Navigating your digital asset journey: A banker's handbook

Past event date: April 21, 2025 2:00 p.m. ET / 11:00 a.m. PT Available on-demand 45 Minutes
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Following new guidance of the OCC's Interpretive Letter 1183, the door is open for banking professionals to integrate digital asset offerings into their financial institutions. However, there is still some uncertainty about how to move forward in a strategic and compliant way. 

Watch this interview between Michael Moeser, Senior Content Strategist at American Banker and Liat Shetret, VP of Global Policy and Regulation at Elliptic to discuss new regulatory expectations, innovative opportunities in the digital asset space and steps to get started.

In this 45-minute discussion, viewers can expect to learn:

  • An understanding of OCC Letter 1183 and its implications for banks
  • Practical strategies for offering crypto custody, payments, and settlement services
  • How banks should guide their customers through the transition towards digital assets
  • Case studies of banks successfully leveraging blockchain technology
  • Future trends, opportunities and risks in the evolving crypto-banking landscape

Transcription:
Transcripts are generated using a combination of speech recognition software and human transcribers, and may contain errors. Please check the corresponding audio for the authoritative record.

Michael Moeser (00:09):
Greetings. I would like to welcome you and our entire audience to this session titled, navigating Your Digital Asset Journey, A Banker's Handbook. I'm Michael Moeser with American Banker and I will be your host today. I'm being joined by Liat Shetret from Elliptic. Liat is the vice President of global policy and Regulation at Elliptic and has spent the past 15 years working with regulators, law enforcement, financial institutions on global anti-money laundering and counter-terrorism finance projects and programs. Liat has published numerous reports on crypto assets and regulation and has spoken before the US Congress, specifically the US House Committee on Financial Services. Welcome Liat.

Liat Shetret (00:57):
Thanks, Michael. Nice to be here. Happy to join you today.

Michael Moeser (01:01):
Yes, thank you. So following new guidance from the OCC's interpretive letter 1183 and the Fed's most recent announcement, FI dash seven dash 2 0 2 5. That's a mouthful there. The door is open now for banking professionals to integrate digital asset offerings into their financial institutions. However, there's still some uncertainty about how to move forward in a strategic and compliant way. Today we're going to dig into these new regulatory expectations, the innovative opportunities in the digital asset space and ultimately the steps banks need to take to get started. So now Liat, before we get started, I'd like to talk about the potential opportunities for banks in the digital asset crypto world. Before we do that, I think we need to level set on what people are talking about, especially since there's a degree of mystery and misinformation. This is especially important because of how today's digital assets are converted into fiat currencies such as the US dollar and the role that banks play in the system, whether or not they're aware that they're in it, not the system, but that they're playing in the digital crypto asset world. First off, can you talk to us about the role that banks play today in the world of digital assets such as crypto, stablecoin, et cetera?

Liat Shetret (02:27):
Sure. Thanks Michael. So I like to start level setting conversations with thinking about what is money. And I think traditionally we think about or know money as being legal tender that is backed by a central government. We know who issues it, we know how much is circulated, we know who then manages the policies that govern it, the fiscal responsibilities, liquidity issues. We have a central authority that is a point of resource and information for us. And digital assets or cryptocurrencies are recorded on top of distributed ledger technologies or DLT. In other words, a blockchain, which is this open ledger that underpins the information and what I would call it is more of programmable money. It's money that has different kinds of characteristics. It's issued potentially by different private sector entities or by other issuers. And what we're seeing happening in the banks is really curious and interesting and I love that we're having this conversation today because it's so very timely.

(03:32):
So in the past, banks have historically had an interesting relationship with digital assets and cryptocurrencies. I'll leave it there. What's passed is fast. What's gone is gone. Today we're seeing that some banks are still crypto skeptics. They still think it might just be the biggest Ponzi scheme in the world. Some are crypto curious, some are very interested to dip their toe the water of digital assets and understand how they can bring their institution into the foray and into the bleeding edge of technology. And others still might position themselves as being crypto experts or crypto enthusiasts. So institutions that are really innovating and offering cutting edge services. So wherever a bank stands, whether it's crypto averse or concerned about risks or the crypto savvy and expert, there's a clear understanding that there's been an unprecedented shift in terms of the relationships that banks have with digital assets.

