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Ep 54: What Are Digital Assets, Really? ft. Lord Chris Holmes
59 Plays15 days ago
Lord Holmes explains how tokenization could reshape identity, finance, and trust across the UK and beyond. He breaks down what digital assets really are and why they matter for everyone, not just technologists. From refugee ID to football cards, this episode connects the dots between everyday life and emerging tech.
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Transcript
Introduction and Sponsorship
00:00:06
Speaker
Hello and welcome to this Owl Explains Hootenanny, our podcast series where you can wise up on blockchain and Web3 as we talk to the people seeking to build a better internet.
00:00:17
Speaker
Owl Explains is powered by Avalabs, a blockchain software company and participant in the Avalanche ecosystem. My name is Silvia Sanchez, project manager of Owl Explains, and with that, I'll hand it over to today's amazing speakers.
Meet Lord Chris Holtz
00:00:34
Speaker
Welcome to another one of our Owl Explains Hootenannies, where we decode Web3 without the buzzwords. And today we're joined by a true force in the UK tech policy world, Lord Chris Holtz.
00:00:46
Speaker
He's a champion for inclusion, a believer for innovation, and someone who's shaping how the future of tech and regulation actually plays out in real life. Today we're asking ah simple yet important question. What are digital assets and why should anybody care?
00:01:02
Speaker
Can digital assets really change the way we live, work, and trust each other online? So let's get into it. Thank you for joining us, Lord Paul. It's great to have you today. Complete pleasure. And to everybody out there who was at the Owl Explains in London in May, it was fabulous to hang out with so many people, that have so many fabulous conversations. So great to be back in the community.
00:01:26
Speaker
Thank you, and and it was great to have you in and our I Will Explain Script of Summit last May. And we were like, we just got to extend the conversation and give the people chance to hear what you have to say because that type of event was not recorded. So we were like, we can adapt and create our our own podcast, like a a sequel.
Understanding Digital Assets
00:01:46
Speaker
um So, Lord Holmes, for somebody hearing the phrase digital assets for the first time, what are digital assets? Why do they matter? The first thing for anybody coming on the phrase for the first time is not to be afraid, not to think, gosh, what does that mean?
00:02:07
Speaker
I've never heard it before. To really take it to the most simple things. So, for example, if you had a photograph on your smartphone, that could potentially be seen a digital asset, right?
00:02:23
Speaker
But really what we're talking about here are digital assets that are, of course, in digital form, but also potentially have a value and are discoverable.
00:02:35
Speaker
So when you put those three elements together, you see that there needs to be some form of technology that can bring these about and enable people to be aware of them.
00:02:46
Speaker
potentially hold them, but potentially trade them. And that's where the technologies around blockchain or distributed ledger technology comes in. Why does this matter?
00:03:00
Speaker
It matters because it opens up such an array of possibilities in terms of expanding what we can get out of our world, if we will.
00:03:13
Speaker
So increased liquidity, increased connection, new possibilities that aren't currently available with things in their current form.
00:03:25
Speaker
So An easy example, I know when I was a kid, we used to get football cards and you'd go to local shop and buy little pack of football cards soccer cards if you're in the United States. And you'd have all your favourite players on. You could hold them.
00:03:40
Speaker
You could swap them with your mates different players if you didn't have them. And that's all good. But imagine the England women's football team, the Lionesses, just this week won...
00:03:56
Speaker
the European Championships. It was sensational. Typically, as is always the case with England's women or England's men, it went to penalties. They always do that to us as spectators.
00:04:09
Speaker
But imagine Chloe Kelly scores the winning penalty for England. Now imagine not just having, say, a football card of that, but imagine if Chloe Kelly, for example, decides she wants to make...
00:04:25
Speaker
a digital call representation of that that she could potentially put out there. And people may well want to own that and hold that. Just one tiny example of how you can relatively easily get into explaining what these digital assets are.
00:04:42
Speaker
A more profound example... imagine the financial inclusion
Web3 and User Rights
00:04:47
Speaker
that could be enabled right around the world just through taking ah view which considers digital assets.
00:04:55
Speaker
yes, they matter. Yes, they're important. and Nobody should be afraid if they're coming at it for the first time because they're Very understandable if you don't let anybody confuse or complicate the matter. And if somebody comes at you and they are seeking to confuse and use elaborate phrases and buzzwords and acronyms, they're not someone to engage with. oh That's really interesting and and I love the example of of the football cards because at the end of the day it's just a representation of things that we've been using all along.
