Kevin Miao: Crypto and Credit - Moving a Trillion Dollar Market On-Chain - [Web3 Breakdowns, EP.64]

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Mar 31, 2023

In this episode, Kevin Miao, Partner and Head of Credit at BlockTower Capital, discusses bringing the multi-trillion dollar securitization market on-chain. He explains how this will reduce friction, errors, and fees. They also explore the potential of blockchain technology in financial markets, securitization's role in reducing binary risk, and revolutionizing the mortgage industry. They discuss the challenges and potential of utilizing blockchain technology for loans and express excitement for bringing more aspects of the crypto space on chain.

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INSIGHT

Crypto Rails for TradFi

Crypto rails can improve TradFi by reducing friction in trade settlement.
This can lower costs and errors currently inherent in traditional systems.

INSIGHT

Securitization Explained

Securitization pools assets like mortgages to reduce individual loan risk and lower capital costs.
This process creates various risk tranches to attract different investor profiles.

ANECDOTE

Cost of Securitization

Traditional securitization involves multiple intermediaries, each adding fees, resulting in 30-40 basis point costs.
These costs increase mortgage rates or lower investor yields.

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This is Eric Golden and my guest this week is Kevin Miao, Partner and Head of Credit at BlockTower Capital. I’ve been excited for this conversation because while a lot of people in crypto seem to be focused on building a brand new financial system from scratch, this conversation focuses on how crypto rails can improve the traditional finance world. After nearly a decade at Citi, Kevin straddles both the TradFi and the DeFi world, and at BlockTower, he is working on bringing the multi-trillion dollar securitization market on-chain. We go deep into the weeds in this one, first getting into the nuts and bolts of how credit and securitization traditionally work, before diving into BlockTower’s approach to transform this entire process, moving it on chain, which will reduce friction, errors. and consequently fees. Enjoy.

For the full show notes, transcript, and links to the best content to learn more, check out the episode page here.

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Show Notes

(00:04:00) - (First question) - The impact of TradFi shifting towards crypto infrastructure

(00:14:00) - How crypto could drastically reduce friction in credit markets and mortgages

(00:28:29) - Building crypto rails in parallel to legacy systems to prove their power and destabilize those traditional structures

(00:37:15) - The gravity of competing with the most entrenched American industry and how Blocktower’s system addresses this

(00:45:22) - How they cooperate and compete with different TradFi and DeFi players

(00:47:38) - Considerations for privacy and reversibility with crypto-based banking

(00:55:41) - How blockchain in banking can eliminate much of the human error in the system

(00:58:57) - What he’s most excited to see built over the next six months and six years

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