(04:27):
And in our recent poll that we conducted in 2025, polling for interest of digital assets by financial institutions and banks, 77% of compliance and risk teams within banks and financial institutions said that they saw compelling business case to progress a digital asset strategy and 76% believe that they want to pursue this kind of strategy over the next two years. So the relationship is there and the relationship is growing and evolving and I think we look forward to understanding regardless of where a bank sits in that array or in that barometer, what does it mean for that bank and how we can support a bank that's looking to enter or defend and protect against risks emanating from crypto assets.

Michael Moeser (05:20):
One thing I want to sort of be clear about is that when we talk about digital assets, we mentioned crypto and people often think of Ethereum or they think of Bitcoin and they see it go up and down. And now most recently in the last few years we had talked about stablecoin. There's interest from central banks getting involved. And so I guess I would ask or maybe ask you to clarify, does everybody have to have the same approach? I mean, can I as a bank decide I want to be in focus on stable coins? What about bitcoin? So can you talk to us about that?

Liat Shetret (06:03):
So not at all does a bank need to decide where they'd like to enter this sort of ecosystem. And when I think about bucketing banks or making some kind of organized response to that question in what I would say is a bit of the chaos ecosystem of crypto, I would suggest that banks have seven different points of entries into the digital asset space. And some of these are the ones that you've just mentioned and others are a bit more straightforward. What I would say is that a majority of these seven that I will go ahead and discuss in a minute are all within the wheelhouse of banks. Banks know how to manage risks, they've been managing risks for years and I think these points of entry are natural entryways for banks to move forward in the digital asset space. So if I were to break this down, the first singular easy low hanging fruit for banks to enter would be in essentially offering banking services to what I would call crypto native businesses or businesses that are primarily deriving their own income from crypto. So offering them client money services, onboarding them, assessing them as an entity and then offering them accounts. So essentially offering them banking services and seeing them managing their risk as potentially high risk, but knowing how to manage that kind of entity. The second kind

Michael Moeser (07:32):
Are those entities exchanges as an example,

Liat Shetret (07:36):
So potentially an exchange would be an example of that? Absolutely. So the likes of Coinbase, the likes of Kraken. So a crypto exchange could be that kind of business that is seeking client money service businesses or an account within a financial institution or bank. The second one is that focus on stable coins. So we're seeing both stable coin issuers, the like of circle, the like of PayPal, the like of Paxos who are offering an issuing stable coins. So banks' role in that could be a to offer account services to stable coin issuers, but also to be reserve holders for those fiat funds that then have the pegged stable coins issued in the crypto ecosystem so a bank could get comfortable in a private to private relationship that they would develop with an entity that's an issuer and then hold their fiat funds for them, essentially offering them custodial services for their fiat services.

(08:41):
Banks could also offer stablecoin wallets that are specifically meant for stable coin transactions and managements and some financial institutions or banks could offer their own stable coins or build out a stable coin system. I would say that's kind of more towards the crypto savvy side, but still an option. The third bucket and what we're seeing a lot of banks coming out and initially looking to deal with is wealth management or dealing with high net worth individuals looking for those individuals or businesses that are looking to have a one-stop shop to bring together both their traditional assets and their crypto derived or digital asset wealth. And in that sense you could think of things like digital asset investment portfolios, whether it's the ETFs, Bitcoin or otherwise, the TF structures, digital asset advisory services that are also required a whole bucket of wealth management. That could be something that a bank could consider opening up.

