that you also think about just the subscription process coming into a fund and you think about linked to if I have and this is not far away from the technology being able to deliver it whether or not with the the markets embrace it but think of this notion of a global wallet a global ID that is my my digital passport that I can do a lot of things with I control access to it I control uh delegation of signing Authority if I came and wanted to invest in in the link to platform and had just had a digital ID think about how many processes that could be somewhat cumbersome or manual today for you would be ameliorated and how much smoother that process would be and rather than having to go sign subscription docs at all the different private Investments I make if I have this one uniform passport that a test that I am who I say I am that gives delegation of Duty for different things to different people or different organizations that would just materially streamline what is a manual process today what's right with with errors from fat fingers you know Etc and I think it's just one area where we're going to see parts of our business even just in terms of the onboarding subscription wire processing you know a lot of those treasury Services investor services today are quite manual on nature and they don't need to be yeah do you see your I assume that your Revenue model today is still very much along the lines of traditional custody and fund management and administration right do you see that Revenue model changing as you evolve into newer types of product like the polynet product that you were alluding to I do today we charge primarily basis points of assets under custody for the custody business and the fund administration business is a similar basis point during while there are some more fixed fee engagements there to simplify I think over time um we may consider licensing some of our software out so that's part of our longer term strategic plan to have 50 of our Revenue five years from now to be in a licensed subscription model and so that uh bodes well for more of a reoccurring Revenue model you know today when you're when you're charging base points of assets you you know you kind of live and die by the sword if you will so in the in the boom years it's great in the bust here is you know not so great and so that's one example in the polynet it's going to be a combination of a licensed software approach as well as a a toll booth of sorts uh where there will be a mechanism to charge on a uh more of a commission like sort of structure transaction by transaction base the more assets that settle on that Network and chain the more that we will be able to um you know somewhat tweaked the revenue model there yeah that that makes perfect sense um and and what's you know before I turn this over to q a I've got to ask this question what's the exit strategy for poly sign or is it too early have you do you you know I know you probably spend most of your day thinking about growing polycline not exiting but well I actually I think about this yeah no I think about the two together you know my job as a CEO is to create value for our shareholders I have a slightly broader view that it's and the way I'm going to do that is by having a a very positive and professionally stimulating and culturally healthy Organization for our employees because I believe if we have happy employees it starts with our employees our human capital and if you get that right you'll have happy clients and if you get that right you'll have happy investors and so I do think about this Continuum I'm on a happy Brigade here Joe trying to make everybody happy I'm partnering with the right firm because we share exactly that same Outlook and values that's great the exit strategy is to sell the company ultimately to I think another Financial Services firm a strategic that will finally eclipse the hurdle of saying we need to be in digital assets and make a decision that it's going to be quicker to buy versus build this is difficult technology to build and I think all the global asset servicing firms are going to be in this space so the bmy balance of State streets of the world some of them are starting to to experiment with the fund Administration side of the business they're not there yet and nobody's there yet in custody in terms of the big guys they're all looking at it they're licensing software they're building but The Regulators haven't yet allowed them to offer that service but I think once that that door opens I think you'll see a consolidating phase and an m a boom in the space which is what I think the most likely exit for us would be clearly you could go public you know when the spec boom was a little bit brighter um we had some conversations inbound just so people wanted to know if that's an area that we would look to go it seems premature for me right now to to sell the company we have a lot of value to build and a lot of opportunity to uh to leverage and says for our primary focuses right now oh great um Irene perhaps you can moderate some questions from our audience yeah yeah thank you so much so we have a question from Michael um saying how will Ripple net and polynet work together or apart so um unclear at this point um what support So Ripple full disclosure they're an investor of ours um I love their business model uh we've got a lot of DNA um in in the firm uh coming from Ripple although just to be clear ripples not on the board they're not an advisor they're not a controlling shareholder but they've been supportive and I continue to think and we continue to explore ways that we may uh be able to support them uh particularly on the on the custody side you know which is one of the one of the areas that we think a lot of the institutions that are taking advantage of Ripple net who are trading and getting on-demand liquidity uh through using the rail system and using the bridge currency xrp that we could be in position to support them either through our standard custody business or through a modification of that uh where the end users of Ripple net could benefit from having a strategic custodial partner great thanks um Nick I know you had a question um you raised your house over to you yes thank you Irene hi Jack thank you so much for being here today we really appreciate it I work with um I work with our member investors every day and and and they often ask me a lot of different questions about poli-sci I know David Schwartz