Where Finance Finds Its Future

On 17 November 2023 Christine Lagarde, the President of the European Central Bank (ECB), told a conference of bankers that “a truly European capital market needs consolidated market infrastructures.”[1] European capital markets certainly lack them now. They are a quarter the size of the American capital market yet support three times as many stock exchanges, and 20 times as many post-trade financial market infrastructures. The lack of a European equivalent of the Depository Trust and Clearing Corporation (DTCC) does not reflect a lack of regulatory effort. A succession of reports and schemes – Codes of Conduct, several pan-European regulations and even an entirely new settlement system run by the ECB (T2S) – dating back nearly a quarter of a century have largely failed to accelerate the consolidation of the capital market infrastructures of Europe. The price of that failure, in a higher cost of capital, a less resilient financial system and lower rates of innovation and economic growth, is more evident than ever in the aftermath of Brexit, amid a steady closing of open markets, and ahead of looming demographic and climate crises. So who and what can meet the challenge set by Christine Lagarde? That is the subject matter of this Future of Finance webinar. For further background on the subject, see the accompanying Future of Finance article, European capital markets are inefficient, so why aren’t European CSDs doing more about it? What topics will be discussed?What are the costs of a fragmented post-trade infrastructure in Europe?What explains the continuing settlement inefficiencies of Europe, despite the introduction of T2S?What has prevented the CSDs of Europe consolidating in the past?Is the current ownership structure of European CSDs conducive to market-led consolidation?Can a single programmable platform (a sort of Ethereum for CSDs) achieve the same effects as a single European CSD?What part does blockchain technology have to play in improving the post-trade infrastructure of Europe?Is the EU Pilot Regime a flop and will the UK Digital Securities Sandbox be one too?Will pressure to settle on T+1 accelerate or decelerate change in European post-trade infrastructure?Are there helpful technical solutions (e.g., “atomic” settlement, using AI and predictive analytics help improve settlement rates) short of consolidation?What is the fastest way to a more efficient set of CSD services for the European capital markets – consolidation, cooperation and collaboration, regulatory intervention, market-led competition or technology?Who is on the panel?Dirk Loscher, Member of the Executive Board at Clearstream https://www.linkedin.com/in/dirk-loscher-9220b6248/Chris Richardson, CEO at Percival Software https://www.linkedin.com/in/chris-richardson-26842923/Andrea Tranquillini CEO Advisor at EDAA https://www.linkedin.com/in/andreatranquillini/Bill Meenaghan CEO at SSimple https://www.linkedin.com/in/billmeenaghan/Martin Watkins CEO at Montis Group https://www.linkedin.com/in/martinwatkins1/Moderator: Dominic Hobson, Co-Founder at Future of Finance https://www.linkedin.com/in/dominic-hobson-49b8222/ Hosted on Acast. See acast.com/privacy for more information.

A Future of Finance podcast with Neil Thomas, Chief Commercial Officer of AsiaNext.AsiaNext, a 24/7, Singapore-based institutional-only digital asset trading platform, opened for business in January 2024. Owned by the Swiss stock exchange (SIX) and SBI Holdings of Japan, AsiaNext emphasises its sound governance and regulatory compliance, which its owners and management believe are the keys to attracting institutional money. The new exchange has already secured two operating licences from the Monetary Authority of Singapore (MAS) and has applied for a third. But easily the most striking ambition of the new exchange is its commitment to a global strategy, in which AsiaNext will form a triad with the Swiss Digital Exchange (SDX, owned by SIX) in Zurich and Osaka Digital Exchange in Japan (where SBI is a major shareholder). To make a reality of this ambition, much depends on the behaviour of others. Technologists must create the tools to facilitate the transfer of digital assets between platforms (interoperability) and central banks must provide the trusted, on-chain fiat currency (CBDCs) to pay for them. But AsiaNext is moulded in the image of its parents and its management does not hesitate to speak of ten-year time horizons as well as the returns that are waiting to be collected on the investment in radical change. Dominic Hobson, co-founder of Future of Finance, spoke to Neil Thomas, Chief Commercial Officer of AsiaNext, about the origins, character and destiny of the first self-consciously global digital asset trading venue. Hosted on Acast. See acast.com/privacy for more information.

