German Finance Heavyweights Develop Fully-Insured Crypto Staking Offering

The crypto focused arm of Germany's Stuart Stock Exchange is gearing up to introduce a fully insured Cryptocurrency staking service next year. Joining us now to discuss is Boris Stuart Digital managing director, Oliver Vince. Welcome to the show, Oliver. Thank you very much. Good morning. Good morning to you. Now, let's start by just laying down the foundation for our audience here, Bors Stuart Digital is part of the Boers Stuart Group which says it's Europe's sixth largest Stock Exchange group. Just give us a brief explanation as to what Bors Stuart Digital's mission is. Absolutely. Um You already mentioned it. I think most of your viewers probably know Stuttgart more from, from Porsche, Mercedes, Bosch and all these companies, but it's actually also um the headquarter of the sixth largest stock exchange um in Europe. And um probably we have also the largest crypto business of a traditional exchange in, in Europe because we ventured into that business already over five years back, really being a pioneer here. Um Today we are offering the, the full infrastructure from a broker solution, a regulated trading facility, a multilateral trading facility and of course, um our own preparatory custody solution um to asset managers. Um two banks brokers that want to invest in crypto or um allow their customers to invest uh into, into crypto. So, all right, we're talking about a fully insured crypto staking service. Um Talk to us about the demand you're seeing from institutional clients for the staking service and how it's fully insured. Absolutely. So I think this is a we we're seeing increasing demand. I think this is something where we are very early on in the market. But as we see more institutional investors adding crypto as a new asset class, as we see more etps um uh being set up um for retail investors to invest into crypto, there's also more demand coming in now for safe and regulated crypto solution or staking solutions um to make use of the uh obviously earn an additional um reward on the assets that are sitting in, in custody, right? But then of course, for institutions, it is very, very important that the solution is safe. It's, it's regulated. Um it's uh adheres to all the requirements uh they have and that's what we built over the last uh 12 months probably. Um And as you know, and we probably touch on that later, um there, there is a, a small inherent risk in staking that is the the so called slashing. Um And we wanted to offer a solution that is not only uh fully compliant, but also a solution that covers all this risk and, and um, yeah, partner up with, with Munich re uh here to, to come up with a uh insurance solution if you can explain that, that insurance for slashing risk. Because first of all, who, who would take out the insurance? Is it the exchange? Is it staker? Who, who exactly is taking out the, um, the insurance? Uh, and how are they compensated? And the like, can you just kind of go into that because it's interesting. Absolutely. So the insurance is insurance, we take up um in the, in the first place, right? We as per the stood guard. But the important thing is, and that's um I think one of the, you know, the aspects of the insurance, the slashing event itself is insured, right? So in the end, it doesn't matter um whether it's the the the the damage, the potential damage is our damage or the damage of our customer of the institutional investor. The slashing event itself is insured and in case of such an event, the insurance company insurance will cover for any losses um from, from such an event. So eventually it's sort of both, right? But eventually it's the investor that is um that is protected um and will not have, does not have to fear any losses from that. And the investor is, is, is basically paying for the premium, correct? Uh To be honest, we have not hammered out um the terms and conditions of that, right. I mean, we put the infrastructure in place. We put the insurance contract in place. The insurance contract is live, we already signed for it so far, the complete insurance premium is paid by Stuttgart. Um And we have not hammered out the exact terms and conditions of our institution offering. So how much does that, how much is that insurance in basis point? To be honest, II, I hope uh we understand that I cannot, that I cannot mention it right now. It's, it's um uh we, we insured a very uh a very significant amount and we're talking about double digit million amounts here. Um And so also the the premium is quite significant. Um but I cannot mention specific numbers. What's it been like for you working with regulators? Of course, on, on this side of the world, we've seen the regulators crack down on firms offering staking as a service. Uh It sounds like maybe they're a little bit friendlier when it comes to staking products in your side of the world. Good question, I think first of all, in, in Europe, we have a quite um they, they started very early on to build a really AAA framework around crypto. Um And to be honest, staking is only partially covered by this um framework uh which is called ma and this is um uh going live uh end of 2000 24. But of course, we are um uh very closely working together with the regulator discussing, uh, these topics with the regulator, um, to make sure that, that we, that we, uh, are fully, fully complying with the, with the current rules. But it's, it's something to be honest. Also, over the next 18 months, we have to be very much on top of things. Right, because things are moving, um, regulation is moving. Um, but this is one of our up and one of our, um, sort of promises to our customers uh that they, that they can um rely on us, um and rely on this 160 years of experience. We have actually as a, as a stock exchange, right? And um complying with regulation, you, you seem a lot younger than 100 and 60 years. Um the, the uh the, the, the overall um uh environment here for uh traditional exchanges in Europe uh getting involved in crypto, uh how many of them are actually either exploring or uh that, that you would almost call rivals or, or competitors in this space in the sense of uh traditional exchanges getting into crypto services such