00:05:31
Speaker
And we have already spent many years uploading things to the internet but now in this shift from web 2 to web 3, what's the big deal now with with owning them? How does blockchain and tokenization flip the script?
00:05:46
Speaker
Web3 really offers the opportunity that perhaps should have always been there when the web and the internet came into being, really, because there's always been that gulf of a database layer, an ownership layer within that ecosystem.
00:06:09
Speaker
So in reality, again, all we're talking about is control, is ownership, is being able to assert one's property rights in that environment, where currently, in many ways, people still conceive of the web as almost a free place to put up content and to play and to interact.
00:06:37
Speaker
But the truth of it is it isn't free, because really, all too often, not just your content, but yourself, you're being commodified.
00:06:47
Speaker
And that's the deal, really, that's been done. And it's a deal that's been done without really the consent or necessarily the appreciation of the users.
00:06:58
Speaker
It's not necessarily a problematic outcome, but it is because that consent and in that sense of the negotiation, the bargain, the deal, hasn't been struck. So to put it in simple terms...
00:07:11
Speaker
right now if you're on the internet in so many ways largely you're the product but what digital assets enable is this sense of control asserting your rights you can become not just mined by ah platform the platforms you become the producers the traders the creators enabled and empowered through these technologies.
00:07:44
Speaker
and that's And that's a key thing. It's more than just, okay, you're sharing the information, but you're directly, okay, owning it. There's more consent and digital safety is not just, oh, the passport, but the protection of of your identity and what you're authorizing to be out there.
00:08:01
Speaker
um And you said before that digital assets should work for everyone. This topic of inclusion is super important. So, How do you see specifically digital assets enabling inclusion, whether in finance and identity, governance or beyond?
Digital Assets for Financial Inclusion
00:08:16
Speaker
It's not just that digital assets should work for everybody. We all need to work so hard to ensure they must work for everybody.
00:08:28
Speaker
Let's take an extreme example, a horrific example of so many people who may find themselves in a coercive relationship.
00:08:40
Speaker
And oftentimes one of the key elements of control is financial control. Often they're not exclusively on females.
00:08:52
Speaker
Well, if you could look at how these wallets can work and having funds in tokenised form, that gives such a potential for that female to get out from under that horrific situation it really offers that possibility similarly if we consider someone in a refugee camp and there are so many people right now through displacement finding themselves in these really really difficult situations but it's entirely possible to get
00:09:33
Speaker
tokenised funds to get digital IDs into that situation and do nothing short of potentially enabling the path forward for those people.
00:09:46
Speaker
And finally, at a macro level, just consider countries where there's volatile currency movements. Well, again, you may want to have a significant or a portion of what you have held in digital asset form as a buffer against those volatile currency movements.
00:10:10
Speaker
Yeah, those are all great examples. And at the end of the day, i think that it's important to highlight what the tech can do for people, that it's not just for the sake of migrating um from traditional physical assets into digital assets just because it's fancy, but because they actually empower people.
00:10:28
Speaker
but Like you said, whether it's a female that's stuck in a in an abusive relationship and she can have more control of her funds, but even countries and people's savings. And I think that's the key point that we also need to to share, not just with the public, but also with with regulators, that it's so much more than than trading, than then even fintech. um But from a policymaker's seat, I understand that there can be a lot of misconceptions out there, but what makes digital assets happen?
00:10:58
Speaker
hard to regulate or a bit tricky, not not hard, but it just um yeah you have to navigate a bit more carefully. Is it the tech? Is it the language or or just the fact that they don't fit all the boxes?
Regulating Digital Assets
00:11:12
Speaker
think it's all of that and more really. And the first thing that any nation, any regulator, any government, any policymaker should do is really engage as widely and as deeply as possible on this.
00:11:32
Speaker
As you rightly identify, so much policy and regulation is done through being informed with what's already happened.
00:11:44
Speaker
And that's a very stable way to regulate. but it's not and has never been the smartest way to regulate.
00:11:54
Speaker
And certainly with the potential changes that these new technologies bring about, it won't deliver the optimal result. What you'll really have is the spectre, if you will,
00:12:09
Speaker
of the regulator walking backwards into the future, being able to see everything that's gone before, but not even being able to turn their head to over their shoulder but what's coming.
00:12:19
Speaker
And it's to use the lessons of the past to inform, but not to rigidly construct the regulation and the legislation that we need.