This podcast will cover these regulatory developments and other issues, all of which are also raised in the second edition of Future of Finance’s Digital Asset Custody Guide (DACG2), which can be accessed here. The event will open with a presentation that draws on Future of Finance proprietary data about licences, registrations and certifications secured by digital asset custodians to illustrate the changing structure and geographical compass of the digital asset custody industry – and what it means for the service providers and their customers. This will be followed by a discussion between the online audience and a panel of experts, moderated by Future Finance Co-founder Dominic Hobson.What topics will be discussed?At what pace are regulated custodian banks approaching the digital asset opportunity?How important is custody to the unexpected success of Germany in tokenising and digitising issuance?How large a factor is SAB 121 in deterring the engagement of American custodian banks in digital asset custody?What does the proposed “safeguarding rule” introduced by revisions to the 1940 Investment Advisers Act mean for custodian banks?What do registrations to provide custody services tell us about the evolving structure of the industry?Why is it so hard to obtain a licence to provide custody services?Why are digital asset custodians so enthusiastic about professional certifications?Are custody markets, regulators and providers aligned on the ultimate destination?PanellistsTariq Rasheed, Partner at Reed Smith https://www.linkedin.com/in/tariq-zafar-rasheed-81b22018/Thilo Derenbach Head of Sales & Business Development Digital Securities Services at Clearstream https://www.linkedin.com/in/thilo-derenbach-2102031/Marius Lunding Smith Director Strategy and Growth at Finoa https://www.linkedin.com/in/mariuslundingsmith/Mark Mayerfeld Chief Revenue Officer at GK8 https://www.linkedin.com/in/mark-mayerfeld-0566874/Moderator: Dominic Hobson, Co-Founder of Future of Finance https://www.linkedin.com/in/dominic-hobson-49b8222/ Hosted on Acast. See acast.com/privacy for more information.

A Future of Finance interview with Max Heinzle, CEO of 21X21X is a Frankfurt-headquartered token issuance, trading and settlement platform built on blockchain technology, and underpinned by a group of long-term investors, that expects to be the first to receive a licence to operate under the EU DLT Pilot Regime that allows operators of market infrastructures to test blockchain technology in the issuance, trading and settlement of tokenised financial instruments. The boldness of the company strategy is evident in its preference for a public, non-permissioned blockchain network, and the fullness of its commitment to automating as many functions as possible by the use of smart contracts. That said, the founders of 21X are astute enough to recognise that it will be easier to attract issuers and investors by working with rather than against the incumbent institutions that currently own those relationships, and within the regulatory frameworks that institutions prefer. They are confident that the shareholders of 21X support their long-term strategy and that the regulators would like to see the business succeed and thrive within the parameters set by investor protection and financial stability. Interestingly, 21X has also chosen Germany, the surprising market leader in digital asset market innovation in Europe, as its initial base of operations. Dominic Hobson, co-founder of Future of Finance, spoke to Max Heinzle, CEO of 21x, about where the company came from, where its I now, and where it intends to be in five years’ time. Hosted on Acast. See acast.com/privacy for more information.

A Future of Finance interview with Nicola Plain, CEO of Aktionariat. Success in tokenising equity is unusual. Most issues of tokens are asset-backed versions of existing bonds or fund shares. So the fact that Zurich-based token platform Aktionariat has succeeded in attracting a variety of small company issuers is a considerable achievement. The goal of the firm is to help start-ups and SMEs, initially in Switzerland but eventually around the world, raise equity capital from third parties at low cost. Its strategy is to reduce dramatically the costs of issuance and post-issuance operations such as settlement and registration. Aktionariat has also formed a string of partnerships with specialist service providers and with SDX, the digital arm of the Swiss stock exchange, which helps the company secure access to the clients of the Swiss private banks. An ingenious liquidity model, based on the principal-based trading of shares in mutual funds, meant that by the end of 2022 Aktionariat was already host to 29 issuers, had as many companies again preparing to issue, and had identified dozens more on a target list that ultimately spans the entirety of the enormous Swiss private company market. Dominic Hobson, co-founder of Future of Finance, spoke to Nicola Plain, CEO of Aktionariat, about where the company came from, what it has achieved so far and what it plans to accomplish in the future. Hosted on Acast. See acast.com/privacy for more information.

