Where Finance Finds Its Future

Growing institutional interest in crypto-currencies, not least as a hedge against rising inflation, has spawned a range of custodial services to safeguard the private keys without which nobody can access the digital wallet that contains the assets. Hex Trust, the Hong Kong based provider of institutional grade digital asset custody services, was among the first in the field. Since it opened for business in March 2018, Hex Trust has gathered a diverse clientele in the private banking, wealth management and asset management industries. Future of Finance co-founder Dominic Hobson spoke to Alessio Quaglini, CEO of Hex Trust, about how he sees the crypto-custody market developing as non-fungible tokens (NFTs) and security tokens are added to the list of eligible institutional investments. Hosted on Acast. See acast.com/privacy for more information.

It always takes time for revolutionary technologies to establish themselves. Blockchain is no exception. Although the pace of mass adoption is speeding up – the telephone took 70 years to achieve 50 per cent market penetration among consumers, while smartphones managed that in three – blockchain is more akin to a general-purpose technology such as electricity in its ability to transform a wide range of commercial activities. As such, it must solve engineering problems that constrain its growth, of which lack of speed and scalability is the most obvious. But blockchain shares with all forms of digital technology the ability to scale exponentially once the engineering problems are solved. This webinar, hosted in partnership with Trade and Invest Wales and Fintech Wales, will assess how close blockchain technology is to taking off into exponential growth and how it could change the entire shape and structure of economies. Hosted on Acast. See acast.com/privacy for more information.

Cross-border payments are notoriously expensive. They are also slower, less reliable and less transparent than domestic payments, in which transfers are now (or soon will be) both instant and instantaneously visible. One reason for these inadequacies is that an oligopoly is at work. There are around 25,000 banks in the world, but almost every cross-border payment ends up being handled by just 15 of them, all of which have relationships with thousands of correspondent banks. Unsurprisingly, given that cross-border payments are also cross-currency, the 15 banks are more or less synonymous with the banks that make up the foreign exchange (FX) oligopoly. CLS, the FX settlement utility set up by the major central banks, is able to cover 87 per cent of transaction volumes across 19 major currencies with a user-base of just 70 member-banks. A mere 14 of the CLS member-banks offer CLS services to the corporates and asset managers that ultimately drive FX activity, as opposed to servicing other banks. Many banks have withdrawn from correspondent banking altogether – the number is down 20 per cent since 2010 – chiefly because of the compliance risks of customer due diligence: banks do not know their customers’ customers and fear being fined for breaches of anti-money laundering (AML), countering the financing of terrorism (CFT) and sanctions regulations. In other words, more than 99 per cent of banks are just processing foreign currency payments for their own domestic or regional customers and relying on the services of the members of the oligopoly to actually send money abroad. This is why it takes an average of 2.6 banks to move an estimated US$1.5 trillion a day across borders. Yet cross-border payments are vital for economic prosperity, international trade, global financial stability, continuing growth in international e-commerce and international travel and especially in poverty reduction. Remittances worth US$707 billion passed through the system in 2019, US$529 billion to people in low to middle income countries, at an average cost of 6.82 per cent in transaction charges. This is why the G20 has made improving cross-border payments a priority and asked the Financial Stability Board (FSB) to come up with solutions; why the United Nations has set a target of reducing remittance charges to 3 per cent by 2030; why the Committee on Payments and Market Infrastructures (CPMI) has published a list of 19 “building blocks” to enhance cross-border payments; and the Bank for International Settlements (BIS) has pondered whether central bank digital currencies (CBDCs) could provide the key that unlocks for companies and consumers the value currently being eaten by banks. Hosted on Acast. See acast.com/privacy for more information.

The margin pressure exerted by asset management clients is forcing global custodian banks on to an unsustainable path of rising asset values and shrinking revenues. Tokenization, while rich in opportunity, could exacerbate the problem by increasing asset safety and compliance risks without reducing the need to invest in new technology. Financial market infrastructures reeling under the same pressures offer no immediate release in the form of cost-sharing. To contain the effects, custodians are consolidating, forming partnerships and investing in front-to-back-office outsourcing services built on managing the flows of data consumed by asset managers. Hosted on Acast. See acast.com/privacy for more information.

Data is all about correlation rather than causation. But this is why it is so powerful. In the past, management decisions could be based on whatever the decision-maker deemed to matter. Now, the causal nature of decision-making is being challenged by a host of correlations. Of no market is this truer than the previously opinion-rich but near data-free zones of workforce management and office location, both of which the Pandemic has challenged at the elemental level. So the emergence of Vertis.ai, a market intelligence platform that aims to improve decision-making in the HR and commercial real estate industries by analysing billions of data points, could scarcely be more timely. Dominic Hobson, co-founder of Future of Finance, spoke to Sam Hocking, co-founder of Vertis.ai. Hosted on Acast. See acast.com/privacy for more information.

Nivaura was a blockchain pioneer in London, working with banks, stock exchanges, financial market infrastructures and law firms on a string of high-profile regulatory sandbox projects that proved blockchain technology could support private placements, structured products, bonds, crypto-currency-backed bonds and equity settlements, even within the existing regulatory regime. The company is now automating data flows in the primary debt capital markets and nurturing the growth of the open-source General Legal Mark-up Language (GLML), a standard for digitizing documents. Next up is derivatives. Future of Finance Co-founder Dominic Hobson caught up with Scott Eaton, CEO, and Co-founder Dr Vic Arulchandran. Hosted on Acast. See acast.com/privacy for more information.

Custody, long the poor relation of the traditional securities industry, has emerged as the foundation of the digitalization of the capital markets. That is because it is confidence in the safekeeping of the private keys that unlock ownership of crypto-currencies and security tokens that will determine the level of institutional investment in both. Polysign subsidiary Standard Custody & Trust has just raised more than US$80 million to build a blockchain-based, institutional-grade custody service for asset managers. Future of Finance co-founder Dominic Hobson spoke to CEO Jack Macdonald. Hosted on Acast. See acast.com/privacy for more information.

Future of Finance Co-founder Dominic Hobson spoke to Revolution Populi CEO Rob Rosenthal about giving consumers the choice, what they will choose and how digital entrepreneurs can create the apps to change the balance of power in data ownership and control. Hosted on Acast. See acast.com/privacy for more information.

Issuers, asset managers and investors are under mounting pressure to report how their investments comply with a range of environmental, social and governance (ESG) criteria. The principal difficulty they face is obtaining data reliable and comparable enough to make meaningful judgments about the companies and the securities they issue. Nobody understands that challenge better than Tim Mohin, now Executive Vice President and Chief Sustainability Officer at Persefoni, a company founded to help companies and their investors track ESG performance, but previously CEO of the Global Reporting Initiative (GRI), the world's largest ESG reporting standard. He spoke to Future of Finance co-founder Dominic Hobson. Hosted on Acast. See acast.com/privacy for more information.

Like insurance and trade finance, international art is a large and valuable market bedevilled by extended chains of intermediaries, excessive levels of fraud and hefty transaction costs. And, like those other markets, art is ripe for transformation by the application of digital technology and techniques to the identification of assets and counterparties and the delivery of objects against payment. Future of Finance co-founder Dominic Hobson spoke to Angus Scott, CEO of ArtClear, a company whose founders are applying their experience of safekeeping and settlement in the securities markets to an industry where trust and automation are in short supply. Hosted on Acast. See acast.com/privacy for more information.