00:12:30
Speaker
There's certainly not enough understanding of And discussions around all of these technologies ah across governments in all departments. I think where there are discussions, they tend to happen in the Treasury Department, yeah in the Finance Department, across around the world.
00:12:49
Speaker
But these discussions need to be happening. in the health department, education, defence, in all departments of state and in local governments, in executive agencies, right across the public and the private sector to consider what role digital assets can play.
00:13:09
Speaker
And the great thing is we know how to get this right. What we need is principles-based, outcomes-focused, inputs understood, regulation.
00:13:22
Speaker
We know how to do this in the UK. We did it just under a decade ago. I was involved with the FinTech Regulatory Sandbox we brought into being very novel, very different way of going about regulation, really holding in a a very positive way regulation and innovation.
00:13:43
Speaker
But you in some ways, don't take my word for it. Measure of success replicated in just under 100 jurisdictions around the world. it's It's that sort of approach that we need to take and to have that positivity that we know what we need to know to make a success of this.
00:14:02
Speaker
and that And that's super important. Know what you need to know to make it successful. and And now flipping the script a little bit, what would be the biggest risk you see? i know that there are many, but what's one of the main risks if digital assets are misunderstood or misclassified or if the regulation just doesn't, how can I say, like stimulate the innovation as much as it should? What would be the biggest risk?
00:14:26
Speaker
the biggest risk is certainly the loss of all of those economic and social opportunities. They could be regulated out before they even have a chance of developing. And it's one of the major reasons why I wrote my report on distributed ledger technologies in 2017, because I saw that clear and present risk that if we didn't start thinking and regulating, right-side regulating around these technologies, it's difficult to have been that these possibilities would never even be brought to bear.
00:15:05
Speaker
So the kind of things that need to be considered are what happens when we take a traditional asset and we turn it into a digital asset.
00:15:20
Speaker
Does that mean just by virtue of that change that we need ah different regulatory approach to that digital asset just by din into it being in digital form. I don't believe that's a sensible start point.
00:15:35
Speaker
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00:16:12
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00:16:32
Speaker
You've worked on on AI, on blockchain accessibility, so you see the full digital puzzle. And i think that a really important theme or just a recurring topic is is trust.
00:16:44
Speaker
So what's the role of trust in all of this, especially when you're dealing with with technology and even assets that you're not touching, users that you've never met? What's the role of trust in and all of this?
00:16:58
Speaker
I mentioned principles-based regulation. and of all of those principles, trust is prime. It's critical that we have trust and transparency, inclusion and innovation, interoperability and assurance, accountability, accessibility.
00:17:20
Speaker
They're all incredibly important. But trust is prime amongst all of them because Without that trust, why would anybody feel comfortable?
00:17:35
Speaker
Why would anybody feel confident to get involved and to start holding these assets and trading these assets or in creating these assets? If trust isn't there, there's a massive problem and we We wrote a select committee report in the UK House of Lords in 2020, and it was all around number of these elements. was called democracy and digital technologies.
00:17:58
Speaker
And we really spoke to the heart of this issue around trust. And similarly, just last week on the... ah science and the communications and digital committee that I remember of, we published report on media literacy.
00:18:12
Speaker
And again, the thread running through all of it is this sense of trust. And without overstating it, the fact that we in this country and around the world, there is a crisis of trust right now.
00:18:26
Speaker
And that needs to be fundamentally addressed by all of us because in many ways, you could reduce it and say, don' try no no dice. that That's true. And and not just in digital assets, but in and everything. that's it's It's the principle that transcends the technology, the country, what you're working on. it's It's going back to the core of all this.
00:18:49
Speaker
um And another thing that I wanted to talk about is digital identity, because I feel like we hear a lot about identity, but what's the connection between, okay, we have digital assets, but then you have to prove who you are or what you have to write or what you have the right to do online. So what's what's the connection and how can digital assets help this concept of of identity? thank that Digital to ID is in many ways one of the most important elements, not just with digital assets, but across all of these new technologies, AI, other blockchain applications, cyber, whatever.
Digital Identity and Rights
00:19:32
Speaker
Digital ID is absolutely critical. Let's go back to that person in the refugee camp, undocumented, But now, by dint of what we can do, by human leading of these technologies, we can enable her or him to have a digital id And that is the first step to then be able to assert their rights and to start making a plan and a path forward.
