January 16, 2022

Happy New Year everyone! As we enter 2022 and hope it turns out better than its two predecessors, one of my goals for the year is to invite you on a journey with me to explore the frontiers of change in finance, and of course therefore, financial regulation. We’re going to look at Web 3.0, DeFi, crypto, blockchains, tokenization, DAOs, embedded finance, and the whole universe of mold-breaking innovation flooding into the financial sector.

To kick it off, I’ve invited our second-ever four-time guest onto the show. In our final episode of 2021, I featured our first four-time guest on Barefoot Innovation – Chris Giancarlo, talking about his great new book, CryptoDad. Today, we’re talking for the fourth time with Shamir Karkal – and for very good reason.

Shamir is many things. He is CEO and cofounder of Sila. He was the cofounder, with Josh Reich, of Simple – in fact, Shamir and Josh were actually the guests on the second episode we ever did, back in 2015. He is my friend. And I’m delighted to say he has, most recently, become a member of our board at AIR.

And… he’s a visionary. Shamir is one of the most thoughtful people I know in envisioning where we’re headed in financial services. Maybe it’s partly because he is a tech person who came into finance, instead of traveling in the opposite direction as many people have.

As we explain in our conversation, I had Shamir speak last summer at a conference I hosted, and I had asked him, there, to make predictions about what the financial sector will look like in 2030. HIs answer was so interesting that I invited him on today’s show to come back and share them again. 

Suffice it to say, he paints something fascinating on that canvas, and it is a picture of very dramatic change. Large banks are still there, albeit in new forms, doing new things. Small banks are – well, you’ll hear what Shamir thinks, along with his advice to small banks and credit unions on how to survive. And fintechs are there, too, looking very different from today.

Shamir says fintech, including crypto, now amounts to one percent of financial services. What do you think the share will be in 2030? How many fintechs do you think will be worth more than $10 trillion by then? How many worth $100 billion? Will there be dozens of unicorns, or hundreds, or more? What legacy business models do you think will be wiped out? Will banks be able to “own” the customer relationship?

And where might we be with Web 3.0 and DeFi? Shamir recounts the history of the web’s evolution, including the many flaws built into the architecture of Web 1.0 and 2.0, and also including the Web’s porosity on identity and its absence of financial infrastructure. What’s the potential of Web3 – a new, decentralized, blockchain based system – to solve these? Can new forms of identity, combined with blockchains, actually create secure data? Could Web3 solve concerns about a small number of Big Tech dominating our economies and our lives, and knowing everything about us? 

As Shamir says, when the internet was built, it didn’t need to be able to integrate with the postal service. Web 3.0 is different. It’s arising, in large part, out of finance – out of trying to build a new financial system that solves both the problems of the old one, and the problems of using Web 2 to do so. And so it will need ways to integrate with the traditional money system. He argues that every payment system in history has been built as an evolution of the prior one. With Web 3, we’re starting with a whole new architecture.

Part of our conversation, of course, asks how we will regulate this. I offer Shamir my short list of the reasons we regulate financial services, and we talk through what can go wrong, and what to do. The list includes financial stability, investor/consumer protection, and of course, crime. And you’ll be interested in his view on whether these technologies will really drive financial inclusion, as so many advocates claim.

We also talk about how to regulate DAOs – decentralized autonomous organizations, meaning, financial players that will have no legal entity to regulate, and are instead just networks of people transacting with each other using open code by consensus. Fortunately, Kabir says this one will be easy. We shall see!

Shamir believes, as I do, that technology can be used for bad or good – it’s up to us what we do with it.

This show is going to give you endless food for thought. My view is that a lot of this change is coming faster than we may expect. It’s time for us all to learn and think. A great starting point is to think about my talk today with Shamir Karkal.

More on Shamir

A true fintech pioneer, Shamir Karkal is CEO of Sila, a fintech software platform that provides payment infrastructure as a service. He co-founded Sila in 2018 with the goal of empowering financial innovation and supporting entrepreneurs who want to build a new financial world. In 2009, he co-founded Simple, the first bank of its kind in the United States. In doing so, he played a crucial part in building the infrastructure that would pave the way for online banking. After BBVA had acquired Simple, he headed the Open Platform at BBVA. Shamir studied physics and computer science at Bangalore University and is a graduate of Carnegie Mellon’s Tepper School of Business. He lives in Portland, Oregon.

More for our Listeners

For those attending the ABA Financial Crimes Enforcement Conference this week, don’t miss joining me for my closing keynote on Thursday, January 13. The ABA asked me to look ahead on how new mandates under last year’s Anti-Money Laundering Act are going to change technology across the whole landscape of AML regulation and compliance.

On Wednesday, January 26, AIR is hosting a webinar, ‘Into the Cloud: Whether, Why and How Financial Institutions Are Adopting Cloud Computing.’ Join me and FDIC Chief Innovation Officer Sultan Meghji for a Fireside Chat exploring how agencies are viewing cloud adoption by industry, and then hear from a panel sharing specific industry examples ranging from retail banking to capital markets to regtech advances.

Also on February 24, please plan to join us for the webinar that AIR is co-hosting with Energy Web called “Make Money Green: Climate, ESG and Financial Regulation,” featuring, among others, SEC Commissioner Allison Herren Lee.

We have some great podcast shows lined up for 2022! Stay tuned for one with Netherlands’ Queen Maxima, who is the UN Global Advocate for Financial Inclusion, and one with the fascinating Hemant Taneja who wrote the book, Unscaled. We’ll also have Catherine Brown from Klaros as well as my friend Jeremy Allaire from Circle back on again!

Don’t forget to follow AIR on LinkedIn and Twitter. Be sure to leave us a five-star rating on your favorite podcast platform. And please follow me personally on Twitter @JoAnnBarefoot. 

And as always, keep on innovating!

Get involved

Stay informed by joining our mailing list