From Pioneering ETFs to Bringing TradFi to Web3: A Conversation with Venom’s Peter Knez

Peter Knez is currently the Chairman of Venom Foundation, a new “layer 0” blockchain focusing on connecting real world businesses and institutions to Web3. But Knez is also a veritable veteran of traditional finance, who worked first at Goldman Sachs under Fischer Black, of Black-Scholes option pricing theory fame, later moving on as CIO at Barclays Global Investors (BGI), where he doubled their overall AUM and grew the US AUM 8-fold.

A curious tidbit about Knez is that while at Barclays, he oversaw the creation of the iShares, the progenitor of the current ETFs. BGI was acquired by BlackRock in 2009, passing the iShares brand to the company. We sat down with Knez to learn more about his career and how it’s now intertwining with blockchain at Venom Foundation.

Hey Peter, really nice to meet you. You seem to have a very impressive career history in traditional finance. What was the most interesting thing about working in Wall Street for you?

PK: I had the good fortune of starting my career at Goldman Sachs. So I learned how a world class organization is created, maintained and managed. I learned what it meant to be an “institution.” In addition, it was extremely beneficial to be surrounded by top talent and many role models. This experience prepared me well to succeed at two other world class organizations like Barclays Global Investors and BlackRock. 

ETFs became one of the most prevalent ways to invest in the stock market or other forms of assets, including Bitcoin and crypto. As a person who was very closely involved, why do you think this investment structure became so popular?

PK: From my perspective, ETFs really only started with iShares at BGI. For us, there was a simple reason for developing it: we were the largest Institutional asset manager without a mutual fund product and wanted to expand into retail. ETFs allowed us to enter the retail market and compete with Mutual Funds. 

We did this by replicating existing indexes with a product that traded on exchanges, while disclosing their holding on a daily basis and delivering liquidity and transparency in a tax efficient format. These benefits are probably the reason why ETFs eventually became so dominant.

Since it’s a hot topic in crypto now, why do you think BlackRock decided to launch its Bitcoin ETF now? Any speculation on whether it might be approved?

PK: I think we are in the early innings of the “institutional” regime in cryptocurrencies and blockchain as the Wild West regime ends. The institutional regime is characterized by increased participation of institutions like BlackRock and by governments. For example, in the US, Congress is likely to soon pass legislation providing a regulatory framework for digital assets. 

BlackRock wants to participate in this regulatory momentum. I believe BlackRock will ultimately succeed. First, they have an excellent track record. Secondly, I suspect BlackRock CEO Larry Fink would not have gone public if it was not pre-approved. Thirdly, the product is well designed to provide transparency via surveillance-sharing arrangements with Nasdaq and Coinbase.

What interested you in cryptocurrencies and blockchain? Did you have any insights from your career that made you appreciate this new technology?

PK: For me, it was less about the speculation on assets like Bitcoin. My interest in Blockchain was its immutability, transparency, tokenization and the potential for peer-to-peer exchange of economic value.

Perhaps even more important are Smart Contracts as a technology, which I consider the ‘hero’ of Web3. Much of my career was involved in Fixed Income securities, which is all about managing various maturities and duration mismatches. Enabling one to program the duration of money will allow resolving duration mismatches programmatically. Taken together with blockchain these smart contracts can dramatically improve transparency, efficiency and security. 

Editor’s Note: Duration mismatches are a common risk in fixed income securities, which caused several major banks to go bankrupt in 2022-2023.

What is Venom? What is the vision behind the project, and why did you choose to work on it?

PK: Venom is a next generation layer-0 institutional blockchain designed to provide the infrastructure for Web3. It is the licensed “blockchain of blockchains” as it provides a scalable base layer we call the “master chain” that enables the launch of “work chains” that are entirely customizable to the application at hand. 

My interest began by searching for the appropriate Web3 infrastructure to build a digital asset management platform. So I wanted to be part of a layer 0 chain that was licensed, scalable with low and stable transaction costs. Where everything on-chain was a smart contract and had the potential to embed AI. In addition, I believe the digital transformation of financial services is so comprehensive and profound that I wanted to live it day-to-day not just read about it. At Venom I am surrounded by teachers. 

Venom focuses on tokenization of real world assets. What would you say is the value of this approach over traditional means? How soon will we see full adoption?

PK: Representing these assets as smart contracts on a blockchain enables a dramatic improvement in transparency and security. The smart contracts also reduce disputes as they are only executed if the conditions are satisfied. In addition, the immutability provides an end-to-end transparent record. Lastly, the digital format enables fractionalization allowing greater access and liquidity to real world assets. 

I believe the combination of blockchain and smart contracts will profoundly transform financial services over the next 5 to 10 years. They will be unrecognizable, as almost every core function in financial services will be transformed.

What are you targeting first in terms of real world asset adoption? Is there any perk to being licensed in Abu Dhabi?

PK: At Venom, we are focused on three primary projects: stablecoins, carbon credits, and commodities. With respect to stablecoins, we are involved with governments and commercial banks in countries both in Africa and Asia. 

We are extremely proud of our origins in Abu Dhabi, and we are currently providing the blockchain infrastructure for the UAE’s unique National Registry for carbon credits. As for commodities, we are collaborating with platforms that aim to revolutionize commodity trading and finance using blockchain. Representing these assets as smart contracts on-chain not only enables an immutable transparent record but also minimizes disputes, ensuring they are executed only when conditions are met.

Building upon our commitment to the region, we're immensely proud to be based in Abu Dhabi. The unrelenting support of the Abu Dhabi (ADGM) has been instrumental in our initiatives. Collaborating with ADGM will certainly be a keystone in our efforts to foster institutional adoption of blockchain technology. I want to personally thank the ADGM, its chairman, board, and leadership for all the support they have offered us.

At what stage is Venom right now? What are your plans for the future?

PK: The vision of Venom is to provide a fully licensed and scalable, institutional quality blockchain that is the infrastructure for Web3. And use this infrastructure to develop the Web3 ecosystem by focusing on real use cases that exploit the unique features of a blockchain. For example, we are working with more than ten countries to be the technology provider for stablecoins. We are providing the infrastructure for the UAE’s carbon credits registry. We intend to be the point of reference in providing the infrastructure for Web3 and its ecosystem as well as the transformation of financial services.

The interview has been slightly edited for clarity and context

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

Other Topics

ETFs