A Discussion on Digital Sandboxes and Web3

Webinar Recording and Transcript

Date: 08/08/2024

Host: Kevin Whitmore, Business Innovation Advisor at Callaghan Innovation

Guests: Alan Crofts, Fintech & Innovation Specialist, Financial Markets Authority

Webinar Length: 46.13

[00:00:00] Introduction and Overview

Alan: Hi, everybody. I haven't got a formal presentation today, so I'm just going to talk for a little bit and then sort of try and we'll open up for Q& A. So I'll give you a bit of an overview for those that don't know what the FME is, what my role is at the FME, which is a bit different from everybody else's role at the FME.

And then I'll talk a little bit about what I've seen sort of internationally in the sandbox environment, different types of sandboxes. And then can hopefully have a discussion around what you, the industry, are looking for in terms of a sandbox. And there's a whole bunch of different views on what actually a sandbox is.

So have that, trying to understand where you're at between sort of different spaces in this digital asset, whether it's, you know, pure crypto or as a tokenization of real world assets. And now if we've got time, have a bit of a discussion around how you would see kind of sandbox kind of operating in New Zealand.

[00:01:01] Role and Functions of the FMA

Alan: So just around the financial market authority. So we are the financial market regulator. So we do things like we do licensing supervision of licensed entities and investigation and enforcement, which is the pointy end of the business. You'll probably see quite a bit in the news around that at the moment.

So that's a sort of more traditional end of a regulator. So then, you know, we give you a license and make sure people are doing the right thing. But we're also very supportive of innovation in the market and want to see competition in the market. And that's more where my role comes in. So I, I come from a commercial background.

And my role is really around market engagement, so I've got three pillars to my role. One, the main one is industry engagement, so working with companies in New Zealand, bringing them into the FMA for some early engagement as they do product development helping them understand the licensing environment.

We Can't give a formal advice, but we'll give a guidance on things you need to think about as you sort of build your product and get towards licensing. The other part is helping internally in the FME upskill people around sort of new tech what it means, what the trends are, that kind of stuff.

And then probably really prevalent to this conversation is the international engagement. So that's around What are other regulators doing? What's happening in the world? What's international regulation look like from people like IOSCO who are putting out recommendations around crypto assets? Decentralized finance, tokenization of digital assets.

[00:02:43] International Sandbox Environments

Alan: So, maybe now I'll just have a chat about some of the stuff I've seen internationally around in different sandboxes. It's reasonable to see New Zealand as a country that's quite far behind a lot of other developed countries. So even if you look at things like open banking, we're just getting started.

So in the UK, they've had that for 10 years, so Some of the things I talk about are tied to that and the fact that we are a fair way behind others. So, if you look at the UK, our equivalent there is the Financial Conduct Authority. They have kind of three, three separate sandboxes, quite different in their functions.

So they have a traditional, That's a very traditional regulatory sandbox. Which that allows companies to bring products to market. Usually with some restrictions around it that might be the amount of money you can move around, the amount of product, the number of customers you can have. And that's usually got some, some close supervision from the regulator.

That's a very traditional regulatory sandbox. So it's a bit like. Kind of like training wheels. So here's your first step. Make sure everything's okay. Run that for maybe a couple of years and then off you go into full production. And there's quite a lot of that around the world. Last year or the year before, I think, the UK also launched the Digital Sandbox, which is actually built for them by a third party.

And that's basically software as a service type play. So it's a platform that has Can't quite remember the numbers, but hundreds of APIs already built into it. Hundreds of data sets built into it for public, private, anonymized, synthetic data. And that allows fintechs to test, it's more a testing environment, so you can run proof of concepts, pilots in there, test against the data sets integrate with APIs, integrate with other players on the platform.

And so that's more, and through that they run sort of digital asset plays and artificial intelligence plays. And most recently, the FCA, which is the Conduct Authority in the Bank of England, have established a digital asset blockchain sandbox, which is there to test specifically digital assets. Now at the moment, that is very much focused on real world digital assets.

