EP 214 – Caroline Malcolm and Ulisse Dell’Orto – Chainalysis – How Does the Seemingly Impossible Become Inevitable?

by | Jul 9, 2022

The Asia Tech Podcast was invited to attend the Chainalysis Links event in Singapore.  We were fortunate to be able to chat with Caroline Malcolm, the Head of International Public Policy and Research and Ulisse Dell’Orto, the Managing Director for APAC and Japan at Chainalysis.
Some of the topics that Caroline and Ulisse discussed:
  • The importance of building communities
  • The necessity of Public Private Partnerships for the mass adoption of crypto
  • Helping Society and Governments prepare for technological change
  • New ways of achieving policy objectives – keeping people safe
  • Blockchain and distributed ledger technology education and literacy
  • The significance of working with regulators globally
  • Access to data and sharing that data to make better policy decisions
  • The sheer speed with which the blockchain industry is moving
Other titles we considered for this episode:
  1. Even When It’s Your Full-time Job, It’s Hard to Keep Up With
  2. You Cannot Ban Cryptocurrencies
  3. Value Will Be Exchanged Differently
  4. Turning On the Lights Just a Bit
  5. It’s Very Novel to Have This Level of Transparency
This episode was produced by Isabelle Goh.

Read the best-effort transcript below (This technology is still not as good as they say it is…):

Michael Waitze 0:30
Hi, this is Michael Waitze. And welcome back to the Asia Tech Podcast. Today we’re joined by Caroline Malcolm, the Head of International Public Policy and Research at Chainalysis. I love the looks on their faces, by the way…and Ulisse Dell’Orto, the Managing Director for APAC and Japan at Chainalysis. Caroline and Ulisse, thank you so much for coming on the show. How are you both doing today?

Ulisse Dell’Orto 0:54
Doing great. Thanks for having us. Actually.

Caroline Malcolm 0:57
It’s fantastic to be here. Thank you.

Michael Waitze 0:58
You both have been traveling a lot. Yeah.

Ulisse Dell’Orto 1:01
Yeah. Yeah, it’s been pretty insane. You know, like, I think this week, we were in Korea and Japan last week. Australia, it’s just never ending.

Michael Waitze 1:12
What is it like flying around right now to that many plays? You know, in the old days, it just would have been like, do this make your connection? Do this make another connection? But are there any sort of barriers to this? Or is it just getting easier?

Caroline Malcolm 1:23
It’s more paperwork. And it’s carry on luggage only carry only

Michael Waitze 1:27
Carry on luggage only? Yeah. Is that because you don’t have time?

Ulisse Dell’Orto 1:31
It’s just just easier, right? Like you don’t want to go through like, potentially they miss then they lose your luggage? I would say that it also depends on the region. I think in Asia Pacific is still pretty challenging to fly to COVID. It’s probably easier in Europe and US.

Michael Waitze 1:48
Fair enough. I mean, this is my first trip since COVID. And it’s literally just like a puddle jump. I came from Bangkok to here and flying into Singapore has got to be the easiest thing in the whole world. Yeah, no testing and all that. But even so even without that, like you couldn’t I’ve been to Hong Kong before, right? You get in the line there. And it’s looks like it’s three hours long. And three hours long. Yeah. But in Singapore, you’re flying. You’re like, oh, no, this could be like days. And it’s not it’s never been more than like eight minutes. I don’t know how they do it. Anyway, before we jump into the main part of this conversation, let’s see, why don’t we start with you? What’s your background? Like? Where are you from?

Ulisse Dell’Orto 2:22
So I’m, I’m Italian. I’m based in Singapore. I as you mentioned, I run Asia Pacific for chain analysis. But prior to chainalysis, I’ve actually launched a blockchain community between Berlin, New York and London that was focused on you know, bringing together entrepreneurs, cryptocurrency experts and developers to share ideas about the cryptocurrency industry. So it was a lot about educating people about about the industry in the space. Prior to that, I’ve always been into startups. So we always focus on taking company for campaigns from zero to 100. So do we have the right structure to scale? Are we ready to move from one country to 10 countries? It’s always been about that. And and yeah, that’s, that’s those are some of the things that I’ve been focusing on in the past few years. But to be very frank, you know, I’ve been working at GE analysis for almost five years, and it feels like 25 years, it’s challenging for me to think about what I’ve done.

Michael Waitze 3:33
It’s hard to remember, Carolyn, how about you?

Caroline Malcolm 3:35
So my experience is really different from all these. I grew up in Australia. I began my professional life in Australia working for the government. And about 12 years ago, I moved to France, I became French. I worked for governments internationally. So I worked for the Organisation for Economic Cooperation and Development OECD, the OECD. Yeah. So my background is actually as a tax lawyer, and I worked in tax for about 15 years, and sort of fell into crypto, in fact, looking at the tax treatment of cryptocurrencies, and then sort of became more interested in sort of technology underlying it and the space more generally, and ended up setting up and running the global blockchain Policy Center at the OECD until I joined chainalysis, just six months ago,

Michael Waitze 4:31
this is so interesting. But what do you take from the OECD? From all the stuff that you learn there? And this is a uniquely global organization? Right? And it looks at things holistically, at least it should and then tries to understand how all those things fit together. Right? How does that translate into what you’re doing today at chainalysis?

