Where Finance Finds Its Future

In January 2018, Gibraltar became the first jurisdiction on the planet to pass into a law a regulatory framework to accommodate financial services based on blockchain. It has helped to attract to the Rock more than a dozen digital financial services companies, including crypto-currency funds and Insurtechs.The government of Gibraltar and the Gibraltar Financial Services Commission (GFSC) pride themselves on their closeness and accessibility to the industry, which they believe encourages a spirit of openness among regulated firms, but they are not an easy touch: it can take 12 months to get approved, and more licence applicants are disappointed than endorsed. Dominic Hobson, co-founder of Future of Finance, spoke to the Honourable Albert Isola, Minister for Digital and Financial Services in Gibraltar, about what licence-seekers can expect and where he thinks the next big opportunities lie. Hosted on Acast. See acast.com/privacy for more information.

Gibraltar has built a reputation as a congenial domicile for insurance companies. With a robust regulatory regime but an accessible regulator prepared to work fast, Gibraltar is now home to a third of motor insurance premiums in the United Kingdom, including those paid to household names such as Admiral. With nine tenths of its business emanating from London, Gibraltar has suffered little from the loss of free access to European Union (EU) markets that followed Brexit. In fact, Gibraltar may even benefit if plans to join the Schengen Area are realised. With a blockchain law in place, and a statement of intent agreed with InsurTech UK, Gibraltar is also catching the attention of the new breed of technology-driven insurers planning to disrupt an industry that traditionally avoids being in the vanguard of technological revolutions. Dominic Hobson, co-founder of Future of Finance, spoke to Mike Ashton, senior finance executive, insurance and pensions, at Gibraltar Finance, the government body that promotes Gibraltar as a financial services centre, about the opportunities InsurTechs will find in the British Overseas Territory. Hosted on Acast. See acast.com/privacy for more information.

Central securities depositories (CSDs) are a target of the tokenization evangelists. CSDs are in theory completely redundant in a system by which tokens are issued directly into digital wallets, transactions are settled token versus token (TvT) between digital wallets, changes of ownership are registered automatically on a distributed ledger, and holdings of tokens are safekept in digital wallets and serviced by smart contracts. How soon such a system could come into being is impossible to predict. What we know is that today the scale of the security token markets is trivial. A generous estimate is that token issuers have raised just US$10.3 billion since 2017, or 0.008 per cent of current outstandings in the global bond markets and 0.009 per cent of the current valuation of the global equity markets. Bitcoin alone is worth 110 times as much as the entire value of the global security token markets. In growing, tokenization faces many obstacles, including the lack of digital cash (as opposed to payment tokens) on tokenization platforms and a lingering degree of uncertainty about the legal and regulatory status of tokens. But both these barriers are now being cleared. The financial incentives - notably a lower cost of capital and the reduction of transaction and data processing costs to nugatory levels – to tokenize are strong. The additional revenue possibilities, in terms of expansion into privately managed, OTC-traded and illiquid asset classes – to say nothing of attracting new types of investor - are tempting for asset managers and asset owners. History shows that digitized markets can scale remarkably quickly. The sheer size of the global bond and equity markets means that even if tokenization garnered no more than a tenth of the market, on current valuations the global market would still be worth US$23 trillion. So it is prudent for CSDs to take the threat of tokenization seriously, formulate strategies to adapt to its potentially rapid growth and develop services that treat tokenization as an opportunity. That opportunities exist, not least to help securities market participants capitalize on the new possibilities opened up by tokenization, is a certainty. At this webinar, Future of Finance joins forces with the Americas’ Central Securities Depositories Association (ACSDA) and sponsors Percival Software, a leading provider of CSD systems, to explore the nature of the threats and the opportunities that tokenization poses for CSDs. Hosted on Acast. See acast.com/privacy for more information.

Perhaps one jurisdiction and a half have actually launched a Central Bank Digital Currency (CBDC). But the second largest economy in the world (China) is now promising to turn its pilot CBDC into a full-fledged digital fiat currency as soon as February 2022. It would be surprising if a member of the G7 – and especially the United States, possessor of the dominant reserve currency of today -did not feel obliged to respond. The Bank for International Settlements (BIS), whose membership encompasses 63 central banks, has followed up its paper on the foundational principles and core features of a CBDC with a further three covering the design of CBDC systems, how users can be recruited to use CBDCs and how central banks can manage the likely impact on financial stability of issuing a CBDC. The infrastructural arm of the BIS, the Committee on Payments and Market Infrastructures (CPMI), is consulting on why issuers of Stablecoins – the original rival to CBDCs, which prompted the surge of activity by central banks since Facebook unveiled Libra in the summer of 2019 – should be subject to its Principles for Financial Market Infrastructures (PFMIs). With Stablecoins now locked in a symbiotic relationship with the emergent Decentralized Finance (DeFi) markets, questions are being asked about how CBDCs will interact not just with Stablecoins but with the crypto-currencies and tokenized assets that are driving the growth of DeFi. Answers are being sought to the potential risks posed by CBDCs to the funding base of the banking industry, the monetary sovereignty of nation-states, the innovative capacity of the private sector and the privacy of citizens. The benefits, in terms of financial inclusion and improvements to the cost, speed and transparency of cross-currency payments, are being trumpeted. At this webinar, Future of Finance returns to a topic that is already established as the most important, exciting and fastest-evolving of official responses to the threats and opportunities presented by the digitization of money and payments. Hosted on Acast. See acast.com/privacy for more information.

