Interview with Maria Pia Aqueveque | New technologies : "The Age of Value"

MARÍA PÍA AQUEVEQUE J. is DTCODE CEO & Founder, business advisor and blockchain expert. She is also an economist, with experience in financial markets and public policies, with a degree in Economics and Administration, a Diploma in Investments and Financial Markets and a Master in Public Policy.

She is also the first Chilean Woman Expert to appear on Nasqad NY Host on Radio TXS on Architectural Technologies in governments, private and public companies.

Maria Pia, tell me more about your entrepreneurship ....

My world is the convergence of economics, technology and finance. I am CEO and founder of Maqueveq & Co. which is involved in strategic and corporate advisory and investment in digital assets and decentralised protocols. I am also involved in DTCODE, a company dedicated to innovative solutions using deep technologies (deep techs) such as blockchain, artificial intelligence, IoT, among others, through collaborative R&D. Currently, I am buying technology companies in Europe to adapt their value proposition and integrate them into the DTCODE ecosystem. Currently, we are working with Spanish, Italian, Swiss, German and Chilean companies, some of them listed and with international recognition, in the field of cybersecurity, digital identities, digital assets, process automation, secure satellite network, among other fields. We are working on a value proposition for industries, through efficiency and security in the management of natural resource assets, infrastructure and logistics; in order to advance in ecological transition, and to make a better use of their resources.

I am Chilean, but for the last year and a half I have been living between Madrid and Rome. Until the beginning of this year I was a board member of a pension administrator in Chile and until a month ago, a board member of an Italian technology company listed on the Milan stock exchange in a capital increase process. I also chair the Chilean chapter of the 30% Club, a global initiative that commits Chairmen and CEOs of the main listed companies in each country to promote a participation of at least 30% of women on their boards and at the top level of decision-making. Along the same lines, in Spain we have been working together with Soho Women in the World to inspire women to be part of this economic paradigm shift that Blockchain technology brings with it. Spain is the best place to carry out this type of initiative, as it has outstanding women who are global leaders, such as Coty Monteverde of the Santander Group, María Parga, Honorary President of the Spanish blockchain consortium, Alastria, among many other women who are leaders in their sector and who are part of this ecosystem.

You are an expert and scholar of technological evolution and its impact on society, companies and institutions. One of the most innovative and disruptive technologies is "Blockchain".

What technology is it, what impact does it have and will it have?

Blockchain is a database. But it is not just any database. It is basically a system with which transactions of any asset can be made securely and reliably between people all over the world without the need for intermediaries.

It is true that this technology is mainly known for bitcoin, its first application, which today many people follow because of the market valuation it has achieved. However, its real potential stems from the fundamentals behind the Bitcoin platform and allows for the redesign of business processes and models.

Even today it is allowing a decentralised alternatives to the financial system, through decentralised finance, which can use different types of crypto-assets, including stable coins, created with the purpose of keeping their value stable, for which it is backed by other financial assets, in this case fiat currency.

There is now a consensus across industries that blockchain technology can simplify and optimise entire value chains by exchanging simplified data in real time with greater efficiency. Moreover, as the technology is creating decentralised and distributed business models, digital identity tools, smart contracts and asset tokenisation, blockchain can - in combination with other technologies that capture, process and analyse data - efficiently re-engineer processes and drive sustainable productivity in the economy. Removing bottlenecks and putting pressure on low-value intermediaries to adopt overdue technological and structural improvements or simply exit the market.

Blockchain is the technology that makes it possible to manage the transfer of value (in a broad sense) between multiple actors, thereby enabling the implementation of the "share value" model proposed by Michael Porter and Mark Kramer. In that they argue that companies can go beyond corporate social responsibility and gain a competitive advantage by including social and environmental considerations in their strategies. Which is what we at DTCODE are working on in Europe. Today there is a great opportunity supported by the recovery plans, in particular in Spain, Germany and Italy.

Moreover, because blockchain is an efficient and effective system for transferring value, this technology allows people to be integrated into economic and financial relationships that were previously not being served by the micro-payments they make and the high transaction costs that blockchain reduces. It allows us to move towards a more inclusive economy, if the incentives are in the right place.

