Enablers of Australia’s biggest innovation community, Stone & Chalk is a startup and scaleup ecosystem that’s placed itself at the intersection of various tech sectors. And that includes web3 and decentralised finance, in which it’s become increasingly involved.

Stockhead caught up with Stone & Chalk‘s Group CEO Michael Bromley to discuss his views on decentralisation, what it means for Aussie businesses and the potential power that lies within web3.


‘Web3 is critical to the emerging tech ecosystem in Australia’

Hi, Michael. Let’s go with the old elevator pitch to start proceedings. What is Stone & Chalk and what does it do? 

Absolutely. So the elevator pitch is really simple. Our purpose is to help transform Australia into a sustainable tech-driven economy. I think there’s, frankly, too much carbon going into the environment and into the atmosphere as a result of the primary driver of our economy. So tech should be able to more than replace that – the revenue, growth and economic development – in a way that’s carbon friendly.

Our purpose is pretty clear but our position is perhaps less well known, which is that we are the largest innovation community in Australia. We’ve got more than 6,000 virtual and physical residents in our community, who are startups and scaleups working with us to help grow and build their business.

We’ve got a team of hundreds of mentors and lists and lists of investors – angels, and corporates and VCs as well. And we put all that together to help drive the growth of the innovation ecosystem in Australia.

Tell us about Stone & Chalk’s web3 angle? How is it getting involved in the blockchain and crypto space? 

So, we focus on emerging tech. And web3 is clearly an emerging technology industry and an emerging tech in and of itself.

We feel that it’s part of our role, in building the overall industry and tech ecosystem, to make sure that we’re across all of the relevant technologies that are driving change.

And I don’t think anybody could argue that web3 is not driving change. Whether people like the change or not is another question. But certainly blockchain, crypto, smart contracts, and all the other things that go with the web3 moniker are critical to the emerging technology ecosystem in Australia. And our job is to help foster that.


‘This technology has potential to be a game changer’

When did you start delving in and looking at blockchain and the web3 side of the tech industry?  

Well, personally, I go back a long way in both web1 and web2 and have been involved in about seven different startups. I like to think of myself as old as you possibly can be while still being a digital native.

But web3… the technology has been around for quite some time, and it’s something we’ve been discussing in terms of finance for quite a few years.

What is it about web3 and crypto that makes you believe in its future? And what potential possibilities do you see for businesses embracing blockchain, crypto and decentralised finance (DeFi)? 

Yeah, I think that last point is the key. I define web3 as really being about decentralisation. There are applications that interest us within crypto, smart contracts and the blockchain – and decentralised finance is one of those.

But I think what’s pushing web3 forward is a perfect storm scenario. And I also think it’s not a why, it’s a why now question.

The question is, why is now the time that we think it makes sense to create our Innovation Centres, and to help drive this technology forward?

And we think that’s because this technology has the potential to really be a game changer in the way people communicate, interact, transact and live their lives. And that’s fundamental to what emerging tech can and should be doing.

So you think decentralised tech has the power to offer more efficiency? 

You know, we’ve learned a lot in crypto over the last few years – we’re still learning and we will continue to still learn. But decentralised systems really are powerful. And they can change, fundamentally, how we live our lives daily.

The internet is different on the blockchain than it is on a network of nodes. The contract to buy a house is different with a smart contract than it is with a piece of paper. Banking and finance is different in that tokenised, decentralised environment.

And in many cases, it’s better. In many cases, it’s more efficient. In many cases, it’s safer. That’s not to say all examples are, but generally speaking we think now is the right time for it. The technology is there. The will of the people is there. And that’s really all it takes to create a movement.


‘Theoretically safer, more secure, more efficient and faster’

What else is it about decentralisation that you think gets people excited? 

I think you can look at it from a perspective of where centralisation sometimes fails, and the perfect example of that is the decline of Silicon Valley Bank, where the US government and the FDIC had to make extraordinary decisions.

The FDIC covers everybody up to $250k. But a lot of people had well over that in their bank accounts in Silicon Valley Bank. The centralised authority behind the FDIC, which is essentially the US government, had to come in and guarantee deposits over and beyond the FDIC’s policy.