(09:43):
A fourth bucket would be custody, so offering digital asset custody, offering secure custody solutions for digital assets that also would require complex or sophisticated cybersecurity solutions called storage solutions. So offering a custody focus. The fifth one is in payments. So global settlement directly or indirectly facilitating crypto denominated transactions for the purchase of sale of goods and services. The six would be trading in exchange, so maybe operating like a asset trading platform integrating with existing platforms, so integrating digital assets into trading capabilities into your existing bank platforms. And the seventh one is one that we're seeing in terms of much more exploration is tokenization. So recording assets on chain, converting real world or digital assets into digital tokens that can be recorded, stored and used to transact on a blockchain. So banks that we're talking to increasingly in the past few months are either entering into the digital asset space in one of these areas specifically they come to us and they say, Hey, we really want to offer banking services.

(11:01):
How do we get comfortable with crypto native actors? How do we get comfortable with risk management for digital assets, risk exposure that we have? Or they come to us with questions like we want to explore stable coins, we want to maybe issue our own stablecoin in the future. Maybe there's an innovation lab within the bank that is looking to grow a particular line of business that has a nexus to digital assets. And so there's no one entry point into digital assets. In fact, sometimes I characterize it as a journey where you see however comfortable the stakeholders within a bank is where they would start that journey.

Michael Moeser (11:43):
So it sounds like there's several links, and that was going to be my next question was asking you about the links that a bank has between its operations and the crypto world. You've outlined seven different ones. I'm curious from the standpoint of if you were to look at banks in general, where would you position most banks being in terms of on their digital asset journey? And are some banks aware or not aware that they're on that journey even though it's moving along, they're being brought along through their customers?

Liat Shetret (12:20):
Yeah, most of the banks that I speak to are certainly aware that they have some kind of exposure to digital assets. I would characterize it more as being on the crypto curious side. So they know they are interested, they know they want to dip their toe in, they know that this is coming, there's a bit of fomo, maybe the fear of missing out of not being involved, but there's a lot of concerns around how do they manage risks and how do they understand this new asset class. I think what we're seeing too is there's a bit of a push and pull between customer bases of a particular institution. Some banks have maybe a more conservative customer base that is concerned around exposure to digital assets and that requires a whole other side of risk management. And then you've got those that have a crypto forward-leaning customer base and they're interested in seeing their bank innovate some more so that they can find ways to bring their holistic assets onto the same platform to maybe be able to touch both their digital assets and their traditional fiat under the same roof. So I think being in tune and attuned to customers of your bank will help guide where is the financial institution at in terms of moving forward with exposure to digital assets.

Michael Moeser (13:46):
Do you ever get any banks that tell you, we're not in crypto transactions, we're not participating, our operations are, there's sort of a river between them?

Liat Shetret (13:58):
Absolutely. There is this misconception that if a bank does not actively custody crypto or actively participate in crypto trading, then the bank has no crypto exposure. That's not right. There is a blind spot there because right now with this integration or this hybrid that we're seeing movement between digital assets and fiat, there is absolutely a relationship there where there's exposure to digital assets, whether it's because customers are using their traditional bank accounts as an on or off ramp to their crypto exchange. So they're using that to cash in and out in terms of converting dollars and a bank might not be aware that that's what their customer is doing. And so getting eyes and ears, I would say getting eyes and ears on that and having that visibility around your customer's engagements and how it is that they use their bank account will help you understand or will help the bank understand what the kind of exposure looks like.

(15:03):
What we also see is that when you combine the capabilities that you have around digital assets in terms of tracing and tracking all the way back into fiat and into the banks, when you have visibility both what happens on chain and then off chain, meaning within the bank you see that there's a much wider visibility. So you're all of a sudden you're seeing that perhaps some of your client's information has been resold in a breach in a dark market and there's some funds that are being misused there. So there's a blind spot that financial institutions and banks could really benefit from ceiling for themselves. And we'll talk a little bit about what that could entail in terms of updating risk assessments and things like this and a little bit.