This time you define as the "Age of Courage", what do you mean?

Just as the internet drove the "information age" in which applications of different kinds have enabled the generation of a large amount of data. It is not money as such, but it is a very valuable raw material that companies know how to monetise more and more and better. For this reason, they have been baptised as the "new oil", which has given life to the algorithms of the third industrial revolution. According to PwC in 2019, there were 4.4 zettabytes of data in the digital universe. And it is estimated that data generation, which has an exponential growth rate, will reach 175 zettabytes (a zettabyte is one billion terabytes) by 2025, a growth of 61% over 2018 figures.

The fourth industrial revolution, towards which we are moving, is a fusion of technologies that is blurring the lines between the physical, digital and biological spheres. And it responds to automation and data exchange, particularly in the framework of manufacturing and development technologies. And it is here that Blockchain will play a leading role as the platform for the exchange of different types of assets in the form of data, through its digital representation or token, giving life to what is known as the "era of value". And in turn enabling the creation of a business model in the digital space.

This process and opportunities for innovation will emerge as external data becomes more reliable and improvements in automation continue, which will be facilitated through smart contracts, digital identity and digital assets (in the form of cryptographic tokens with metadata) on the blockchain. These elements allow the distribution of the value that each agent contributes, in instances of collaboration in the collective creation of knowledge, involving intellectual property, and of development, in production processes. Facilitating the implementation of a collaborative economy.

Regarding this last point, it is important to understand that throughout history technology has allowed society a new way of organising production processes, yet there have been no major changes in the distribution of wealth. Because a centralised model of production has been perpetuated, even during the third industrial revolution. And what we are talking about is that in the future blockchain could break with this pattern. And we could move towards a model where, as Joseph Schumpeter said, "business profit is the expression of the value of what the entrepreneur contributes to production". And not the centralisation of the links in the production chain, as is the case today. Uber is an example of this, where about 80% of what it does today is related to user and supplier identity authentication processes, as well as payment management. The commissions charged to those who make the rides are around 20% of the fare, being those who create the most value, they must assume all the costs and risks, while Uber, increases its capitalisation. Blockchain, in conjunction with cryptographic digital identities, allows this authentication process to be carried out automatically, just by validating attributes, without the need to store all the information. And the technology has already existed for years to have a digital society and economy, Estonia is proof of this. However, the business associated with data is several trillions of dollars, so there are economic interests that prevent its implementation by large players.

Let us remember that many are already predicting the end of capitalism as we know it, particularly now that the COVID pandemic poses a tremendous challenge ahead. The countries of Europe have the European Union that is supporting them with funds. But let's remember that Latin America, for example, which has always been strategic for Spanish companies, has been set back ten years at the macroeconomic level and twenty years at the social level as a result of the pandemic. And this may bring challenges for these economies in terms of how the economic and social political order is structured. This context can also be an opportunity to experiment with new models. As Mark Twain said "it is not what we know that can give us trouble. It is what we think we know with certainty that simply is not so".

The Guardian's British journalist Paul Mason has suggested that this growing data-driven society represents the end of capitalism as we know it. More likely, capitalism itself will be engulfed by an ocean of algorithms. Just as the rise of mercantile capitalism in the 14th century drove the Italian Renaissance, the social and financial wealth generated by a data-driven economy is poised to animate a new social order. But as Yuval Noah Harari has argued, "power is in the hands of those who control the algorithms". This is already happening, as the Netflix documentary "The Social Networking Dilemma" makes explicit. And this situation is also a risk to people's freedom and the only way to deal with this is through sovereign digital identities, where individuals own their information. And they can manage who has access and if they choose to, they can monetise the data they generate. In other words, they receive compensation for the value they contribute to that algorithm.

It is important for the political and business world to realise that there is a new way of seeing the world and power, in its broadest definition, due to the access to information brought to us by the internet. And the opportunity we have to move towards a new economic, political and social order that can be equally profitable. This is what I was talking about at an event in Davos, Switzerland, at the end of January 2020, a month and a half before the global pandemic was declared.

