Good morning, everyone. So delighted to be here today to talk about a new era for finance. So I’m not sure if any of you have had the same experiences I have at the forum over the last few days, but I feel like there’s almost two separate conversations happening here.

There’s one set of conversations about geopolitics and macroeconomics. This is, you know, the set of conversations worried about the fragmentation of the global trading system, about debt, the role of the dollar. These conversations can be quite depressing, quite worrisome, and have really been a big focus of a lot of the discussions here.

Then the other big focus of the discussions has been on AI and innovation and technology. And this is a really exciting set of discussions about the possibilities for the future, all these exciting new developments going on. For example, I was at a dinner last night with some MIT colleagues, and they were talking about how AI is allowing them to advance their scientific breakthroughs even faster than before.

They’re doing things like they’re making water out of air. You can think about what that could mean for space travel, for example. Talking about how they’re using AI to break down the structure of cells and plants so that plants can adopt to global warming.

And this is really exciting stuff. But it’s a real disconnect within the much more depressing macroeconomic and geopolitical discussions. So, in this panel today, we are going to take the bold step of trying to merge these different discussions.

So, we’ve now had a couple days to warm up, so we’re now going to try to bring these themes together. And more specifically, we’re going to talk about innovations in financial markets, including not just how these innovations are occurring, what the future could bring, but also think about the regulatory and geopolitical backdrop that these are occurring in, and how the regulatory and geopolitical backdrop can affect these innovations in finance.

So, I hope you had your coffee. We’ve got a lot to cover. And these are big topics and exciting to try to bring these big themes of Davos together in this panel.

So, to do that, we have four fantastic panelists covering some very different sectors of innovation and finance, and also four different regions of the world. So, this is a really nice mix of people for this panel. So, let me just very quickly introduce them.

You have their full bios in your packets. First, we have Steven van Rijck, CEO of ING Group from the Netherlands. Then we have…

Jai Khafre, who is Chief Enablement and Global Affairs Officer at BNY, Bank of New York. Then we have Fred Hu, who is Founder and Chairman and CEO of Primavera Capital Limited from China. And then we have Chengpeng Zhao, who we call CZ for short, so I don’t stumble over that name anymore, who is CEO of Binance from the UAE and who is just retired.

Ex-CEO. So, he is going to be the particularly fun person to listen to as he no longer has any constraints on what he says. But anyway, the theme of the panel is about how technology is rewiring global finance.

And for those of you who follow this field, there is a lot going on. There is a lot going on in forms of payments and currency. There’s a lot going on also in the plumbing, the pipes of how financial transactions occur.

It’s a lot to keep up on. So, to just get us started, I want to go down, and I’m just going to go in the order you’re all seated, and ask you what you think is the rewiring that is the most consequential. What is the development you are most excited about?

It could be a segment of markets, what’s going on in private credit, investing, Bitcoin, stablecoin, digital currencies. It could be in technology, Bitcoin ledger technology. It could be in more plumbing-related issues.

Leave it really wide open just to get us going. Talk about what you think is the most exciting new development that is going to have the longest term impact in finance. Steven, get us started.

Wow. The pressure. Now, look, at ING we have broad operations, but in retail we have 41 million private individual customers.

Eighty-five percent of those use the mobile as their preferred device. Eighty-five percent of retail sales is also being done through the mobile. And what do I try to say is that… Most people do already work mostly through the mobile with us.

So we are a digital bank in the core or in the heart of what we do. But it also means that we still have a way to go to get people on the mobile more and more and to use the device more. That is for us the first step.

So why are our customers to the mobile? Because mobility will help the customer the most. Then the second step is how can we make our customers’ lives easier?

It’s in the end all about the customer. And what I’m most excited about, what we can do, and that comes in a few phases. First of all, and that’s AI.

We are already using AI for about a decade, for example, in contact centers and with chatbots with varying degrees of results. Sometimes it’s good, sometimes it’s not so good. But now with Gen AI, and especially with Gentic AI, we can improve the customer experience dramatically.

It starts first internally with bringing new stuff to market, with coding for technology. Then there’s a second layer that has to do with customer processes, such as lending processes or contact centers, to make life simpler in the day-to-day basis for customers. But then thirdly, when do we sell something or bring a new product to customer in a better way?