A year and a half may have elapsed since the last central bank digital currency (CBDC) was issued. But the work at and by central banks, banks, supranational organisations and technology vendors has continued. The accompanying output of policy statements, academic papers, discussion documents and accounts of experiments is a vast but rich source of experience and information. Which is why a team at R3, a leading force in the digitisation of financial markets and a participant in multiple CBDC projects, embarked on a review of the literature that has accumulated about CBDCs. Dominic Hobson, co-founder of Future of Finance, spoke to Alisa DiCaprio, the Chief Economist at R3 who lead the investigation, about what the review unveiled about how CBDCs are being designed, issued and operated, and learned what CBDC designers everywhere still lack: a trove of empirical data about the impact of CBDCs on the behaviour of money, markets and especially consumers.  Hosted on Acast. See acast.com/privacy for more information.

Once true digital money is available on blockchain networks, the token revolution will begin. What that money will be is coming into focus. The idea that cryptocurrencies and Stablecoins will one day replace fiat currencies seems less realistic today than at any time since blockchain technology was first applied to traditional financial markets. In fact, the most plausible future of money is now one in which an inverted pyramid of tokenised deposits sits on top of a fulcrum made of central bank digital currencies (CBDCs). It looks awfully like a past and present in which commercial bank money (including e-money) sits on a fulcrum of central bank money. Which suggests that national and international monetary establishments have reasserted their control of money, defeating the ambitions of the libertarians and the innovators that spawned myriad cryptocurrencies. The truth is more complex. The innovative ideas and technologies of the cryptocurrency pioneers are now being embedded in a monetary system that is evolving towards faster, cheaper, more transparent and more open forms of money and payment but which has yet to find its equilibrium. Instead of re-visiting details, such as CBDC design choices or the regulation of Stablecoins, this webinar discussion will stick to a higher-level question: What is the likeliest future of money now?What topics will be discussed?Is regulation intended to restore public confidence in cryptocurrencies or destroy it?Are CBDCs in major currencies ready to move beyond the experimental stage?Are CBDCs a workable solution to inefficiency in cross-border payments?Are CBDCs relevant to making domestic payments faster?Are Stablecoins now a relic of the cryptocurrency past?Are tokenised deposits a glimpse at the future of commercial bank money?Is atomic settlement a flawed concept?Why is netting making a comeback?Where do Fnality, Partior and the ideas of The Regulated Liability Network (RLN) fit into the future of money?Has T+1 accelerated or postponed the payments revolution?Is tokenised, programmable money a reality already?Could all forms of digital money and digital assets be issued, traded, stored and serviced on a common, programmable platform?Who is on the panel?Matthew OsborneSenior Manager for Payments Policy at Bank of England https://www.linkedin.com/in/matthew-osborne-49552716/Jack FletcherHead of Policy and Government Relations (Digital Currencies) at R3 https://www.linkedin.com/in/jack-fletcher-465060101/Mathias StudachHead Finance, Risk and Organisational Development at SDX https://www.linkedin.com/in/mathias-studach-77a427a0/Moderated by Dominic HobsonCo-Founder at Future of Finance https://www.linkedin.com/in/dominic-hobson-49b8222/ Hosted on Acast. See acast.com/privacy for more information.