Caroline Malcolm 4:52
So for me, that was always a big question. You know, they guess for me, the driving passion is to help some ideas and governments in particular, prepare for the process of technology change that we are going through. And that’s obviously, you know, crypto and blockchain are a big part of that. But obviously, it’s much broader as well. And so when I thought about leaving the OECD and coming to the private sector coming to church analysis in particular was about, you know, can I achieve that same mission in this place? And for me? I’ve, I’ve discovered Absolutely, yes. Is the answer to that? And do you

Michael Waitze 5:33
feel like in a way that you have to do this, though? Do you know what I mean? In other words, you can we can spend a lot of time talking about, and I don’t want to actually I don’t wanna spend any time talking about speculation or cryptocurrency per se, I really want to talk about the underlying technology, and the community building around it, because I think it’s really important. But I think there’s a disintermediation taking place. And crypto is the enabler for this for saying there is the global society, which has been so far divided by physical boundaries, like mountains and oceans and and rivers. And those boundaries are going to fall slowly but surely, and blockchain and distributed ledger technology as the as the backbone for that it’s going to make it possible for people with similar interests, to be able to communicate and become a community. And in a way, you almost have to, because there’s some question in my mind about what governments will be doing to facilitate that, and actually moving from OECD do not a government entity per se, but into this space. It’s feels like the next step is not fair.

Caroline Malcolm 6:36
Yeah, look, it is definitely there is I guess, a process more generally, you know, reconception of what is the role of government when you have the opportunity for not just globalized systems that were facilitated by the internet, but decentralized systems as well. And you know, what, what role does government have to play? I think, though, we have had lots of instances and even just the pandemic has been one of them. At the end of the day, people still see a role for government, and who did they turn to when there was this kind of very significant global health crisis was was government and so what we’re seeing in the crypto space, so it’s quite interesting, because obviously Kryptos Origins is a very sort of anti the system, anti these structures. And yet today, we also can see that, okay, we want to have that innovation, crypto and blockchain offers, but we do still think that as a society, certain guardrails are important, and you know, for all its faults, for all its challenges, government is still the entity best place to put those

Michael Waitze 7:37
can we make the case that every technological technological change, excuse me starts as an anti, right. In other words, whatever’s happening over there is not good enough. And the only way we can solve this, but is by this, and I remember in 1997, and 1998, my younger sister was starting her own company. And I remember very specifically saying to her, Laura, you should definitely put this up on the internet. And she was like, I’m on tour. That’s only for criminals. Yeah, but am I wrong?

Ulisse Dell’Orto 8:06
No, no, definitely. That’s one of the things that actually we talked about today. Here in Singapore, or running Chainalysis Links.

Michael Waitze 8:13
You want to talk a little bit first about what Chainalysis Links is? Yes. So people know, because we are in Singapore.

Ulisse Dell’Orto 8:18
Yeah. So we started doing Chainalysis Links, in 2019. So this is really a conference that brings together both the public and private sector. And we facilitate communication between the two, we still facilitate cooperation between the two. We’ve now run for conferences in the region. So we did, Sydney last week, Tokyo and Seoul this week. Now in Singapore,

Michael Waitze 8:42
I like the way you’re closing your eyes,

Ulisse Dell’Orto 8:44
I’m closing my eyes, because it’s

Michael Waitze 8:45
trying to really envision yourself checking in to know. Okay, that was Sydney. Yeah, that was Tokyo.

Ulisse Dell’Orto 8:51
I don’t know where I am right now. But it’s fantastic to see the interaction between the public and private sector. And, you know, one of the things the messages we’re trying to convey here is that if you look at what happened with the internet, but also other technologies in the past, at the beginning, it becomes it’s very difficult to see a technology becoming ubiquitous. And it’s very, very difficult for this technology to see this technology as inevitable, right. So you would have never thought that, you know, 20 years ago, we would have exchange information the way we do today. Through through the internet through social media. And what’s happening today with cryptocurrencies, exactly the same thing, but with value.

Michael Waitze 9:34
Exactly, exactly. And it makes it so much, right. Like if I had told you, you could read any book or get access to any data or access to any information at the tip of your fingerprint at the tip of your hand, you would have said like this is magic, and that magic doesn’t happen. But now if I can say that you can have an exchange of value that’s frictionless and seamless, in a way that you couldn’t have understood before. That’s what that’s where we’re going and you’re right. Maybe your mom or your grandma can’t understand it. But you know, they’re on their phone every day chatting you when you come at home when you forgot my birthday. But before they never would have presumed that they could do that. Yeah. And that’s what you mean when you say it goes from being I can’t imagine this to I can’t imagine not this inevitable. Yeah, exactly. Yeah. Can I talk about the government role before because I don’t want to sound like I’m anti government. But again, in the old days, the government was the only choice. And it was push, pure push, right. Like, people wouldn’t know what’s going on, governments would get a ton of information, they’d make a decision, almost like a decree and then they’d push it out to people it for the most part, right? In a way that was benign, meant to be good. But now because of this, and because we have access to all this information. And now because we have a sort of democratized way of value exchange as well. Now it’s less push, and more collaborating. Which is why I feel like you’re in this perfect place to say like, I used to do this. And there’s nothing wrong with this. But if we do this, too, and the PPP part, right, the public private partnerships, really help no, sorry, go ahead.

Caroline Malcolm 11:01
No, no, I think this is this is really true. And I think, look, the pace of change means that this is no longer you know, and this is true sort of lawmaking, regulating, generally, it’s no longer this sort of top down or tell you the way it’s going to be can’t be you absolutely can’t be, there’s just not the level of knowledge needed to be able to keep up with this space, even when it’s your full time job. It’s a hard space. And so having, you know, having that more collaborative approach, the public private partnership, sharing ideas, sharing information, sharing knowledge, and particularly for where chainalysis is in the market, sharing data about what’s going on, to help make policy better new ways of achieving the same policy objectives because of the policy objectives we think about in this space, and not novel, keeping people safe, whether that be money laundering, Investor Protection, it might be around, you know, advertising, it might be around also, you know, resourcing our society in the sense of taxes. So these are not new issues, but the way you can actually achieve them is completely

