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Perspectives: The confluence of TradFi and DeFi
415 Plays3 days ago
Our latest podcast features Joseph Lubin, Co-Founder of Ethereum and Founder and CEO of Consensys, in conversation with Manish Kohli, Head of Global Payments Solutions, HSBC. They explore how decentralised trust, tokenisation and smart contracts are reshaping finance, from stablecoins and tokenised deposits to real-world assets with digital twins.
Watch or listen to find out more.
This episode was recorded on the sidelines of the HSBC Global Investment Summit 2026 in Hong Kong. Find out more https://www.business.hsbc.com/en-gb/campaigns/global-investment-summit
Disclaimer: Views of external guest speakers do not represent those of HSBC.
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Transcript
Introduction to HSBC Podcast
00:00:01
Speaker
Welcome to HSBC Global Viewpoint, the podcast series that brings together business leaders and industry experts to explore the latest global insights, trends, and opportunities.
00:00:13
Speaker
Make sure you're subscribed to stay up to date with new episodes. Thanks for listening, and now onto to today's show.
Manish Kohli's Role at HSBC
00:00:21
Speaker
Thank you for tuning in to this podcast. We're shooting this on the sidelines of the Global Investment Summit. My name is Manish Kohli and I run the Global Payment Solution business at HSBC.
Discussion with Joe Lubin on Digital Innovations
00:00:32
Speaker
My world sits at the confluence of TradFi and DeFi and increasingly we're experimenting and we're moving a lot of our business into new forms of movement of money and new forms of recognizing assets It's a pleasure today to be joined by Joe Lubin to have a conversation on all things digital today as well as in the future.
00:00:54
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Joe is one of the original founders of Ethereum and the CEO of ConsenSys.
Joe Lubin's Career Path and Ethereum
00:01:00
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So it's a pleasure, Joe, to be with you today. So Joe, let's start with you. ah you know When I've heard you describe your career, you've said it is at the convergence of cryptography, finance, and technology. And that's a very, very unique combination. So help us and understand a little bit about your career journey and how you've come around to being one of the founders of this fantastic platform called Ethereum. yeah so That is accurate. I think it's ah it's a little more nuanced and path dependent than than that simple statement. So, being a technologist all my life, I've done a lot of software engineering. I started out of college, even in college, doing artificial intelligence. so I was doing robotics, machine vision,
00:01:48
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um AI in the form of neural networks and connectionism back then. So that was mid 80s to early 90s. Then there was ah a an AI winter that happened and I just started doing different kinds of software engineering.
Financial Crisis and Market Shifts
00:02:06
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I did some work in the world of finance, worked at Goldman for a little while. and that That was just building software for for the private wealth management people. And I ended up getting involved in some investment management and started to
00:02:26
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evolved from just thinking about the world of science and technology to to starting to think about the bigger picture issues, things like finance, global macro, geopolitics, etc. And so that took me from being a naive, optimistic idealist to to being a little bit concerned about the direction that that the world was moving in. And so I started to think about the sizes of debt, you know national debt and and debt in the system in
Bitcoin's White Paper and Decentralized Trust
00:03:01
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general. There was a period in 2003, 2005 leading to the global financial crisis where it started to get clear to me and I was
00:03:14
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paying attention to trading systems and investing systems, it started to get clear to me that the world was moving from being based on fundamentals to turning into a liquidity situation where you trading was often or market health was often about risk on, risk off, what what's the Fed going to do in the US, s et cetera. And so as I got deeper and deeper into it,
00:03:45
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I began to get really concerned. i I thought the excessive debt in the system would lead to stagnation, a Japanification of the American and global economies. And and there was a general awareness ah of increasing loss of trust in centralized institutions, so whether they be governments or financial institutions or religious institutions. I was against that backdrop.
Tokenization and the Digital Economy
00:04:12
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that I encountered the white paper of Satoshi Nakamoto in early 2011, and lots of other people had the same insights and reactions. And Satoshi Nakamoto, a group of cypherpunks, essentially pointed to a bailout um and indicated that there was a need for an evolution of the system. There's a need to introduce a new form of trust, a new more powerful form of trust, a decentralized or objective trust. and And Satoshi showed us how to operate this new form of bottom-up trust in the form of Bitcoin. So that was a revelation for me. And I picked that up in 2011. I grew excited when before that I felt like
00:05:01
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were probably moving in a direction where money printing, inflation, etc., was going to end up in financial repression of the general population. So I felt, again, as an optimist, I was hoping that we'd figure out a way to to grow our way out of that situation. Maybe we have. Maybe with the advent of decentralized protocol technology, decentralized trust, maybe with the assistance of of ubiquitous machine intelligence, maybe we are actually on our way to to growing.
Decentralized Finance and Financial Systems Evolution
00:05:32
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I always think of you like a tech pro with this phenomenal Wall Street and real TradFi backing and grounding. I think that gives you actually a very unique perspective in how you approach financial services. So how do you see this? If the world has become fully digital, what does that really mean? What's the end state look like?