Competition in equities trading in developed markets is now so well-established that it seems to have existed forever. In reality it is as much a creation of regulators as of the digital technology that has enabled stock markets to dispense with physical floors and reach across national borders. True, NASDAQ can trace its history back to 1971, but competition was massively accelerated in the United States by Regulation National Market System (or Reg NMS) of 2005. A similar measure in Europe, the first iteration of the Markets in Financial Instruments Directive (MiFID) in 2007, began the process of breaking the domestic stock exchange monopolies of the member-states of the European Union (EU). But now the future lie clearly with the digitisation of data and the digitalisation of processes. Someone who has been at the heart of disruption and innovation in the stock exchange industry throughout the years of upheaval is Alasdair Haynes, the founder and CEO of Aquis Exchange, which he set up in 2012 after spells as CEO at both Chi-X Europe (now part of Cboe) and ITG International (now Virtu), to prove his belief that subscription revenue and the Cloud are as relevant to stock exchanges as large corporations. He spoke to Dominic Hobson, co-founder of Future of Finance. Hosted on Acast. See acast.com/privacy for more information.

The voluntary carbon credit market has emerged rapidly as a market-friendly way of combating climate change. It has attracted blockchain-based entrepreneurs that see carbon credits as ripe for tokenisation, in large part because a novel idea developed by people outside the traditional financial services industry has yet to develop an infrastructure capable of hosting issuers, investors and traders safely. Greenwashing, double-counting, lack of transparent prices, an absence of trustworthy intermediaries and even outright fraud are prevalent. Existing efforts to overcome the lack of information and integrity in carbon offset projects have not met with success but both policymakers and institutional quality infrastructure providers are now getting involved, and hopes are rising that the carbon credit market will grow rapidly. But there are formidable obstacles to overcome.What topics will be discussed?Carbon taxes are a mess (e.g., fossil fuels are subsidised as well as taxed, and at differential rates). Is that good or bad for the carbon credit market?What is preventing the carbon credit market from growing?Registries do not seem to have solved the integrity problem in carbon credit markets. What can (e.g., the ICVCM Core Carbon Principles (CCPs))?Which bodies – securities or futures or commodities regulators – should regulate the carbon credit markets?The Taskforce on Scaling Voluntary Carbon Markets (TSVCM) advocated “core” carbon spot and futures contracts as “reference contracts” for other carbon credits. Has that idea progressed?Can and should carbon credit contracts be standardised?Can existing securities and commodities market infrastructures play a role – or is a completely new infrastructure required?How might carbon credit markets can be linked to ETS markets, potentially enhancing liquidity?Is tokenisation an appropriate technology for the carbon credit market?Does it make more sense to issue carbon credits natively on to a blockchain or to tokenise existing carbon credits?Is the lack of digital money a problem in the tokenised carbon credit markets as it is in the other token markets (and, if so, are Stablecoins an answer?)What might the carbon credits market of the near future actually look like?How durable are carbon credits as an asset class? To what extent are asset managers and asset owners deluding themselves that sustainable investing can also deliver high returns (echoing politicians that dress up costs as benefits)?Who is on the panel?James C. Row, Founder and Managing Partner at Entoro Capital, LLC, a middle-market, traditional and alternative investment bank based in Houston, Texas, and CEO of Capturiant. Deanna Reitman, Partner Head of Carbon and Commodities at DLA PiperSean Mullins, Senior Vice President – Digital Assets and Financial Markets at Northern Trust Gbemi Oluleye, Assistant Professor (Lecturer), at Imperial College LondonModerated by Dominic Hobson, Co-Founder at Future of Finance Hosted on Acast. See acast.com/privacy for more information.

A Future of Finance interview with Co-founders of R3, Chief Technology Officer Richard Brown and Chief Strategy Officer Todd Mcdonald.R3 first came to public attention in 2015 when a group of major financial institutions and technology vendors backed the company to work out how blockchain technologies could be applied to regulated financial markets. More than six years on, R3 is the established enterprise software company behind a host of live and soon-to-be-live blockchain-based networks across multiple asset classes. In that time, its founders have learned a great deal about how regulated financial institutions think about and adopt blockchain technology, the balance that must be struck between competition and collaboration, the importance of inter-operability between networks and how to build a business case within a major financial institution. Dominic Hobson, co-founder of Future of Finance spoke to two of the founders of R3, Chief Technology Officer Richard Brown and Chief Strategy Officer Todd Mcdonald, about their experience and their expectations for the future. Hosted on Acast. See acast.com/privacy for more information.