And there I think Gentic can help. And that’s the third layer of AI that I think really can make a difference because then it sits in the core of what we do, which is how to deal with customers. And that’s why I’m very excited about AI.

Fantastic. Jie? Great.

So happy to be here.

So BNY, the bank that Alexander Hamilton founded over 240-plus years ago, we’re now serving clients across over 100 markets, helping clients all over the world safekeep, move, and manage trillions and trillions of dollars’ worth of assets across different securities, asset classes, and geographies.

So as you can imagine, a variety of rewiring through different macroeconomic and geopolitical scenarios over the past 240-plus years. I would say, coming back to the question today, though, For me, for BNY, it’s really about interoperability, interoperability between public and private markets, interoperability across on-chain and off-chain, interoperability in terms of securities and various asset classes and geographies.

And BNY, you know, we’re very privileged to be able to sit in the middle of all of that and really helping to not only develop innovation but deploy and scale innovation because without scale, you know, innovation, you know, the benefits of innovation don’t get fully maximized.

Steven, I would echo what you said about AI and for BNY, AI is going to be and has already started being a real supercharger of almost everything we do. So we have this motto within the firm of AI for everyone, everywhere and eventually everything, including one of the most important tenets of the financial ecosystem, which is risk management. So we’re actually using AI to improve proactive as well as real-time risk management, which, you know, if you go back to the velocity, the complexity of the world that we operate in, risk management is going to become even more important.

Thank you. Fred.

Yeah, so, you know, financial service, you know, has so much data, is ripe for technology. And so with the gen-AI revolution, so financial service, you know, is really a game-changer. You know, historically, you know, Wall Street in particular, but, you know, financial service in general has been actually on the forefront of adopting latest technology, you know, information technology.

You know, my older firm, Goldman Sachs, actually, both, you know, Kay and I served, was reportedly the first Wall Street firm to purchase the, you know, IBM mainframe, actually from Mr. Watson directly. So that showed, you know, later 40s, early 50s, right?

So… financial service firms was on the forefront of adopting information technology, but you know, and of course, you know, financial service is always in part of supposedly smart people, you know, graduates from MIT you know, financial engineers, but fundamentally still rely on, you know, they do a lot of data analytics, but still rely on human judgment, right?

Now with the Jain AI, so you have this kind of, you know, super intelligence, all the data available to financial services, and with the Jain AI in a model, you get, you know, extra intelligence, which augments human intelligence, you know, obviously human is still in the loop, but that is really transformative, you know, from infrastructure to risk management to customer service, you know, the whole, you know, vital chain across financial service.

I do think this is, you know, game-change, it’s transformative, you know, it’s going to have very, very significant impact, not only for financial service in terms of efficiency, productivity, and risk management, but for society, for the global real economy at large.

Suzy. Sure.

Well, I look at a very narrow segment of the financial market, which is basically cryptocurrency, blockchain, web3, however you call it. I do believe that this is, this technology is a game-changer for sure, and I think we’ve proven over the net, over the last 15-16 years that it’s not going away. Binance is one of the largest crypto exchanges in the world.

It is the largest. By far the largest. It’s larger than the next five combined.

But just some numbers, right, it has 300 million users. It’s probably larger than any bank that I know. And its trading volume is higher than Shanghai Stock Exchange.

It’s higher than New York Stock Exchange last year. So it’s, but right now in the crypto space, there’s really two proven industries, there’s exchanges and stablecoins. Those are large businesses.

I’m really excited about three new more. I think tokenization is a huge one. I’m talking with probably a dozen governments about tokenizing some of their assets, because this way the government can actually realize the financial gains first.

and use that to develop those industries, extractions, you know, the trading markets, etc. Payments is something that we’ve tried, have not really conquered in, well, have not really started in crypto. We tried, but nobody really pays in crypto.

But I think now we’re seeing the convergence of traditional payment methods being on behind the scenes, being supported by crypto. So the spenders swipe a card, crypto gets deducted from their account, the merchants get US dollars or euros or whatever they get. So now when we have those bridges, I think payments is going to come pretty big.

The third one is what you guys all mentioned is AI. The native currency for AI agent is going to be crypto. They’re not going to use bank cards.

They’re not going to swipe credit cards. Crypto blockchain is the most native technology interface for AI agents. So when AI goes big, today AI don’t really, they’re not really agents.