So, tokenization of things like equities, bonds, carbon, those kinds of things. Debt securities. The moment they have it, they've excluded crypto, but that environment is there mostly around traditional assets and seeing how that works, and so giving people confidence that these things work really well.

And that's like a five year term, so if you go in there, you get approved, you've got sort of a five year window to build up capability. There's also, in Europe, there's a European blockchain sandbox, which is a pan European thing, very much focused on distributed ledger for traditional things like supply chains, healthcare information, social security, so again, very much digitizing traditional assets.

And then probably on the other end of the spectrum, you know, places like Hong Kong where I have the fintech regulatory sandbox, which is the same as the first one I talked about out of the UK. But they also have a stablecoin sandbox. So looking to stress test stablecoin business models. So to get into that, you have to, they all have a hurdle rate to get in.

So you got to usually approve. How, you know, what's your product? How innovative is your product? What's the benefit to society, to the public? understand risks, take all that kind of stuff. The Hong Kong one has a specific thing around your business model. So you've got to prove your business model is robust and then, you know, talk about what your stablecoin is backed with and stress test And that that environments there to stress test stablecoins and then Singapore, they have the, pretty much the full gambit so they have regulatory sandbox.

they have a digital asset sandbox, and they've also built. Not true sandbox, but a global blockchain network that are, thing called project guardian if you look it up. And that's with people like JP Morgan, so it's the big institutional banks. And looking at international blockchain transactions and interconnectivity between multiple blockchains.

So, and making those bridges work between the different blockchains, very much for sort of wholesale, traditional financial stuff like bonds and equities. And that, that's the aim, that's, I guess, that's the market disrupting itself before it gets disrupted. So, breaking down the old traditional institutional networks and using blockchain to do that.

Thank you. And the Australian securities guys also have a testing environment. So it's ASIC in Australia. They have a traditional sandbox, limited licensing. You've got to pass the test to get in, get accepted, and then you're sort of given a train of wheels. Limitations in what you can do around how much money you can do and move around in a certain period of time.

So that's a whistle stop tour, really, of what's out there. There's a myriad of them. You can go to Dubai, you can get an innovation license there that allows you to say it's a different language, but it's very much the same thing.

[00:08:37] Discussion on New Zealand's Sandbox Needs

Alan: New Zealand doesn't have any of those. So there's a number of reasons for that, but we are seeing.

You know, there's an uptake in digital assets. We need to think about how we grow innovation in New Zealand. And we also, as well as that part of that, we also need to think about how we ensure customers are protected in the market and that it's, you know, products delivered to the customers are fair and reasonable when they get to market.

So they, I guess my questions would be, I'm really interested to understand what are you looking for in a sandbox? A few questions coming now. So does everybody ask, what are you looking for in a sandbox? Do we have agreement on what it should look like? So what should it be for New Zealand?

Should it be perhaps more than just like a regulatory sandbox, where you're given some trainer wheels, rules. Limited licensing, close supervision from a regulator like the FMA, and then grow with that? Or is it more like a digital sandbox where you're testing, you know, really new technology against, you know, preset data groups?

Or is it something in the middle? And then, who would you see, who would you like to run it? I guess. Do you see it as a public thing, a private thing, public private partnership? So those are my kind of key questions. And I guess above all of that, do you think we need one at all?

Kev: Maybe just to kick that off as well. I remember there was a platform called Apex out of Singapore as well. I believe that's still going. Is that What would you class that as in terms of what MIS is doing there? I don't know what that is. Okay. So that, that was similar to what you were talking about before in terms of exposing APIs.

So it's, it's literally a API exchange. And I believe the attempt was to get the larger banks, especially. Credit Suisse comes to mind, but they're not around anymore. So that's probably not a good example for those banks to expose their APIs so that the challenge of a startup or somebody building a business in this space, where you go through kind of prototype, bases, but the, the process on the bank side is so slow that eventually the startup gets bled dry.

Was, was one of the problems statements that they had. So the idea was to create an environment where startups could come in now and start consuming APIs and, and start to build out their product that way. So is that kind of fitting in with, with sort of what you've seen in the other spaces as well?

