Despite its popularity, traditional finance has some inefficiencies that need to be addressed. There is still a lot of financial inequality, both in monetary value and access to investment products and services. Unfortunately, there is only so much that can be done from within the financial sector, as regulators, legal requirements, and other constraints prevent a global solution that creates a level playing field.
With decentralized finance and blockchain assets, that situation becomes different. Even those who work in traditional finance acknowledge something needs to change. Rather than waiting for someone to do it for them, some take matters into their own hands. Retail investors are a key market to tap into, and traditional finance may not [always] present that option. Exploring alternative options through blockchain technology holds tremendous potential, although Wall Street veterans agree there is still much work ahead.
I decided to talk with Jack Tao, the CEO of digital assets derivatives exchanges, Phemex, to get more insights about the topic.
1. Now that introductions are out of the way, could you tell us a little about your background?
Before founding Phemex, I was an executive for Morgan Stanley for over a decade. When I started out, I had a good grasp of how financial markets work, but I wasn’t prepared for how hostile Wall Street can be towards retail investors.
2. From Wall Street to digital assets, what made you switch sides?
*laughs* I wouldn’t say Wall Street and digital assets are opposing forces, but there’s a lot wrong with traditional finance, and decentralized assets are a solution to many of its issues. Between the inflated fees and frozen trades to the exclusive pre-sales, there’s so much bias in financial services. When we heard about blockchain, we knew what we had to do.
3. What got you into the cryptocurrency space?
I was quite curious about blockchain as soon as I heard about it. I started out mining Bitcoin, and even made an account on a reputed cryptocurrency exchange to invest in a more diverse range of assets. It fascinated me that these currencies could exist without centralized intermediaries, but I knew the technology was far from ready for mainstream consumption.
Even today digital asset regulation is scarce, but back then it was even worse. I ended up losing a significant part of my crypto portfolio after a platform malfunction, and this made me realize that though blockchain was supposed to represent ideals like decentralization and transparency, the industry lacked both maturity and mature players.
4. What do you prefer about working in blockchain as opposed to traditional finance?
Unlike on Wall Street, there’s a real sense of community in the blockchain industry. It’s heartwarming to see people from all over the world come together to build the future of money, and I’m proud to be a part of that movement.
Globally, stock markets house over $80 trillion in assets, and with so much money at stake it’s hard to view each trade as anything other than moving numbers on a screen. But there are real people behind every market, and though our financial systems weren’t designed to be unfair, the harsh reality is that they are.
5. We know traditional finance has its flaws, but what are the problems you’ve seen in the digital assets arena?
Decentralization isn’t a competing approach to today’s financial systems. It’s an evolution of our financial infrastructure that ensures its fairness. With blockchain, people aren’t trusted to do what they need to, but are economically incentivized to act in the network’s interests, and disincentivized from acting against it.
Today, one of the biggest issues in the space is the lack of regulation and education. The technology isn’t at a stage where it’s ready for mainstream adoption, and uninformed early adopters are falling prey to the scams. The lack of regulation only furthers this problem, since there are no systems in place to resolve these disputes.
There’s also the matter of ethics. Since the industry is still growing, large players do have the ability to manipulate markets. This doesn’t produce any permanent effects, and markets eventually stabilize to their previous levels, but sudden price movements are going to put a lot of potential investors off.
6. In your experience how has the blockchain industry evolved over the last decade?
As I mentioned before, my terrible experience with an exchange led to the founding of Phemex. At the time, it felt like the same restrictions towards smaller investors in traditional markets were creeping their way into the blockchain sphere. It would have been so easy to give up here.
However, the existence of centralized entities in a decentralized ecosystem isn’t really the problem. It’s about having centralized entities that have your best interests at hand — regardless of who you are. This is what Phemex strives to be.
7. At this point, it’s obvious that blockchain is altering the face of financial services globally. What makes it so special?
After the global financial crisis of 2008-09, there’s been a growing shared sentiment that ineffective middlemen were ruining economies for the rest of us. Blockchain is our collective response to a system that keeps breaking. Of course, DLT is still in its early stages, and it could take years, decades even, for the technology to accomplish what it’s set out to do.
8. What does ‘Phemex’ mean?
With blockchain being such a community-driven ecosystem, we knew from the very start we wouldn’t get far without their support. The word ‘Phemex’ is actually an amalgamation of two words — ‘Pheme,’ the name of the Greek God of fame and renown, who was known for championing the public’s views, and ‘MEX,’ an abbreviation for mercantile exchange.
Together, Phemex stands for our dream of a more transparent financial system, where voices are never stifled and no one is given an unfair advantage.
9. How does Phemex fit into the broader blockchain industry’s narrative?
Building Phemex was definitely not a one-man job. Our founding team, which included eight other executives from Morgan Stanley, didn’t create Phemex to be just another exchange platform. We’re out to fix financial services.
Since Phemex was founded in 2019, we’ve grown from a few thousand members to over 1.5 million active traders on our platform, reporting quarterly trade volumes greater than $250 billion. This month, we’re also giving our user interface a complete overhaul, including a whole new visual design so users can easily navigate and utilize our services.
Our leadership consists of Wall Street veterans who understand money, and how financial systems can be made to favour everyone. Trading may be fundamentally competitive, but that doesn’t make it a zero-sum game. Phemex wants to encourage an economy that’s powered by equal opportunity and monetary freedom, so everyone can make meaningful contributions to their future.
10. Do you have any advice for someone just getting started with cryptocurrencies?
Start small, and don’t think about profits just yet. Blockchain is a complicated sphere, and it’s important to understand where the real value lies before trying to capitalize on it. With thousands of digital assets to pick from, there are so many projects doing groundbreaking work, but not all of them are worth your time and money.
Our goal is to provide everyone, even those just getting started with digital assets, with a platform that doesn’t play favourites, where winners are determined by their own skills, ability to adapt, and market foresight. Break through the noise with blockchain, and break free from the limitations of traditional finance with Phemex.