Michael Moeser (15:53):
Well, let's move forward to the situation that we have today that's been created by the occs recent interpretive letter and the recent FDIC announcement, which just came a few weeks ago. Can you give us an overview of the OCCS 1183 letter and what that means for financial institutions? And I'd also ask if you could speak to the FDIC announcement as well and not necessarily the verbiage itself, but what do those two announcements mean?

Liat Shetret (16:24):
Sure. So those two announcements just before jumping into the details came within the context of President Trump's executive order on digital assets and crypto at the beginning of his term. And the administration came in very hot and heavy and clear on the fact that this is a crypto president, that there's going to be an opening for digital assets and a bit of a reshaping of the regulatory environment. And that's what we've been seeing from the moment the executive order had come out and the tasking that the various agencies have received as a result of that and what's been coming out in terms of guidance. So the occs interpretive letter 1 180 3 really essentially removed preexisting blockers, and I'll just remind that the O CCC requires banks to seek supervisory nonobject from them before engaging in any crypto related activities and practice. What that meant is that if you were a bank looking to get involved in any kind of crypto activities or offering any kind of crypto related product, you needed to seek pre-approval from the OCC.

(17:33):
You had to come in, present your plans, present your control frameworks, present the ecosystem that you were setting up to manage that activity and wait to receive OCC approval. What that meant is lengthy approval processes. There was an element of setting up risk controls upfront without getting the opportunity to necessarily battle test them to see that they were operating. And it created a barrier to entry and it created a challenge for banks to even look at this avenue as viable for them to come in. So the pre-approval process really limited innovation and stopped banks from exploring that space proactively. So the OCC has via this interpretive letter, eliminated the prior approval requirement. There's no need to seek prior approval from the OCC. They've actually moved the language rather than highlighting the risks to mitigating risks that the language is much more focused on enabling innovation, utilizing standard banking regulatory frameworks.

(18:37):
So now banks are able to deploy their own tools, their own risk management practices and frameworks into the space, which has sent really a clear strategic signal for banks to plan and where there was uncertainty around would you get approved or not approved by the OC to move forward, this is a lighthouse signal and a freedom to engage in crypto activities. And I think the same applies with the FDIC, right? So later in March after the occs, the FDIC came out with a similar announcement essentially removing those pre-approval blockers for FDIC supervis institutions. So they're no longer required to submit prior notification or any intention to engage in crypto related activities and you can just get on with this. And so there's an opportunity to really just get involved directly and engage in what they call permissible crypto related activities. And I think the one thing to note is that that doesn't mean not have risk management or controls in place and the traditional things that we know and love transaction monitoring and so on all have to stay in place.

Michael Moeser (19:53):
But it does level set the playing field, if you will. So instead of with the pre-approval approach that we had before, really only the largest of banks and the largest of institutions with the broadest compliance teams and the resources to put together a presentation that you would bring to the OCC or the FDIC or other regulatory body, it now sort of level sets it that you can go out and begin to innovate and don't have to have these ginormous resources that maybe only a handful of organizations in this country do. Wouldn't you say that's a fair assessment?

Liat Shetret (20:34):
Exactly. I agree with that. There's no need to build before you know what you're building for the market. And that's a huge game changer because you can go into the market and trial things, you can your own pilot programs, sandboxes, innovation labs, and trial and test a variety of different digital asset products that meet your risk tolerance and risk threshold and not need to run that by the regulators. And in fact, the speed to market is something that we're seeing a hugely come to play in terms of how fast can digital asset-based products be rolled out safely and soundly. And it's almost become at the behest of the learning curve of the bank to just move forward, removing the regulatory blocker and putting in place that enabling language of innovation has really changed and as you said, level set the field for sure.

Michael Moeser (21:31):
Well now this new letter or letters if you will, they do provide some regulatory clarity as you just mentioned, but many banks may not be clear on how to move forward with digital asset offerings. I know you listed six or seven seven at the beginning of the conversation. So what are some options banks have and how should they get started? What should they consider as they begin to think about guiding their customers through the transition towards digital assets?