Alan: Yeah, I mean, so that's very much the UK digital, digital sandbox is built on that model.

The people that built it, it's interesting, it was actually our ex Westpac CIO that built it. So they FCA'd and built us another as a private company and the UK built it. And he pretty much gets frustrated with the exact same problem you just explained that it took them so long to onboard the fintech either gave up or I run up cash, so he's The company is called Naya One which, and they built this platform, and they have basically gone around the world, and got API standards and data sets, so some are public, some are private, and that includes going to banks.

And so they've got the, you know, open banking obviously is prevalent in the UK. So they've got all those standards and then FinTechs can test against them.

Kev: Cool. So maybe we throw it out to people on the call.

[00:12:32] Q&A and Open Discussion

Kev: If you've got any specific thoughts, I know probably Pramod here and David will probably have some, some thoughts, but what are your, what are your challenges now? And what would a New Zealand based, um, digital sandbox. Help with and in what sort of context if you've got any thoughts, maybe just jump off mute and Join the discussion

Alan: while you're being very New Zealand and quiet I'll just give you another thought provoker. So one of the things I've seen I'm quite new to there for me. So I've been here Since December, but I mean, I've talked to a lot of fintechs and startups and one of the challenges I see is there's a, you know, it's like the classic innovators dilemma.

So the crossing of the chasm and you can come and chat to me and some of the other people, but there is no, it's a real challenge to go from that to achieving full licensing. And then, so I'd be really interested in people's experiences of that. How do you start to get traction before you can meet all the requirements of EC, a full financial market license?

Kev: And I think obviously the other one we're still grappling with at the moment is the banking challenges and getting debanked. If you haven't actually got a pathway through to a bank account, that's potentially still a big challenge. bigger blocker than potentially the challenges around a sandbox or what that might facilitate.

So I think that's why we're also discussing, is there a way in which you kind of bring that all together and you create that compliance pathway whereby you're getting ticked off from a legal regulatory tax security perspective and then paired potentially with, with a banking partner as part of that process.

So whether you call that a sandbox or a, a pathway of compliance pathway, whatever, whatever terminology, it's that sort of facilitation of taking all the requirements and getting that banking partner at the end.

Sally's got a point. Some recommendations on behalf of the industry made re sandbox as part of the digital currency paper submitted by Alex Sims and Jeremy Muir. Are they in the mix? Oh, that's a good point. Have you seen that paper?

Alan: Yes. Yeah. I have seen that paper. What. Kind of aligned to that paper, but slightly on a tangent, so I'm about to kick off a bit block of work, should get approved, might not, cover myself slightly there around industry engagement around the same topic, not just the sandboxes, but digital assets, and on getting a better understanding of some of those challenges.

Which ties to that paper. And so I will be coming out to talk to people like Jeremy in the, you know, legal firms, funders. And companies understand the current state, what are people doing, what are the barriers, particularly, around moving things forward.

Kev: Thank you. And I know we've got Paul on the line as well. Paul often says how we're pretty privileged here in New Zealand, obviously, to be able to just walk in and talk to regulators. It's a pretty rare privilege to globally be able to do that. So. Yeah. And I think you've probably had experience in the past with easy crypto as well. Sort of being able to discuss these sorts of topics. Would that be right, Paul?

Paul: Yeah. Yeah. I mean I don't think I don't think people in New Zealand appreciate that distinction and it's really good. You know, Alan and I caught up fairly recently and, you know, we talked about a whole bunch of stuff actually, but being able to feel like you're able to submit your views.

Yeah. Into the thinking before, you know, actions and or reactions are submitted as a real strength to the New Zealand environment. Like, it's a real strength. You know, and, and, you know, my, my views on Sandbox is really interesting. I was Ellen you know, your, your, your questions kind of caught me off because I was really leaning towards the MaaS model.

Um, but I can now, you know, see why you know, there's an alternative coming out of the U. K. I hadn't actually considered it as a real viable alternative so I don't have a good answer for you in that regard. I do, you know, I, I, my, my counsel would be kind of start with the end in mind so if we, if it is about fostering innovation without.