00:20:04
Speaker
It's not just about individuals. The key and the real opportunity is that everything can and everything must have a digital be it an asset, it an individual, be it a company, be an institution, to have a digital ID to be able to effectively operate and enable this whole ecosystem and the possibilities, economic and social flow through, in short, really,
00:20:36
Speaker
If we can enable digital assets to meet digital ID, that's where we can engender and enable digital trust.
00:20:51
Speaker
so So it's all interconnected. i love how you just framed it all all there and it's quite clear. um and let's get a little philosophical now as we're closing and just concluding because it has been so great. But I also wanted pick your brain a bit and know what excites you the most about the future of digital digital assets and what's perhaps something that that gives you pause or something that we should be be careful with.
Opportunities and Risks of Digital Assets
00:21:19
Speaker
We'll start with the pause. And that's definitely the clear and present danger that we don't get to realise the economic, the social, the national, the global opportunities from these new technologies.
00:21:40
Speaker
And that will come down, yes, to the policy piece, to the regulators, to the legislators, but it comes down to all of us have that most effective of public debate and public discourse around the opportunities, around people's fears around these digital assets, around people's level of understanding, to really ignite that discourse to ensure that that fear doesn't come into a reality if we don't get those opportunities.
00:22:09
Speaker
And in many ways, what excites me is a flip of that, really, because people talk about some of the difficulties being the decentralised nature of this.
00:22:22
Speaker
But we can understand decentralisation, we can understand transnational, we can understand global, because if we look at many of the key challenges facing us right now, they are global in nature.
00:22:39
Speaker
Be that the climate emergency, the energy crisis, migration, whatever it may be. And if you will, one of the most existential decentralized risks in terms of our understanding of it will be nuclear fallout.
00:22:58
Speaker
It knows no boundaries. It's stateless. and comes But we've come up with a very effective means through... the International Atomic Energy Authority, of looking at how on a global level we look at nuclear energy.
00:23:14
Speaker
So we can do this. And by doing it, what a positive role, aligned with other technologies, digital assets have to play in terms of the climate crisis, the energy emergency. Yes.
00:23:33
Speaker
right rising inflation, the spectrum of stagflation which is looming over many nations right now, such huge possibilities, but possibilities inevitabilities, possibilities become realized when we human lead and we connect and we co-create around these technologies.
00:23:54
Speaker
that That's great. And now just one last thing. and my last question for you would be, if you could change one thing, whether it's a definition, a rule, or perhaps a mindset that you believe is holding digital assets back in the UK or even in the world, what would it be?
Engagement with Digital Assets
00:24:14
Speaker
I'd say as I would with anything, just be open to the possibility. You don't have to consider any of this as being the silver bullet or even necessarily a silver a bullet, but just be open to the possibility, open to the discussion.
00:24:32
Speaker
Because if we look at some key leading indicators, look to the numbers of under 25 around the world who are holding digital assets, look at the funds people,
00:24:46
Speaker
who are holding digital assets in their portfolios. Look at the US government that have built up a huge treasure trove of digital assets. Well, something's clearly going on here.
00:24:58
Speaker
If young people, funds people, and government people are all holding these digital assets, all I would say that tells us something's going on here. It's worthy of having both ears listening getting involved in the dialogue, discussion, and considering how potentially digital assets could be put to positive use in your life, your business, your community, your country, and through it, trying to further connect around the world.
00:25:32
Speaker
That's such a great reminder, and I think it's a great way to synthesize what we have discussed today.
Episode Summary and Call to Action
00:25:38
Speaker
Be open. Open to this new technology, open to the possibilities that it helps unlock.
00:25:43
Speaker
Because I think it's quite evident, not just from this episode, but from our many hootenannies, that digital assets aren't just about crypto. They're about how we own things, prove things, and trust things online. And as we've heard from Lord Holmes today, getting that right means learning more about this technology, regulating wisely, making sure that everyone's including and asking questions. Curiosity is a great starting point. And for that, I think we have a lot of resources for the curious minds here at Owl Explains. So once again, thank you, Lord Holmes, for joining us. And thank you, listeners, for spending time with us at Owl Explains.
00:26:18
Speaker
If you enjoyed this episode, we invite you to share it, rate it, and tell your friends. Till next time.
00:26:27
Speaker
We hope you enjoyed our Hootenanny. Thank you for listening. For more hootful and hype-free resources, visit owlexplains.com. There, you will find articles, quizzes, practical explainers, suggested reading materials, and lots more.
00:26:42
Speaker
Also, follow us on Twitter and LinkedIn to continue wising up on blockchain and Web3. That's all for now on Owl Explains. Until next time.