Speaker1: Hello and welcome. I am Piers, retired CEO of the Decentralized Finance Protocol radix, a public ledger entirely focused on bringing the different to the mainstream. This is our podcast, the defi download a show about all things decentralized finance and all things crypto, where we dive into the details of the projects, assets and services that are powering the defi revolution. Today I’m joined by Annabel, partner of the Amber Group, a global financial services provider, creating the Goldman Sachs of crypto to create a one stop shop for people to buy, sell, structure their crypto and earn yield on their crypto holdings in a highly trusted environment. Annabel, thank you so much for coming on the show.
Speaker2: Thanks for having me.
Speaker1: So it sounds like a lot of things that you guys do. It’d be great if we could sort of just jump into the different products that you guys offer and sort of how they work. And then and then sort of a little bit about the ethos is why you’ve created such a large suite of products and how it all comes together into your like long term crypto vision of where things are going to go in in the future.
Speaker2: Yeah, sure. Sounds great. So I’ll start with our Amber app, the of the mobile application that we launched just last year. And it’s it’s a simple UI and the functions right now include buy and sell crypto, the major currencies, Bitcoin, Ethereum and Stablecoins. And then you can also earn yield on the assets that you have on the on the platform, on our trading functions. And in addition to spot, there is also margin trading. And we have this cross margin function where you can actually use your interest bearing collateral, the deposits you’re earning yield on as margin collateral to open up your positions in volatile markets. So it’s quite convenient, especially with the last few days where you can just see, oh, the market’s dipping, I’m going to buy to dip directly without depositing more assets on the platform. This is just the beginning. We plan on rolling out a lot more features going forward, including including payment. We’re launching our ember card payments sometime in Q3 this year and we’re very excited for that. And just new features as the market and the crypto space itself grows, we aim to be at the forefront of that and really deliver the best in class services to all our users globally.
Speaker1: So with regards to the the Amber app, you guys, you’ve launched it quite recently, right? Like last year, was it?
Speaker2: Yeah, yeah. Last September.
Speaker1: So why why does the market need another consumer facing place to buy and sell crypto? What does the Amber app like offer to the everyday user, the, you know, the thousands of different venues that you can do it and doesn’t?
Speaker2: Yeah, no, that’s a great question. So, Amber, we as a firm were founded four years ago and we really started as doing the institutional services. We run our own prop market making strategies and also serve as a lot of the the largest miners, VC funds, different token projects in the space and really providing an institutional grade services in terms of liquidity provisioning in terms of different trading strategies out there. And then last year it was when we realized that with our ability, with our institutional grade services, if we can platform and productize a lot of those services, then we can offer the same high quality service to a lot more people globally. And that’s what drove us into building our own mobile app and design it to be a lot more user friendly than our web portal, which is designed for more sophisticated traders or more institutional traders. And in terms of all the other services out there. Sure. I think, you know, if you want to buy or sell spot, there’s a lot of different exchangers. If you want to earn yield or do borrow lending services, there are also a lot of different applications. But for us, I think we are really the one stop shop, like you mentioned, and we aim to be truly global, not just focusing on one jurisdiction so that users across different regions can get the same quality services and consistent services on our platform. And in terms of regulation and compliance fund, we’ve also been working very hard on that and staying at the forefront of that, applying for all the. Applicable licenses globally and then really aiming to be the trusted partner for both our institutional and our retail users.
Speaker1: So from a retail point of view, am I in control of my crypto or is it custodial or is it non-custodial?
Speaker2: It is custodial at this point. We work with the industry leading tech providers like Fireblocks, also with Bitgo on the custody solutions. On the tech side, we have our own R&D center dedicated to doing a lot of the research on research and development on our own wallet and custody infrastructure to ensure the security of our funds. That is the most paramount to us just keeping asset security.
Speaker1: And what was the what was the reason that you guys sort of decided to go down that route with the consumer facing application, sort of the custodial rather than non-custodial as the approach?