They don’t buy tickets for you. They don’t pay for restaurants for you. But when they actually do, those payments will be in crypto.

Okay, so there’s the best case scenarios here. Here’s what to get excited about. Now I want to shift gears a little bit about whenever we have a period like this of lots of innovation, experimentation, you know, some succeed and some don’t.

So I want to think a little bit about what might not work. In 10 years from now, if we’re sitting on a panel here in Davos, what is one development we might be talking about today that’s not even discussed? It’s sort of gone by the wayside.

Let me just, just to get you thinking, give you a couple ideas. So a lot of excitement by all of you about AI. There’s also some work going on at MIT where they’ve come out to show that AI is great to do a lot of work really quickly, but it’s sort of mediocre.

They call it work slop. You can get sort of 80% accuracy and if you’re fine with that, AI is great. But you know, if you really want to be the best and get things really right, there may be limits.

Also, experiment with a Bitcoin. El Salvador worked very hard to push Bitcoin a great way. El Salvador is very reliant on remittances, doesn’t have its own stable currency.

It seems like a logical place that Bitcoin could really take off for remittances, reduce transaction costs, and there’s been almost no take up despite a lot of marketing and a lot of work. So there’s just a couple of the potential limitations just to give you some time and get you thinking. But now let’s go down, same order.

What is, again, something that people might be excited about today, or at least some people are excited about today, that you think is not going to be even in the discussion ten years from now? Yeah. Get us started.

Yeah, let me first respond to what you just talked about, and about AI not giving a perfect customer experience.

And I think that you hit the nail on the head, because it is about the customer experience. Digital means are just the means, it’s not the end, it is just a means to an end. And when we start to use AI, you see it also in chatbots, and you look at the Net Promoter scores with that, I would think the voice interactions of humans just had a higher score than the initial chatbots.

Now with Gen AI, at least on the more simple journeys, you see that it is comparable. So a significant step up. Probably voice bots with Gen AI or Gen AI can help with that, because then the interaction becomes much more natural.

But we are not there yet. And what we should not forget is we need to continuously use technology to make the customer experience better, not the other way around. So that’s maybe what I want to say about that.

And that’s what we need to do as well. Because I agree with you, the big group on simple journeys, such as how do I open an account or how do I make a payment, can be happy. But if it’s about a digital journey on inheritance and it doesn’t work well, people don’t forget that.

And it’s at the outer ends of the customer experience that we need to be very careful, not to be confused about, OK, if digital is not good, OK, those are only a few people. They can completely lopside the way and trust that people have your organization. Now it’s very hard to understand what will in the future not work.

So maybe in the past people thought that Google Glass would be very popular, and it was for a little while. But I don’t know if we still use Google Glass. If you look at the metaverse, for example, my kids were very enthusiastic about the metaverse, which are social avatars that in an avatar world you just interact with each other with your social, with your avatar, and then sort of are in a parallel world.

That I don’t see so often anymore. So but those are more gadgety type of things, I think. So it’s hard to predict what will let you on and what will not.

I have, I mean, I’m sorry to say it’s easy, so I do believe especially blockchain technology is important and is growing in importance for sure. And we’ve seen big examples of that. I also see crypto in the investment space is becoming very important.

It’s quite speculative, but it’s also becoming a more important investment currency. I don’t know yet to what extent crypto as such, blockchain, yes, but crypto coins as such will be there in the payment space. I will need to see that.

I’m watching it. We’re experimenting with stablecoin.

I’m just not sure yet. Julie.

I would say it comes, everything comes back to trust. You know, there may be many recipe, many ingredients in the recipe of a perfect financial system. But the one ingredient I think we can all agree on that’s essential is trust.

So innovations that fail or new technologies that 10 years from now look like hype, I would hope that the ones that do do well and survive and go on to thrive are going to be the ones who can really hold on to customer trust first and foremost.

They should be serving also client needs, to Stephen’s point. So the combination of is something actually fulfilling a basic need or able to fulfill customer needs and customer preferences better than existing alternatives? And is that new development able to attract and very importantly sustain trust over a lot of different time periods?

So that’s what, that’s how we look at innovation from the BNY context. Is it helping the client experience or improving or solving a need that our clients have? And are we able to do it, deliver the product in a way that’s going to build on the trust that we’ve accumulated over hundreds of years?