Michael Waitze 12:14
different. Exactly. Yeah. I mean, if the back end technology that’s running it, right, so in the old days, you’d have Swift, right, so I can send money anywhere in the world. But there’s a whole bunch of services that were built around it so that people don’t actually understand what they were doing. And what happened after that happened. Right. Again, just to give you some context, when I joined Morgan Stanley, it feels like the 1930s. It was actually the late 1980s, the first book they gave us was something called after the trade. And the reason why they gave it to us was because they said the trade is great, and it could make a decent amount of money. But if you can’t process it and understand what happens after the trade, the trade itself is useless. And as the underlying technology changed, we had to build other technology around it, so that we could still understand what happened after the trade. And I feel like that’s kind of what’s happening here. I like to keep making these analogies, right. So people in different verticals can understand. The E commerce side of this is easy to understand why and how that’s changed. The Financial Services part is what we’re talking about now. But if that’s true, then companies like chainalysis, and other companies that operate in this space, if they want to get all this data and then be able to analyze it, they have to build a whole new infrastructure around it, to be able to do that. Is that does that make sense?

Caroline Malcolm 13:27
Yeah, no, absolutely. And I think that this is why the sort of reg tech or subtext supervisory technology is also changing will continue to change to fit these new rails that have been been developed. And that’s why it makes it one of the most exciting things to be doing in policy.

Michael Waitze 13:46
Right. But do you feel like now, sitting in your seat, that you’re now working together seriously with the government regulators globally? And saying, Here’s what we found. Right? So maybe you thought this sort of regulatory infrastructure was right. But maybe this is better based on what we’ve found?

Caroline Malcolm 14:06
Yeah, this is this is why I love doing what I do at chainalysis. Because you have access to the data that you can share with governments to help them make better decisions and to work with them to think about, you know, what are alternative ways to not just get to the same policy objective that we had before but to get there better?

Michael Waitze 14:27
Yeah, that’s Sorry. Go ahead.

Ulisse Dell’Orto 14:28
Yeah. But also, if I can say something, we’ve never really seen, at least in my opinion, an industry that moves this fast, like we’ve never had anything like this before. And so innovation moves much faster than regulation. But I think that the role of chainalysis can play in place on a daily basis, really educating different stakeholders in the industry. And it’s really about educating them about being more dynamic about accepting the fact that not everything can be controlled, and that in order for thee, in order to embrace innovation, there will be events that, you know, will force the government to make difficult decisions. You know, I could talk about algorithmic stable coins, for example, and some of the things that happen with with Luna, Celsius. All these are essential for the growth of the industry and accelerate regulation in the industry.

Michael Waitze 15:22
So, can we talk about this for a second? Yeah, so it’s so easier. It’s so easy. Sorry, it’s my, my voice is ahead of my brand. But it’s so easy for the media to look at what happened at Luna. And look at what happened at Celsius. And say, like, I told you so. Right. But the reality is that if you believe people are operating in good faith, right, I’ve met Alex machine ski, do I have his name? Right? The founder of Celsius, right. I didn’t meet him for a long time. But I don’t think these people were operating to try to rip people off. And yet, if you look at the beginning of every technological transition, right, at some point, something goes wrong. And the reality is, if it doesn’t go wrong, first of all, it’s an edge condition. But second of all, if it doesn’t, you don’t know what to fix. Is that fair? Sorry. Go

Ulisse Dell’Orto 16:08
ahead. Yeah. And it forces it forces your regulators to really become experts when it comes to you know, like stable coins Exactly. Understand what’s the difference between algorithmic and centralized stable coins. It just forces them to accelerate their knowledge and like, establish policies that are in line with what’s going on instead of like, trying to look at answers from the past, right plying answers from you know, that that’s what we’re seeing really today.

Michael Waitze 16:35
Yeah, I mean, look, it’s like trying to fix an M one MacBook Pro. And the only knowledge you have is of the ENIAC. Yeah. Is that okay, I want to get back to community building. Because you said your first foray into this was building a blockchain community. Yeah. Why did you think that that was the right way? To start? You know, what I mean? Like, why is the community so important? Yeah.

Ulisse Dell’Orto 16:58
Well, I always felt that most people had an issue in understanding, you know, what is blockchain? Why why are we thinking of cryptocurrencies? Why cryptocurrencies could help 2 billion people to go from being unbanked to access financial services. It’s always been, you know, very clear to me that most people do not understand the value behind the technology. And that’s why I started working on organizing events, bringing people together, and educating people. And that’s exactly what we’re doing a chain analysis, we’re doing analysis, essentially, among other things, is basically bringing people to the same basic level of understanding of the technology. Because if we have both the public and the private sector understand why we are using blockchains, why they matter? What are the use cases, and it’s going to be much easier to regulate cryptocurrencies, right? To embrace them?

Michael Waitze 17:54
Yeah. And look, I look at it like this. There could be a room on the other side of this building, right? That’s filled with cash. Right? And if I said to you, and I’m not saying that everything’s related to money, right, but if I said to you, and we could go there, I could turn off all the lights. Yeah. And I go, Hey, come into this dark room with me, there’s a bunch of cash in there, you just be like, boom, I’m not going in there. I can’t see anything. And I don’t understand what’s happening in there. But I’m serious, right. But even if I flipped the lights on just a little bit, if I turn the dimmer up just a bit, and I go, Hey, come on in, you’re like, Okay, it looks okay. in there. Yeah. And now I want to learn more. Right? Yeah. Does

Caroline Malcolm 18:26
anything that makes sense. And I guess, in particular, you know, often we will share data that we have about the levels of illicit activity in cryptocurrency. And it’s quite interesting, because as I speak to regulators, often it’s not enough to just give them the data and say, Look, this, this is the number, this is how much listed activity is this is a comparison with Trad fi, you know, based on that, you know, the appropriate risk based approaches is x y Zed to get them to really have trust in that data that you’re sharing. You have to be able to show them how we know this. How do we know about how much listening activity because this is very novel to have this level of transparency? Completely new. And that’s why I think, you know, if you think about trade fi, this is not a case where you have to go around to each financial institution and ask for their data and then hope that they’re giving you accurate information. They’re not hiding things from you. This is we can see for ourselves, regulators can see for themselves what’s actually going on. So in helping them kind of build trust in in blockchains. It’s not just about sharing the information, but sharing why we know this, how we know this, so