has been on Twitter for years and and always stressed that poly sign is in stealth mode we're in stealth mode we can't talk about it but he always seemed so excited about it and wished he could talk about it but but wasn't able to um but one of the a couple of questions I had was on the on the website it talks about financial institutions leveraging digital assets um also talks about transacting and digital assets across Capital markets and payment sectors can you take us down to ground level and give us a couple of examples how your customers um what sort of services that you would provide your customers in relation to those things yeah well on the on the payment side again think of us as a bit of a lock box uh first and foremost on the and specifically within standard custody what we're chartered to do is provide custody and Escrow Services uh for our institutions so we're less um focused and we don't have a solution today for a like a payment rail but you can think about it uh probably the best Testament to the synergies between custody and payments would be what PayPal did and buying a firm called Curve a number of years ago I think it was two years ago and what curve does is they essentially are a or were a firm that had built what's called multi-party Computing which is essentially a a sharding software if you're familiar with private Keys you buy digital asset you get a key generator think about 27 digit alphanumeric code and you write that on a piece of paper and you break it into three pieces and store them in separate places and I'm simplifying it um that there's a there's an algorithm that does that and there are a couple of firms a number of years ago who started businesses doing that curve being one fire blocks it's a quite successful company in the space more recently copper in the UK and there's another firm that was recently acquired by coinbase Unbound and that's the business that they were in we viewed that as as critical technology to have as part of our solution we have a multi-faceted approach we haven't spoken much about this but we have a blockchain at our core that Arthur and David designed that MPC Computing uh part of it Arthur and David I introduced to all the companies and they rub their chin and said I think we can do this better ourselves and so we built our own algorithm that does that key sharding um PayPal is getting back to your question wanted to own that because they envisioned building out this this um digital component to their payments business but critical whereas in the in the traditional fiat currency world where the payments are US dollars or the Euro or whatnot traditional institutions can Warehouse the currency or custody the currency when you move into a digital asset space you can't go to bny Mellon or Wells Fargo and say can you hold my Bitcoin and so they needed another solution they could have hired us to be their default custodian we had conversations around them or they could have built their own which is essentially what they've done and they bought one of the leading software providers to be a critical ingredient so point is payments businesses do require a form of custody and if you think about a lot of the um and ripples has a core focus on global remittances which are smaller payments more frequent transactions you know the Philippine fisherman who wants to send money to his cousin in Spain you know how does that happen you know it might be fifty dollars to the equivalent you know the idea of going to a bank getting a wire sending it across town like you just spent 40 bucks on your wire for a 50 payment it's going to take three days there's an error rate don't really know when it gets there the recipient has to go to a bank you know it's just it's messy quicker to get the money put in your suitcase fly there obviously a little more expensive but but through Ripple you could do it instantaneously and at a fraction of a penny and so um we're bullish on on Global Payments we're bullish on on the whole remittance business and you know we have not yet really built out a solution specifically targeting that but it would be some way shape or form having something to do with our with our custody and or settlement technology that we're building appreciate that Jack one other question before um Irene asked the others um it's our understanding that that um that polycent has 200 plus customers currently are there are you able to give us any names of any of your customers are you able to to release any of those bigger names that our investors might be aware of yeah we uh don't release any of the names um just for security reasons on the custody right so you know and some of them are big names and they don't want to be targeted or you don't know in the same way that you know customers don't say where they're where they're um assets are held sort of thing on the fund Administration side um I I probably shouldn't say that just because I don't have permission to but I can tell you on the fund Administration side they are if you looked at the top 10 leading digital asset investors I think we're supporting eight of the top ten that helps us appreciate that Jack thank you you bet thanks Nick um we have a bunch of questions but I have one that I just wanted to touch upon which you've you've basically just mentioned which is the blockchain at the core and I wanted you to talk a little bit more regarding standard custody which is obviously the only custodian to utilize third-party transaction verification and build its platform on a combination of smart Hardware security modules and Noble blockchain tech so I think I read that you once said that that makes it kind of better than cold storage um so for those that don't understand the space well can you kind of explain in layman's terms the significance of this because it's actually kind of a big deal it is a big deal um I will um try to differentiate and back up in the industry maybe five years ago let's just say or seven years ago which seems like a lifetime storage and I reference back to you buy a Bitcoin you get this key and that is your proof of ownership it's a bearer instruments so it goes back to you know there is one stock certificate and if I take it out of Nick's hands now it's mine now I own this dog and Joe takes it from me he's got like there you can't say Hey Joe took my stock certificate and there would be a ledger over here say yeah that's right jack owns it in in the case of