Hello everybody and welcome back to another edition of C&F Talks where I get to speak to one of our speakers at a forthcoming event. Today it's a great pleasure to have with me Keith Grose, who's the Senior Country Director at Coinbase UK. Keith is going to be speaking at our UK's New Cryptoasset and Stablecoin Regulatory Regime Summit in London on the 26th of November.

By way of background, Keith spearheads product and business strategies in one of the world's most dynamic fintech markets. Coinbase is, as I think most of you will know, our viewers will know, is a leading player in the crypto space and it's going from strength to strength. Keith is a seasoned leader with a passion for transforming financial infrastructure.

Prior to joining Coinbase, Keith led the establishment of Plaid’s UK and European operations, driving its growth as one of the largest private fintech companies globally and served as COO of Sequence focusing on B2B financial innovation, fintech innovation. Keith, welcome.

Maurice, thank you for having me, it's great to be here.

Great to have you with us.

Now, as you know, the UK government has expressed its ambition to be a global crypto hub. From your perspective, at the heart of it, as it were, what are the most critical next steps the UK needs to take to make this a reality, especially concerning the upcoming stablecoin and crypto asset regulations?

Yeah, I think that is the most important first step, which is clarity and what the rules are going to be around crypto assets and also stablecoins. Actually, the stablecoin regime draft regulations from the Bank of England are coming out in just a couple of weeks from when we're recording this. And obviously, by the end of the year, I think we'll have final draft form of the stablecoin and crypto assets regulations together.

But I think the key thing to see here is a few things. One is to recognize the growth potential of this industry for London. The history of the UK and London is being at the heart of financial services globally.

If you look ahead for the next decade, blockchain and crypto assets are going to be part of that, stablecoins are going to be part of that. And I think the government and policymakers are aware of that and making this the environment with these rules that we can actually grow this industry and deliver growth for the UK is a key factor. And I think to do that, what I would love to see is a couple of things.

One is there's currently a UK and US task force that is working together to think about how do we drive some equivalence and some action coming out of the state visit that happened a couple of months ago. I think making that a success, delivering a digital markets champion, and making sure there's a whole of government push to deliver this policy alongside the rollout of the regime itself is going to be really critical. And then making sure that we have a third mover advantage in the UK, right?

We can see what's happened with the Markets and Crypto Assets Act in Europe. We can see what's happened with the Genius Act in the US and with the upcoming Clarity Act in the US as well. And then the UK can figure out how do we take the best of all worlds and bring that forward.

So, I think if you again, if you have a digital markets champion, if you learn from what's working and not working in other jurisdictions and bring that together, we can really make sure that stable coins and crypto assets become a core part of financial services in the UK going forward.

Yeah.

You mentioned what is working, what isn't working in other jurisdictions. But would you care to elaborate on that? What are the key points?

Yeah, I think one I would put out there is that the US is going all in on stablecoins, right? So, I think there's been this debate of are you doing CBDC, central bank digital currencies? Are you doing third party stablecoins?

And the US has fully decided to go with third party stablecoins that are fully backed by high quality liquid assets. And I think that is driving a lot of the growth in stable coins today. And so, I think seizing that and making sure that that works in the UK is going to be really critical, because I think it will tie to the role of the pound sterling in the world over the coming decades, if we get that right.

And so, I think making sure that you don't have holding limits on the amount that consumers can hold of a stable coin that you can use a GBP backed stable coin in both a retail and a wholesale context. Those are really critical aspects of this regime. And in particular, there's in the UK, the Bank of England regulates wholesale context, systemic stablecoins, and the FCA regulates the consumer side, making sure that there's not a cliff edge in between those regimes, and you can actually handle both of them.

Those are things that policymakers are aware of, but making sure that that is successful, and that there's growth for companies across both of those regimes is going to be really important going forward.

Yeah, I agree.

I mean, here in the UK, there's been a debate about tokenized deposits versus stable coins. But what would you say in terms of the advantages of stablecoins versus tokenized deposits? What are the top three advantages, perhaps?

Well, I think I would state a few ones. So, one is right now, stablecoins are the only settlement asset on chain. Right. And so, I think if you think about where tokenization is heading, and by tokenization, I mean tokenization of real-world assets, be it property funds, money market funds, right, you're going to see more and more asset classes, equities move on chain. And the settlement and collateral of that today is in stablecoins. And so, I think the UK needs to embrace that and needs to make sure that there's a UK pound sterling stable coin that can be used for that use case going forward.