It too difficult for a startup, who, which is offering a financial service, you know, there needs to be controls, but if we can do that, then, you know, if that's the goal, then I think that's a different outcome from, from some of the other things. And you'll be aware, we've got a kind of a few things to tackle, but I think you're going to have to pick one and fight that battle.

And if it is innovation then, you know, that's the way I would go. And just be proud of that. Like, you're not going to appease everyone, you never will be able to, but if the goal of the Sandbox is to foster an innovative Cheers. ecosystem in the fintech community, then, you know, embrace that bit and go with it.

I guess would be my, my one comment.

Alan: Can I ask a, then, so the, one of the things that struck me as we've been talking to some of the companies that have come and talked to us is that the business models are quite different. So some examples of people would, traditionally you have licensing, it would be say like a managed investment scheme license.

So you would have a, maybe a peer to peer license, probably two very separate players. So one company is doing managed investment, somebody else is doing peer to peer.

What's something they're not truly decentralized this of hybrids most of the ones I've seen models there's quite a lot of business models layered upon inside the Proposition so there's a core which is more like a marketplace and manage investment people listing securities tokenizing them Then, there's peer to peer trading within that, so there's like swaps, and then secondary market trading as well.

Then some, couple of models I've seen where people have like, taking a traditional asset, tokenizing it, and then swapping it into a crypto. What, what are your thoughts on how you get the regulator to feel comfort with visibility into that network, and how the flows of money.

Paul: You go with the simple stuff in the morning, don't you?

Oh look You know, no, it's a great question. I, again, I think it comes back to what we're particularly good at, which is principles based rulings. Like, you can't be specific because you know, that, that, that complex scenario you just painted is complex today, but tomorrow that'll be old hat. It'll be a platform for someone else and someone will be innovating on top of that.

So I guess that's, that's point number one. In terms of how do you get visibility, like, I mean, the visibility is about managing the risk and it's kind of like, where does that risk sit? And there are, there's some very great, some very good tools to, to look at what's going on, on chain and, you know, they are incredibly transparent and I really do wish our regulators had a better feel for, or, or, or access to that.

And I know there's a cost in that, I get it, but you know, they're not opaque, right? are really, really transparent when you start using those tools, and you'll be able to, and there are people innovating in that space, like RegTech and crypto is a big deal, so that people can actually see the systemic risk when stuff is being, you would use the term rehypothecated, you know, but they're, you know, they're being, they're being created as synthetics, which is kind of what you're talking about, you know, if gold becomes a token, then it's a synthetic, and then what happens and who owns it and Well, that's the stuff.

All right. So that's that. So look, and I get, I get when it's new, it's makes you uncomfortable. Once you get familiar with those technologies, like it's quite enlightening and way more transparent than what's happening in and can I just say other markets? Because it really is, right?

You know, we, we as people widely soldier on, and we don't really know what's happening with our cashier amusements and all that sort of stuff. We're told, but there's a lot of trust in that system. Whereas once you get past the fact that it's software, I think the trust is Much better in, in, in blockchain type world.

That's my position. And others can, can change on that. In terms of, again, like at a sandbox level, I guess it depends what you're trying to achieve. Like if you, if you are getting multiple demands for what I would call a real world asset tokenization that, that, that says, you know, there's a puck going that way.

and we kind of need to wrap our head around that. I would say that, you know, our definitions of financial products and all that stuff hold, they clearly look like financial products to me, so we have a bunch of rules. It's just whether those rules are able to curtail the free flow at a retail level or a wholesale level, which is kind of how we, we manage.

And that, that unfortunately is the thing that's blurring the most and, and You know, that's what blockchains and tokenization does. It means that everyday people can access fee bills or whatever the heck is underneath it. And, and, and, and that's the big question I would ask. And I think you and I touched on it, you know, when we caught up, you know, the sophisticated investor protections really mean what?