Yes, honestly, I don’t know. I think the nature of innovation, technology change is uncertainty. How could you sit here and say, well, this is something Caesar is doing.

It’s not going to work ten years from now. I just have the horizon so long, I have no idea. But I do think there are different paths to brand new finance, because finance, as sophisticated, as complex as the ones that exist, there’s still a lot of limitations.

In terms of data, financial services have so much data. ING, another bank, ICBC, I was on the board. One billion retail customers.

So I haven’t been to a physical brick-mortar branch for ten years. It’s everything just digital. So I think we’re still at the very beginning.

With the data that we can get, not just structured data, but the non-structured data with the general model, we can just get so much intelligence. That’s going to risk management. The traditional model is where, because we’re limited by the data set that we can use, the computer power, also the algorithm.

So yes, it gives us insights, but we’re limited. Now, almost like we can many, many magnitudes more intelligence in terms of understanding the risk and also management. Custom service, traditional, your call, especially in the U.S., your microphone call is always a one-hour wait, if you can get it.

Whereas now, it’s instantaneous. Custom service response, so billions and billions of calls. So these are real.

But still, we’re in the early days, and any technology change, mainly with the work, even exceeding the wildest expectation, others will phase out. So I think the market

You know, and customer adaption is the ultimate judge. We need to have you hang out with more macroeconomists. Macroeconomists will always tell you why nothing is going to work, why everything is a problem.

Maybe both would be good for each other. Okay. CZ, what should we worry about?

Or maybe not place our money on right now.

Sure. I think my three panelists have been very smooth and politically correct. I’m going to give some more direct answers, which will probably offend quite a lot more people, including people in my own industry.

I do agree with Steven that I think, look, even if you asked me this question 10 years ago, I would probably say Bitcoin payments. And 10 years later, we’re not quite there. So I’m still skeptical about payments.

We’re working on it. We as an industry, we’re investing in many payment projects. But I think in any innovation field, there’s always a very high degree of failures.

But the small number of successes will be exponential, right? I also echo what Steven said about meme metaverse. What we saw in NFTs was pretty hot for a while, but now they’re kind of pretty quiet.

I have a very high, strong feeling that memes are probably going to be similar. I could be wrong. I think a lot of crypto guys will hate me for saying this, but this is a very high-risk new areas where the value is highly speculative, building use cases for those are hard.

Some memes do stay, like Dodge, around for like 15 years, and they still have a couple billion dollars of market cap. So there are things that have culture value that can stay. But I think most memes probably will not last that long.

And then I also want to add, to offend the other industries, I think brick and mortar banks will decrease significantly over the next 10 years. Decrease? Decrease.

Decrease. People will have much less need to go to a fiscal bank. I think ING pioneered online banking, and that was like 20, 25 years ago.

So it takes a long time to replace the old industry. Now we have cryptocurrencies, we have blockchain. The need for going to a fiscal bank to do stuff, now we have EKYC, we have E-everything.

So the need to go to a fiscal bank may decrease. I don’t think banks will disappear. They serve a very important purpose, well, many important purposes.

But all of these industries, even new ones, traditional ones, they all have risks. So we should just, you know, look at the space on a periodic, careful basis. But you only told us what has failed over the last 10 years.

You haven’t told us what will fail 10 years from now. Well, basically saying, like, look, memes are high-risk, fiscal banks are high-risk. I can go on, but then I’ll offend more people.

But fiscal bank is not innovation, though, it’s like 17th century, right?

No, I think, though, your last point is really important. I want to put you on the banks. If you put some macroeconomists in this discussion, they would really be focused on the risks to banks.

As finance flows through other channels, through other mechanisms, banks are a critical source of financing for investment and growth, and especially small companies, and especially in Europe, but with mixed significance around the world.

But so if some of these new forms of finance take off, the role of banks could decrease. They could have less funds. Funds will be channeled through other mechanisms.

So I particularly wanted to hear from Stephen and Jaylee. You’re more closely linked to the traditional banks, although you are innovating in the new space, too. Very much so.

How concerned are you about the traditional role of banks? Are we going to be looking at very different banking systems in 10 years? Yes.

Are you?

Well, I would say that at one point, paper checks were the most novel thing, right? And if banks only ever focused on paper checks and didn’t innovate beyond then, then those folks probably aren’t really around anymore. And so innovation is absolutely part of the – it is the name of the game.