The impact of technology on the economy and finance is changing them, I have heard you talk about token revolution and tokenised economy.

What does it consist of?

The tokenised economy alludes to what we have been talking about. It is based on a digital representation of an asset, and its ownership, in metadata format, in a secure, immediate, transparent and efficient way, where an action (transfer of value, co-ownership agreement or other) is executed through a "smart contract".

In order to understand their implications, it is first necessary to understand what types of digital assets or cryptoassets exist. Although there are different ways to classify them, according to their technical layer, utility, purpose, I prefer to classify them depending on their legal status. First, there are cryptocurrencies or virtual currencies such as bitcoin (BTC). They are instruments of exchange and storage of value, as well as units of account; second, platform tokens, such as ether (ETH), from the Ethereum platform, a token that is used as a unit of exchange to finance the resources implicit in executing actions within a blockchain platform. The third is utility tokens, such as the Utility Settlement Coin of the Fidelity consortium of the world's sixteen largest banks, including Banco Santander, which are digital assets that are not intended to function as investments. The fifth is security tokens, which are digital native bonds, stocks and other securities that are traded peer-to-peer without financial intermediaries. An example is stock tokens, which the derivatives exchange FTX today offers that represent the underlying asset shares of Netflix, Facebook, Amazon and Tesla. The sixth type of tokens are crypto-collectibles, which are fully unique digital assets that are traded on a blockchain allowing authentication of the parties and traceability of the asset. They are characterised by the fact that they are non-fungible assets or tokens, hence their acronym NFT. Undoubtedly the most famous is the Beeple painting, auctioned by Christie's for almost $70 million dollars and containing 31,168,313 bytes of data. Another is natural asset tokens, which are digital assets that are backed by real-world physical assets such as energy, carbon, water and air. They have a high potential to move towards sustainable production models in which caring for our natural resources and contributing to the care of our natural resources is a tradable asset. As is already being done by companies such as Power Ledger, with its POWR token, which makes it possible to trade excess renewable energy. And finally, there are stable currencies, which are 'collateralised' (or backed) currencies, associated with another external value (be it a fiat currency, another cryptocurrency or other assets) to theoretically provide them with stability. Here I like to stress those that are collateralised by a fiat currency and issued by a central bank into what is known as crypto-fiat.

The digital economy in the "information age" or internet, as we knew it before bitcoin, the first application of blockchain, is based simply on uploading or sending a copy of information about an asset, in a broad sense (e.g. a presentation, a photograph, a sales document, etc.) to the cloud.

These tokens, coupled with cryptographically encrypted digital identities, can give life to decentralised applications (known as Dapps) or decentralised organisations (known as DAOs). The latter are blockchain-based cooperatives that operate internationally in a digital and decentralised manner. Through protocols or consensus agreements that are executed in cryptographic software programs, such as "smart contracts", it is possible to manage the interaction of multiple actors in a transparent and efficient manner. It also makes it possible to generate participatory decision-making mechanisms, to better manage and distribute the value contributed by each of the parties and to reduce information asymmetries. In this way, it enables trust between the different parties involved and distributes power within an organisation.

It is important to understand that these tokens make it possible to give a digital business model to assets that exist not only in the digital space, such as the Beeple painting, but also to physical assets. Remember that in the internet era, these assets lost value because numerous copies of the asset were produced in which originality and ownership could not be verified. This is what blockchain and digital identities have come to change, making it possible to associate their origin and ownership by authenticating the digital identity (in the form of a digital certificate) of the asset. An interesting example was when, in April this year, the cybersecurity company WISeKey held the first auction of a luxury watch, a Hublot, in NFT format. Interestingly, this digital asset was directly associated with the certificate of authenticity of the physical watch's microprocessor, so the auctioned NFT was a digital twin of the physical asset. This was the first case where the physical and digital worlds were connected. The verification of the authenticity and ownership of the digital asset is what differentiates it from its copies on the web. Thus, similar to digital certificates embedded in luxury goods such as cars, watches, jewellery, etc., it differentiates their quality and value from their copies.