Just because I was involved in a deal, does that make me more sophisticated? Just because I was born into wealth, does that make me more sophisticated? Like, I just, you know, I think that's a big question that, that, that, that, that scenario you talked about challenges. And I think probably is a question that needs to be asked again.

Kev: I might just throw out there as well. I've had a fair bit of feedback from some of the sandboxes implemented in Australia, and this is from the DeFi association over there when they were working with the reserve bank of Australia. The New South, new South Wales task force on data, digital and AI Sandbox, and also the A SX data Sphere Sandbox as well.

And I think probably the, the predominant theme that came through in terms of the, the, the challenges that they faced was the level of bureaucracy in terms of sign-offs and approvals. So that was, that differed, I think depending on the organization they engage with, but the New South Wales task force as well, they mentioned, there were just so many meetings, so many meetings that the whole thing sort of Didn't work at the pace of the startup kind of required it.

Versus in the case of the RBA Sandbox, they actually had really good engagement through that that entity and it moved quite quickly and a lot of commitment and engagement. So looking at it from a New Zealand perspective, it feels like. To me that it would need to be something light enough that it could move fast enough without too many overheads as a starting point.

And I think that's the thing that, that Australia kind of made clear was, yeah, how do you make it fast? How do you make it light? And how do you make it, um, functional enough for a startup to want to engage? And that probably includes those, those API exposure opportunities as well, so that people can start prototyping things the way they need to.

But I know those APIs take a long time to get from The institutions as well. So that could be something that, that, that we work on in the background.

Alan: Yeah. And I think I think these things apply to most business models, not just sandboxes, I mean, but I think for me, it's about clarity of what's required.

So having a real clear application process. So this is, yeah, this is what the information we need. These are the things we're looking for. These are the things that. will make an easy path. That's what will make it a more complex path. And certainly a few of the other regulators have sort of, could call it a case manager.

So somebody that works with each of the applicant, helps them through the process and then works with them through the period of the sandbox. So you're not bouncing around trying to find somebody in an organization. and then LIMP might not be a problem in New Zealand, but beams of light. having a clear limit on the number of customers you can deal with at one time so you don't get flooded.

So making that yeah, a manageable process and making it a personable process.

Patrick: Thanks very much Alan, for setting out what sandboxes you know, are doing in other places. For, for my clients the main sandbox interest in terms of financial instruments and. tech offerings, digital offerings, is through Singapore.

That's where everything gravitates. And I'm aware that through my own connections that Singapore, obviously with the connections between New Zealand and Singapore, that would also be a logical regulatory partnership, opportunity if you like, and I'm aware that they have even been some discussions as I understand it between the FMI and mass about what might be able to be offered.

on a joint basis. And I say that with a view to, you know, New Zealand has a small number of participants and, you know, to set up a full sandbox here from scratch, you know, is a cost particularly at the moment with the way things are. I'm also aware that Mass is open to sharing, if you like, and allowing access.

So it just seems to me that. While there may be really good offerings in the UK and even Australia certainly, I think, you know, the direction and the one we should be looking at is Singapore and that matches the, the client's need to look to Singapore as the place where the money is, if you like.

Alan: Yep. I mean, there's definitely merit in that. I'm always a fan of, you know, If you can partner I'm never really a fan. I've come from tech environments. So if you can buy it or rent it or partner with it, it's much better than building. And there are, there's certainly precedent for that because there's a number of fintech bridge agreements that exist between some are connected to New Zealand's existing free trade agreements.

There's a sort of digital path. there and that would include people like Australia, Singapore, UK. And some of those are some involve Sandbox or Sumdown, but it's almost, you're going to where the customers are. And you're. Kind of getting a an acceleration into that market by doing those partnerships, I think yeah, there's lots of merit in exploring that idea.

Patrick: I think the other aspect of that is the, sorry, MAL and Singapore, some of the sandboxes don't have, no, the number of applicants that they used to hit because it's been so up. So we can certainly supply applicants. So again, you know, there's potential for If there was a coordination of regulation, which shouldn't be that hopefully difficult of actually gaining access to Singapore's sandboxes rather than, you know, reinventing the wheel and starting our own.

