Timothy Tam: So, Wayne, you’re from Octagon Strategy, you’re the CEO there, and we’re speaking at TOKEN2049. So I guess, just want to start off the conversation with, do you want to tell us a fun fact about yourself that other people do not know at all?

Wayne Trench: Okay. So my background is mining, but not crypto-mining.

Timothy Tam: There’s only mining in crypto, right?

Wayne Trench: Yeah. So my background originally is from mineral processing and mining. Originally from South Africa, so that was, I guess, in my blood. I had my own mineral processing supply business, which I sold a few years ago. So that’s maybe a fun fact.

Timothy Tam: Wow. There you go. So millionaire in mining, and then going to be a millionaire in crypto as well.

Wayne Trench: Oh, one can only hope, one can only hope, yeah.

Timothy Tam: Cool. So I guess, do you want to talk a little bit about your background. You know, I’m aware you used to work in institutional finance. Then what brought you into crypto? And maybe do an introduction to Octagon Strategy and what they do.

Wayne Trench: Sure. Yeah, so I had roles, I guess, in traditional finance at both Macquarie Bank and at Morgan Stanley more recently, in the electronic trading space. I guess my experience in the traditional financial markets was, I guess, I viewed as being sort of helpful for the business that I’m currently part of now. My exposure, or the first way I got exposure to the blockchain, I guess, was in a prior sort of world, in the old world mining space actually, where we were looking to leverage blockchain technology to track and trace parts as they wore out.

Timothy Tam: Interesting.

Wayne Trench: That was traditionally done with things like RFID tagging, but blockchain makes sense now. We actually didn’t get to implement the way that we, in time before we exited, but that was my first exposure to blockchain itself. Then, once we’re back in Hong Kong, through friends actually who founded our parent group A & X International, I sort of had some pretty good insights into the way their business was growing. I had followed their progress closely, and we’d invested in a couple of things together along the way. I guess that’s really what’s spurred my interest in crypto. I guess one of the, as I was thinking about this crypto space, that probably the thing that I had to get my own head around first was, why do we need cryptocurrencies? Tokenization made complete sense to me, but is there a need or could I justify in my own mind a need for cryptocurrency? I think as I reflected on the events of 2008 and 2009, and have seen the mismanagement of fiscal and monetary policy by a number of governments around the world, I think that’s what really was the watershed moment for me. Whether this is going to dominate global financial markets or not, is another story. But is there a need? I think, for sure. That’s my view.

Timothy Tam: Yeah, no. That’s interesting. I guess 2008, you talk about you’re clearly in the thick of things, traditional financing, and everything collapsed, so seeing the need for cryptocurrency. What does Octagon do? Like, we’ve obviously done a trade with you. We did an OTC trade. Can you explain to the audience, what is the service that Octagon provides, and what is an OTC trade?

Wayne Trench: Sure. I guess in short, Octagon strategy is Asia’s largest digital asset brokerage. We facilitate the block-sized buying and selling of crypto.

Timothy Tam: No pun intended, right?

Wayne Trench: Yeah, exactly. But, yeah, block size, would mean sized order, which is difficult to execute on a retail exchange quickly, seamlessly, and easily. The definition of blocks, I guess, will evolve over time. What constitutes a block today, is different to what would have constituted a block 12 months ago. I think that will continue to change over time. We provide a single price for our customers to execute against, and then we provide a sort of seamless settlement within the hour to, I guess, make moving size liquidity a lot more simple and easy than what you might be able to in a retail exchange.

Timothy Tam: Understood. If someone is looking to buy or sell a large amount of cryptocurrency, you’re saying they could execute with you? You’d give them a price and then the money or cryptocurrency would land in their account within the hour.

Wayne Trench: Correct. You got that right.

Timothy Tam: Understood. And then are you able to provide a little bit of background or color, like obviously ourselves we have an ICO, so we had to convert some of it to build out the operations. I mean, who are the other people that are doing some of these trades? Is it like a lot of the people, our audience will talk about whales, people with a lot of cryptocurrencies. Are you able to talk high level who the clientele is?

Wayne Trench: Yeah, it’s a mix. I guess our business comes from a different variety of client segments. ICO issuers, that would be one of the client segments, but high net worth and ultra high net worth individuals are another sort of, have been quite significant players in this space. Then, increasingly more so, I guess, they’re more institutional type of flow this starting to come to the market, be it crypto focused hedge funds, or to a lesser extent, but traditional long-short hedge funds that are, I guess, starting to dip their toe in the water, and then, of course, family offices are probably a bit more nimble than say, private banks and loan only S&M managers. We’ve definitely seen more concentration in the institutional space in the last six months than we did sort of 18 months ago. I expect that to continue.

