What Happens When Assets Move On-Chain, Is It Better Than Our Existing System | EBC11

So good morning. Second day of European blockchain convention. Yes, a lot of side events yesterday in the evening. We still need to energize a little bit. Uh I'm quite confident that we have a very interesting banal now around and uh we will dive into the real world world assets topic and I'm representing RBI uh a banking group uh acting in 13 14 markets in central and eastern Europe.

So my context to RWA was rather risk weighted assets uh until recently. Now it's real world assets. Um I'm working there in strategy. Uh we have a special department uh that works on the conjunction between strategy and technology looking into disruptive technologies and since 7 8 years we are looking very closely into blockchain. Um we believe uh that the blockchain technology will tremendously change banking industry.

uh we have done not only strategy papers uh we also conducted uh several number of of doc's so we were doing already funds tokenization 5 years ago very lean very slim uh not meant for scaling but uh meant to understand uh what what are the benefits of the technology and um my intro statement uh is that I'm quite sure that every serious bank uh with a strategic foresight will enter this space within the next 2 years. Uh so that's that's so obvious I cannot tell you. But that's enough from me. Uh we have very interesting panelists here. Hardi which company are you representing and what is your connects to real world assets?

Can can I borrow your mic?

Hi there. So uh oh no there's one right behind me. Okay, here you go. I

was wondering what that was. Uh okay. So uh I'm Hadi Kabalan. Uh a pretty long trajectory in the space. You can look me up.

But uh one of the things that uh Camry does is uh we that uh we run an institutional uh fund that invests in tokeniz world assets. Uh and uh Kamwise fund was probably if not the first and one of the first institutional funds to do so. Uh and so we've been involved in um you know most of the major uh RWAs that you've uh heard of from large uh asset managers and issuers that that have come over the last year. Uh and so one of the things that we really bring is kind of a a buy side perspective um and really try to uh shape and focus and be interested in the uh type of assets that truly use blockchain uh for advantages that are not available uh offchain.

IU go ahead. Uh hey everyone, thanks for coming. Uh my name is I Grigorov. I'm co-founder of uh Real Finance. Um we are uh EVM compatible L1 for large scale on boarding of institutional grade uh RWAS.

Um we are at our MVP stage currently and uh our main focus is actually to give infrastructure to institutions which can bring their assets onchain especially in terms of financial instruments uh and uh in a very transparent structured and decentralized manner.

Thanks um thanks for coming everyone. Um I'm and um I'm at the growth team at Koshi on the crypto side. Koshi is the largest prediction market um in the world. Um we let people trade on real world events. So like anything from like politics to economic markets to sports uh or even culture, people can trade on anything on culture.

Um and yeah, up until now we we were like the first CFTC regulated prediction market in the US. Um uh we recently announced our uh last raise uh at $5 billion valuation last week and we expanded uh internationally to 140 plus countries. Uh and at the same time we're also looking to go meaningfully onchain over the coming weeks and months um as we kind of expand or scale uh Koshi.

Many thanks for having me here. Um Christoff Hawk is my name not um Zaga as shown shown here on the slide um behind um I'm head of tokenization and digital assets at Union Investment. Um so we are Germany based um asset manager and yeah literally we we have um DT blockchain technology um on the agenda for about um 10 years and um for us um it's important on the one hand um because obviously when coming with investments um important that we are we have the ability to invest in tokenized products. Um so we we've had our kind of moon landing uh so to say about 5 years ago when we invested um in the first publicly available um uh bond uh from from the European investment bank um IP and um on the other hand it's also important um looking at um tokenization because um I'm a strong believer in 3 years time token will be the the kind of um standard wrapper for uh for for securities Um so not having the the physical global document anymore um which is today the format of securitization and um yeah we we are strong believer that um DT in combination with AI in combination with um quantum computing will significantly reshape the entire financial industry. So um we we are in the middle of a massive um financial transformation and and therefore in the very best interest of our investors of our clients it's important that we are ahead of the curve in this context.

Super. Thank you Kristoff. Thank you guys for the introduction. I hope I haven't promised too much. We have a very diverse uh panel here.

Two liquidity providers with a threadfire background. I I may say so a startup a unicorn. So let's start with the the guys in the middle. Yeah. What is the the the sole reason why you are going uh the tokenization way the real world assets way in your uh business plan in your business idea?

Is there nothing existing uh on the conventional side that you have used and big for your for your business idea? What kind of advantages do you expect out of the the RWA setup? Evo, maybe you start.

Okay. Yeah. Um, sure. Well, um, me personally, I come from the traditional financial sector as well and we have seen, you know, so many deficiencies there so far. Uh, I mean the accessibility to certain instruments and financial vehicles is still very limited.

Uh, you always need to go through brokerages etc. Uh I do think you know blockchain as a whole brings a lot of further advantages. First of all 24/7 markets uh no regional restrictions etc. But on top of everything uh you know interoperability and being able to leverage upon these assets is probably what made us um you know um build real uh as a company and uh as infrastructure. I think that you know institutions have also seen uh the benefits of such kind of a system and infrastructure and um yeah actually we we are partnering already with three banks um they're all in different regions they're all interested in uh actually tokenizing part of their assets being able to uh you know uh offer this to their clients as well so um I mean there is current systems in place but I do think that you know uh there is a lot more we can do uh when we bring this as its own chain.

Cool. Thank you Henrik. Continuing with you.