Speaker2: Right. So I think this is this is the the sci fi part of our offerings in the defi world. I think we we also have made a lot a number of times and I don’t know if you heard of Keeper Dao. It’s a project that’s incubated by Amber and also our partner, Ty Yang. So that’s our foray into DEFI. And our R&D teams also work with different DEFI projects to provide a lot of the blockchain solutions or smart contract solutions that they need. And we also recently hired the co-founder of Shield. Torchwood welcomed him on our team to really add to our info security side of things. So we do take all of that very seriously. And I think the reason that we went for a custodial service at the moment I was separated from a lot of our defi efforts is because I think at this point in time a lot of the defi ui UX is still much harder to use compared to a sci fi route. And that’s why most people default to using a centralized exchange or other centralized platforms. So I think we are monitoring the development in both the defi world and also in DEFI and want to make sure that we give our users something that they like to use and is smooth and easy to use for them.
Speaker1: So let’s talk a little bit about that. So, you know, I’ve had to play with your app and you clearly have been thinking about the user journey a lot and trying to make it as easy as possible. What is it that you’re able to do as a custodial solution versus a non-custodial solution that that improves that you think radically improves that user experience for the user? Like when you talk about it being difficult to use Defi, what are you specifically thinking about?
Speaker2: I think less so on the product features, but more so on accessing it. I think a lot of people are still having a hard time understanding the idea of keeping your own private key somewhere safe and then memorising your seed phrases or recovering them. We have a lot of users who are trying to transfer their assets from their ledger over and just panicked because they feel that somehow they’ve lost their federal funds and then we’ve managed to help them recover that. But I think going through a lot of that, seeing a lot of that instance is just proof that a lot of users just don’t know how to use these non-custodial wallets to begin with. And then using that, you still have to interact on chain. So for a lot of the newcomers to space, that’s just too much of a hurdle. But they shouldn’t be dissuaded into even just trying it out. There should be kind of a step in the middle that will guide them towards perhaps they’ll grow into getting used to the more non-custodial services and getting to the space that way.
Speaker1: Is there any interesting like sort of path to take? Because I think that a lot of defi projects decide not to go down the custodial route like there are plenty of, you know, self-custody of keys is terrifying for most average users. And I talk I often talk about like the inadequacy of the user experience of Metamask or something like that. But a lot of, a lot of the sort of defi projects have gone down this route of non-custodial and using these interfaces precisely because of the the complexities of the regulation. So you’re offering a yield savings product within Ambar app sort of 16% per annum or. Coin and usdc and stuff like that in some instances, although I did notice that the yield curve was weird, I would get a higher interest rate for for a shorter time frame and a lower interest rate for a longer.
Speaker2: Yeah. Because that’s that’s kind of like our welcome offer, like our intro offer, just like for a shorter period of time.
Speaker1: Right. But from the from the point from the point of view of financial regulation, you’re selling a financial product at this point, you’re actually selling a savings, a fixed rate savings product. So like and because you are the custodian, you are selling that directly to customers. So how do you deal with that in the in the context of like jurisdiction by jurisdiction regulation for that?
Speaker2: Yeah, and it’s a good question. And that’s why we we are spending a lot of efforts into acquiring the relevant licenses everywhere to begin with. There are not even that many jurisdictions in the world that have put out clear regulations in terms of how crypto should be viewed and crypto finance services should be regulated. So to the extent that they they have put out something like the act in Singapore or FFC in Hong Kong and to some extent more and more countries now that we are taking a very active stance and engaging the regulators and making sure that we’re correctly set up. But in a lot of the other places it’s like, you know, as much as we want to adhere to rules, we it’s just simply not clear. And the the yield that we offer essentially is sort of works like a bilateral loan agreement between us and our users. They deposit their their assets with us and then we promise will pay back the principal plus the the interest of fixed interest at the end of it. So it’s perhaps different from all of the other fund structures or the fund products we’ve seen either in crypto or in traditional finance space.
Speaker1: It’s very interesting. And in terms of sort of like one of the biggest problems that people always come across is, is on ramping. So being able to go from money in my bank account to money in a product that I care about. How do you how are you guys dealing with that? What have you what have you done so far and what jurisdiction do you serve with that?
