Where Finance Finds Its Future

When it came to digital money useable on blockchain networks, the choice between central bank money and commercial bank money used to feel binary: Stablecoins and tokenised deposits and e-money were stopgaps pending the introduction of CBDCs. But as the threat of Stablecoins that were either global or issued by unregulated non-banks has receded, a more traditional hierarchy of money has asserted itself. CBDCs are likely to become the central bank digital money foundation on which myriad forms of digital commercial bank money will blossom.Central bank digital currencies (CBDCs) originated in need (to put fiat currency on blockchain networks) but also fear. Central banks were fearful that private forms of money based on blockchain technology would rob them of control of national and international monetary conditions. These fears were crystallised by the prospect of Facebook issuing a multi-currency Stablecoin called Libra.Having crushed Libra – whose remnants were sold to digital asset bank Silvergate in January 2022 – developed market central banks around the world are now bringing Stablecoins within the regulatory perimeter by privileging banks as issuers and prescribing what assets they can use to back a Stablecoin. This has released much of the pressure on the major central banks to issue CBDCs.There are currently just four CBDCs actually in issue – the Bahamas Sand Dollar, the Eastern Caribbean Dcash, the Nigerian eNaira and the Jamaican JAM-DEX – and all are developing slowly, with limited take-up. Significantly, all four were issued in developing economies, where the benefits of CBDCs in promoting financial inclusion and fighting financial crime are easiest to capture.Of another 93 countries exploring a CBDC – as monitored by the Atlantic Council CBDC Tracker – the most advanced (Brazil and Kazakhstan) fit the pattern. In all, just 17 are at the pilot testing stage. Of them, the Swedish eKrona project is the only one being pursued by a Western economy. 72 central banks are still developing or researching their plans, and the rest have stopped doing even that. True, the Bank for International Settlements (BIS) website records ten CBDC experiments in progress, with various combinations of banks and central banks taking part, and it is not hard to find others where the BIS is not involved. So the leading central banks have not lost interest in CBDCs, but they do now seem relaxed enough to let the private sector lead the digitisation of money.This reflects a consensus that a CBDC in a developed market must not disintermediate the commercial banks through which central banks influence monetary conditions. Nor are most central banks credible providers of customer-facing services such as digital wallets, foreign exchange and checking customers are not money launderers, terrorists or sanctioned businesses or individuals.There is an even more profound sense in which central banks are content to cede the leadership role, and it is this: CBDCs are emerging as the foundation of a layered system of issuance and distribution in which asset-backed Stablecoins issued by regulated banks, tokenised cash on deposit at regulated banks and e-money backed by cash held at regulated banks will provide the bulk of digital monies.To carry on reading, go to : https://futureoffinance.biz/is-this-how-cbdcs-will-happen-in-the-major-global-currencies/PanellistsRicardo CorreiaSenior Technology Executive at R3 Gilbert VerdianCEO at QuantBarney ReynoldsPartner, Global Head Financial Institutions, Governance & Advisory at Shearman and SterlingKeith BearFellow at the Centre for Alternative Finance, Judge Business School at the University of Cambridge Hosted on Acast. See acast.com/privacy for more information.

There is now widespread acceptance that digital assets are going to co-exist alongside traditional assets for a long time. That implies that issuers and investors will need a market infrastructure that renders issuers indifferent as to whether a source of liquidity is digital or traditional and investors indifferent as to whether an exposure is available in digital form or in traditional form. Both sides of the market just need something that works efficiently at low cost with minimal disruption to the status quo. D7, the Cloud-based post-trade infrastructure Clearstream is building to link the digital and the traditional securities markets, aims to provide exactly that. Dominic Hobson, Co-founder of Future of Finance, spoke to Michael Crezelius, Head of the Issuer CSD at Clearstream, and Thilo Derenbach, Head of Commercialisation and Digitisation at Clearstream, about how D7 does what it does now – the service is in production already - and what it will do in the future. Hosted on Acast. See acast.com/privacy for more information.