Michael Waitze 19:51
can you do that? So for the people in this room, we know why the transparencies there, but maybe both of you can talk about this a little bit. Can we just fix blame to people that don’t know where the transparency comes from, right? In the sense that you can build an entire application that looks at every single transaction. And why? Do you know what I mean? In other words, like I could never see your bank records, I can’t go to Swift and just like download all the activity that I can’t do. It’s not possible because it’s not open. But if I understand the way blockchain and distributed ledger technology works, I can write code to just look at it’s there. Yeah. Can you explain this?

Ulisse Dell’Orto 20:26
Yeah, definitely. And that’s the difference between what we what we saw in the past and what we’re able to see. Now, as you know, Carolyn was mentioning, the level of transparency is something that we’ve never experienced before. So we’re basically looking at a public ledger that allows anyone to access this ledger and look at several anonymous informations, that basically means that we know know, the size of the transactions, we know the data, the transactions, we know, at least, with alphanumerical numbers was behind the transactions. But we do not actually know whether these transactions are between an exchange for example, or a payment processor. And we do not know whether these transactions are happening. And they’re being listed or illicit, right. So these are some of the things or distinctions that probably you can talk about on chain, and chain alysus. You know, he talked about being in the dark, basically, turn, turn the lights in this environment. So basically, what we do is help any stakeholders in the industry understand, okay, these two kinds of parties that are transacting, one is an exchange. The other one is a payment processor, and they’re exchanging funds, these are listed activities. What we also see is that the Darknet market is receiving funds from this cryptocurrency exchange, this is illicit so will really allow regulators cryptocurrency businesses to basically understand what’s going on, and guide them through what actions can be taken to limit the exposure to illicit activities. That’s what we can do today, that was not possible

Michael Waitze 22:02
before. So

Caroline Malcolm 22:04
we’re gonna jump in the analogy I like to use, it’s like, you know, this public list of all the transactions that occurs, it’s a little bit like the map of a city. But just looking at this list of transactions is like having a map of the city, but it’s got no names of the streets, it’s got no name to the building. And that’s what chainalysis brings, we don’t tell you which person is sitting inside the building. But we can tell you, you know, this is awkward road. This is, you know, a coin based exchange, we can tell you who are the actors in the ecosystem? And what’s happening at that trend and transaction level?

Michael Waitze 22:47
Are the regulators surprised when you go to them? And show them this data for the first time? And not just the regulators, but others as well? Do you know what I mean? So like the sales process is

Caroline Malcolm 22:57
still there is to the point that you have to repeat the same thing multiple, multiple times, I’ve been working with regulators who, you know, have been, you know, preparing legislation in this space for a number of years. And I will still get the question about, you know, but can I see, you know, a personal wallet or an unholstered wallet? Can I see that on the blockchain, that people think that it’s still very hard to get their heads around the fact that yes, you can see all of the transactions, you can see all of the wallets that are available. But but

Ulisse Dell’Orto 23:32
this is why it’s, you know, it’s it’s amazing, right, like the gap that we have still to this day, when it comes to understanding of blockchains understanding of, you know, what is possible, what is not possible. And this is why that’s a big part of what analysis does is educating regulators, cryptocurrency businesses, you know, making sure that everyone, not simply between public and private sector, but also globally, gets this same level, the US, for example, as the regulators have a very good understanding of, you know, cryptocurrency and blockchain. Can you say the same thing about every country in the world in Southeast Asia, in Central Asia? That’s not the case. Some countries are catching up. And that’s our role here.

Michael Waitze 24:13
So this is the big question for me now, right? So you’ve built all these communities, you’ve built an analysis tool and a whole bunch of other things, right? And then you go out and talk to other stakeholders, right? We talked about PPP. And you’ve been traveling a lot. And I think this is super cool, right? Because now you’re interacting directly with people in different countries, different regions, different religions, different backgrounds, different levels of education and literacy. Do you see differences? And can those differences be overcome? Do you know what I mean? In other words, the regulars in Thailand have made a decision? Yeah, this is kind of okay. We’re gonna let this stuff happen, which you wouldn’t think would happen because it’s Thailand. Right? And I live in Thailand. I love it there. I’m not saying that there’s anything wrong with it, but I wouldn’t have expected them to be super aggressive, but they kind of are in Singapore. The model Terry Authority of Singapore is very involved, it feels like to me you would know more than I do. But that’s not surprising to me. Right? The US is a free for all. It’s on its own right. But do you see these differences? And you have to take different approaches in different places?

Caroline Malcolm 25:14
Yep. So I mean, absolutely. In terms of both the regulatory approaches and how they see, cryptocurrency, both at the very sort of macro level is digital assets, part of our vision for our economy,

Michael Waitze 25:30
but can it not be?

Caroline Malcolm 25:32
Some still think that you know that you can cut it out? Or that maybe not even necessarily cut it out. But that won’t won’t be a priority?

Michael Waitze 25:40
Can I just jump in for a second? Right? You already mentioned this, and you were shaking your head? Yeah, yeah. Yeah. When he was saying it, right. But this idea of it’s got to be impossible. And now it’s inevitable. Yeah, right. In other words, countries can’t, they shouldn’t get left behind, because they don’t understand that everything is going to get digitized. If it already happened, right. In other words, we saw it in spreadsheets at first, right? And VisiCalc was like the first way to take all of your letters and then put them on your laptop. And then it moved into lotus 123. And then it moved into Microsoft Excel. And then it moved into Google Sheet. Sorry, go ahead.