Speaker2: Yeah, so that’s actually another reason why this is set up to be a custodial service. I think a lot of the non-custodial services onramp is perhaps the largest issue because there’s no reliable way for them. You still have the exchange. Exactly right. You know, you still.
Speaker1: Want to use our application. You go over there.
Speaker2: Go sign up to Coinbase. You still have to go through a custodial service anyway to do the initial onramp. So we want to keep that all in one in one place. And for us, we are registered with FINRA and FINTRAC and both the US and Canada for the money service business license. So we are licensed to take in dollar fiat. So for our clients with dollar accounts or even basically any G10 currencies that can easily be exchange into dollars, they can access our services.
Speaker1: So like in terms of servicing globally, how does someone in Asia on ramp fit into Amber into the Amber app?
Speaker2: So for our clients who bank in Hong Kong or Singapore, it’s quite easy. They can send their Hong Kong dollars, a $6 to our bank and we can do the conversion for them or they can do it locally at their own bank. These currencies are pretty easy to convert. Same in Europe. If pound it can be easily exchanged to dollars in other jurisdictions. For example, China, Korea because of the capital control. Then it is much harder as I think a lot of the users in those places would find another local providers to to buy into Stablecoins. But unfortunately, that’s just the regulations.
Speaker1: Yeah. I mean probably the hardest part of crypto, right. And that’s like it. The banking being getting banked as a crypto company is just incredibly challenging. Like even finding a bank that’s going to go, Yeah, sure. Even if you do all of the AML, KYC, and the regulator has given the thumbs up for you doing the process that you’ve done and you’ve got external audit and all of this kind of stuff is still it’s still very difficult to find a bank.
Speaker2: Who’s yeah, it’s fun and banking and then also just going out and doing all the other taxes on all the things that are constrained in very traditional way and then nobody understands how it can be applied to crypto is frankly quite frustrating and that’s why we are all hoping to see on a regulator. I’d actually spending some time to to to recognize crypto as for what it is as opposed to try to fit it in either like securities or commodities, you know. So we’ll see what happens.
Speaker1: Okay. And then from the point of view of actually building the user experience, like, as I say, on on the on the Amber app, you guys have thought literally thought about it being user experience. The thing that I couldn’t work out from it is who the target audience was because some of the Amber app is like super easy to use. Like, don’t worry about it, don’t worry about the product. Here’s, here’s a 16% savings rate. And then others of it is like, here’s a, here’s a trading view where I have candlestick graphs and I have a professional view on like what the spot rate is. And here’s a way of doing leverage. And like, I couldn’t work out like it felt a little bit like it was split, split personality. Like part of it was going, Oh, we’re easy to use. And the other is, Go, you’re a pro, you want to be here. And I couldn’t work out like who the audience.
Speaker2: For it is. No, that’s that’s a great question. I think initially we design it to be very simple, mostly for the newcomers. And we saw a huge influx of them over the last year with with this bull run. It’s been incredible. But then because we were we have been offering a lot more sophisticated features. So we thought that we can also add it to the app for for a lot of the users who are sophisticated enough to use that. And we’re seeing actually even the more sophisticated traders, they prefer trading on their on the mobile app as well. As opposed to maybe being in front of a computer. I guess maybe it’s because these days a lot of people just are on the road and they can only access their their mobile, mobile phone. Yeah, it’s very mobile first. And we thought that we could selectively add some more advanced features for those who want to use it. And we also want to, like you said, right, we think a lot about user experience, also user journey and user growth within our platform. So hopefully the newcomers that came in six months ago and figured out what is bitcoin and bought some and now earning yields and with this the moves in the market, maybe they want to try try out new features as well and be able to grow with our platform and with the industry, with the market. So you would love to see more of that as well.