And I, again, I know there has been some discussion. I think Ryan Johnson Hunt has spoken to the FMA and I'm aware of other discussions from the other side, at the mass side, so, you know, it would be good, I think, if New Zealand could Piggyback on what is available with a very sophisticated and well resourced and financially, you know, abundant place like Singapore

Alan: Yep.

Yeah. Thank you.

Kev: Yeah, I remember when Sopnandu from MIS was here five years ago And they were at that stage talking about APEX and the release then but also obviously Promoting the Singapore FinTech Festival, etc so yeah, especially from a learning perspective rather than reinventing the wheel, I definitely agree.

New Zealand's probably in a, in a better place to, to piggyback off what, what other people have learned. And that includes, yeah, the UK and Australia and others as well.

Alan: Yeah. And I guess to that, it's also where the customers are My thinking would be that most of the web 3 companies, fintech companies in New Zealand may have a few customers here, but ultimately the growth is going to come internationally.

And then having accreditation or acceleration into those markets makes a lot of sense. You don't want to have to do it twice.

Kev: Yeah, that makes sense. Is that sort of a consideration for, I guess, the, I'm just thinking out loud in terms of, yeah, not just, not just it being a sand up sandbox to test and evaluate a product per se, but also connections into, into other markets as well.

Alan: Yeah, I'm probably way outside my wheelhouse again, if my comms people are on, they're probably trying to put me in a bag right now.

The, as I alluded to earlier on, I mean there are, so we have, we obviously have free trade agreements and some of those free trade agreements have specific. Digital paths in them. The UK also has a thing called FinTech Bridge program, which extends to Australia Singapore, I think Hong Kong, and somewhere else which is, ties into the testing environments it's almost like a Go into that program.

We don't have it yet. But that's something to consider for the group, I guess. That gets you connected with the regulator in that market and then that regular, the regulators in UK's case would set up the connections for you in the market. So you wouldn't go into the market cold. I have talked to some other government agencies about that and they've So we've taken that and gone to consider it so the two things tied together is about partnering what the regulatory requirements in each of the markets can you do that, get that tick in the box without having to go to the market cold?

Can you do it from New Zealand? These things all make a lot of sense. I used to work in exports or previous, but for banking, I would do a lot of trade stuff, so yeah.

Kev: Cool. And I just saw your point there around who would pay for a sandbox. Maybe we delve into that a little bit. So, I mean, what are your thoughts there in terms of the, the opportune, or the options there?

Because obviously a user pays. I mean, my guess is that users probably don't necessarily want to pay for it if they can avoid that, but then that would also potentially open up if somebody else is, is paying for it and owning it, then you're potentially at the mercy of. their processes and their timings and all those sorts of things.

Have you seen how other countries have, have kind of financed these types of things in the past, or is there anything sort of sitting at the front that you think kind of makes the most sense?

Alan: I'll put some theories out there. We're a small country and to the last chap's point yeah, things aren't that great here economically at the moment, right?

So economy's not too flash. So for a small country like New Zealand, we've my view is that it could easily be a public private partnership. You know, obviously the regulators have got some of this capability. So some of the larger big tech firms have innovation platforms that You could have discussions around.

So it could be a public private, you know, it could be an international player who's got this testing environment like that. I'm no fan of, you know, going out and building this thing. There's too much of that around. So it could be public private, should be like some kind of SaaS. If we're going to have a digital one, it should be a SaaS.

Play that almost already exists and you're just uploading data to it. Could be a fee for service, I haven't really thought much about that. That's all startups. More startups have no money so you've got to make that, you can't really make access, you know, cost of access a burden, because then you're defeating the whole point of having the thing.

So, the main, the one in the UK was public private partnership to get started, City of London Corporation and the regulator It's the digital ones hosted on a, one of the big cloud providers. I don't know about the fees, but I suspect it's reasonable for the purpose of it. So I'd say it's a, my gut feel would say for New Zealand, a public private thing would make sense.