00:05:53
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So the economy has been getting more efficient and effective for a very long time. So we used to have lots of stores, mom and pop stores, and efficiencies have have created consolidations. Other technologies or trends have have also brought in more efficiencies. so um Uniformization of different things, first standardization, creating standards bodies and and standardizing different kinds of financial instruments or or different kinds of interaction systems in the global economy. a Uniformization in in terms of shipping containers and other things like that, enabling us to to do things at scale in a more automated fashion.
00:06:45
Speaker
Digitization. in its centralized form has been a tremendous driver of of this trend to towards greater effectiveness and efficiency. a form of digitization is tokenization and tokenization is going to be a profound new accelerant that essentially we'll see in the natively decentralized economy where we have
00:07:15
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an economy that's increasingly built of decentralized protocols, whether it's ah a layer one generalized compute platform like Ethereum or decentralized protocols, decentralized infrastructure protocols for her energy and Wi-Fi systems and things like that. So we're going to see layers and layers of these decentralized protocols that are tokenized because that's the crypto economics on which they work.
Smart Contracts and Economic Efficiency
00:07:43
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We're also seeing stable coins or or different forms of um tokenized money, whether it's stables or or depository tokens. and So there's a ah whole hierarchy ah of different kinds of
00:07:57
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decentralized money systems. We're going to see lots of real world assets being tokenized, whether they're financial instruments, whether they're portfolios, whether they're objects. So we have these natively digital tokens coming from our crypto ecosystem. And then there's trillions of dollars ah of other kinds of assets hundreds of trillions ah of public securities, but then there's real estate and their automobiles and their houses and precious metals, other commodities. All these things can have digital twins. So a digital twin of a financial instrument looks and behaves very similarly to a financial instrument. And and we're we're working on different forms of that in our company consensus with some
00:08:48
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financial market infrastructure groups, but also just some companies that are wrapping things that are holding equities. But if you think about um this tokenization phenomenon moving into the general economy, you can imagine that you could wrap the ownership and operation of a car or a house in one of these tokens. And these tokens can be bought and sold, they can be leased, they can represent how you remotely control a house or car. You can provide access to the house for a certain period of time or something like that. You can lease out your car and not provide access to the glove compartment or something like that. You can take these tokenized instruments and use them as collateral in decentralized finance or or other kinds of situations. and so We are moving into a world that going to be a lot more fluid.
00:09:50
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Decentralized trust enables you to remove or ameliorate lots of different kinds of risks, counterparty risk,
Integration of TradFi and DeFi Systems
00:09:58
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liquidity risk. If you can reduce all the risks or many of the risks or eliminate some of the risks in an economy you can build you can guarantee the execution of transactions you can build complex processes with programs called smart contracts on on platforms like ethereum and and those are guaranteed to operate as advertised you can create
00:10:23
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agreements that that are that guarantee the performance of their counterparties in those agreements. These are the kinds of things that can move our economy into a more efficient and more effective economy.
00:10:36
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These are the kinds of things that can compress value creation events much more tightly in time. And and we, as bankers, we know the the value of compounding value creation. If you can do more of that, then you can actually grow your economy much faster.
00:10:53
Speaker
That's true. And you know, that the future that we just talked about is probably not so far away. I mean, everything you talked about, we have very strong conviction ourselves and we're one of the lord's largest issuers of tokenized bonds, you know even real world assets like gold and tokenized deposits. And actually last week we got our first license in Hong Kong for to be a stablecoin issuer. I mean, a lot of these things that you talked about is actually real. i personally think they're coming closer and closer to us at pretty breakneck speed. I set up the confluence of TratFi and DeFi. This is a world that we are seeing transition between the two. And I often say that our job is to build bridges between these two worlds because they'll probably move at different speeds.
00:11:38
Speaker
I just heard you at the at the at the panel where you said in the future there'll be no TratFi, no DeFi, there'll just be finance.
Innovations in Merging Finance Technologies
00:11:46
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just help um Am I looking at it differently? how do you look at the two worlds converging?
00:11:51
Speaker
The traditional finance world has been innovating for 400 or so years, so tremendous innovations. If you look at the nature of money and financial instruments ah and the layers and layers of of safety that that the system has built, certainly it's volatile. Our ecosystem has been innovating for 15 years, Bitcoin for 15, for little over 10 years. And we've been speed running a lot of the things that that we've been seeing in the last bunch of decades in in traditional finance.
00:12:28
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Our mechanisms are much more agile and much faster operating and much more immediately responsive than than the mechanisms in traditional finance. And so marrying the two sets of technologies is has been inevitable. it was retarded for a period of time. a because we we just weren't mature enough and capable enough to to support real world activities, high value real world activities. And B, because the traditional interests, the vested interests preferred to continue status quo. So
00:13:09
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Certain financial institutions in the United States at least prefer to keep winning what I call is a rigged game. so So they're very dominant and very successful and why change the rules if you don't have to? At the same time, a few of these financial institutions have been paying attention to our technology and using our technology in different forms since nearly the start. And so they're taking care of their business yesterday and today and also planning how to be very, very successful when they're they're building on decentralized rails yeah and using constructs ah that are only possible in decentralized finance.