Speaker1: Pretty interesting. Last question on on the Amber app before we move on to other sort of products and services, like one of the things that is always challenging and I know that there’s quite a few people who listen to this podcast who are running sort of defi applications or products themselves. One of the most challenging things is often user acquisition, especially in sort of like bull run time, like it can be incredibly expensive per user acquisition, partly because a lot of the platforms prevent you from advertising, especially when it comes to things like trading and investment and stuff like that. So what’s your user acquisition strategy and what have you guys found to be a good way of thinking about user acquisition and what have you found to be failed experiments in user acquisition?
Speaker2: That’s a great question. So this year I’m running our Global X Initiative, which is a team dedicated to identifying different go to market strategies in different regions globally. So right now we have a presence in Korea and go into Latin America market and Turkey and Russia everywhere with high crypto adoption where we know that people are interested and perhaps need a platform like is where they can do everything at once and know that they can trust a platform. So, so the approach is, is quite different depending on the specific market. But I think there are some generalized lessons that I’ve learned in terms of what not to do. I think it’s very important to to. Not there is not a general playbook for this market. And frankly, a lot of the more retail facing products in this market are very focused on trading and leverage trading. So it’s very risky, encouraging, very risky behaviors. And those channels are the opposite of what Amber should work with, because our product is quite the opposite. We we emphasis on securely buy crypto to as a portfolio diversification and then to grow and preserve your wealth. So it is really finding the channels that agree with your ethos and with audiences that are looking for the same thing instead of blindly going into those communities that just focusing on get rich fast. So that’s definitely one of the things I’ve learned and a lot of times really is understanding the local culture and what the local users are looking for. Every, every market, the needs are different. With Amber, we’re lucky enough to have a really wide range of services. The con is that it could be quite confusing because there’s it’s hard to explain what we do in one sentence, but a pro is that in each market we can find the services that our clients are looking for. So to be our star or a highlight, so to speak, so is really working with our local teams there on the ground, speaking to users, speaking to the community and figuring out, okay, this is what they want, this is what they need.
Speaker1: It’s interesting. There’s a there’s a great saying that I love in business, if everyone is your customer. No one’s your customer. Yeah. And like working out like who? Like who you say no to as much as who you say yes to. Like who’s the who’s the person that you’re actually really like fits really nicely within your definition of a product and service offering and that you can create a fantastic customer experience that transcends beyond the merely good. And doing that requires sort of a certain amount of focus and dedication.
Speaker2: To, yeah, I wish you had told me about this earlier, especially in a bull market or I. It’s hard to say, oh, you know, this is the only thing we’ll offer.
Speaker1: Right? I mean, like it took us a long time as well. Like FedEx decided to focus on on on DEFI specifically in engineering our platform for DEFI specifically only in 20 like at the end of 2019, it was before the Defi summer, but like it was at the time, it was one of those decisions that we just spent such a long time building a general platform and technology that was generally applicable to a large. You could use it for supply chain management, you could use it for, you know, charitable giving, you could use it for finance, you could use it for this or that. And we realized that actually even even every single one of these opportunities for for these products is probably $1,000,000,000 opportunity easily. But if you don’t focus in on like what your target audience is, what the tools they need are, how you can make sure that they win and succeed on your platform and create communities that are like our self helping. Right. Like I, you know, I have a developer who wants to define and then I have another developer who wants to do Defi. They’ll help each other. I got developer wants to define another developer who wants to do supply chain management is just going to continually talk past each other. Right. And you’ve got that sort of like another thing that I really like from a friend of mine who worked at McKinsey is you don’t stop. He said to me, Piers, you don’t start a fire by taking your taking your lighter and moving it between all of the logs in the fire. You start a fire by keeping the lighter underneath one log until it catches alight.
Speaker2: That’s right. That’s absolutely right. The importance of focus.
Speaker1: The importance of focus. Let’s let’s talk about let’s talk about the on the subject of focus, talk about the other products in the Ember in the Ember group and sort of how they all come together. So like you start you said that you started in institutional I know your your background of many of the partners Amber Group are sort of traditional finance and that was your sort of your background as well. But like what what was the what was the starting product set for for the Amber Group? And who was it targeted at? And where did you guys find your first sort of like success there?