I don't think it needs to be a huge amount of cash. And if you're not doing the digital version, it's more regulation and a policy play anyway. But to the other point, that doesn't address the issue of links to other markets. So I think you have to take all these things into consideration about, you know, do we need the digital aspect?

Do we use somebody else's? Where we think that's a market. Obviously, you know, we talked about earlier, Singapore's a financial center, and if you look at New Zealand's investment landscape. The fintech side is quite small compared to, you know, agritech or cleantech manufacturing.

Kev: And then in terms of, I guess, the scope, I mean, I guess that's the next question is, are we sort of envisaging this as a, as a fintech kind of sandbox or should it encompass more, more kind of industries around gaming? Or is that still something that we're trying to, I guess, get feedback on at this point is, is kind of how big do you make that scope for digital sandbox?

Alan: I think that's. One of the things I still don't have a feel for as part of the block of work, I'm going to go out and talk to industry to get a better feel for, because I, my view at the moment is only the companies I've seen which are the ones that are directly in my space, so, I think we need to understand where the depth is New Zealand's really small, so, Very shallow market, so it's really understanding where the biggest need is from industry as it, you know, FMA, I mean, we're obviously in the financial space, so not everything, will have a financial aspect to it.

Yeah, that makes sense. And, you know, thinking outside the box, you know, there's already some activity around digital identity, as we talked in the previous meeting, right, with some sandbox capability there, so.

Kev: And I think that, that seems to be the thing I'm seeing from, from a government lens, at least, is, yeah, everybody there is, is wanting, Some form of movement around the digital identity space cause they all need it.

But it sounds like on that side, we've got DIA moving forward with some sandboxes of their own there, which is positive. But that's obviously separate to, to a financially motivated one. Maybe just one more question from me. Yeah do we have any kind of feel for maybe open source is the wrong term, but being able to replicate with permission what Singapore or the UK or Australia have built?

Is there any kind of understanding there under our sort of agreements with them what can be accessed or do we not have a sort of a take on that yet?

Alan: No, I don't have a take on that yet, but maybe a bit of a broken record on the, you know, don't build it yourself. Sometimes being last is, please, please do to your advantage, right?

Because people have tried lots of things. Most of these other players are in version 2 or 3 of, they've seen what's, I think your point earlier on around making it too difficult, too slow, why did we make it so hard, what were we worried about, so, I think we're in a good position to learn from all these other players, what's, and then right size that for New Zealand, and whether that's we actually do something ourselves or whether we partner whether we do both, don't know, but yeah, I It needs to be right size for us, but we learn from everybody else.

Kev: Cool, that makes sense. Alright, we'll throw it out to questions. Has anybody got any questions for Alan or any points they'd like to

David: Really useful hi Patrick as well, good to see you there I just want to share my perspective with a founder's lens on understanding a lot of stuff that's already happening. Because in New Zealand, there's a lot of, Can I just ask,

Alan: can you just give me, where are you from David? So I just understand your questions of it a little bit.

David: I used to work with these guys at Callaghan Innovation, I'm an innovation advisor, I work with founders in Web3.

Alan: Okay, thanks.

David: Yeah. So there's this perception that New Zealand's a small market, but in truth, what, what happens is they have to align themselves with nations that are regulated and they have to have entities in other countries.

And so there are a hell of a lot of assets that are orchestrated from within New Zealand that are sitting on balance sheets and other companies globally. Patrick's working with a crowd called The Weave. They've already established a corridor into Singapore. They brought capital in through there aligned with DSG group.

And the comments are that that's one of the best data rooms they've ever seen. So that due diligence process was world class. And it's because the people blazing a trail, are setting standards as they go. They're collaborating with the fma, they're getting the regulations and so to my mind the problem statement really is around, How can we utilize these benchmarks that are proven, that are getting wins, they're raising capital, their diligence align?

So that we can, FMA can start set stamping these things. So these guys have already pulled together a sandbox, you know, like a private secret sandbox. How can we pull their resources and our platforms and create a safe space together? Yep. But where it, where it falls apart, And so what we've just seen is that there needs to be some funding to pay people just to do some stuff.