And it doesn’t have to be just digital technologies. It could be financial instruments. It could be ways for retail and institutional clients to access asset classes that they previously hadn’t really been.

Super familiar with these are all innovations and doing innovation I keep on repeating myself, but really, you know deploying innovation in a way with Responsibility and safety in mind. I think it’s going to be super important. So it’s really up to financial institutions large and small older and newer to figure out how do they innovate responsibly responsibly innovate with Client centricity client trust at the very heart of the why that they are Innovating and I think if you do that and that’s the ethos with which being why is approaching innovation I think the future is bright

Anything else that just very optimistic way to Concentrate just I have to agree with it now But it’s well, but I think the key word is trust

So that you that you said and so it we have the banks have high trusted customers and I think that’s what we need to bank on and Then it’s all about continuously looking at disruptive technologies and see what we can do with it And so we have had a big fintech era and some of the technologies were very useful Some of them were not so useful So it’s not or or it can be and and so some of the things that we develop we develop ourselves sometimes Fintechs because they’re more in an isolated environment.

They can develop a very specific tool that we don’t use later And we invested also in a number of more blockchain based payment systems such as finality for example or a surely a X and so Currently we have started together with a number of other banks in Europe a stable coordination is called Kivalas So it’s all about continuously looking at what’s happening in the world.

How can we apply to the customer? How can we retain the trust and in the past those were these these brick-and-mortar banks where we and we start For a large set as a telephone bank. It’s about if it’s not a telephone bank Why don’t we then export that somewhere else and then make it to a digital bank and then it became for a computer?

It became a tablet and then it became a mobile and now you see different means of payments with blockchain technology I think it’s a natural progression to continuously innovate. In that sense, I think that pressure from the outside world, including regulation, helps us because it forces us to get better. And that’s why we can continue to innovate, so I’m not concerned.

And I’m actually very happy to collaborate with all these new technologies. We keep going on some risks.

Another big risk that macroeconomists, financial experts, focus on is risk to financial markets. Everything can now be done much faster. I was at a session last week on some of the risks of algo trading and AI in financial markets now.

I think, again, things can happen much faster. I think, for me, also, a wake-up call was even before many of these innovations you’re all talking about came into play, looking at what happened with SVB. And what happened with SVB, we saw a bank collapse much faster than we have seen before.

Compared to, say, 2008, peak of the global financial crisis, biggest two bank collapses in the U.S., or the two biggest ones in the U.S. that collapsed then, it took about two to three weeks to really see the run hit them, where they had to declare bankruptcy. In that run that took two to three weeks, only took out about 10 to 15 percent of their deposits.

Then SVB, one to two days, they lost about 80 to 90 percent of their deposits. So things just happen much faster. And that wasn’t even a story of AI or Bitcoin or some of these new technologies.

This was just the new developments that people can chat online. They don’t have to all go to the coffee shop and exchange news and rumors. And it was the new technology that people can withdraw from their accounts online instead of having to go wait in line.

So in some sense, that’s old-fashioned technology compared to the things you’re all talking about. Yet that has fundamentally changed how quickly bank runs happen. And then when you think about implications for financial markets more broadly, you have more momentum trading.

If everyone is trading on the same algorithm, and AI is doing it so humans don’t even have time to push a button, prices can move much more quickly. You’re going to get more hurting, more volatility, a whole set of risks. How much should we worry about that?

Is there anything that can be done?

You know, look, this is why proactive risk management, risk detection, you’ve got to start with that, real-time risk detection because without that, then the risk mitigation actions won’t necessarily kick in in time.

So that’s one. Two is, this is why, you know, things like T plus one settlement, real-time payments, central clearing of U.S. government securities.

Those are market structure developments, innovations in a way that BNY is very much helping all our clients around the world execute and onboard, and reduction of things like settlement times, the greater ability for asset owners and asset holders to do things like collateral management, knowing where the collateral is, knowing the value and being able to move the collateral in a more real-time fashion.

Those are all very tangible, available now mechanisms to improve risk management. And, you know, I should probably also add that us as financial system participants, we’re not in the business of predicting exactly what’s going to happen, how, when, and to whom. We’re in the business of preparing for and planning for a variety of different risk management scenarios.

