The Big Whale: Originally, the crypto industry was almost exclusively geared towards individuals, but over the last two or three years we've seen it revolve much more around businesses. What are your thoughts on this?

Cristiano Ventricelli: There's clearly something happening around businesses. Blockchain technology became popular thanks to cryptocurrencies and the interest of individuals, but now we're seeing more and more institutions taking an interest through the use of blockchain for commercial purposes. There is a sort of detachment between the technology itself and the crypto-currency market.

Are you pitting the two against each other?

No, but we can clearly see that the big trend is the digitisation of finance and that this concerns both crypto-currencies and all the other assets that will gradually be integrated into blockchain. We see many players exploring this space through Proof of concept and pilot programmes.

Financial institutions are really investing in this area, and not just privately; we see governments and national institutions working on this technology.

For example, the European Investment Bank has issued bonds on Ethereum and other blockchains, and almost every central bank in the world is talking about MNBC (central bank digital currency).

The need to innovate is there, and even if there is no consensus on the best approach, most institutions are working on projects.

Do you see this acceleration as only affecting finance? There are also many projects in luxury goods, gaming and everything to do with traceability.

Finance is by far the main playground for blockchain because we live in a hyper-financialised society. But there is real interest in developing non-financial applications on blockchain networks.

I would take the example of synergies with artificial intelligence (AI). We could potentially use blockchains as a decentralised environment to train, test and put AI models into production without relying solely on centralised data centres.

What do you see as the main challenge for the crypto industry today? Isn't it simply to finally help businesses make money?

This is a fundamental question. Today, companies are interested in blockchain because it offers them efficiency gains. You can, for example, optimise the reconciliation, validation and auditing of internal information (commercial, financial...) because you have a decentralised and shared register.

Also if there are challenges for businesses, there are also challenges for crypto players: interoperability and standardisation are indeed two of the main challenges they will face. These two technical aspects will make it possible to streamline processes and scale up when there are still far too many different blockchains that are not even capable of communicating with each other.

One of the biggest challenges for businesses is finding the right partner in the crypto space. Do you think that rating agencies like Moody's have a role to play in this area by rating projects or tokens?

The mandate of traditional rating agencies like Moody's is very specific. We rate companies on both their compliance with regulations and their ability to pay (for a debt in this case, editor's note). On the first point, the lack of a comprehensive regulatory framework on a global scale is still a real brake on crypto.

On the other point, the crypto industry is special because there is no credit and repayment system for these credits. So the rating agencies cannot produce a rating, at random, for Bitcoin or Ethereum.

More generally, I think above all that the sector needs a system for rating the technological risks associated with the use of this or that protocol. For example, if I issue a bond on Ethereum and Ethereum fails, I can't pay my creditors because the blockchain doesn't work. So my smart contract can't process the transaction to transfer the money from the issuer to the creditors.

The intrinsic credit risk of the instruments we see on the market doesn't change just because you issue it on a blockchain, but there are other technical risks such as disruption of the blockchain or smart contracts. The risks are primarily technological.

Can you tell us more about Moody's involvement in the blockchain industry? How many people are working on this, and what is your vision for this industry?

Moody's has been involved in blockchain for several years. From the outset, we didn't want only a handful of analysts to master these subjects while the rest of the company didn't know what we were talking about.

That's why we set up a cross-functional organisation to enable every analyst to build up their skills on the subject.

We work mainly with financial institutions and have started to rate digital bonds issued by financial companies and government entities. We are rating new instruments such as tokenised money market funds, and this range of products will continue to grow.

What topics do you work on on a daily or weekly basis? Do you tend to rate tokenised products? Do you plan to explore these topics further?

Rating is our core business, but it's not the only thing we do. We are also involved in research to understand new technologies, which translates into the publication of reports, research articles and podcasts.

We have seen many financial institutionslike BlackRock enter this space over the past 18 months, and recently the SEC gave the green light to spot ETFs. Do you think the only way to democratise crypto is to build a bridge with traditional finance and the traditional economy?

We are convinced that the cryptocurrency market and decentralised DeFi finance will complement, not replace, the traditional financial system. DeFi and what is known as TradFi will coexist and cooperate synergistically, and we are already seeing some applications today such as with Morpho and Aave.

The idea that DeFi can stand alone is outdated. Traditional financial institutions are entering DeFi, we see it with BlackRock, JP Morgan or Société Générale and these two universes are destined to work together.