Caroline Malcolm 26:13
Yeah, no, and I think that’s right. And we’ve seen that even at a bare minimum, if you trying to ban access to digital assets doesn’t work. So even at a bare minimum. It’s just not possible to do unless you’d like to shut down the internet completely. Yeah. And I think that, you know, so even at a bare minimum, you need some sort of framework to manage that,

Michael Waitze 26:43
right. In other words, you can’t just close your eyes and just hope it’s gonna go away, because it’s not gonna go away, and you may as well, intermediate disintermediated at the beginning and get in front of it, as opposed to just go on. We’ll deal with that in 10 years by 10 years. Sorry, go ahead.

Ulisse Dell’Orto 26:57
We are seeing that if you think about it, like, probably two years ago, several countries, were looking at Banning cryptocurrencies, whereas like, the conversations that we have today is much more about like regulating cryptocurrency, what is the best way to what is the best approach to regulate cryptocurrencies? Even know, we were talking about, like, you know, the fact that you cannot benefit in China, for example, which used to be the biggest crypto mining country in the world, right, they shut down everything. And now we’re seeing activity coming back up in China as well.

Michael Waitze 27:26
So just figure it out. Yeah, right. Sorry. Go ahead. And it’s

Ulisse Dell’Orto 27:30
just, you know, it is inevitable. And I think it’s an a unique opportunity for any country, to really, you know, attract capital, talent. And, and, and it’s very competitive. But I think that if a country regulator builds a strategy, a framework that, you know, attracts these things, then, you know, there’s going to be plenty of of talent and investment in that country. And I think that a lot of the regulators are still figuring this out, depending on on the region, but the potential is, is immense.

Michael Waitze 28:08
Do you feel like the the growth or the development of cryptocurrency, I mean, look at its core, its software? Yeah. But we can call it a coin, but it’s not a physical coin? Sorry, go?

Caroline Malcolm 28:19
You’re gonna say no, no, absolutely. I mean, it is it is at its core software. It’s just software, right?

Michael Waitze 28:23
Yeah. And maybe it’s highly encrypted software. And then maybe at some point, it’s going to be built on quantum computers. So all this stuff could change. But at the end of the day, it’s just software. And I’m curious what you think about this, right. So at the beginning, governments are opposed to it, because it feels scary. Then they’re like, Okay, this stuff’s okay. And then they’re gonna go like this. Wait a second. I can have money that’s programmable. From a public policy standpoint, this is really powerful in a way, maybe too powerful. Does that make sense? In other words, if you’re on some sort of welfare program, I want to give you money, but I don’t want you to spend it on like, fancy jeans. I want you to spend it on food. Yeah, well, I can just program the money so that money is only available to spend on food. So from a public policy standpoint, it’s kind of interesting, though.

Caroline Malcolm 29:11
Absolutely. Even just the delivery of public assistance is really interesting. We saw during the pandemic, there was, you know, literally overnight, a need to change the way that we distributed benefits to people in need. There we were globally, and then we were literally writing checks to send out to people when they needed money today, we could say, come back in six weeks, when your checker

Michael Waitze 29:40
clears or when it clears. Right. It’s like I got a check in the mail. Great. We can eat in two more weeks.

Caroline Malcolm 29:46
Absolutely. So this I mean, this was a I think a real wake up call about our alliances on financial infrastructure that doesn’t meet the needs that we have today. But then

Michael Waitze 29:57
how do you do this right? Again, in this room, it’s a little bit of a bubble. Because we understand like, if I sent you a check, you’d laugh. Even if I just, even if I suggested even like, really, when it has been moment. I haven’t checked, we haven’t checked this frame, we can talk about that too. And actually, I’ll tell you right now I got a, I got an IRS refund, okay. And they forgot to give me on top of the refund, they made a mistake. And I call shucks, we have to give you another $67. I’m like, great. My bank was here. I was in Thailand. So send it to me in Thailand, I was coming to Singapore for a business trip. And I came to the bank here, HSBC. And I said, Can I deposit this check? Because I deposited the other check before, which was a lot larger. And they’re like, Sure. And I signed it and did all the right stuff. And you’re like, Oh, $67, check, we have to charge you $50 To deposit. I’m not getting I’m not making this up. And so I kept it. Because it wasn’t worth it. But we know all of this. Right? So you can’t tell somebody, even in a suburb of Chicago, which feels like a pretty, you know, smart place and say, Don’t worry, we won’t send you a check, we’ll just send it to your Metamask wallet. How do you get past that? From a public policy perspective, right? Because to somebody in New York, or LA or San Francisco or Singapore, right, or Sydney, or Berlin or London, like those people are going to understand that the literally somebody in the in a suburb of Chicago might not get and it’s not it’s not class?

Caroline Malcolm 31:29
No, this is I guess, the natural sort of adoption curve that you get with technology. You have your like, your your first mover’s and then, you know, on day one, not everyone got an email address.

Michael Waitze 31:40
I agree. And I remember telling my mom, you should go to AOL. She was like, What’s a well, and I’m like, Okay, go to your computer.

Caroline Malcolm 31:47
Absolutely. And the same thing, you know, and then for a long time, it was like, Okay, I have an email address. But I don’t really trust sending money online. I don’t want to put my credit card details. I mean, if you think about, I mean, we put our credit card details online, it’s just,

Michael Waitze 31:59
it just sits there. It’s crazy.

Caroline Malcolm 32:01
Yeah. And so that just that is a process. That that takes time. And that’s part of, you know, human nature is that we don’t adapt necessarily, very quickly, you have your first mover’s Go ahead.

