From Blackrock to Uniswap

Mary Catherine joined my colleague Bloomberg reporter Olga Karif to talk about her belief in blockchain, what comes next after the terror collapse, and how she sees defy shaping the future. Here's that conversation. Mary Catherine A. Later is here with us MC. So appreciate you taking the time. Let's start by talking a little bit about your career and how

you ended up in crypto. So, I know you got your start at Goldman, Uh, could you possibly walk us through the twists in turns of your career and sort of how you initially got into crypto. Well, first, thanks so much for having me. You're right, I started my career at Goldman Sachs in a completely different time, and so I had grown up always wanting to be at the intersection of how the economy works in technology and just felt like the Internet was the most important thing

in my lifetime. And I ended up um in a job that wasn't doing tech investing in Goldman Sachs um and my second week is when Lehman Brothers collapsed, and so it was a front row seat to how the risk management of large financial institutions could have just a dramatic domino effect on so many people who didn't even think about the connection they might have to the global

financial system. And so after a few years at Goldman, I went to law school and business school thinking that there could be policy solutions to how the financial system could work better, and then also maybe tech might be a driver of more access and ultimately did a fintech startup, then landed up black Rock. My fintech startup failed and

I shut it down. It was when I was a black Rock, I think in my first or second week there that Larry Thanks, the founder and CEO, made some comments about how blockchain and crypto were used for money laundering, and I first gotten interested in bitcoin in two thousand eleven as a law student because it really interested in how the Internet was creating more access to technology and financial services. And I had a seminar where we were reading about open source systems and the sort of legal

implications of them, and I learned about bitcoin. So when Larry made these comments, I wrote, in sort of an impertinent moment, I wrote a memo as to what I thought should be different in what black Rock should be

doing in blockchain. And I didn't think anything of it except that I hope somebody listened to me, and it got forwarded to senior management, and you know, they then after a few meetings, were like, okay, you figured this out, and so with with a group of other people, you know, we've created working open and create a little lab of engineers who volunteered to start building prototypes. So that was we worked with Consensus and the Ethereum Foundation to do

an Ethereum smart contract prototype. We worked with some of the different consortion groups that were being formed at the time to get big financial institutions interested in blockchain and the applications. We did work around how bank loans could be on block chains and how equity trading and derivative settlement could be different. That got me hooked six months of my full time focus the black Rock and then moved on to other roles building fintech businesses for black Rock,

but I still kept a foot in crypto. And what changed, I think a year ago was that we moved from a time of most of the energy in the crypto ecosystem being focused on building core infrastructure to a time when you could start to build applications and businesses on top of that infrastructure. And so to me, it felt like the right time to make the jump and make the move to work in crypto and web three full time.

A quid check of lateness business slash headlines Bitcoin US through sixty dollars as a stimulus fueled valley of the past few months of sets concerns over speculation. Bitcoin has surged over the past year, lifted in part by support from Elon Musk and some in the corporate world. The original digital coin traded for just a few cents for several years after its debut a decade ago. It is now gained more than a thousand percent in twelve months.

You made the move to unit swap, the world's biggest decentralized exchange protocol during sort of the bullmarket in crypto, which is a very different situation than sort of what we are seeing today, and you alluded that it's kind of in many ways similar to the financial crisis of when you were at Goldman and I was wondering so today, you know, just in the last couple of months, we've seen high profile firms go insolvent announcing bankruptcy. Crypto prices

have fallen a lot. Has that shaken your convictions about defy And how are your thoughts about defy and it's promised different if they are from from a year ago when you meet this jump from traditional finance into decentralized finance.

I jumped to you know, swap in particular because I felt like it was revolutionary technology that could have a positive impact on the financial system, regardless of the market dynamics, regardless of whether token prices were up or down, but that the idea that anyone in the world can create a market for anything, and that anyone can be a market maker using code, and that that could be more efficient and as effective as a central intermediary was compelling

to me. After fifteen years in finance, and I still believe has huge potential. Interestingly enough, I am really optimistic that we'll see more or at least a lot of partnership and innovation with big players in finance. If we're in a bear market, certainly a different time than we were a year ago. For crypto, it's still a good time to be building and innovating. There's almost like less distraction from the frenzy of the market dynamic and then

there was a year ago. And so I'm really excited that this is a time when we can focus on which companies are good actors with real technology and not just writing a wave and not just excited about the hype and driven by momentum. When I was deciding whether to join units WEP full time, I thought really hard about what the opportunity for the company and the protocol, which are related but different, would be in any market condition.

