Fintech

Crypto winter is the time to build, a Polygon co-founder says

A less frothy market means you can differentiate between speculation and building foundations for the future.

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Polygon co-founder Antoni Martin spoke with Protocol about crypto regulation, the crash and more.

Image: Protocol

Antoni Martin, enterprise lead at Polygon, wasn’t happy about the crypto crash. But he thinks that this is the time to “differentiate between speculation and build.”

He’s done his own share of building, starting Hermez, a Layer 2 protocol that merged into Polygon in September and is now known as Polygon Hermez. As enterprise lead, he’s the primary point of contact for everyone from big banks to governments that want to learn more about the blockchain technology effort, which aims to scale up Ethereum by avoiding congestion and allowing it to process more transactions affordably.

Martin, who spent years working for Citibank and Deutsche Bank before diving into the blockchain world, spoke to Protocol about what Polygon could be used for, how the crypto crash has eroded trust and how he’s helping shape the EU’s crypto regulation.

This interview has been edited for brevity and clarity.

How important do you think crypto is to the payments industry right now?

I am speaking a lot with incumbents now, with a lot of banks and people from the financial sector. And the truth is that in this sector especially, they're very scared. In the last 10 years, they are the focus of a lot of regulation mainly as a consequence of what happened in 2008-09, and some of the actions were questionable.

I have been working for 17 years in the financial sector. I created Hermez two years ago, and I know perfectly what happened the last 10 years in this industry. As you know, there are a lot of AML compliance departments scrutinizing every transaction.

Antoni Martin Antoni MartinPhoto: Polygon technology

If you ask me, payment is a perfect use case for blockchain, or Polygon, or Ethereum. But at the same time, I think that it will be the last one where it will be applied. It will start as it has started now in [our partnership] with Stripe, it’s a way to do payments with USDC. But that is something very specific for Twitter, and not really the core of the payments sector, if we’re honest.

This is just the beginning. We are very happy and we have a lot of hope in this first use case; it’s opening one door. That doesn’t mean the door is already open: I think we should be very cautious, there is still a lot of work to be done. But yes, it’s a first step.

So what are the next steps to find more uses for Polygon?

Another question that is very important is you need to consolidate transactions from a lot of different actors and legal entities. And in this sense, blockchain is also perfect because it applies very well to supply chain use cases, to insurance use cases where there are different legal entities.

But then at the same time, security [matters]. I think that every minute there is a hack in one element of the financial system. But it's also one thing where blockchain can help sort it out.

A very good example is what we are trying to do in the city of Lugano, where you will be able to pay all your fees, your fines, your taxes, even your coffee, because merchants are involved. The idea is that everything will run on top of the platform on Polygon. You will be able to pay with a stablecoin pegged to the Swiss franc, which is named luga, and another one pegged to the dollar, in this case tether. This is the future.

With the recent crypto crash, what happened with luna and the general crypto market downturn, has that affected how Polygon operates? Did you notice any difference in the trust that people have in crypto?

Yes. Honestly, I’m not happy about what’s happened to luna or other protocols, of course. But a stablecoin that was giving you a 20% yield? That's something strange. At least around me, I don't know anybody investing in luna, but not because they were more clever, more silly, whatever it is. But because it was strange. The same applies to other DeFi projects that were giving 90%, 80% [yield]. It's a little bit of common sense, meaning if you see that there are these big yields, normally there is a risk involved.

Obviously, it has decreased a little bit of interest in crypto, yes, that's for sure. At the same time, it's also the moment where you can differentiate between speculation and build. In our case, here at Polygon, we deployed Nightfall, a privacy platform, and Supernet, a sovereign blockchain platform that is like the internet of blockchains. Now, in July, we will deploy the first zkEVM in testnet.

I think it's a moment to be focused on building. You should still look at the price of your token or asset or whatever, because otherwise you will become crazy. But yes, I think it's time to build up, and with time the market will differentiate.

Particularly with the EU’s Markets in Crypto-Assets bill and transfer-of-funds rules, AML checks have been a point of contention. How do you feel about crypto regulation coming up?

I was involved in some consultations with the European Parliament. I can tell you that I have spoken with more than 40 members of the European Parliament and, again, they are trying to understand. Obviously, yes, there is this component of security and AML.

I think at a certain point we should sign a trade-off that if you are the owner of the wallet as you are the owner of a bank account, you should be able to say it. Here in Switzerland, for example, I am declaring my hardware wallet. It's part of my assets, and I pay some taxes on top of it. I understand that for some people it is very attractive to earn a lot of money and yield without paying any tax. Well, maybe we can discuss if the taxes are fair or not; that's not the discussion.

They are trying to establish some control. We should find the right balance between the owner of the assets and total control on all transactions. There should be a midpoint.

When we speak with regulators, with governments, they are not against blockchain [technology]. For example, they are very interested in the field of traceability that blockchain can bring and can be really helpful for AML or KYC. Obviously, here also there is the privacy topic, because otherwise they can trace all your transactions, and we don't want that to be a very Orwellian world. But here zero-knowledge can help a lot to provide this privacy. Here the question is: How can we manage these technologies that are adding privacy and scalability? But regulators and governments are very interested to understand how they can apply these in real life.

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