Investing in digital currency and blockchain technology

In part 2 of the AMS Crypto Investing special Elizabeth Rossiello, AZA Finance Founder & CEO and Adam White, Bakkt President join Yahoo Finance’s Zack Guzman to discuss Investing in digital currency and blockchain technology.

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ZACK GUZMAN: And Elizabeth, we were talking about regulation heading into break here. And it is interesting to kind of get your insight when we talk about that, given the fact that this year, we've seen El Salvador adopt Bitcoin as legal tender. We were talking about the ease of efficiencies in regards to whether we should look at Bitcoin as a commodity or a currency when it comes to transactions across state lines here. Talk to me about how big that is for the sector and what it does maybe to change the way regulators think about it.

ELIZABETH ROSSIELLO: Well, there's a lot to be said about accepting multiple currencies as legal tender for smaller nations who struggle with liquidity. But I think what we need to think about with regulation is that it's not apples to oranges here. There's a lot of different products, a lot of different uses for this technology and for this asset class. And we can't have one regulation fit them all.

We work with a lot of large Fortune 50 companies and their corporate treasury teams. And they settle with us in stablecoins. For example, USDC. They shouldn't have to have a specific license to trade via USDC as opposed to another currency pair going forward. This is just going to be one other currency pair in the basket.

So I think when we think about should this be legal tender, should this be a CBDC or a central bank digital currency, should it be holding as a portfolio or as an asset in a wallet that were trusted third party provider, there's a wide range of regulation for this industry. And it is an entire industry.

So we really need to be specific when we talk about it. I think what's most interesting is when we see governments get involved, like in China, and the PBOC issue its own coin and really set the scene for what it thinks all of the industry within China should look like based on its own government participation.

I think in other places, we've seen the private sector lead. We've seen a mixture of private-public partnerships. And in some spaces, we've seen regulators simply include trading in this currency or using this infrastructure under existing regulation. So I think we need to be a little more specific when we talk about it because this is a major issue for a major movement.

ZACK GUZMAN: Yeah, and I mean, on that front, you know, we talk about it. It's good headline material when we talk about crypto killing traditional finance or banking or anything like that. But you've kind of looked at it as a complementary model to kind of work around some of the issues that traditional banking runs into, particularly when it comes to cross-border payments and transactions and the like. I mean, is that maybe the right way to be thinking about it now here in 2021, that it's mostly complementary?

ELIZABETH ROSSIELLO: 100%. I mean, I have a t-shirt that says, "Normalize crypto." But I think we need to think about it in terms of the future of monetary policy, the future of alternative assets to invest in, the future of technology and how we're running companies based on open source software, interconnected self propelling software. I think it's a lot of different topics that we need to think about, but it's affecting everything from how we trade to how we interact with each other, to how we move money and the infrastructure beneath it.

So I'm sorry to be general when we talk about it, but I think it's-- we need to separate what's going on here. I mean, there's some very cool things at the edge of the industry in terms of DeFi and NFTs. It's a lot of young startups. There's Fidelity and JPMorgan getting involved, governments, like I said. So it's really across all industries from the front to the back office, not only just the technology, but also a new way of doing business.

ZACK GUZMAN: Yeah, and Adam, when you kind of dig into the new way of doing business back here in the US when it comes to regulation, there have been a lot of complaints in terms of just not having regulatory clarity from the SEC or maybe other agencies as well. I mean, how do you kind of, I guess, iterate when it comes to the technology there at Bakkt if there are those uncertainties? Because you're dealing with a lot of digital assets, not just airline rewards miles, but all kinds of loyalty points and crypto assets as well.

ADAM WHITE: Yeah, good regulatory starts with partnership. And what most people don't know is we spent years working closely with regulators before we ever launched our first product, namely regulated Bitcoin custody, and then the first physically delivered Bitcoin futures contract here in the US. That partnership is what helps provide regulatory clarity.

So a lot of the work we do at Bakkt is regulated as a money transmitter in nearly 50 states. We have a New York BitLicense. We have a New York trust license as well. That-- those licenses and that partnership with regulators allows us to offer new products and continue to be innovative.

So to us, it's-- regulatory clarity is not something that happens overnight. It's something that takes time. I think we're optimistic that we're seeing the US ask those tough questions. And we're seeing the crypto industry rally behind that, provide education and partnership. But it's going to take time. And that's kind of, again, the heart of what Bakkt does, is we launch products that we're confident meet regulatory requirements, but can still innovate and leverage all the unique things that crypto provides, like DeFi, like NFTs, like the web 3.0.

ZACK GUZMAN: We didn't even get time to get into NFTs. I know you guys were real jazzed to talk about that. But we only have about two minutes left to wrap up here. And we started this conversation with kind of where we are and where we're going, I suppose, in the timelines. Maybe we'll wrap up with quick one minute each here, bold premonitions for what could happen in the crypto world that you see some big events and evolution points to maybe keep out eye for in 2022. And Elizabeth, we can start with you. Any bold calls for what could happen here?

ELIZABETH ROSSIELLO: I think we're going to see the regulatory map start turning much more green. We've been eight years in this process, even longer. I was on the committee in several countries, writing regulation, you know, in 2014. It's time now. And as Adam said, we're working together over a long period of time. And you're going to see those lights start to turn on. And we're at the place where there's no turning back. This is happening.

I think the-- seeing the large banks move in, in the last bull run was a big indicator-- seeing a lot of the institutional investors come in with big tickets and a lot of sticky investors. I think now we're at the place where-- I don't want to say it's too big to fail, but it's too much velocity to stop moving forward. And I'm not just talking about the price, I'm talking about the technology, the integration, and the idea that we're building something radically new for a new kind of financial system.

ZACK GUZMAN: And Adam, take us home. Your bold claim-- your bold call, rather.

ADAM WHITE: I think one of the biggest challenges for the crypto space over the past decade is, what's the killer app? What are people using crypto for, beyond speculation and maybe some early proof of examples of remittances or payments? And I think we're going to see in 2022 the first very clear example of a killer app. And if I had to guess, it's going to come across in a way where people have no idea they're using crypto, predominantly probably through gaming/the metaverse and NFTs.

What's happening with Axie Infinity and Zed Run and Star Atlas, we're keeping a very close eye on. And that is bringing in millions of new users into the crypto ecosystem that were never involved in crypto before. And I think that's fascinating. And I think it's time for that to happen. And we're very excited to see it play out over the next year.