crypto it's a bearer instrument so that that access to that key is really super important because that is your proof of ownership and and all transfers are irreversible now the benefit is you have this blockchain that essentially is a otherwise known as a distributed Ledger uh technology that stores in an immutable way lots of information that can never be reversed so there's no revisionist history going on in this industry either in the early days of storage there were two different types hot and cold and Cold Storage referred to a mechanism of storing those private keys in a way that was completely offline and in the extreme cases and one of the First Institutional custodians literally had machines that stored the information that were not on the internet they were not online that was kind of plugged into the wall and they were literally housed in bunkers in Switzerland with like armed guards there and nobody know where it is and if you found out where it is and if you're broke in and got past the guard and got into the cage and you know took the machine out you could theoretically find the the keys or other people have had them in like the satellites or whatever that's great maybe it's great because they are super safe there's also a bit of a zero um or a single point of failure because if I know where you're where your bunker is and I bomb your bunker you're kind of out of luck and um the industry has obviously evolved since then the other challenge with it is going back to what I said about pre-funding if Bitcoin miraculously today goes from twenty thousand dollars to fifty thousand dollars and you say great I want to sell it it's going to take some time to go to the bunker get your key out of the bunker walk back put it at the exchange and trade that so it's not a particularly um practical solution either and so what we've come up with is a way to do that through this key sharding software which I mentioned um the MPC we store it in a series of Hardware servers for one of a better term called Hardware security modules that are stored at different co-location facilities different vendors all around the world and different machines and they go in clusters and so you have to have these different hsms essentially coming together to agree a transaction and to move it all of that and these machines Hardware security modules self-destruct if you try to tamper with them so you take a screwdriver to it it'll it's like James Bond kind of stuff it blows up and which is okay because we've got other hsms that can come together so there's no single point of failure and the beauty of the blockchain is it runs that multi-party computing and the business logic through to store in the hsms so another core feature I'm looking at the the four of you right now you have an organization that's linkedo's uh crypto Holdings you will have Quorum levels of approval so Joe can't just decide to move all the Bitcoin from this address to that address because he might be stealing it so he's got to get two of four signatures or three of five signatures that also support that transaction and all that business logic as well is stored in our blockchain so The Regulators love it it's a differentiated kind of belt and suspender approach the insurers love it because it adds a different layer of security and it also allows us to do a lot more machine to machine transaction processing without the risk of human Intervention which slows things down we're the most secure but we're also the fastest and it also mitigates uh the risk of collusion because no one human being can um essentially you know change that process or or deter what the signatories would otherwise have directed yeah I I might add Jack that uh you know after we did our very first technical review our engineering team and your guys not only were we impressed the fact that you have the MPGs home framework but the consensus protocol that brings all of that together and to validate actually on the Ledger that consensus protocol that you guys have in corporate Partners parties that are party to the transaction itself and and you guys as the platform party the third party validators that have zero anything to do with a transaction right right and we thought that was really neat yeah so we have a bunch of other questions one is from an anonymous um attendee and the question is is standard custody and or poly sign going to help solve the naked short problems in the Securities markets is that one of the Avenues of the business not certainly we're currently focused on um that would I think be well I take that back there is the answer to that is actually yes uh from a standpoint of something that we're doing around an escrow feature where this requires some permissions and some some integration we have a strategic partner in cow and digital the Investment Bank if you are a hedge fund let's just say you've got a trading relationship with cow and you've got a custody relationship with standard custody we've built something we call a look and lock that if you give Cowan permission to see what's in your Vault you call Cowan and say trade right here 50 Bitcoin and sell it for me um you would otherwise have to move it to The Exchange to sell it and move it out of our storage it's going to take you five minutes you know you're on the road or whatever you give Cowan permission to essentially lock that asset they go out and sell it and you would settle later that day or next day or whatever you agree to with them but for that that ability to lock the asset in our in essentially in an escrow Vault account would be naked on that short so there's a there's a Nuance to it I don't know if that was the the context of the question but wearing a custodial hat there are things we can do to help solve that that problem and it's really important because of the bearer nature of the asset great Kelly is asking will polysand custody assets for the retail investor will they custody defy assets such as Flair including all off flares assets we do not support retail customers or our threshold that we've been licensed for our accredited investors so there could be some retail investors that are accredited investors that could theoretically have an account with us and we will be cussing uh different D5 assets than we are today okay then we've got another question um the Claire is on our list we're not currently but it's on our roadmap okay um is the polynet coin crypto asset going to be made