You often talk about how decentralized finance will essentially change the way traditional finance works. Would you maybe talk a little bit about that, and what do you think the world will look like as the shift takes place, How will things look differently, you know, in a few years, and also how will some of the difficult things. Some of the challenges that crypto is going through right now with a lot of insolvency and bankruptcy issues, how will

that impact how things develop? Well, first of all, the insolvency and bankruptcy issues aren't really decentralized finances, as you know really well from from covering this. We're seeing right now is how centralized companies that we're managing balance sheets didn't do a good job of managing their own risk and weren't disclosing the risk to users and investors. And I think that actors who are taking on those kinds of risks need to be treated similarly to anyone who's

managing a balance sheet and managing client assets. So to me, that's not decentralized finance. That's not defied, that's not about changing the underlying technology. Those are almost traditional in some senses, traditional financial forms that happened to be managing cryptos and asset class and they did a bad job and they're failing, just as there were in the early days of the Internet.

We have a huge task ahead of us as a as a field to reduce spam, to reduce phishing, to reduce potential risks, to those who are interacting in Web three and the sort of decentralized applications and protocols. But that is part of what I know. You can Swap labs were in investing in and we are looking at different ways to screen tokens for risk. We're looking at different ways to identify what's called a rug pole when somebody could manipulate the market and drive down the price

of a token. The good news is that because all this activity is on chain, you have so much more data to work with, and so you can identify bad behavior quickly and transparently, and you can build models that can then detect that kind of I'm bad behavior. So in many ways, I hope that some of the positive changes are not even observable to individuals who just might be like saving and investing or two individuals who are

trying to reach communities through token communities for example. I hope that some of what feels safe about today's financial system is replicated, but with really different structures from making for creating safety and more technology driven solutions for creating

some of that safety. Will be right back with more from Lamoug Reports, Ogakarif and Unit Swaps CEO Mary Catherine later, one of your strategic goals at unit swap is to make wol Street more comfortable with decentralized finance and to bring them on board. And I was wondering, how has woll Street reacted to the recent events in crypto. Is it more difficult to persuade them to sort of join

decentralized finance. There are many leaders in traditional financial services who are familiar with blockchain and have been thinking about it for years and know what the opportunities are. Every time I explained to someone who spent their career in finance what unit swap is and how it works that they could take tokens that they own and deposit them on a protocol and start to get the fees from

trades from which they're providing liquidity. The notion that code could be a market maker kind of blows people's minds. So I haven't noticed a change in people's reactions. Some weeks, it's felt like a little bit more interest from people who could partner with us and use the technology. I wonder if there's less of like a cultural resistance because you have to focus on technology right now. It's not just about like token prices being up into the right.

That's really interesting. So there is actually more interest because maybe some of the Wall Street firms that are coming in are in there not because of speculation, but because they want to deploy this for specific business purposes where the blockchain technology could be helpful or more efficient. And that's consistent with what you know we're trying to do.

Like our mission is to unlock universal ownership and exchange, and that means more people, more assets, more partners, and that means our technology has to be global financial system scale, and it has to be safe and it has to

be simple. That does not mean that we that like un swap for example, is identifying what assets should be supported by the technology, and players in traditional finance have no shortage of assets that might benefit from being on chain, from transparent systems, from uh simplifying the number of players and and and intermediaries were in a given trade. So some of the challenge is that changing the infrastructure of financial sert US is also means cutting someone's revenue stream

and changing the incentives. But ultimately, if we end up having like somewhat more consistent infrastructure across different asset classes, I think that's a really positive outcome, and there's plenty of people on Well Street who are excited about that, and are they waiting for sort of more regulatory certainty in terms of, you know, how things shake out and what exactly do you think are some of the biggest issues that are they're waiting to get resolved in what's

your sense as to how soon they would get resolved. We're spending a lot of time thinking about the right policy outcomes, because I think the most important thing is that we have policies that protect investors effectively, that can reduce fraud, but not to regulate code that has the potential to be extremely positive for so many people and

to really um serve the interests of policymakers. So we tired recently ahead of policy, and we're spending a lot of time thinking about the right kinds of policies that can achieve those objectives protect people, keep them safe, but also mean that we don't quash the innovation of these

decentialized protocols. So regulating n f T s is like regulating PDFs or regulating you know, an fungible token, which is what unit swap supports today, is like regulating again like a dot dot or something like that, and so that's not really the right lens. It's like, what is that file format trying to do? What is that format for value trying to accomplish? And one of the risks