You’re right, Kristin, the magnitude and the complexity of the risk landscape has changed. It’ll continue to change. That’s sort of the one certainty, right?

So this is where, again, just going back to real-time settlements or faster, speedier settlements, the ability to do proactive and more real-time risk detection and actually interconnectedness of the financial ecosystem.

These are all positive attributes in the long game of risk management.

Yeah. I think to add to that also, indeed, I think the digitalization has helped the speed. the lowering of transaction costs, but also better risk management, for example, using blockchain technology because of distributed networks.

And therefore, it has partly made the banking world safer and the finance world safer. On the other hand, and there’s the interconnectedness part of it, if the supply chains and the banking systems and the digital networks are also connected, that means that the proliferation of when something happens gets enormous.

And that means that, let’s say, real-time monitoring, compartmentalization of networks, differentiation of cloud systems are becoming much more important in the past because in the past when something happened, it was limited to what happened in a particular branch and we could contain it.

Now it gets all over the place. And I think that’s why looking at risk management and be much more proactive in it and looking at trading patterns or information patterns to see what is happening is much more important now than it was in the past.

And that’s where technology can also help us.

That’s a good point. Do you want to jump in?

No, I think this is certainly a double-edged sword. So AI could enhance the risk management capabilities, but also now there’s likely AI enabled fraud. So it’s kind of like a chicken, not like a mouse and a cat kind of game.

But the question you alluded to, systemic risk, because of the speed, because of the concentration of a certain model or algorithm, that may cause synchronized trading behavior, more like amplification of human behavior in the AI era.

So that’s kind of unknown, but it’s kind of known that we know that there’s shocks, whether currency or bank run or maybe geopolitical events, something happening in Greenland, for example. So definitely the speed of transmission of… from one, say, from currency interest rates to like equity and other fixed income markets while commodity futures, that could be much faster and so it’s kind of unknown.

But in the new era of AI in finance, that’s in this place, the role of central bank and you know, FSB, global corporation, and also, you know, there’s also for recruiters and microprudential, you know, policy makers, you know, yourself used to be in the government, you know, also need to stay with the game, right?

To use AI as kind of early warning system, right? You know, to detect the emerging risks, so get prepared, right? So I think, you know, it’s unknown, but I’m not as pessimistic just because, you know, AI that, you know, we are going to lose control in terms of systemic financial stability going forward.

I have a couple of points to add to that.

I think that’s, I can dissect that into a couple of different separate points. I think number one is, if everything else stays equal, being faster and cheaper is always better. That itself does not create more risk.

What’s the risk there is, it’s just faster will make it appear faster to happen. But if a bank, or banks have fractional reserves, so if the bank doesn’t have enough money, just because people can withdraw money faster, that’s just going to expose the problem faster. But making it slower doesn’t solve that problem.

It just makes, it just means more consumers couldn’t withdraw when they want to withdraw, so they’re stuck. That doesn’t solve any problems. So if everything else stays the same, technology that makes things cheaper, faster is always better.

On the Silicon Valley Bank, when you described the question, in the crypto industry, we have a different kind of rumors or feel to it. The bank may or may not be in trouble, but our impression is that the bank is very crypto-friendly. It may have been shut down by Operation Choke Point 2.0 back in 2023.

I’ll also give another example that happened to Binance. In December 2023, this is after the FTX went down, after Luna, UST, after Silicon. This is before Silicon Valley Bank, actually.

In one day, there was maximum withdrawal of $7 billion equivalent of assets from Binance.com. No issues. In that week, there was a few days before that, it was up, like, a couple hundred million, a billion, a billion, and then seven billion, and then a billion, a billion, a billion.

In that week, total $14 billion worth of assets got withdrawn from the platform. No issues. In a bank, I don’t know of any bank that can handle that.

So when the term bank run, it’s mainly because the design of banks are fractional reserves. When you have a fractional reserve system, then you have this liquidity issue. So that comes down to the system, systematic design of the system, not so much AI.

So that’s kind of my view. Yeah. The AI does have the problem of synchronized action, potentially.

But I think that’s a very small, we’re looking at a very small thing to blame the entire problem on.

My view. Okay. So I got some different ideas.

So what was going to matter was settlements, risk management, and also regulation, including reserve requirements, things like that. So some of this has to be done within each company, but there is also a role for government and government regulation and all of this, and infrastructure in the country. And this is where we are very lucky to have a rich panel, where we have people who, all of you operate internationally, you operate around the world, but you each are at least based, or your company is based in different countries.