So that's going to be a really critical aspect to make sure that we get right. And then I think there is probably room for tokenized deposits and stable coins together in this world, right? And I think I'll go back to the money market fund example. When that rolled out, people were really worried about what does that mean for the world of deposits. But obviously, there's room for all of this. And I think it's really critical.

And then the last part is stablecoins can be both a payment mechanism, and they can deliver rewards for users if they're backed by high quality liquid assets, right? So USDC today, you're offering 4% rewards to users because they're backed by US treasuries. And so, I think making sure that you can offer that type of benefit for consumers where it's both a payment mechanism and something that offers value that builds this business model for the companies, but also for the consumer. And I think it delivers real value and growth for stable coins in the UK if we get that right.

Yeah, I fully agree. Switching subjects a little bit.

Coinbase recently launched a Web3 and AI acceleration in the UK. What's your vision for this initiative? And what kind of impact do you hope it will have on the UK's tech ecosystem?

Yeah, I mean, I think it's a really exciting initiative. And it's something that Coinbase is doing together with a bunch of partners like Fabric Ventures, Animoca Brands, Founders Factory. The UK and London in particular has a really deep history of entrepreneurship.

But this is taking that and making sure that we're also bringing expertise around both crypto and digital assets and AI to help coach founders. So, this initial group is going to be eight companies that are hand selected that will get a really in-depth backing over eight weeks in London, in person, learning from experts, helping grow their company. And also, I think the other interesting factor is we're trying to find companies that are at the intersection of crypto, Web3 and AI.

And I think that's really important because if you look at the intersection of those two industries, it's programmable money. Agents need to be able to move value to interact, to do commerce with each other. And that is where programmable money fits. And that is the perfect use case for crypto. It really is the only form of programmable money. And so, I think that's something that I'm personally excited about.

And what I want to see from this is hopefully this is the start of something that one, builds the future of crypto and AI companies here in London, here in the UK, becomes a core part of the history of entrepreneurship for the UK, but also something that we can do on a recurring basis and over time grow more and more founders. Because I think the ultimate goal is going back to what I said at the beginning, we want London to continue to be one of the centres of financial services. And in this future world where you're going to have agents and blockchain being a core part of financial services, starting those companies and growing them here in the UK is really important.

Yeah. And I think it's a great initiative. As you say, there's a huge opportunity ahead for London and other financial centres in this area.

Beyond trading and investment, you touched on other assets that might come on chain. What do you think are the most promising real-world use cases for crypto and blockchain technology that might gain mainstream adoption in the UK over the next five years or so?

So, I'll go back to tokenization. I think more and more asset classes are moving on chain and you're seeing this starting with things like property and money market funds. But I do think you'll also see it happen with equities. And the value of this is one much more efficient settlement, but also 24-7, 365 access. You expand the market to anyone else who is on chain. I think there's tons of benefits around tokenization.

And so, I think that use of blockchain and making sure we're bringing other traditional asset classes on chain and democratizing access to them is going to be something that's really exciting and a use case that's going to be really important. Stablecoin payments is the second one I'll say. I think if you go, anyone, I would encourage you to go look at the growth of stablecoin issuance over the past two years. It's been truly phenomenal. There really weren't any stablecoins in 2020. Now you have almost 300 billion of stablecoins issued today, and a lot of them are being used to instantly move value across continents, across oceans. So, the cross-border use case of stablecoins is another one that I would highlight is a really important use of crypto.

And then the third thing I'll offer, which I'm personally quite excited about is bringing more DeFi use cases, which I think traditionally were for more of the crypto native people, making that accessible to the average user. And the one that I'm personally very excited about is the ability to do borrowing and lending against crypto assets instantly, which basically is democratizing Lombard lending, which is previously something that was only available to ultra-high net worth people through a private bank.

With crypto and with programmable money, you can make that instant accessible for someone with as little as a hundred pounds. And so, I think we're a ways from that being widely adopted, but I think that's a use case that's going to be really exciting. How can you use your existing assets as they become tokenized as collateral to instantly access funding as you need it? I think that's going to be a really important part of financial services going forward.

Yeah, fantastic. It really is a revolution, isn't it? Some fantastic opportunities there.

Yeah, slowly but all at once. Step by step.

Step by step. Absolutely. I think we've probably run out of time, but we're really looking forward to hearing more from you, Keith, at the conference.

For our viewers, it's the UK's New Cryptoasset and Stablecoin Regulatory Regime conference being held in London on the 26th of November. Further information available on our website, www.cityandfinancial.com. If you attend this, you'll hear from Keith and a host of other stellar names in this industry and hear all about the opportunities and of course the challenges involved.

Keith, thank you so much for joining us today.

Maurice, thank you for having me and looking forward to the conference.