Speaker2: Right. So initially it was quite simple. We were all ex traders and the founding team saw the room for arbitrage was immense in crypto in 2017 when I compared to today that was even. The Wild West. So they were running. They were already running arbitrage quant strategies on traditional equities and other asset class. But they saw the opportunity in crypto and decide to pivot full time in 2017. And because of that, we’ve spun time. Really?
Speaker1: Hang on just just a sec. Let me let me unpack some of that, because the financial jargon sometimes is is a little bit dense. So quant meaning quantitative methods.
Speaker2: Or algo.
Speaker1: Based algo based strategies where you have a bunch of rules that you run on the market to trade in and out of positions very quickly to take often instantaneous arbitrage opportunities between markets in different jurisdictions. Say, for example, oil is priced at $30 a barrel in Japan and 31 in in America. You have a quantum strategy to be able to balance those two out and sell sell on the expensive market by a cheap market and prop. So proprietary trading desk, meaning that you had your own book, you had your own capital and you were trading for your own profit. You weren’t. Or you may take other clients money, but you weren’t expressly going out and looking for people. You’re saying This is our capital, we’re going to go trade on this. So you started with a bunch of capital and you had an opportunity to move from a highly competitive market from the point of view of successful quant strategies to a much less competitive market in crypto, because it just hasn’t been. It’s just uncharted territory. The tools are less good, it’s harder to get started, it’s difficult to work out the infrastructure. And so there’s a lot more alpha opportunities there. Alpha meaning high profit opportunities.
Speaker2: Yeah, exactly. And all the big guys in traditional markets, they are not even they don’t they’re not bothering to look at crypto because the market cap was so small back then. So they took the opportunity and move into to crypto and really to, to capture a lot of the alpha that you mentioned in the market. And to do that you really need to, to build your infrastructure to connect to all the liquidity venues, be it the exchanges and all the different jurisdictions and also to different OTC trading counterparties. So we spend time and effort is really, really building that and organically grew into providing services, external services to our LPs or our friends or other people that we know in the market, because they would come come in and say, hey, can you buy or sell this for us in large sizes? Hey, can you provide execution services since you already run algo trading? Hey, do you do borrow lending or structured products? So really organically grew into service providing all those services to the market and really grew from a small pop shop into a much bigger institutional facing crypto finance service company. And right now.
Speaker1: And why and why were people coming to you like why? Why were institutions, institutions, inverted commas, i.e. professional companies that are run specifically focusing probably on the crypto markets. You have a balance sheet of crypto. Why? Why were they coming to you and going, Can you do this for me? Rather than doing it?
Speaker2: A lot of a lot of our early clients are perhaps crypto VCs or crypto funds doing probably more investments. And when they need to accumulate a position or or sell out their position in a secondary market, it’s difficult for them to set up their own trading teams and set up all the access to all the exchanges, all the liquidity venues. And oftentimes they’re maybe there are LPs or they just funds in the market and they. You know, there weren’t that many players in the market even back then. And our team, I think just from our background, because we did come from a traditional finance background, I think people feel a lot more there is that I guess trust built in it that we’ll do things the more compliant with which we do. It’s quite obvious if you compare Amber to perhaps a lot of our competitors in the market that we do do things in a more conservative way because I think that compliance training from Wall Street is kind of ingrained in our brains.
Speaker1: As it should be. Right? Like there’s plenty of stuff that is, is funky in crypto and how people sort of behave.
Speaker2: Yeah, it’s important to have that bottom line somewhere.
Speaker1: Right? It’s important to understand why often these lines are put in the sand because of moral hazard more than anything else. And like being able to make sure that you’re set up to to avoid that is a good way of avoiding the kind of things that we saw in the equity markets in the 1970s and 1980s. And we’re likely going to see stories emerge about the crypto markets in equally the same way. But it’s good that there’s at least a model to bring across in how you should operate in a, in a, in a, in a moral fashion while still providing a market service.
Speaker1: And just just just to just to unpack a couple of your more more of your financial jargon there. So LP meaning limited partner in the case of a of a traditional funds not like LP in in terms of like.