The decision by regulators to bring bank-issued Stablecoins within the scope of regulation is helping to fashion a vision of the future of money in which central bank digital currencies (CBDCs) play a role not unlike the one existing forms of central bank money play in the money markets of today: underpinning innovation and experimentation in different forms of money and different ways of making payments by both banks and non-banks without putting monetary, financial and operational stability at risk. Dominic Hobson, co-founder of Future of Finance, spoke to Ricardo Correia, Head of Digital Currencies at R3, where he leads a team that is working with central banks, banks and financial market infrastructures on a variety of projects exploring the potential of CBDCs and fiat-backed Stablecoins.  Hosted on Acast. See acast.com/privacy for more information.

Privately managed assets have become the default choice for tokenisation enthusiasts. The reasoning behind their choice is hard to fault. The advertised benefits of tokenisation apply a fortiori to the asset class. Privately managed assets – especially hedge funds and real estate, but also equity issuers that might previously have used the private placement or crowd-funding markets to raise capital – account for a disproportionate share of token issues so far. But are the enthusiasts and the pioneering issuers missing the point of tokenisation? Hosted on Acast. See acast.com/privacy for more information.

Tokenisation may be making limited headway in the conventional securities markets but it is attracting considerable interest in less familiar asset classes. 360X, the digital assets marketplace backed by Deutsche Börse and Commerzbank, aims to tokenise rights in expert-verified and high-quality art, music and (in cooperation with Tectrex) real estate assets. 360X Music, which provides an infrastructure for structuring deals, issuing tokens and promoting them to investors, has already issued security tokens backed by music royalties, and 360X Art is set to follow. Dominic Hobson, Co-founder of Future of Finance, spoke to Fabian Schaum, Co-founder and CIO at 360X, about the progress the company is making with regulators as well as issuers and investors. Hosted on Acast. See acast.com/privacy for more information.

Securities are issued into CSDs. The integrity of every issue of securities is safeguarded by CSDs. Ownership of securities is recorded by CSDs. Transactions in securities are settled by CSDs. Securities are serviced by CSDs.So, if it happens, tokenisation will either disrupt or transform or eliminate these functions. It is therefore both an existential threat and an exciting opportunity for CSDs. What tokenisation is not is something that CSDs can afford to ignore.Attendees will hear speakers make the case for and against investing in tokenisation capabilities now. They will also be given the opportunity to vote on the Motion before the debate and again after the debate, to test whether minds were changed by the arguments. Hosted on Acast. See acast.com/privacy for more information.

Digital asset enthusiasts are finding that neither issuers nor investors are ready or able yet to let go of high levels of intermediation. Historically, keeping track of investors is the responsibility of the registrar who, in a blockchain-based future is made redundant by a digital ledger that is updated automatically every time an asset changes ownership. Small and medium-sized enterprises (SMEs) have rarely made use of a third-party registrar anyway, preferring to keep their register and cap table on a spreadsheet. Now they are finding that the benefits of digitising their existing liabilities – lower issuance costs, a lower cost of capital through increased liquidity and readier use of their own securities as collateral for loans – are hard to realise without a digital registrar to keep track of who owns which digital security and facilitate issuance and trading of digital securities on multiple trading platforms. SEC-registered transfer agent Vertalo fulfils that role. The company is working with digital asset issuers and trading platforms to overcome the challenges of maintaining up-to-date registers of owners by moving the necessary data quickly and securely between different issuance and trading platforms. Dominic Hobson, co-founder of the Future of Finance, spoke to Vertalo CEO and founder Dave Hendricks. Hosted on Acast. See acast.com/privacy for more information.