associate with it. So we need to kind of evolve the way that we're thinking about it and not be as simplistic as just bucketting all tokens and all n f t s together and assuming that they need some more regulatory treatment. Really interesting that we continue to see the fallout of the Terra collapse. Really we are getting coin market Cap website, for example, saying that the wipe out of wealth has been around two hundred billion dollars

in twenty four hour time periods. So really, the gyrations in the crypto space have been huge with kind of the recent events where you know a lot of people have lost money through just the coin values dropping, or through fraud or insolvents of some companies. Are you concerned that this would lead to a tightening of the regulatory oversight and the regulatory environment to the point where innovation is stifled and how do you think you can prepare

for something like this? Well, smart regulation is going to be really important for the whole fields growth. Having rules that create clarity is only positive for the companies that are building in Web three in terms of how we can help make sure that we end up with smart regulation. As I said, we're not waiting. We're already building stuff that we hope helps serve some of those policy aims. Right, So I mentioned that we have a team now of data scientists that are looking at how to screen tokens

to identify their level of risk. So one example is, you know, our system flagged the lunar coin and terra as riskier than um etherory, for example, and like it would have given a user a warning to that effect. And I think the best thing we can all be doing is just explaining what the benefits are more clearly, right um, why the technology is useful, and then also trying to build products and features that make the whole

system better. In general, traditional assets that could trade on UNITSWAP could include everything from like real estate to company shares to those kind of things. Right well, in theory, because the token is just a file format, you could start to represent any kind of asset as a token, right And so you know, from the time when I first started working, when I was a black rocking crypto

part time. And there's been excitement about tokenizing real estate or tokenizing bank loans or you know, having all kinds of different assets in the black chain, and there are really specific reasons why those things don't work, because, for example, there's plenty of assets where people make money on the time that it takes to trade in the time that it takes to settle, and so there's not a lot of incentive to have those things settle and trade fast.

Or for example, you know, I'm not suggesting that that we need to have a wholesale transition of how all markets work if we don't need to. There definitely are areas, like you think about long tail fixed income, so like not very frequently traded bonds or small cap stocks and things like that, where if you have the ability to

boots drap liquidity, that could be really advantageous. For example, for like the major e t F fishuers who to trade e t fs that include fractions of those assets um but effectively, then what happens is the e t f n's up pricing those assets as opposed to the

trading of the underlying primary themselves. So that's just like one small example, and I think it's excitement about that is part of why UM Stacy Cunningham, it was the most recent president of the New York Stock Exchange until December, joined us and as an advisor because she was excited about different current use cases that could be moved from traditional finance UM to crypto. But we're not in the

business of accelerating a lot of that right now. We're trying to just invest in the core technology and driving education about it and then as I mentioned, a lot and making it simpler and safer to use. So if we were to look at ten years from now, what do you think traditional finance and and defy will look like and how will it be different from today? Well, I've been around crypto Longe enough to know that it's really foolish to make any projections, So I'll just say

I hope it's much bigger. I hope it's much safer. I hope there's a lot more women in the whole space, and I'm optimistic that that will be a positive outcome for how the global financial system works. But who knows. On one time for him, thank you so much, thank you, thank you, thank you, Olga for taking us inside of Unit Swap and thank you Mary Catherine for being a

guest on the show. You can find Olga's reporting on the Bloomberg terminal on Bloomberg dot com, or follow Ulga on Twitter at Olga karif that's k H A R I F. There's an old joke in finance. When companies fight, lawyers win, and right now in crypto, lots of companies are fighting, some for their corporate lives. Kirk Lindon Ellis, one of the biggest law firms in the world by revenue, has emerged as a major player in crypto. Earlier this month, the firm signed on to work on the bankruptcy filings

for both Celsius Network and Voyage of Digital. There's relatively little case law that addresses how crypto assets and their holders should be treated in a bankruptcy. For more on this, you'll hear from Bloomberg reporter Jeremy Hill. I'm Stacy Marie Ishmael, and this is Bloomberg Crypto, a daily podcast from Bloomberg and I Heart Radio. For more shows from I heart Radio, visit the i heart Radio app, Apple Podcasts, or wherever

you get your podcasts. Email your questions comments or suggestions for the show to Crypto at Bloomberg dot net, and you'll find us on Twitter at Crypto. The supervising producer of Bloomberg Crypto is Vicky Vergalina. Our senior producer is Janet Babin. Our producer is Mohammed Ferup. Our producer is Sharon Burriro, associate producer is Mosses and um Desta wander Ad is our engineer. Original music by Leo Sidrin