Ulisse Dell’Orto 32:14
I just think that, you know, it should be part of like, our education, you know, I agree should be one of the things that we’ve done actually in Singapore with Singapore management University chainalysis, we ran blockchain courses for financial institutions, executives, to guide them through what is blockchain? What is transaction monitoring and all that. But if we think about it, like, why, like, this is this technology is revolutionizing everything that is touching every every sector, every industry, we should enable the future generations and probably, you know, the generations that they still don’t get it about, you know, like, how does the technology work? Why does it matter? Why How can it, you know, accelerate, or facilitate like payments and exchange of value? This should be taught, you know, there’s something that that doesn’t happen overnight. Education plays a very important role. And, and I really think that, you know, universities, schools, there, we’re seeing a bit of that, but we should see that it should not be, you know, wow, they also have like a University has a university course. On blockchain, you should be, oh, this university doesn’t have that. You know what I mean? Like, it’s not the exception. It’s like, it’s

Michael Waitze 33:24
the norm. It’s the rule. Right? And I look, I say this about a lot of different things. Like, why didn’t they teach that in high schools? Is my sort of catch all phrase for everybody should know this? Yeah. But how do you get from a public policy standpoint, governments because governments run most of the schools right, to be able to then go out and tell everybody in the public school system, how this stuff works? It’s a rhetorical question, right? Because it’s super hard. And even you said, we’ll use this from now on, innovation is much faster than regulation by the regulators are constantly chasing. And in a way, sometimes the innovators are trying to run away as fast as they can. Right. So there’s a balance there, too. But I think that a lot of education, at least when I was a kid is a little bit about brainwashing. Right. Six times five is 30. Just keep repeating the timetables, right. I’m older than you. But But again, it’s not that different. Sorry. Go ahead. No,

Caroline Malcolm 34:15
yeah, it is. And I guess, bringing new approaches into very established systems is extremely difficult. And that’s often why it can be easier to start from scratch, then to reform something that’s already in place completely

Michael Waitze 34:35
agreed. Yeah, completely agreed. Like Greenfield stuff is way easier to get into people’s brand and saying you used to do it this way. Now do it a different way. That’s almost impossible.

Caroline Malcolm 34:45
No, it is. I think one of the things in terms of bringing that education on mass is I think the recognition including in Trad fie that the people’s entry point, you know, if you think he is, you know, what was the relationship that we bring you to a bank and then hold you in a banking relationship with a particular bank through your lifetime. And it was a mortgage, right? So you’d get in, you would get your mortgage, and then you’re not going anywhere. And now I think, increasingly crypto is our entry point, people looking to sort of say, well, what’s that relationship with financial services that I’m going to have? And the entry point being crypto rather than necessarily more, you know, established products in this space.

Michael Waitze 35:31
Here’s the thing, right? Again, in the old days, that mortgage was the thing that kept you at your bank, even if the bank was horribly like, well, our mortgages there, we got to make another mortgage payment. Now, the big investment banks said, I don’t care where your mortgage is, we’re buying it, repackaging it, and then we’re going to sell it to somebody else. But you didn’t know that and you didn’t care really, right. But there’s some concern from people that, you know, decentralized finance sounds great, right? But on the other side, if it’s decentralized, who’s in charge, right? Like, who answers if there’s a problem with my transaction? Or I get something or something illicit happens? Who do I tell? Right? And we can talk about the protocols around specific chains. And that’s neat, too, right. But again, most people never going to understand this, but they do understand. I need to get on the phone with the lessee and just say, Hey, what happened?

Caroline Malcolm 36:19
Right? Yeah. And I think that that is also going to change in the sense of we were talking earlier today at links about how, you know, 10 years ago, the user experience for a centralized exchange to buy crypto was awful terrible. And I think we’re in some ways, we’re at the same point with define now, the the barriers to access in terms of the user experience is still relatively high, your mom and dad is not going to get on and be like, hold on, while I go by and, you know, join a liquidity pool, that’s just not going to happen. And so I think that, you know, these things that user experience, and part of that is the consumer education piece, some of those protections that will occur, that will make that space more accessible, but also safer for the broader community, as as regulation also moves into the defy space as it has with sci fi.

Michael Waitze 37:10
Yeah, again, let’s go back and make an analogy, right. But when cars were first introduced, right, they were hard to drive. And there were a lot of accidents. And then somebody

Caroline Malcolm 37:17
had to walk in front of them holding, you know, a light to be like, you

Michael Waitze 37:21
know where you’re going exactly. But the other thing too, is that all you needed to do was get into one accident going going right back to my horse, because I know how that thing works. And all I have to do is feed it right. And I like to make these analogies not because they’re funny, even though sometimes they can be. But just to say that, like in the course of human history, stuff changes. Right, and there are early adopters. But at the end of the day, it just keeps happening. Right? Just keep cycling through. I’m curious if you’ve learned over time from community building, like some not specific things, because I think that’s a BS way to talk about stuff, but just like a mentality around how to get people involved. That may not be involved from the beginning. You know what I mean? Like when you first build a blockchain community, the seven guys and back then it was probably mostly guys are just like, Yeah, this is so cool. But at some point, you have to brought in the group of people that are in that, I’ll be honest, I remember being at a conference here. I want to say 2012, but it could have been 2013. And I watched five guys, one of them was a good friend of mine actually got him on the panel. Right, just because he’s really smart. And I was like, What are these dudes talking about? Because I think they were doing a bad job of explaining it to be fair. Right. So what do we do to get people involved?

Ulisse Dell’Orto 38:38
That’s a great question. I think it’s, it’s all about, you know, showing them that or proving them that, you know, this is a once in a lifetime opportunity. And this is a train and that we need to be on our planet we need to be on where we have the chance to change the world. And, you know, when we were talking about cryptocurrencies back then you have over 2 billion people in the world that are unbanked. There’s a unique opportunity for these people to access financial services, but also for you as an individual, the way that you’re, you know, exchanging value today will not exist tomorrow in the same way. So you need to learn how this technology works. And you need to understand that value will be exchanged differently. So just like from from that concept, it became pretty, pretty easy to for people to understand that this is much bigger than them. Probably that’s, that’s the thing. And and that’s how we started building the community.