We have the Netherlands, the U.S., China, and UAE. So could each of you talk about how important is the regulatory framework, and I’m going to start with you, Fred. In particular, different countries are taking some different approaches to how they manage some of these different risks.

And Fred, in particular, could you talk about China and the U.S. are taking some different approaches? How does the approach of the government affect opportunities in each of these countries?

And then I’ll open it up to the rest of you.

First of all, China is a member of IMF and BIS and FASB. So China actually adopts and embraces and sticks to all the global rules in terms of financial stability and potential regulation. and the Consumer Protection.

But further than that, I think China is still, I would say, where because of tradition, you know, the political system is still, I would say, more strict and more, you know, tighter kind of regulation, not in terms of systemic stability, but also in terms of conduct, you know, behavior, even products, specific products, you know, all need kind of approval by central bank and the regulators, like all CSRC, the security regulators.

So generally, also financial regulation in China is stricter, you know, tighter than US, US is still quintessential capitalist, you know, there are always good regulations, but generally give market participants, financial institutions, a lot more leeway, a lot more autonomy.

So China is very, very strict, yeah. But the surprise, though, is even with that kind of very strict regulatory framework and philosophy tradition, you know, it’s still quite amazing, you know, even as China is also on the forefront of, you know, innovation, you know, particularly the fintech.

Actually, let me angle that, Steven, you mentioned this important issue of cross-border spillovers. We saw that in the banking crises, just a bank somewhere based in another country, it can affect your country and you may not be able to bill it out or support it. So given some of these spillover risks which you highlighted, do we need some sort of global regulator for some of these issues?

I would support that.

You would? Okay.

So, you know, look, I mean, we are present in 35 countries on the ground, so large parts of Europe and in the US and in Asia as well. So differences in regulation, well, let me put it this way. First of all, if you have the same activities, it would help for societies if you then also have the same regulations.

So activity-based regulation will help. That is currently not the case everywhere. It is improving, but not the case everywhere.

That also means that other financial institutions, not necessarily banks, should then become part of that activity-based regulation. Because if you employ the same activity and generate interaction with customers, that should apply for the same regulation. When we talk about Europe, also there you do see that regulation is not completely harmonized and integrated, and therefore you have some gold plating in several countries, depending on what they see happening and how they want to look at their own banking sector in their particular market.

And it is not confined towards borders, but you know the whole story about Europe. We need to become one. Secondly, but there’s also good things, if I look at MECAR, for example, which is the crypto regulation, and it is enabling blockchain technologies now to become more part of banking, and therefore it is becoming part of the technology stack that we now have in terms of the interaction and the digital way of doing transactions with our clients.

So I think that is good, because that then provides an umbrella under which people can act. When I talk about the AI Act, again, that’s a different side of the coin. If you look at the U.S., AI is very much focused on opportunity and innovation.

If we look at the AI Act in Europe, it’s very much focused on risk management, and there’s nothing wrong with risk management. I think it’s very good. We should keep the system safe.

But if the AI Act only talks about risk management, but not about the strategic positioning that Europe wants to take in AI, we have – it’s reversed. We should start with how do we want to position ourselves, and then how do we protect ourselves? And I think that’s a different approach that people take in different parts of the organization, and that’s what we should change.

And then maybe last but not least, looking at investments, and that’s a particular hobby horse of mine. In Europe, the mantra has always been, also because of the concept of societies, we have big pension funds, employers and employees will contribute to the pension funds, and therefore the pension funds will invest.

You see changing societies and changing demographics of societies, so the number of workers in the market is decreasing. And it means that the pension system from the past can’t hold up anymore and it means that people need to continue to think about how do I invest for the future, for myself, for my children, for my family, for college, et cetera.

And so, therefore, the responsibility put on the individual to invest for the future becomes more and more important. And in that regard, Europe needs to stimulate investments beyond savings much more. In Europe, we have a GDP of about 16 trillion, 12 trillion of that sits in deposits with the banks.

I’m happy with the deposit sitting in the bank, but they don’t really work. And I want them to put them to work. And that’s the mind shift, the set shift that we need to have in Europe to get more people to invest for the future.