Liat Shetret (22:04):
Yeah, I think that banks are already doing everything that they need to be doing. They just need to be adding the digital asset element. And what I mean by that is starting from your own risk assessment as a bank, what is your risk assessment language around digital assets? What are your risk appetite statements? What is your risk threshold? Is everybody in the bank along the same risk threshold or risk appetites, whether it's sanctions teams, fraud teams money, anti-money laundering teams, counter terrorism finance teams, the board, the C-suite, understanding one direction of travel for the bank is important. I meet with a lot of different banks who I see have different risk appetites as they relate to digital assets across different teams. And there needs to be an orchestration process that aligns the bank under one kind of mission or under one approach towards digital assets.

(23:05):
So starting out with literally the risk assessment, bringing it out and saying where do we have exposure to digital asset risks? How can we manage that risk and where do we grow lines of business that are profitable for our banks and our customers? And I think looking, observing how your clients are currently interacting with within the bank with digital assets will also help give you an indicator of what customers are looking for. If they're using their bank accounts to cash in or out, maybe there's an opportunity there to help create those partnerships with the main counterparties or crypto exchanges that they're operating on or operating with and hold their digital wallets at. So there's opportunities that can come from customers, but also from the strategic planning of the bank that are rooted in the risk assessment as a first kind of port of entry

Michael Moeser (23:58):
In terms of that risk assessment plan. Not everyone's going to have the perfect one for the crypto world. Can they begin with a standard risk assessment plan that you might say you're thinking about getting into auto lending or mortgages and start there and then begin to modify that?

Liat Shetret (24:14):
Absolutely. So most banks and financial institutions will not have a specific crypto module, so that's not something I've seen where a bank immediately is ready to go. So I would think that most will need to start somewhere, which is why I say you start with your own existing risk assessment and from there you can tweak it to things like adjusting your specific interest in particular assets. Not all crypto assets are alike, so maybe you have a particular tolerance for some assets that like Bitcoin and Ethereum that are more practical traceable. So you kind of find the characteristics of the different tokens that appeal to you and you move from there. Maybe you don't want to have specific pairings or specific crypto assets that have communities that rally around them, specific meme coins or sentiment social coins that are maybe not ones that you would want to have on your platform so you could risk assess the specific exposure to particular tokens to begin with as a way of understanding. And it's a learning process also, again, coming back to what are your customers doing and how are your customers using your platform as another opportunity to just see where can you start to tweak your risk assessment.

Michael Moeser (25:34):
When you think about driving digital asset strategies at a bank, what is it that is really driving the current digital asset strategies and what should banks have in place so both they and their customers recognize the most benefits?

Liat Shetret (26:13):
Yeah, so I think initially I've mentioned just plain fomo, the fear of missing out peer banks are looking at each other and they're reading each other strategic kind of readouts in the news every day. There's a new bank that's coming out with a new partnership with a crypto business, maybe an acquisition, maybe it's a merger and acquisition. There's all these different business models coming out potentially with payment companies. So a bit of it is really being driven by this concern of remaining competitive, remaining financially relevant, looking down the five 10 year plan and saying, I want to be positioned in this market. The regulatory environment is also 100% driving a lot of banking engagement. We're seeing that come into play in a sense where the opening of the regulatory federal level engagement with these letters coming out of the OCC, the FDAC and others, the direction from the SEC, the dropping of the enforcement actions across a variety of different actors, the deregulation that's occurring is a signal for banks to also be able to step in and really take advantage of these opportunities.

(27:29):
I think what's also been driving it is there's been staff movements between regulators to the private sector working in crypto businesses and then back to banks and financial institutions. So there's a lot of movement of knowledge between a variety of different types of sectors, and I think that's bringing to a lot of education and knowledge that's happening. So the number of people who now do crypto compliance has grown. The number of people who now understand how to manage digital asset risks, the talent is available, and that talent is now moving into banks and coming back to build out those crypto compliance programs and coming out to help make banks more competitive. So in a way, it's resources, it's the fear of missing out, it's the regulatory environment and just wanting to be positioned in a way that makes it more competitive.