Michael Waitze 39:39
So I’m constantly trying to figure out how I move the conversation away from pure speculation, which is what the news reports every day, right? Bitcoins at this price, who cares? I mean, I honestly don’t care at all. Right? What I really want to know is what’s the uptake of the underlying technology, but this is a boring story, right? What I haven’t I want to say I struggle with this, right? Because I think I get better at every day. But we need to figure out a way to tell people that like this is just a normal part of technological transformation. And that the speculation that you hear about on TV, it’s just noise. Right. And and you have to ignore that does is that fair?

Caroline Malcolm 40:14
I think it is, it was quite interesting at a panel earlier today, you know, talking to three different companies in the crypto space, you know, and exchange, a stable coin and infrastructure builder, you know, all talking about, you know, how much they’re hiring, fast growing, it’s really, really challenging to find people. And that’s not the story you hear the story you hear is like, you know, run for the exit, right?

Michael Waitze 40:39
So this is my thing, right? This is why I love what I do. So when I was at Goldman Sachs, one of the guys that joined the trading desk was an engineer. This was right at the beginning of this phenomenon, where they just started hiring mathematicians and engineers to trade because they just thought, let’s remove the human emotion from trading and just take the mathematical realities, and see if we can get the algorithmic trading stuff and the high frequency trading stuff to be better traders than humans. One of the things that this guy said to me was, engineers spend a ton of time trying to minimize noise, can’t eliminate it, right. And that’s why there’s noise on this line, right? And we can buy like a Fed head, or whatever to try to eliminate or to minimize some of the noise and find signals. Right. And I feel like the news today. And you know, Blockchain is just like, the most recent thing to talk about that has a lot of fun stuff happening. And it’s so it’s easy, but like, even when I was in Japan, during the earthquake in 2011, you know, it’s this big explosion, the nuclear reactor went bad and stuff, and people were calling me from all over the world. Are you okay? Like, it’s 200, and something kilometers away from me. And no one’s died from the earthquake. They’ve died from the wave. But this is normal. And all the stuff you’re hearing on the news is noise. Right. And I want to, I want to figure out a way in this space, right, to educate people, because I do think the literacy side of this is really important, particularly for the uptake. Sorry, it is that

Caroline Malcolm 42:09
and it was quite interesting. So when I was setting up the blockchain Policy Center at the OECD, at the same time, some of my colleagues were setting up an AI observatory. And the response to the two from policymakers couldn’t have been more different. Blockchain was like, you know, the poor cousin of AI,

Michael Waitze 42:30
was like the jailed cousin. Let’s be serious, really.

Caroline Malcolm 42:34
And it was very, very in, you know, and that flatbed through in terms of like, people who were number of people who were interested, the amount of funding we got, so on and so forth. And, for me, this is quite shocking, because when I think about the things that are fundamentally challenging to us, as a society as a human race, you know, the level of risks the challenge to the way we do things, right now, I’m far more worried about AI. So um, I

Michael Waitze 42:59
was gonna say, like, from the onset of human communicating with each other, there had to be a way to exchange value. There just had to be and if I gave you a cow, and you gave me a sheep, in return, you gave me a piece of paper that said, in about two months, I’ll give you something back. And I owe you, right? Like, we’ve always been doing this. But like sentient artificial intelligence is something we don’t know what’s going to happen. No control, and there’s no control. We don’t know what’s gonna happen. It’s way scarier to me.

Caroline Malcolm 43:23
And even right now, in terms of AI, the problem of black box, not knowing how decisions were arrived at, before we get to sentient AI, assuming we’re not already there. But, you know, like, even even before we get there, they’re really big challenges to the way we’ve done things through AI. And yet the hysteria around crypto and blockchain is extraordinary. Yeah,

Michael Waitze 43:49
because it goes up and down. Right. So you can report on it easily. Look, when we were building algorithm algorithms for our clients are Goldman Sachs. Sometimes they would call a Why did it do that? lingo? I don’t I don’t know. I can’t see the code. Sorry. Go ahead. But to

Ulisse Dell’Orto 44:02
be fair, like, you know, I completely agree. But if I look at, you know, 2017 2016 it was much worse, you know, you would you still have a lot of conversations about, you know, cryptocurrencies are only used by drug dealers, and, you know, this is

Michael Waitze 44:20
the internet or 1998 on the internet. Yeah, same thing.

Ulisse Dell’Orto 44:22
We’re seeing, like a shift like, we’re really seeing people, you know, admitting that, you know, cryptocurrencies are here to stay, understanding that, you know, zero point 15% of actually day to day trades are connected to illicit activities. If you look at you know, I think there was a UN report that was looking at fiat currencies, two to 3% of activities are connected to these activities in fiat currencies. That’s like a billion, trillion dollar problem, right, and also much bigger problem

Michael Waitze 44:52
and also like, what is the market capitalization of cryptocurrency today is let’s just call it a trillion dollars. Yeah, up Approximately give or take 123. Yeah, whatever. Yeah. Yeah, depending on really, let’s just call it let’s just call it two. I mean, but the sheer number of FX that trades every day is about six and a half trillion dollars. So you’re right. No comparison, no comparison. And we may as well do it now when it’s small and try to figure out this stuff, which is what you’ve been working on. Yeah. Right. Absolutely.

Caroline Malcolm 45:20
Absolutely. But I agree with only that there has been a shift. So we started the blockchain center in 2018. By about 20, end of 2020, is when people started coming, governments started coming to us and say, Okay, so what’s this thing you’ve been banging on about that we should pay attention to? You know, I’d like to know, what is blockchain? What is crypto? Can you can you tell me so you started to get inbound interest rather than trying to push this thing? there started to be pull factors where where governments would come towards you and say, Okay, tell me a bit more.

