Sergey Nazarov, co-founder of Chainlink and CEO of Chainlink Labs, sees a clear case for decentralized finance and blockchain adoption as markets reel and global trade relations strain as a result of President Donald Trump's tariff war.
Chainlink is a decentralized oracle network that connects external off-chain data to blockchain smart contracts. Because it uses open-source infrastructure, any blockchain can connect to off-chain data through Chainlink and contribute.
The Chainlink platform has enabled more than $20 trillion worth of trading transactions across several blockchains with more than 2,200 projects spanning from decentralized finance to capital markets, according to the company.
Nazarov attended the
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The event was hosted hours after President Donald Trump signed an executive order
Last week the president
American Banker spoke with Nazarov Wednesday before Trump announced a
People around the world are watching tariffs. Where does decentralized finance fit into this?
SERGEY NAZAROV: I think our industry is actually going to become even more important in a time of deglobalization because it's an industry that is not being deglobalized. Globalization is generally a very powerful force and it's very powerful in markets because if you have a globalized market – which is what crypto is and why we've been able to grow so quickly – you have access to global liquidity or the purchasing power of everyone globally. Whereas the traditional financial systems doesn't really have global liquidity. They have it in some places, but they mostly have local, domestic liquidity.
At the end of the day, the few things that are still globalized in nature will be very big. If you had 15 different touch points between countries and now you only have five, those five are more significant because countries care about them more.
How are the market fluctuations due to the tariffs affecting crypto?
Asset prices going down is generally bad for our industry overall. Our industry is still correlated with the Nasdaq.
I think the flow of Chinese capital into our industry has always been good. If our industry is viewed with a Western-centric focus, it could negatively affect that dynamic. Although I don't think that will happen. Chinese capital is what took the bitcoin price to $1,000. The first really big jump when people started to take bitcoin seriously was when it went to $1,000 and that was driven by money coming out of China. Historically, there's been a lot of movement in the market based on Chinese capital.
On the other hand, as inflation goes up, I think retail consumers will have less capital to spend on risk assets, and on investments in general. What was happening before was that inflation was benefiting assets, but now inflation will go toward goods and consumer items, and that's not good for crypto in the long term.
Will this uncertainty affect the pace of adoption of blockchain technology or are you seeing financial institutions still moving ahead?
What's happened now is we've reached a kind of critical mass of institutions that are going to launch blockchain solutions in production, and when that critical mass of institutions launches these solutions, it'll be enough of a signal that the transition of the financial system into a blockchain-based format is happening. You actually don't need 100% of all institutions to be involved. What you need is some percentage of them doing it at the same time; that starts to create an institutional blockchain transaction ecosystem. The types of people that are doing this with us are not small: UBS, SBI and Fidelity, whose tokenized funds we power. BlackRock is also on-chain publicly. I think that's what's going to happen.
What other indicators are you paying attention to?
One of the other good reasons to believe it will happen is that it's being driven by the buy side. Historically, in capital markets when behavior, transactions or adoption is being driven by the buy side, it continues to grow. Basically, the rest of the financial system are service providers to the buy side. If the buy side starts making tokenized funds and starts using tokenized assets in those funds, the service providers can't ignore that. They're going to have to explain how they're going to service their client.
That's interesting.
I thought the tariffs might disrupt some of the work on blockchain projects, but I think it's actually only accelerated it for banks. We're consistently talking with banks now and usually when there's market downturns, people tend to pull back from projects, but that hasn't happened at all. Maybe it'll still happen. Maybe there's a delay there, but maybe there really isn't a delay. Maybe what happens is the need for global payments and the need for global assets to move across ecosystems becomes even more pronounced.
It's going to be interesting to see what happens with the crypto industry as more traditional connections between countries and institutions fall apart. It may be that the crypto industry and blockchains as a technology become more and more of a parallel system for institutions and people and countries to transact.
Why do you think there's been so much movement recently within this space?
The whole dynamic has completely shifted because the U.S. has now decided that it needs to catch up.
There's an understanding now that cryptocurrency is a key market that the U.S. wants to lead in. There's an understanding that stablecoins are a distribution mechanism for the U.S. dollar and U.S. Treasury ownership. … They're starting to understand that the financial system will migrate to this blockchain-based model and consider, what will be the position of the U.S. in that financial system? … The most important thing is where all the assets get issued. Do the assets get issued in Singapore, Hong Kong, Dubai or Europe? Or do they get issued in the U.S.?