Four years have elapsed since the Swiss stock exchange (SIX) took the bold decision in 2018 to respond to the challenge tokenisation has issued to traditional securities exchanges. SIX opted to build alongside its existing infrastructure an entirely new, blockchain-based trading, settlement and custody platform for digital assets. In September 2021 the SIX Digital Exchange (SDX) received its operating licence from the Swiss regulator, the Financial Market Supervisory Authority (FINMA) - itself now part of the SDX network – and opened for business. The leadership of SDX also knew they could count on a supportive legal environment in Switzerland, and SDX has since November 2021 hosted digital bonds both for its parent company[1] and UBS that can be traded and settled at both SDX and SIX, and launched a service for cryptocurrency investors to earn a return on their holdings of cryptocurrencies[2]. But its principal focus now is capital-raising for small and medium-sized enterprises (SMEs). Dominic Hobson, co-founder of Future of Finance, spoke to Massimo Butti, head of equity at SDX, about the range of services SMEs require to issue tokenised securities successfully, the partnerships that SDX is forming to build a supportive eco-system for issuers and how the remaining obstacles to the self-sustaining growth of the tokenisation markets can be cleared. [1] See the interview with Stefan Bosshard, product head, fixed income, at  SDX, at: https://futureoffinance.biz/2022/02/16/sdx-explains-the-challenges-of-pioneering-a-regulated-digital-bond-issue/ [2] See the interview with Alex Smith, crypto product lead at SDX, at: https://futureoffinance.biz/2022/08/30/sdx-web3-services-non-custodial-ethereum-staking-service-is-live/o Hosted on Acast. See acast.com/privacy for more information.

Tokenised funds exist already in the United States and Singapore. Asset managers are not only issuing tokenised funds but backing projects whose ambition is to facilitate the large-scale tokenisation of shares in mutual funds. What are the benefits they see?In this podcast, the coming tokenisation of the mutual funds industry will be discussed, in terms of the incentives to change, the techniques employed and the timetable by which it will proceed.Whenever and however it happens, it will be a seismic transformation. According to the Investment Company Institute, there were at the end of June 2022 a total of 152,888 funds in existence around the world, worth a total of US$64.4 trillion.And the case for change is powerful. Mutual fund managers face challenges of profitability which existing methods of efficiency – automation, outsourcing and offshoring - cannot solve.It is why asset managers throughout the world – including eight leading organisations in London - are now investing in tokenisation, and not just of funds but of securities as a whole.They sense that shifting funds on to a blockchain-based operating model will streamline the infrastructure that separates fund issuers from fund investors, cutting costs to the benefit of both.It follows that existing intermediaries – such as transfer agents, fund accountants and fund platforms – must adapt their existing businesses to a tokenised future, or face extinction. Hosted on Acast. See acast.com/privacy for more information.

Safe custody is the service that will unlock corporate issuance and institutional investing in the securities, asset-backed, non-fungible and fund token markets. While there is widespread recognition that regulation of digital asset custodians would accelerate progress, regulators around the world have so far reached consensus on combating financial crime only. Even that is proceeding slowly and patchily, but regulation of digital asset custodians and digital asset custody risks is proceeding more raggedly still as different jurisdictions jostle for advantage.Secure custody emerged early in the history of cryptocurrency markets as the main barrier to the entry of institutional investors. It remains the major obstacle to the engagement of traditional, long-only institutional investors in tokenised assets such as Non-Fungible Tokens (NFTs) and security tokens.Even the more adventurous institutions pioneering trading and investment of tokenised assets – namely, hedge funds, wealth managers, exchanges, corporate treasuries, sovereign wealth funds and family offices – are now demanding custody services that are not only high-quality but regulated.It is not hard to see why. The task of safekeeping the cryptographic public/private key pairs associated with a digital wallet that confer ownership and control of a tokenised asset requires the mitigation and management of risks that are different from those of traditional cash and securities custody.Because they are used to store, manage and transfer tokenised assets, private keys also represent a single point of failure. In a traditional custody chain, by contrast, various intermediaries (brokers, depositories, clearing houses, custodians) reconcile holdings and transactions repeatedly. Hosted on Acast. See acast.com/privacy for more information.