Michael Moeser (28:26):
There's a question from the audience, and the question is from a bank, do you have a sample crypto risk assessment for attendees? And I think this came from when we were talking about risk assessments. I don't know if you have a sample risk assessment plan, but what would you say if someone were taking an existing risk assessment plan they had for a new venture or a new partnership, what would you recommend to that individual as they take their standard risk assessment plan and tweak it for the crypto world or digital asset strategy world? How would you modify that? What would you look for?

Liat Shetret (29:02):
Yeah, so we certainly have those kinds of charts and a bit of a workshop environment in which a risk assessment could be tweaked. I think if I were to just list off a few things to look at, it's always good to ask the questions of customers or as you think about your risk assessment, why is there a particular engagement with a particular token? What is the purpose of holding the crypto assets? Is it speculative? Is it investment? Is where does that asset sit? The other thing is around the ability of onboarding. Do you have the right information that you to make those judgment calls? And some things that are important to have are things like a disclosure of a crypto address or a disclosure of a wallet infrastructure, whether it's an entity that's applying to your bank to be onboarded, you want to know that you're able to do proper due diligence on them, and you can't do that unless you have insight into their wallets and into their source of funds.

(30:06):
Source of funds is also one of those key pieces to understand with crypto, because with crypto you can see back into the money, what we would call hops. You can go back and see funds moving from wallet to wallet to wallet to wallet, which you can't do when it's one swift message away. And that's all the visibility that you have with funds as it relates to crypto. You can look back and understand specifically, are funds coming from say fentanyl proceeds? Are they coming from a dark market? Are they coming from clean sources? And you can assess exposure and risk exposure and determine for your institution in your risk assessment, what are your thresholds. For example, a no-brainer would be you have zero tolerance for sanctions derived funds hitting your platform. Those are very clear indicators. You have zero tolerance for child sexual abuse material funds on your platform. So looking at those same kind of egregious categories and understanding what kind controls you can put in place that would mimic that same risk threshold or risk tolerance that you have for fiat, a lot of it really comes to just emulating your fiat risk thresholds and rules and just ensuring that you're giving it that crypto twist. And some of that is definitely spelled out on our website and in other resources that are available in terms of tweaking risk assessments for specific crypto exposure.

Michael Moeser (31:41):
Well, that's a great segue. I'd be remiss in not asking you about your firm elliptic. Can you tell us a little bit about Elliptic and how the company came into being what it is today?

Liat Shetret (31:52):
Sure. So Elliptic is a blockchain analytics company. We've just turned 12 years old and in the crypto space, that means we're over 150 now. So we've got happy birthday. Yeah, thank you. Thank you. So our founders came from the uk, we're a global company and now have offices both also in Japan, in Singapore, in the US and EMEA across the UK and offices as well in the UAE. And what Elliptic does is essentially trace and track across 50 different blockchains in real time to trace money that may be moving for illicit purposes or maybe moving for obfuscation purposes. So what's unique about a blockchain is that money moves literally at the speed of light and you're tracing and tracking it, trying to almost beat potential criminals to liquidity. So that visibility of money moving with that real time across blockchains, elliptic essentially grabs those insights and surfaces them up in a risk-based neutral way.

(33:06):
So we don't assign it any kind of red, amber, green, we don't tell you it's high risk, it's medium risk, it's low risk. We trace and track movement of money and identify potential points of exploitation, potential points for scams, frauds or exposure to any of those categories that we talked about earlier. Things like sanctions, terrorism, finance, money laundering, and you as a financial institution or law enforcement agency or regulator, all of which are over our 600 customers that utilize elliptic, we'll then make a risk-based decision to draw on those data analytics and really make the decision that's best for the financial institution in terms of making sure that you're keeping dirty money off of your platform. And in a way, it's almost an early warning system. Instead of investing time in investigating at the back end, you're able to see the source of funds upfront and therefore block put an escrow reject funding that you don't want to have from a counterparty due diligence perspective, it allows you to really get into the nitty gritty of where the source of funds is coming from down to the most granular details and recognize where funds might be coming from a potential exploit or hack, and again, enable you with those insights to take better decisions for the bank.