as what you're doing now. Uh how, what is the transition like or is, is, is strip guard basically doing it as a, you know, kind of like, hey, we're small, smaller than, than, you know, say, uh some of the larger exchanges, but here we are, we can do this and, and we're, we're gonna take those kind of risks. Absolutely. I think we, we were when we started over five years back, real pioneer in this, I think, to be honest, if you look around on the landscape, we are still a pioneer when it comes to crypto trading, crypto um crypto custody and offering really this this full one stop solution to our our customers. Nevertheless, of course, in the last couple of months, I think you see increasing activity, right? I think also the larger stock exchanges in uh in, in Europe and in Frankfurt, Paris and London, I think they realize that this is something um that's relevant also for them in the, in the coming years. So I, I assume we will see more activities there. But so far, I think we're still quite, quite far ahead in that game. What interest does the does the exchange have with securitizing uh assets? You know, we we we hear a lot about this being the future of crypto that the idea of uh of uh of uh Blockchain settled uh Blockchain, settled transactions, et cetera. Here you are um in exchange it as a si si decent size exchange, it, you know, it might not be the biggest in Europe, but it's certainly it's certainly bigger than most crypto exchanges out there. Um What interest do does your exchange have in securitizing and settling uh transactions on the Blockchain or are you just getting involved in solely digital assets as a trading vehicle and not trying to merge or, or get involved in that. Yeah. Very, very good question and, and very important um strategic uh topic for us. Um I mean, first of all in my head, right, I mean, there's all the thing about around crypto crypto Cassity staking, we just talked about this is a business that, that exists now, you know, this is revenue generating and then there's the, the securitization arm of things um which will will change the world we live in, it will change our world probably in the next uh a couple of years, but this of course, will take, take a little bit longer. Um But it's something we are looking into very carefully. Um And as you rightfully said, this, this directly has the, the, the opportunity but also the threat um to change our, our core business. Um We, we actually recently set up um an own entity in Switzerland um called Digital. Uh So Bear also owns B Swiss, which is the second largest uh Swiss Stock Exchange. We uh we founded a company there to explore the opportunities and um we will launch probably a uh DLT marketplace for such assets there in 2024. And we are also carefully looking into the opportunities of the DLT pilot regime in Europe uh with regards to, to the products. Um we are also trading as an ex exchange, right? But like I said, I think this is early on, we're having a lot of interesting and, and very valuable discussions also with um with the industry. Um but this will, I think stock now will take a couple of more years to become big. Iii I, the reason I bring it up is that in many ways, if you're, if you're providing a market for digital transactions, one would think that you would say, OK, well, this is almost a vote of confidence in this being the future or a future technology in financial transactions. Um I, do you find any regulatory uh pushback with the idea of digitizing and securitizing uh uh on or rather rather digitizing securities on uh the Blockchain? And do you, do you have any uh pushback from European regulators or Swiss regulators? No, I mean, of course, you have a lot of different opinions here, right. And of course, of course, I think there's a lot of, a lot of uncertain discussion on the market, but I, I would really say there's no pushback even to the contrary, I mean, as you know, there is the, the DT pilot regime um of the European regulator um has started, I mean, we, we, we um expect the first uh licenses being granted um maybe even this year or beginning of next year. Um The Swiss regulator is even a little bit more forthcoming. Um They, they put ad LT regime into place that, that is not pilot anymore. It's, it's a real DLT regime. So from a regulatory perspective, I definitely see um uh see support there, I definitely see support there. But I think the big challenge and this is an a challenge also for the industry is you need to, to be successful, you need to be really build an ecosystem, right? You need to, you have, you have to have the, the sell side, the people um issuing the, the, the, the the the the crypto bonds and crypto papers and so on. And then on the other other side, you need to have the, the buy side, the investors um investing into it. And I think that um uh yeah, we will take some time to, to um build that ecosystem Oliver. I, I gotta ask you, of course, your company seems to have a very forward looking when it comes to digi very forward looking attitude when it comes to digital assets regulation in Europe also seems to be advancing a little bit faster than some other parts in the world. What do you make of the markets? We took a look at the markets at the top of the show. Uh They, they are definitely a little up today but still trading very flat, very liquidity. Uh What's your reaction to that? No, I mean, that's what we see in the markets for quite a while now, right? Um I mean, as you can imagine, my compliance department will tell me, never, never uh uh say anything around the markets. Um But I mean, of course, um as a, as an exchange, we are, we're, we're hoping for uh uh increasing market activity um towards the end of the year and next year. But um to be honest, uh uh I, I it's hard to make any predictions, right? I think that's uh beyond what I can do. All right, Oliver, we will leave it there. Thanks so much for joining the show this morning. We hope you have a great rest of your day. Thanks a lot. Thanks for having me. That was Boris Digital managing director, Oliver Vent. All right, you can check out more staking week stories on coin desk dot com. This week that's presented by Foundry. I should mention that Foundry and Coin Desk are both owned by DC G.