Greengage, which has been active in the crypto-currency markets for the last three years, has set itself a new mission: to become the merchant bank that channels the fiat currency deposits of crypto-currency exchanges to small and medium sized enterprises (SMEs). To that end, it is currently considering whether to pursue a banking licence, which would allow the firm to provide a full set of banking services across three fiat currencies. But transforming the fiat currency deposits of crypto-currency exchanges into loans to SMEs is just the first of the ways in which Greengage plans to fulfil its wider ambition of building bridges between the crypto-currency markets and the traditional financial markets. Dominic Hobson, co-founder of Future of Finance, spoke to Greengage CEO Sean Kiernan.  Hosted on Acast. See acast.com/privacy for more information.

New York-based INX Limited shot to prominence last year when it raised US$85 million in an initial public offering (IPO) that was not only tokenised but, because it was fully registered with the Securities and Exchange Commission (SEC), open to all kinds of investors. This broke with the established pattern of issuing security tokens to sophisticated investors only, placing INX in the vanguard of the burgeoning tokenisation industry. The company is already developing plans to tokenise OTC-traded companies, real estate, intellectual property and a variety of other asset classes on to its blockchain-based automated trading system (ATS). The company also operates a cryptocurrency trading platform and has acquired both a digital asset broker-dealing business and an inter-dealer broker. Future of Finance co-founder Dominic Hobson spoke to Douglas Borthwick, Chief Business Officer at INX.  Hosted on Acast. See acast.com/privacy for more information.

There is no shortage of challenger banks and neo-banks but it is often hard to discern what is being challenged or what is genuinely new. Most are doing nothing more disruptive than creaming off revenues established banks are too lazy or dysfunctional to retain. The character of five-year-old Chetwood Financial is harder to categorise. Its leadership emphasises the personalisation of its products rather than the quality of its customer relationships. By refusing to take ownership of its customers, Chetwood inverts the logic of the traditional bank. It sees customers not as cross-selling opportunities but as individual borrowers or lenders. It sees products not as either profit generators or cross-subsidies but as customised answers to particular problems. Chetwood knows what its customers’ problems are because it has used data to find and understand them in the first place. It is a perspective that not only makes it easier to manage credit risk – indeed, it enables the bank to reward improved risks with cheaper money – but subtly shifts the purpose of the enterprise way from making money for shareholders towards manufacturing the best retail borrowing and savings products it can, at least for its chosen clientele. Dominic Hobson, co-founder of Future of Finance, spoke to Mark Jenkinson, founder and director of strategy at Chetwood Financial. Hosted on Acast. See acast.com/privacy for more information.

Real estate is a primary target for tokenization. Its size and intrinsic illiquidity makes tokenization and fractionalization unusually appealing for owners and developers, and investors are attracted by the opportunity to gain exposure to the asset class at lower cost. So it is not surprising that the real estate sector spawned the flagship tokenization of shares in the St Regis Aspen hotel back in 2018. Among the real estate entrepreneurs that recognized the significance of that transaction three years ago was Ed Nwokedi, then working in the capital markets group at Cushman & Wakefield. Today he is the CEO of Red Swan CRE, a blockchain-based marketplace where issuers can raise finance for commercial real estate projects by issuing tokens to SEC-accredited investors. Dominic Hobson, co-founder of Future of Finance, asked him how Red Swan works and where it is going next.  Hosted on Acast. See acast.com/privacy for more information.

Projections put the size of the security token markets at US$8-9.5 trillion within just four years. That is bigger than the US$7 trillion invested in the privately managed asset markets that are presently seen at the most promising axis of growth for the tokenization industry. The rewards are easy to list. A lower cost of capital for issuers. Increased liquidity, and access to a wider range of asset classes, for investors. Automation of costly asset servicing by smart contracts. Faster completion of customer due diligence checks. Lower transaction costs, thanks to disintermediation. For the most part, security tokens fit comfortably within the existing securities market regulations in major financial markets. The technology to support issuance, secondary market trading and post-trade servicing is in place. Service providers, from trading platforms to custodians, are open for business. Yet the actual number of issues remains remarkably small and tightly concentrated in a handful of sectors and geographies. The sums raised have fallen far short of expectations. This webinar will seek to explain why an industry on the cusp of explosive growth is failing to detonate, and what it will take to make security tokenization happen. Hosted on Acast. See acast.com/privacy for more information.

The wealth management industry is under pressure. Profitability depends on scale, and in the United Kingdom there are more than 27,000 firms vying to advise clients on the management of their savings, from independents with a handful of clients to the wealth management arms of global asset managers and private banks. Clients are increasingly demanding, forcing their wealth managers to invest in technology to provide digital interfaces and reporting. They are also more sensitive to cost, and likely to opt for less lucrative passive investment strategies offered by the likes of Vanguard than the expensive active alternative. New entrants such as Monzo and Revolut are tempting investors with free brokerage, while platforms are also offering simpler and cheaper alternatives. Yet there is widespread recognition of the value of well-informed advice, especially if it can be provided at a reasonable price. The answer to the conundrum obviously lies in technology. Which is where Wealth Wizards comes in. The firm, acquired recently by Royal London, enables wealth managers in the United Kingdom to offer financial advice to clients in a purely digital form, making it affordable and accessible to a much wider range of investors. Dominic Hobson, co-founder of Future of Finance, spoke to Simon Binney, Business Development Director at Wealth Wizards.To find out more go, click here. Hosted on Acast. See acast.com/privacy for more information.