What is the future of traditional finance, how will banks and FinTech evolve?

The current scenario is challenging for most banks and FinTechs. And the choices are to reinvent themselves or to converge, for as Victor Hugo said: "No army can stop an idea whose time has come". We must recognise the momentum that decentralised finance has gained this year. The impact of the economic uncertainty we have experienced since the start of the pandemic has driven the market capitalisation of several cryptocurrencies native to the blockchain, such as bitcoin, Litecoin and Ether, and tokens such as Orchid, Compound and Celo, among many others, which have been built on another blockchain. And of course when the market capitalisation of a selection of more than 7,600 cryptos (tracked by the portal coingecko.com) was more than $2.5 trillion in mid-May. But the most interesting thing is not their market value, but the financial services protocols behind most of them.

While it is true that banks such as Santander have been experimenting with blockchain technology for three years, in the design of digital identities, issuing tokenised bonds, creating an interbank infrastructure for the creation of Synthetic Central Bank Digital Currency through a Utility Settlement Coin that represents the tokenisation of money (real assets) safeguarded by a Central Bank, they have not yet made any pronouncements regarding cryptocurrencies. In contrast to BBVA, which in December 2020 announced that in its subsidiary in Switzerland, where the regulation allows it, it would begin to offer commercial services for the purchase and sale of bitcoin.

The convergence of traditional finance is already happening: Anchorgade Digital, the company in which Visa participates, has become the first cryptocurrency bank in the United States. And it already offers credit in traditional money, using ethers or bitcoins as collateral. And it has just announced, for its institutional clients, a line of credit financed with ethers.

And it would not be surprising if in the short term we see large exchanges, such as Binance or Coinbase, entering into alliances or outright buying banks to reach end users and provide them with more guarantees, being under regulated frameworks.

Moving slowly, when it comes to delivering services to retail users can be very costly for banks and Fintech, as we are also seeing new competitors entering the market that are challenging them today. Without going any further, the leading German telecommunications company, Deutsche Telekom, one of the largest telecommunications companies in Europe, has invested in Celo (token with a market capitalisation of around $800 million), which is a blockchain payments platform that allows mobile phone access to decentralised financing projects, making it easier for users to bypass traditional financial companies.

How is the issue of regulation in this great transformation?

We are faced with the same old problem: innovation enabled by new technologies is advancing faster than regulatory frameworks. With the exception of jurisdictions such as the UK and Switzerland, through regulatory frameworks that rest on three pillars: innovation, stability and financial protection.

Regulation in much of the world was not prepared for the digital economy, and we have already seen this in the internet era with the new business models. But today's problem is deeper because we are talking about cryptoassets and in particular cryptocurrencies, which make it possible for the same asset to behave sometimes as a currency, sometimes as an intangible and sometimes as a financial asset.

This puts us in a scenario where we have rigid and old regulatory frameworks facing a completely new reality. And they are forcing this new asset class to fit into a regulatory framework that is not commensurate with its nature and characteristics. Moreover, this fear of the unknown and loss of control has led governments and regulators to ban their use a priori, rather than embrace these technologies and provide a regulatory framework that gives certainty to users, as they are doing in the UK and Switzerland. And that is why these jurisdictions are attracting innovative, serious projects that seek to comply with all the compliance processes to ensure the authentication of the parties and avoid money laundering. That is why, for example, all the projects promoted by the Santander Group, such as the Blockchain bond issue and the Fidelity consortium, are based in the UK.

I would like to argue that we are facing an economic challenge as a result of the pandemic and that recovery funds can be a catalyst for innovation and technological development to transform Europe back into a relevant player. In particular to move towards a tokenised economy that generates economic incentives towards sustainable models and leveraged by cryptoassets. However, regulation is required to generate guarantees, both for these ventures and for users.