That’s a complete failure of centralisation on display for everybody. And so decentralisation offers a potential alternative approach, which would have built in failsafes.

If done right, decentralisation eliminates the middleman and eliminates that centralised authority that can make mistakes, and replaces that with algorithms or tokenisation and smart contracts, or combinations of those things.

The result being, theoretically, a safer, more secure, more efficient, faster economic benefit. That’s why I think it’s critical and why I think it’s got an important role to play. And people will continue to experiment with it, because that value proposition resonates.

It’s the teething problems with those experiments that grab quite a few negative headlines, though, right? 

Yeah, and that’s nothing new. Maybe I’m weird this way, but the first thing I thought of when I heard about the Silicon Valley Bank mess was the old  film It’s a Wonderful Life.

The movie is, essentially, the same story of Silicon Valley Bank – it was a run on on essentially a mutual, but still a run on a bank. And I can picture Jimmy Stewart explaining to all the people rushing the bank – well, I can’t give you your money because your money is tied up in that person’s house and that person’s money is tied up in that person’s business, and explaining how the economic system works. The SVB situation would’ve made headlines at many stages through modern history.

And so, to your point, the fact that crypto and decentralised finance is making headlines for negative reasons at times is really to be expected in a way. That is literally how all emerging technologies, industries and economic systems evolve. And that’s okay as long as we know that going in.

Stone & Chalk Group CEO Michael Bromley. (Image supplied)


Are CBDCs overreach? ‘Time will tell’

Why do you think some governments and some (perhaps many) legacy financial operators push back against the idea of decentralised finance? A fear of loss of control? 

It’s basic human nature that everyone wants to protect the patch they’ve got. And so yeah, you’re talking about some very powerful people in the world with control over some very large numbers.

And the first thing that people think of with change is fear. How will this affect me negatively? That’s the first human response to change. And that’s a fair response.

What do you think of CBDCs (Central Bank Digital Currencies)? Some (and okay that includes me) tend to think they’re a system of centralised digital control that has potential for concerning governmental overreach. But do you think they can coexist with the crypto industry’s stablecoins?

Well, time will tell as to whether they’re overreach, but I do believe CBDCs and stablecoins  and privatised solutions can coexist, and I think they will coexist, although I don’t know in what timeframe.

Each of them may end up over time just serving different purposes and different communities. Or one may end up winning out over the other. I don’t have an opinion on that so much, but I do think it’s almost guaranteed that most governments will try to issue CBDCs, because they just think that’s their job. Let’s hope that’s not an exclusionary practice and an additive practice to the market.


DeFi is an ‘existential threat’ to banks

Are you seeing much positivity for web3 tech from the traditional side of finance here in Australia? 

The short answer is yes, I’m seeing that. But I’ll give you a specific example.

When we made the announcement of our web3 Innovation Centres and the partnerships with the Australian DeFi Association and NotCentralised, the first two calls we got were from “Big Four” banks.

They wanted to know what this meant, how they could leverage it, how they could take advantage of it, what they could learn and how they could partner with us and the Innovation Centres to advance their thinking and their strategy with how to deal with decentralisation.

What’s really behind that interest, do you think?

It’s because the technology, DeFi, is an existential threat to them and they acknowledge that, which is good.

And I think because it’s an existential threat, there’s significant interest from large corporates and, obviously, from the tech side.

The thing that that often defines Australia in a negative way, in terms of international banking, is the relatively small landscape of our Big Four. And it’s, in this case, driving a need for innovation.

In this case, they don’t have a choice. It’s a threat, everyone knows it, and so they are now scrambling individually to say, okay, well, what’s our response? I think that’s a good thing for, for the economy. And for the for the industry.

You’ve recently had some discussions with NAB, for example, which has developed its own stablecoin – as has ANZ. Can you tell me about any involvement there? 

Well, what I will say is that we’ve had conversations with all of the Big Four banks and that two of them are far more advanced at the moment than the others in terms of their web3 engagement.

In what way is Stone & Chalk looking to help these banks approach the web3 sector? 

The kinds of discussions we’re having with them range from talking about web3 and DeFi strategy development – at a very low end, to far more high-level considerations as well.