Michael Moeser (34:30):
Well, I think that's very helpful in knowing what you guys do and then your background, because I think this, as we think about the opportunities, the doors have been opened for digital assets, we still have those compliance rules, the regulatory rules. We still have safeness and soundness exams. When I think about the risks impacting banks and rules that they need to follow, where are some areas where compliance teams may have blind spots?

Liat Shetret (35:01):

Yeah, so we touched about this or we touched on this a little bit before. I think one of the biggest elements is that criminals are now operating in sophisticated typologies that connect between fiat traditional currencies, the US dollar, the Euro and crypto. And in those typologies, they're really using a hybrid of mechanisms to move money fast, to liquidate fast, to create obfuscation, to do layering, and move money in a way that throws off our traditional capabilities to identify money laundering or scams and things like this. And so I think we have this unique opportunity to almost get ahead of it and a unique opportunity to try and stay one step ahead of it. So banks that are looking to really mitigate that risk exposure to their platforms need to have the visibility specifically. Also, we've seen non-state actors like North Korea or DPRK utilize both the traditional banking system as well as crypto sidestep sanctions and sanctions regimes. And that's an important element also as they relate to country regimes, country sanctions regimes and making sure that banks are doing what they can in order to make sure that they are understanding of those risks and those complex typologies that really intertwine between fiat currencies and crypto because criminals have gotten sophisticated. And we do have that obligation as kind of gatekeepers to protect our platforms, but also of the financial system.

Michael Moeser (36:48):
Well, there's a question that relates to not necessarily the North Koreans, but it has to do with cross-border payments on the question is from the audience, another bank, how should banks interact with crypto enabled payment rails, especially those used for cross-border payments? And I don't know whether the question is how big of an opportunity is this or if I'm involved with this, how should I guard against it? But it certainly sounds like crypto enabled payment rails, particularly for cross border, certainly opens up the opportunity because it competes with wires. There's FX that you have to think about in a fiat currency. And then there's also the risk, and you clearly mentioned them with state threat actors like the North Koreans. And so how as a bank should you think about these crypto enabled payment rails, particularly as you look at cross border?

Liat Shetret (37:46):
Yeah, so typically when we see banks entering this space and entering this conversation, a lot of it comes around kind of the education piece of understanding where this potential hits their financial institution. A lot of it comes back to counterparties and understanding that exposure to crypto and particularly to stable coin actors. So I think when it comes to the cross borders, it really comes down to the power of the analytics to understanding your counterparties. And that's that is quite granular. We have a lot of resources on this, so happy to share those back.

Michael Moeser (38:21):
Yeah. So let me ask you then, as we talk about digital assets requiring specialized compliance and risk management tools, you talked somewhat about blockchain analytics and can you maybe expand on that in of why that's important and how that can really help an organization maintain that safety and soundness of their organization? Sorry.

Liat Shetret (38:46):
Sure. So banks have access to a variety of data in the backend that help make risk-based decisions on a daily basis. Things like KYC information, things like just the broader customer due diligence packets that come, things like negative news, all of that we would call off chain data because it's not data that would live on a blockchain. Blockchains just because of that nature of being open and transparent, give us new data that we can utilize and draw on. And that's called on chain data. And on chain data could be things like a wallet address or a transaction hash or information around interaction with specific wallets that have some kind of illicit activities going on with them, the blockchain data. So the kinds of information that elliptic would surface in our platforms are those exact elements of essentially putting all those pieces of on chain data that's available and interpreting them into the tools in a way that is then accessible by a bank to identify and match on chain with off-chain data to help understand a broader holistic picture of an individual or an entity.