Ulisse Dell’Orto 45:55
Yeah. Yeah, I remember, probably in 2017, I had a trip. I did a trip for chainalysis in South America. And Jonathan, our co founder couldn’t make it. So I happen to live in Argentina, I speak Spanish and I could communicate with local entities. And I remember having surreal conversations with the Central Bank of Colombia, Argentina, and trying to explain blockchain and cryptocurrencies, really. And for them, it was, you know, it was really like, no, what are you talking about? Not happening. And now it’s inevitable, right? Back to what we were talking about before. So there was a shift, and it’s just gonna get more and more clear for for these entities. And for everyone. I’ll let

Michael Waitze 46:39
you both go in a bit. But don’t you feel like there’s a certain amount of fun and excitement in your job? Because it’s still new? Do you know what I mean?

Caroline Malcolm 46:49
Most exciting job in policy. Right, right.

Michael Waitze 46:51
That you’ve ever had. Right? And it’s like working at the OCD was terrible. It was super cool. No, no, mantastic It was super cool. But it’s a different energy, right? Because now you’re telling people stuff. Yeah, but things that like, are coming. It’s new. It’s exciting. And you go to bed at nine o’clock on? Gotta go up tomorrow to this. You’re like, I just want to tell more.

Ulisse Dell’Orto 47:08
Sorry. Yeah. And I mean, personally, I feel dumb on a daily basis. You get to so much, yeah. It’s things are changing every day. And, and that’s really like, one of the one of the reasons why I love this industry. You know, you never get bored. There’s always something new because you know, we’re at an infancy stage, when it comes to bad analogies and things are just being built as we speak.

Michael Waitze 47:32
I want to change the subject just a little bit because he reminded me of something. Have you ever had like a job? A job? Yeah. Because you said you started really early. Like when you graduate? Yeah. You know what I mean? Yeah, cuz you built stuff. You started stuff. You built a community? Yeah. Hopefully the answer is no.

Ulisse Dell’Orto 47:47
I did. Actually I did. I did have I worked for several companies, startups. The one prior to chainalysis. Actually,

Michael Waitze 47:56
why would you budget startups? Right? In other words, you never worked in like JP Morgan? No, no,

Ulisse Dell’Orto 48:00
I never. I never worked for large corporations.

Michael Waitze 48:04
This is what I mean, like so you wake up every day with this kind of innate incitement excitement about like, I want to make this point you said I learned something right. I feel stupid. It’s that idea of ignorance to me. That drives, right. That’s why I do what I do. Like, I’ve learned so much stuff today. Why don’t I know anything about public policy?

Caroline Malcolm 48:25
Yeah, no, it is and look, because blockchain, its decentralized nature challenges. So many of the ways that we traditionally approach policymaking. It’s hugely exciting. And it really is a space where you can do policy and do it in a really innovative way and have a lot of freedom to think up new ideas to to support the mission. It’s not that the mission has changed. But there’s new ways to get there.

Michael Waitze 48:53
Right. Right.

Ulisse Dell’Orto 48:55
No, no, I completely I completely agree. And it’s we’re very fortunate against to be part of this industry and really proceeded to be part of, you know, something that is that is changing the world. Really,

Michael Waitze 49:09
yeah, I just want to make that point. Yeah, that the beauty of starting something from scratch and building and it’s something that’s real is that you get to learn this stuff all the time. And being on sort of the cutting edge, or the bleeding edge, regardless, is so exciting. You know, I like to humanize things a little bit. And I’ll leave you with this. You know, at the end of the day, if you’re working in Goldman Sachs, and you go home to your partner, and they say How was work today, we just work regardless of how much money you’re making. Yeah. But I feel like now when I talk about what I do, and it must be the same for both of you like, Hey, how was your day? Awesome is like the only thing I can say unless somebody dies. Yes. Yeah. Do you know what I mean?

Ulisse Dell’Orto 49:42
And I mean, like, definitely, when it comes to the industry, in general, when it comes to channels is probably even more. I remember, you know, several situations where you know, in divorce 19 chainalysis, was directly involved or used by law enforcement agencies to take down the largest child pornography website in the world. Wow. I mean, when you do that using chainalysis added to it, you realize that I’m having an impact. I remember, the Norwegian police once once called us and told us, you know, we have someone who was kidnapped, and they’re asking for that. They’re asking for money in crypto, like they’re entered with crypto like, right? We could help, right? Yeah, we could help them solve the case, and you’re having the deaths like life or death, you know, like really having a real impact.

Michael Waitze 50:27
So this is the thing that right, and that is, insurance and inshore tech companies, you’ll see the, you’ll see where I’m going with this in a second. They always say that, like people that are new to insurance don’t understand its relevance until they make a claim, right to like, get the money that I’m gonna have to do this thing. And boom, they get money in their account to fix something that’s been broken, right? Because that’s the nature of insurance. And like the Norwegian police, or the people that took down this, you know, child porn site, maybe didn’t think it was possible or didn’t understand that it would be easier if they use chain analysis to do it. But once they see it, they can’t unsee it. And then they get to look at their problem solving in a completely different way. Without you having to explain it to them. Do you know what I mean? You don’t have to come in and go, Hey, you could use this. B ut it changes their whole perception of the way they look at all problem solving. And that has to be super cool. Anyway, I’ll let you both go. Caroline Malcolm, the Head of International Public Policy and Research, and Ulisse,I got it wrong. Dell’Orto. Ulisse, perfect. Thank you, the Managing Director of APAC and Japan at Chainalysis. That was awesome. Hopefully was good for you. Thank you very much.


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