One way to move forward in parallel to regulatory changes is sandboxes, such as the one we have here in Spain. These are controlled test spaces. Let us remember that here in Spain, on 13 November 2020, Law 7/2020 for the digital transformation of the financial system (known as the "Sandbox Law") was passed. This allows innovative projects (including several fintechs) to be presented and tested safely and under the supervision and control of the regulator.

It should be remembered that in the European Union cryptoassets (including cryptocurrencies) are not considered currencies, but assets or property. Today, a person who uses cryptocurrencies is taxed more heavily than someone who uses euros. In Spain, for example, if a person uses euros to pay, they are not taxed, except for VAT. However, if you use a cryptocurrency, you have to pay an additional tax, and calculating this taxation is not easy to do. In the European Union, discussions on the taxation of crypto-assets and the governance of blockchain platforms are evolving. That is why I recommend those who need advice on this matter to consult Spanish lawyers Cristina Carrascosa and Almudena de la Mata, respectively, who are part of the working groups on these issues, convened by the European Union.

How does geopolitics play a role in this tokenised economy? How do States and Central Banks position themselves in relation to digital currencies, cryptocurrencies and possible stablecoins?

There is currently an imminent concern of a global debt crisis and a sharp devaluation of the dollar. And in this context, Bitcoin's anti-inflationary feature makes it increasingly attractive as a savings vehicle. So much so that even Ray Dalio, founder of Bridgewater Associates, the world's leading hedge fund manager, who went from doubting Bitcoin to today declaring that he prefers it as a savings vehicle. "Personally, I'd rather have bitcoins than a bond," he said.

And as the saying goes, "an action is worth a thousand words", and we have started the month of June with news from Russia, giving notice that they will stop using the dollar in their National Welfare Fund reserves within a month. They plan to replace some $40 billion with gold and other currencies to minimise the risk of US sanctions. This highlights the weakening of the dollar.

It is important to understand that the dollar's supremacy today is being challenged by three cycles occurring simultaneously, in distinct stages. The first, a looming concern of a global debt crisis and a sharp devaluation of the dollar. Second, internal cohesion, as wealth gaps grow and value gaps widen. And third, the emergence of another power to challenge the existing superior currency.

According to Ray Dalio, we are in the middle of the first cycle. But I dare say that the second cycle has begun to sharpen and accelerate as a result of the economic impact of the pandemic. And the third cycle is undoubtedly starting to be generated by China's expectation to start implementing its digital yuan (crypto-fiat) next year, by allowing foreigners attending the Winter Olympics in 2022 to use it. While the European Central Bank has announced that it may not be conducting a proof of concept until 2025.

Paradoxically, given China's evident advantage in the digital yuan, the counterweight to avoid the dominance of the dollar could come from the stablecoin Diem (formerly Pound) in the Novi (formerly Calibra) wallet, made up of a consortium of mainly technology companies, including Facebook. The stablecoin project, collateralised with the dollar and led by Facebook, announced that it will focus its operations in the United States through an alliance with Silvergate Bank. The Diem Payments Network will register as a money services company with the Financial Crimes Enforcement Network (FinCen), while Silvergate will also manage the reserve that backs the token. If approved as a payment service provider, Diem will offer payment services through Messenger and WhatsApp, reaching a number of users equivalent to 3.3 billion users by 2020. And by being dollar-collateralised, it could prevent the digital yuan from beating the dollar geopolitically. However, this stable Ojeda is being resisted by some supervisory bodies.

Let us remember that the United States and China are also engaged in a geopolitical trade battle that is also taking place in other dimensions. Both in blockchain technology in the logistics chain of products, as well as in the development of artificial intelligence algorithms that allow them to dominate in order to have an advantage over their competitors, will enjoy time and applications that could be crucial to have greater influence on the international concert. The question that arises is whether Europe will be smart enough to develop a strategy to generate a counterweight. At least as far as digital identities are concerned, the European Union has been quick and in April last year passed a law that sets a three-year timeframe for member states to move forward with their creation. Spain has played a strategic role here, and the standards used for years in the Spanish blockchain consortium, ALASTRIA, are considered a benchmark.