(40:09):
So if I am a customer who has an on chain footprint and an off-chain footprint with my bank, my bank at the moment has insight into my transactions and what it is that I do using my cards and using my bank account, but they might be missing my on chain footprint and therefore not being able to see my fentanyl addiction habits or my payments to a variety of dark market vendors or my involvement as a scammer. The abilities, the insights that blockchain data or blockchain analytics provide is essentially that reconciliation between what kind of activities am I doing on chain versus off chain. What's unique about on chain data is that you don't need to necessarily get into any personal identifiers or PI information because you can look at a wallet and based on its composure of what's in it, you know that it is an illicit wallet or has illicit activity flowing through it. And that's a big difference because you can essentially develop a new concept of know your wallet that isn't specific to an individual or an entity, rather, the wallet is bad, therefore I don't want to interact with it. And you can make a risk-based decision to not deal with that wallet. And it's that kind of insight that blockchain analytics would surface for the bank.

Michael Moeser (41:36):
KYW I like that. Know your wallet. Yes, exactly. So looking ahead, what does elliptic have planned to stay ahead and continue to help financial institutions on their digital asset journey? Thinking about AI, since it's the word of the day, if you will, can you talk about how AI comes into play? I think we chatted a little earlier about AI copilot.

Liat Shetret (42:01):
Yeah. So you can't go through an entire 40 minute conversation about crypto and not mention artificial intelligence or LLMs or ai. So I'm happy you brought that up because one of the big intersections that we're seeing around innovation is really that meetup point between crypto digital assets and ai. And elliptics really excited around our launch of the elliptic copilot because what we've done is essentially used AI as a layer on top of our blockchain analytics that interprets what it is that we are seeing, whether it's in an investigation, whether it's in the flow of funds that essentially provides the kind of readout that would be important to, for example, in filing a sar. So the language that would come into play explaining what happened when were funds moved, summarizing that. And so it is really a way of making compliance teams efforts more focused and scalable, particularly across the private sector and trying to triage faster, adjudicate faster.

(43:06):
And so what we're seeing is that the complexity of on chain typologies are so robust, and then when it becomes increasingly more complicated with off chain, it becomes difficult to interpret what it is we're seeing. So our AI co-pilot essentially provides that summary capability sifting through massive data volumes, identifying fraud techniques that are being used. We've baked in the regulatory components into our AI copilot so that it's able to summarize with great astute assessment what it is that we're looking at. And so it's really essentially turbo powering crypto blockchain analytics with ai. So we're hoping to make it faster and speedier for banks to make decisions.

Michael Moeser (44:00):
That sounds really cool. Very cool. Well, Liat, as we come to a close here, any final closing thoughts, any final words of wisdom that you would like to share with our audience on their digital asset journey? As some are starting, some are partway and some are well on their way, any words of wisdom you could share?

Liat Shetret (44:20):
One thing I'm hearing commonly these past few days is that some banks and financial institutions are concerned that they're already far behind in the crypto digital asset journey. And I just really want to emphasize that that's absolutely not the case. Different banks are starting in at different levels and the educational journey, although a bit steep, is one that is surpass. And there's a lot of resources. We're committed to being partners to banks and financial institutions in their journeys, and there's a tremendous amount of resources. Traditional compliance teams are absolutely able to upskill to crypto compliance, and we're really looking forward to seeing that happen. So don't think it's too late and absolutely step into the world of digital assets.

Michael Moeser (45:07):
Super. Well, thank you. Thank you Liat for the conversation today, and I want to thank our audience for attending and the questions that you provided, so we really appreciate your attendance and cooperation. Thank you.

Liat Shetret (45:22):
Thanks Michael. Bye.

Speakers
  • Michael Moeser
    Senior Content Strategist
    American Banker
    (Host)
  • Liat Shetret
    VP of Global Policy and Regulation
    Elliptic
    (Speaker)