available for purchase on the public markets it's a ways away uh but ultimately the answer to that would be yes but but as maybe some regulator might be watching this we got a lot of wooden shot around um ultimately bringing quali net version one will not have a native token to it but the longer term plan is ultimately to have a token we have a lot of work to do in terms of structuring it to determine whether or not it will be a security or not and if it's deemed to be a security or if we believed it to be a security we will absolutely register it as such and comply with all the laws of the land um Jerry is asking why when would a financial institution decide to build custody into their framework versus buying custody as a service for example NASDAQ comes to mind as they just announced their digital asset business how can poly sign compete in an arena where larger institutions are willing to build and offer it all students so I think it's going to become a speed to Market sort of um decision that a lot of the bigger Banks would do bigger Banks want to ultimately own custody because it's core to what they do you know being white melon State Street Northern Trust they're custodians first and then they've got all these businesses that evolve on top of it so and we've talked to you know most of the big Banks they ultimately want to have their own solution the question is whether they buy someone like standard custody and then build upon it or start from scratch and I can tell you the technology is taken us four years to build it with the brightest Minds it's not something that your I.T team at State Street just decides to up and do hiring the talent to build this is tough it's tough as a startup in Silicon Valley it we are able to attract the type of Engineers who want to work with startups generally speaking that same type of engineer does not want to go work for a big bank and I think it's going to take the big Banks a while to get there and when this tide turns and the institutions are stampeding in they're going to want to be there quick and I think that will dictate a different approach from a strategic M A standpoint for them it's my view we've got time back two more questions Chris is asking any chance Jack can talk about the evaluation I know you're on screen and um I thought you might want to jump in and ask a question yeah Jack thank you so much for sharing your thoughts with us today and I'm on the board of link two I love the way you pronounce link to linkedo so I'm gonna start using that link to it from now I heard Joseph so I got it right in the second half I apologize Joey is thinking about Lincoln so ciation but uh when I I be on the screen for a while you you sort of already answered my questions I did I was asking you how the big guys uh how you differentiate from other uh newcomers in this space and how you compete with the big guys you you mentioned that uh Wells Fargo already have their own custodian system uh so how do you compete how do you differentiate yourself uh with others well none of the traditional banks have a solution yet because they are at their at their core they're either broker dealers and finra has not allowed them to do it or uh they are g-cities globally systemically important financial institutions that require fed approval so to date we have not seen the Goldman Sachs Morgan Stanley you know or the Wells Fargo cities um offer a custody solution they're all looking at it building it but they're not live in the market the other big folks that we compete with the coinbase the world Fidelity has an offering in a separate subsidiary coinbase's coinbase you know everybody starts with them uh we've got some I think differentiators in terms of our service levels we are also confident they're in exchange they're a market maker they're a broker they're A lender they're retail they're institutional their custody they're an exchange all in one some people don't like that we're just custody so that's an easy demarcation folks like Fidelity only support Bitcoin we support 30 different assets so there are differentiators there and it's not a situation I think where you'll have kind of a one-size-fits all I think just like hedge funds today or or asset managers have multiple prime Brokers and custodians that use I think so too but will that be the case in the digital asset Arena so do you have a competitors already that you are aware of oh absolutely oh yeah can you name a couple sure so we I mean we compete with with coinbase there's a firm called bitco which was one of the earlier ones there's a firm out here called Anchorage uh that we compete with so Jack uh is a lot nicer than Mike bellsheet and we would never partner with bitco for that reason so um thank you Jack thank you Joe so Lily to your to your uh to your to your naming rights we're actually going to keep it linked to poli-side right So eventually we'll have linked to poly sign I like that uh Jack uh Joe you get the opportunity to ask the last question uh and then Jack if you close this out after this we would like to keep us on track contact thank you um rather than ask a question I'm just going to bring up uh you know a piece of trivia that I think might at least be um peripherally relevant here which is that um like Jack I'm I'm kind of new to blockchain uh coming from the Trad fire world and a student uh of it but I'm also for those of you guys that know me well you know this I'm also a student of rock and roll and uh this year is the 50th Anniversary actually of a landmark record that the Rolling Stones put out called Exile from Main Street and I was thinking about that and I was thinking that's what Jack is he's an exile he's actually exiled from Wall Street and uh boy are we lucky to have Jack as an exile from Wall Street uh in our ranks so with that I just want to again thank Jack so much for spending an hour with us and if he doesn't mind I'm going to have you know um Keith Richardson Mick Jagger just take us all out yeah love it well thank you very much a full-time income from YouTube without ever trying to grow your own channel [Music] thank you Jack really appreciate it thank you Jack thank you thank you thank you Jack thank you thank you Irene great job [Applause] I love the stones too can't turn it off there you go we'll grab a beer together and listen to it you got it all right thanks guys take care thank you everybody thank you

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