So the will and the desire of the community is there. The leader in the private sector. But you need to pay two or three people. They'll use the technology. They'll make sure it's all aligned. There was a risk assessor, compliance guy. We've got a world authority on risk assessing stablecoins. And so to my mind, it's just a little bit of funding and the private sector could do most of it and they could even design the sandbox for you and then just invite you to the table to say, yep, that's cool.

So a lot of the work could get done if there was just a little bit of funding to lubricate the engine. What are your thoughts on that?

Alan: I agree, it doesn't need to be big, right? You just need a few good people. And, yeah, I think that goes back to my thing, it's like a public private, it doesn't need to be massive, we've got the sort of building blocks, just need some people that facilitate it and understand how to manage it and manage the risk, so I agree with that.

Where do you get the money from? I don't know, but I, but that, I think when I, I think when I first arrived in the FME, there was, I think there's some perceptions around, it was a huge big thing. And it was going to be really complex and expensive. I don't think that's the case because you, Like you say, there's already a lot of work being done, so I agree, and I don't think we will have hundreds of companies coming through any one time, right, so it's got to be a right size, so if you can ask, you're asking me where the money is going to come from, I can't answer that question right now.

David: I think if we get the problem statement right, because to my mind, the sandbox can solve a lot of problems in terms of, here's an FMA verified digital identity that we trust. Here's a verified you know, set of standards that we approve. And then we pull the banks in and say, cool, if these guys pass and get accredited, we are going to give them a bank account.

And we are going to, we can roll out this digital identity. And then we can bring the insurance. Guys in and so they can start underwriting things. So I kind of like a flywheel is how I see it But someone has to someone's got to fund it, right?

Alan: Yeah, and I think in my preamble thing I talked a little bit about IOSCO.

So the International Securities Organization, they've got recommendations on Crypto assets, they've got recommendations on tokenization, digital assets, which the FMA is very keen to be part of. global standards. So we've got one set of standards that work in New Zealand, and they're that same set of standards applied no matter what market you go to.

That's a bit of a gap at the moment in those two areas around crypto and digital assets.

So it's almost, yeah, we are, I mean, they're looking at consistency across all the markets. There are some differences. If you look at Europe, it's very, very prescriptive. Whereas UK, New Zealand, there's some other markets that are more principles based, but at a high level, it's trying to get everybody on the same page in terms of what's required, so you don't go to one market, go from here to say London, and it's on a different set of rules.

So with you, I agree 100 percent in principle.

Kev: Cool, thanks David. Any other questions or points or thoughts or feedback from anyone?

If not, we might wrap it up there. Five minutes too. So thank you very much for taking the time, Ellen. Really appreciate well, just being available to have these discussions. Obviously, it would be also really good to continue the discussion, I guess, if there's any, any thoughts on working groups, or it sounds like you're also going to be able to do your own sort of research on, on industry needs and things like that.

But if there's anything that you need in terms of assistance to help formulate some of that stuff, please sing out.

Alan: Yeah. What would be really useful would be. If people have in groups or companies you think I should go and talk to just send me an email. It's just alan.crofts@fme.govt.nz.

Yeah, cause I'm very conscious of, we're only seeing a tiny segment of the market. So, cause they're just the companies that come and talk to us. And a couple of people have said to me, yeah, that's not everybody. So, yeah, if you've got, yeah, if you've got any thoughts who you should be talking to, just send me an email.

That'd be great. Thank you very much.

Kev: Yeah. And I think also, I mean, yeah, we did start some of these discussions almost five years ago. I think getting to some form of even prototype for something relatively, relatively quickly, I think would be, would be in everybody's interest. So yeah, as much as we can help, I'm very happy to do so.

Yeah. Thank you for attending and we will follow up with additional sessions after this. As Alan mentioned, if you've got any feedback or thoughts, you can contact him directly. Otherwise thanks for attending and we'll see you on the next learning series event. Thanks very much.

Thanks everyone. Cheers. Bye.