Empowerment through Decentralized Protocols
00:13:52
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So our company ConsenSys has been working with financial institutions for nearly our whole existence and we think of ourselves ah as more natives of the technology and builders of the infrastructure of the technology but we also in the Ethereum ecosystem
00:14:10
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We, unlike the Bitcoiners, I think, I think we felt like we're not going to be able to consider ourselves successful unless we are able to introduce decentralized trust and decentralized protocol technology to the entire global economy to to make everything better. And so I look forward to a world in which what we've been doing on our ecosystem grows usable enough and scalable enough and a little more legislation, make it legal enough so that everybody's comfortable, making use of DeFi, issuing real world assets and taking stable coins and other instruments in their business. And, you know, they're
00:14:55
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hundreds of trillions, four, or five, six, seven hundred trillion dollars in in public securities around the world. And there's four trillion dollars or so worth of value in the decentralized protocol ecosystem. And so we are eager to to build a sturdy enough infrastructure to to support all the assets.
00:15:18
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Which again, I think resonates a little bit the way we think of it. We think as technology is one of the enables enablers, but actually regulation being in another enabler because to banks and financially regulated institutions like us, that gives us a lot more comfort and helps us innovate in a more responsible way.
00:15:35
Speaker
So Joe, you've often held contrarian views as compared to the rest of the market, which you obviously defines a lot of how you approach your innovation. what What contrarian view do you hold today?
00:15:47
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ah that you really believe will turn out to be correct? So this may be considered contrarian. I think think we're all aware of and believe that machine intelligence is going to be important. I think there are people that think that machine intelligence is somehow separate from human intelligence. I think of it as derivative of human intelligence. I believe that we're moving into a great era. I believe that decentralized protocols are going to enable people and communities to have greater economic, social, political, financial agency in their lives.
Future Predictions for the Financial Industry
00:16:28
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And we're building our wallet, our MetaMask wallet, into ah a new kind of neobank that people can own and control so that they have real agency in their lives.
00:16:40
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And and machine intelligence, I believe, should saturate the economy. Everybody should have easy access to machine intelligence. And I believe that instead of us thinking about artificial general intelligence or artificial superintelligence as something that's going to happen out there or to us, I think we should think about ah ourselves as being increasingly part of
00:17:10
Speaker
the evolution of our species which will um involve us hybridizing our human intelligence with machine intelligence and so I think that I think that we're creating a a super intelligent organism the cognitive apparatus of of the planet of Gaia and that we're all gonna be empowered through agency and through access to the the some knowledge, wisdom, best practices that we've developed, that humanity's developed. And so i think we're all going to feel like we are playing very significant roles in in the super intelligence.
00:17:51
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We're in GIS 2026. Let's fast forward assuming we're in GIS 2029, let's say fast forward three years. What do you hope that of all the things have worked on and you're hearing today in the market, which banks are focused on, what what would you really think that the banks or the whole industry should get right? And what do you think would surprise us if you, what would surprise you if they didn't get it right?
00:18:15
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I think banks should continue to carefully and prudently move in the directions that we're all inexorably moving in, I believe. My concerns are are just bigger picture. I think our ecosystem is doing a lot of things well. The machine intelligence ecosystem is mostly doing what they're supposed to be doing. Geopolitical complications are are really... um the dog that's wagging a bunch of different tails and we're, you know, our our ecosystem is a fly on on the tail of of of that dog.
Banks and Decentralization
00:18:53
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I think that we need to make sure that clear heads prevail as geopolitical tensions ramp up and ah we We are at the end of a super cycle and hopefully we land this super cycle without a very kinetic World War III. I think we're we're already in a cyber and financial World War III and maybe that's the the state of the world going forward. and Maybe that's the baseline. If there's anything banks can do, it's that they should help protect
00:19:31
Speaker
decentralization should cherish rigorous decentralization because it enables credibly neutral platforms to maintain their integrity. It enables censorship resistance to make this whole thing work. Without censorship resistance, we we lose the value of Ethereum and Bitcoin and permissionless innovation. If we can keep that going and we can marry machine intelligence into these decentralized protocols, I think i think decentralization plus this hybrid human-machine intelligence will enable us to to make our way through the complexities. and I really think we i think the complexities are so severe that we really need that we need to evolve and mature in order to... We need that sort of help to get through. Fantastic.
00:20:22
Speaker
Joe, as always, it's been a real pleasure having a conversation with you.
Closing Remarks and Podcast Subscription Encouragement
00:20:26
Speaker
Every time I speak to you, I kind of walk away with a few more ideas and a few ah different perspective of looking at the world. So thank you. Thank you again for joining us. Thanks having Take Thank you for joining us at HSBC Global Viewpoint.
00:20:38
Speaker
We hope you enjoyed the discussion. Make sure you're subscribed to stay up to date with new episodes.