Timothy Tam: Yeah. I mean, you yourself come from and institutional background, Wayne, and you’re getting lots of interest in that space and what is your general view, like this year? Is this year going to be the explosive year in terms of professional money managers coming in, more family offices, or you think, especially with the recent correction, that people are a little bit, taking a step back?

Wayne Trench: We kind of view 2017 as the year of acceptance, and 2018 as the year of adoption. There’s still a number of things that need to take place for a real institutional demand to come in size. I think it’s largely centered around regulatory guidance and regulators providing, I guess, clarity on their take. That’s starting to happen. The more nimble economies around the world are sort of staying probably more advanced than some of the others, but that will really give, that to me, will be what 2018 is all about. We’ll have some proper regulatory frameworks in which to operate in. Following that, we’ll have a whole bunch of other stuff will fall into place. Things like custody and whatnot will come on the back of that. And once those things are in place, then I think the institutional demand can really come.

Timothy Tam: Got it. Got it. A lot of people look at what volume Bitcoin trades on daily basis. I think in Coin Market Cap across all the exchanges, they’re equating say, about 10 billion US. How much of the trade is actually done just high level, in your view, because you guys see a very specific segment of the market where it’s done off market? Is it a small amount? Is it a significant amount, just compared to what’s traded on the exchanges? Or, it’s hard to tell?

Wayne Trench: It is, yeah. It’s an interesting question. Our estimates are still that the bulk of liquidity actually, or at least a very meaningful amount, trade off-exchange. Now, I think the other interesting thing to sort of think about is the reported exchange traded volumes relative to the actual exchange traded volumes, I think are two very different things. In an unregulated space, like we operate in, things like watch trading and whatnot is not actively policed at this stage. You probably read the same articles that I have around, which estimate that up to 95% of some exchange-traded volumes are probably not real. It’s nice, and who knows the exact numbers, but it wasn’t that long ago that we were quoting, or at least we felt as though 70% of total volumes that were traded off-exchange. I think that’s probably changed, right? Particularly with retail adoption, particularly in Korea and Japan, but still, it’s still a meaningful chunk is off-exchange.

Timothy Tam: Sure. Are you able to explain to our audience what the definition of wash trading is? Is it fake volumes? Some of the audience is not familiar with some of the terms.

Wayne Trench: Yeah. If I’m a buyer and seller in a particular coin and I go and buy my own offer or I go and sell or hit my own bid, there’s no change in beneficial owner. It records as transaction volume, but actually, nothing really happened.

Timothy Tam: Got it. I guess this probably comes as a surprise for the audience, I have the similar opinion as well. A lot of the figures that you probably see on the exchanges, as you have articulated, likely may not be the real trading volume figures. In fact, a lot of the trades are actually done on figures that are not quoted on Coin Market Cap, but done through OTC brokers, such as Octagon and Octagon’s the biggest one in Asia.

Wayne Trench: Correct. It’s very interesting.

Timothy Tam: Yeah. It probably comes as a surprise for a lot of people.

Wayne Trench: I agree.

Timothy Tam: Great. Can you talk about what coins Octagon is active in, obviously Bitcoin and Ethereum? Are you active in any other coins?

Wayne Trench: Yeah, for sure. We trade all of the majors, I would say. The typical trading volume has been focused around BTC, Ethereum, Litecoin, Ripple, Bitcoin Cash, and so on. We can trade any of the old coins as well. It’s really about, does the scale of the size of the ticket make sense for us to be involved.

Timothy Tam: Sure.

Wayne Trench: Liquidity profiles obviously more challenging, the further down the market cap list you go. But, I’d say, the lion share of our trading volume would be centered around the top five or six.

Timothy Tam: Okay. Perfect. And I guess just the final question, Wayne. What are you most excited about in this space, say coming up in the next year or two?

Wayne Trench: I’m just fascinated by the creative minds that are working on disrupting traditional industries with blockchain, with tokenization. If you think about being able to token and transfer value much more easily than we have done up until now, and also providing access to get exposure to things that people, let’s say, the two billion un-banked in the world have never had access to a bank, and do they need it? Well, maybe crypto provides an answer for them and the opportunity to connect to the financial system more seamlessly than could have otherwise done. Then, if we can tokenize real estate, or if we can tokenize dept instruments, it might be muni bonds or whatnot, and provide the people with access to things that historically been for the select few who have had the ability to be involved in that sort of stuff. I’m not sure exactly where it all ends up, but I think that’s part of the exciting piece.

Timothy Tam: Yeah, I know. I’m super excited about that, the ability to bring in and connect a lot of people in the world to this technology that traditionally, especially in banking, a lot of people don’t have. I think that’s super exciting. Great. Thank you for your time, Wayne. I appreciate it and look forward to speaking to you again soon.

Wayne Trench: Thanks for having me.

Timothy Tam: Thank you.

Wayne Trench: Thank you.