That’s a nice link to this broader theme of Davos is geopolitics. If you want to be a powerful country in this world of changing geopolitics, having an efficient financial sector and efficient investment is going to be key. Yeah.

Yeah. Anything else? Do either of you want to jump in on this?

And then I’ll open it up to the… So, what I would add is that regulation has to be a force for good for economic growth, market access, and innovation. And when that happens, regulation actually helps to breed adoption.

It helps to actually encourage participation and adds to the trust that the, you know, other sort of participants actually have in the underlying financial ecosystem. And I would say that some of the, you know, the regulatory simplification that we’ve seen in different parts of the world, I think is really, you know, aimed towards fulfilling that objective of really balancing, you know, the sort of the undertaking of being regulated and so on and so forth with what’s actually good for business, what’s actually good for market access and continued faith and trust in the system.

Thank you. Suzan Kereere, any quick…

Yeah. I have a different… Well, I have a different perspective on this issue because we’re sitting in a different industry.

It feels to me, personally, like, you know, the banking industry, the securities industry, the regulations are highly developed, highly mature, and they are highly similar across countries. I know their differences. This is probably a novice person looking at a problem in a very simplistic way.

Whereas for crypto regulations, it’s different, very different in every country right now. And to be honest, well, Binance has like what, 22, 23 licenses all around the world, but the majority of countries don’t have licensing regimes today in the world. And we also see US is progressing very quickly, but it’s in progress, right?

So the market structure, well, the clarity bill, the market structure bill, the genius was passed last year, so six, seven months ago. So this is an in progress thing. We also see many other countries, you know, UAE has adopted fairly forward regulations.

Bahrain, Pakistan, Kenya, we’re glad to be in the consultation process together with them, so they at least talk to industry players. I’m a personal advisor to some of these governments, even though I’m not a regulation expert, but I just tell them from a market player perspective. Also, in this process, there are some key differences in countries’ policies, especially when it comes to capital controls.

Many countries, when you take money out of the country, they have a limit. Above that limit, that becomes money laundering or basically illegal, however you call it. US doesn’t have this issue.

It doesn’t have this control. Taxes are very different in every country. So this kind of affects financial regulations, because, you know, especially if you buy Bitcoin, the price goes up.

Do you pay tax or not on the unrealized gain or realized gain or whatever, right? So we think that obviously more clarity, more consistency will be much, much better, but I don’t think a global regulator will work. Well, it’s possible at this moment.

Different countries have different priorities, different agendas, different considerations. So a global regulator will be quite difficult. We would love to see it, especially if that global regulator can put in a positive regulatory framework that’s relatively pro-innovation.

And that will make the industry players’ job a lot easier. But to be honest, logically, it should be like that, right? Because crypto is the same in every country.

We don’t want to change country to country. So there should be an optimum framework that we should be able to put in. So I’m actually spending a lot of my time trying to figure out what that is and how to work with different countries.

That’s great to hear. I agree. Right now is probably not the time to launch a new global international organization, a new global regulatory framework.

It’s a big uphill battle. But that doesn’t mean we shouldn’t start thinking about what it would look like if the opportunity does arrive, especially if we have some sort of crisis, some sort of major financial meltdown. We might want to have some ideas and plans ready to go to put something in place.

What might be easier is regulatory passporting.

Like once you get a license in one country, a number of other countries recognize that. And that just requires the regulators in different countries to have some kind of agreement. We’ve seen some discussions of that already.

I think that step most likely will happen first. Making a new regulatory body or even a forum, making a global organization is very hard to push down to the execution levels. And it takes time.

You know what? I think that’s a very positive way to end. Unfortunately, we aren’t going to have time for questions, but please feel free to grab any of the panelists if you did have any questions.

But I think that’s a great way to end this sort of merger between all this exciting innovation happening. It is a role for probably some regulation, global coordination, but let’s not be too ambitious right now. And I think your proposal is a great path to think about going forward.

So I’ve been asked to summarize this session. We’re out of time, and it’s impossible to summarize all this. But I will just summarize it with one sentence.

What I took from this is AI is part of the exciting opportunity ahead in finance. AI is also going to present some substantial risks in finance, including for banks, just financial markets overall. Regulation is part of the solution.

But again, AI, it could be part of the solution in managing some of these risks. So I think very exciting opportunities, risks going forward, and AI is at the core of all So, thank you very much.