At the high end, we’re talking about building a joint venture approach to developing web3 capabilities with one of these banks in particular.

We’re really thinking about a venture studio approach to how we address for them, and with them, the existential threat.

So we bring our DeFi community expertise, and obviously they bring themselves to the table. And we’re currently trying to figure out what that might look like together.


Crypto regulators have ‘a steep learning curve’

What about regulations that might either have potential to slow or help this kind of innovation and collaboration? Where do you think Australia is at with its crypto regs process? Some prominent Aussie crypto industry players we’ve spoken to tend to think the current government has been way too slow with it all. 

We’re actively involved in the regulations discussions and are part of several roundtables and we have regular catch-ups with various local and federal government representatives. And what I’ll say about the regulations response is that there is no response from a federal government anywhere in the world that’s fast enough right now.

Our government is in no way out on some sort of iceberg alone on that. Could it be faster? Absolutely. Will it be faster? I hope so. And that’s one of the things that we’re asking for. And we’re explaining that and there’s nobody in the government, both federally or locally that I’ve talked to, that says, no, this shouldn’t happen faster.

They all agree. But there’s a steep learning curve. And that’s partly because there’s a lot behind the concept of decentralisation – philosophically, technologically, and from a policy point of view, and there are no playbooks anywhere in the world that anybody can turn to and say, do it like that.

So I’m satisfied that we have a governance system set up that recognises the urgency and need. We’ll see how that translates into results.


Convergence of tech, including web3, will ‘change the world’

Can you describe what your Innovation Centres are set up for and what they provide? You’re in partnership with the Australian DeFi Association, so presumably that’s a heavy focus… 

Yeah, the partnership is essentially that the Australian DeFi Association has its own constituent membership. That’s a virtual membership, and what we’ve done is we’ve created a physical centre of gravity for that membership.

So we have four incubators, startup hubs, and scaleup hubs in Sydney, Melbourne and Adelaide. And in each one of those, there’s an opportunity for one of those members of Australian DeFi Association to join one of the hubs and be in a specific space around other DeFi proponents and founders, as well as the rest of our emerging-tech ecosystem.

Some benefits include mentorship and added value through Aust DeFi and NotCentralised and access to venture capital capabilities and networks.

And there are programs that are designed to help the components of DeFi startups that are consistent with all other startups. Early stage startup development processes are the same, regardless of your industry.

So all the programs that we have that focus on fintechs or reg tech, or quantum or AI, or space tech or whatever else we already have – we offer those same services to these organisations as well.

Okay, so it’s essentially a great way to network and connect and take learnings from a wide cross section of the industry?

Exactly. And other industries, too. Stone & Chalk isn’t just about web3, in fact most of our membership is not involved with web3 yet.

We feel, though, that web3 represents an underlying technology capability that might support a number of our existing technology startups and scaleups in other fields.

And that’s really where it gets exciting and interesting; that convergence of web3, AI, quantum and cybersecurity – it’s really going to change the world as we know it. They’re literally going to reinvent how we do things on a daily basis, by necessity. And that’s really exciting.

All of that comes together under our roof and we let those individual groups coalesce into whatever’s new that comes out of that because they can’t do it alone.


‘It’s all about the tech ecosystem’

Do you have any predictions for the future of blockchain and crypto? 

I won’t speak to it in terms of specific predictions, other to say that I think blockchain will continue to evolve, the technology will continue to grow and keep moving towards tech that’s more friendly to the environment, whether that be through different types of mining or through tech such as proof of stake.

Do you personally invest in any crypto? Bitcoin and/or Ethereum for example? 

I personally never have, no.

That’s interesting. It’s all about the interest in the technology for you then? 

It’s all about the tech ecosystem. And about helping to facilitate the building of that. I don’t care what wins specifically, as long as it creates an environment and a community that creates economic development, growth, jobs, education, training. That’s what I’m in it for. I’m not here as an investor. I’m here as an ecosystem builder.

The tech trends will shift in ebbs and flows, and so we’re here to support whatever that might be in the future.


This interview was edited lightly for clarity. None of the contents of this article should be construed as financial advice.