Yeah. Um yeah so as I said um Koshi has operated as like an offchain regulated um prediction market up until now. Uh you can think of it as like the Coinbase of prediction markets. Um but yeah, we're now like uh looking to like go meaningfully on chain. Um we're working closely with Salana and the Salana Foundation.

Um I'd say like the the primary two reasons why we we we we like believe there's like a huge potential in like uh bringing uh prediction markets on chain and like Khi uh like leading the way uh is is you know primarily like there is you know like a very high value uh audience and there's just like a lot of liquidity onchain that we can tap into by having um you know like an onchain experience where people can trade on um you know like anything as I mentioned before from like sports to uh politics who like who's going to be the you know who's going to win the next US election uh to like culture who like who's going to be you know top artist on Spotify um and then second second like main reason why we're looking to go meaningfully on chain is to like build out an ecosystem of builders that can um like build stuff on top of koshi uh so you know we we've seen it we've seen it like very successfully done on like hyperlquid for example the hyper liquid ecosystem. Uh there's been, you know, like trading terminals, analytics tools, dashboards built on top of hyperlquid thanks to like the permissionless rails of crypto. Uh and we're kind of, you know, taking inspiration from what like players like Hyperlid have done on like the per side and just seeing how we can um kind of like yeah build on on on the same principles but with prediction markets.

Thank you, Enrich. Kristoff, if I might change the question a little bit into your direction, you were already elaborating that there is a disruptive force within this tokenization. Um, you as a asset manager, you could invest into a lot of different uh asset classes. Yeah. Why is the momentum now in from your point of view the right one to start with uh tokenization with real world assets and what is the very obvious first ranked uh benefit that you would uh tell to your boards to do so why why isn't the the time right now um I guess um over the last couple of years it was important um for for the entire um stakeholders is involved in this type of business.

um to go through a learning journey um to set up um uh internally um the the infrastructure um to to go um through all the regulatory um requirements. Um so at at the moment um when investing in in tokenized products um for for example um we we we still have to go through a kind of new product process um where we we have to analyze the blockchain in detail um which is involved um with with the transaction um where we have um to do an indepth uh analysis um about the registra the decentralized um registra for these type of securities because in the traditional world typically you have the big CSDs um central securities um depositories like like a clear stream like a euro clear here in Europe um in the new infrastructure you you have um fintech um companies fulfilling this role and that's why we have to do um proper analysis um KYC processes and then obviously um it's also important um that our custodian has the readiness ers um to manage um the um the DT based um securities and um all that's a process uh you you have to go through a learning journey. uh as mentioned regulation plays plays a key role to give an example um in the US we we've had um Zap 121 um until couple of months ago and Zap 121 was saying that a custodian of um DTbased securities um needs to have um uh own capital 100% owned capital for for products um uh they have uh in custody on behalf of clients which is completely ridiculous and makes um the the entire process extremely uh expensive and that's why uh in the US most custodians and they they didn't offer any services for for DTbased securities and um Trump obviously was was a complete gamecher and you you've seen a 180°ree um turnaround um in in the in the US and from from a Biden um at SEC uh with with the attitude we don't want to get involved in digital assets. We we don't want to get involved in crypto. Um to a Trump um clearly coming with with a statement um uh uh financial transformation is key and in the US we want to be in the lead.

So these are all ingredients um coming back to your question which are um highly important um to uh to to further evolve the the entire um ecosystem and also an important piece is um not only looking at um assets on chain but also looking at cash on chain we we've seen significant developments because um uh by by just having the asset side on on chain not so the the cash side uh you you would have a massive break and you you couldn't raise all the synergies we we would like to see and and therefore cash on chain is it stable coins is it um deposit it tokenized um deposits um with with the big banks um is it um um wholesale CBDC is really uh is really a key requirement and now now literally we are there and um what what what are the the benefits for investors on on the one hand we we see massive um efficiency gains having the entire ecosystem on on blockchain and on the other hand um even more important for investors and the the investable universe will widen significantly. So um going forward u and and that's due to the fractionalization um um when when looking at the DT ecosystem you you can offer in in very small clips to retail investors um tokenized real estate um tokenized infrastructure projects um alternative um uh assets like uh private equity private debt and that's not possible in the old world. So at the end um the end investor is in the very big beneficiary of of this evolutionary journey we are currently on. Super. Thank you Kristoff Hardy.

What about you? Uh being a having a fund you could literally invest into everything. Why are you specializing on RWA? What is the sweet spot for you? Is it front running?

There's there's one primary reason, but before I share it, I I'll say that it is obviously a profitable thing. I mean that the fund generates around 14% yield on annualized basis from real world assets, not not onchain lending, but real world assets that are tokenized. Um, so it's it's clearly a profitable thing, but that's not the main reason we do it. The primary most overriding reason we do it is to train our AI because software likes to talk to software and human fund managers will cease to exist and we're building the systems to replace those human fund managers and we need to train them and we train them by having them talk to software. So because once you take an asset and you make it into a token, you've you've made it into software and then you have to go into a multilateral evaluation of it beyond crypto.

Crypto is kind of two-dimensional classic crypto with RWA tokens. you have to look through the token and so there's a multiple dimensions behind it in addition to everything you need to figure out about what's happening in liquidity flows and markets and and the chain and all of this stuff. So that's that is the overriding it's you're right it is more painful like you know you you have to find the the right assets you have to convince people to bring their great assets and and you have to you know you have to talk to your auditors about why you have gas tokens in your portfolio that are unintentional but are there because you need it to interact with smart contracts and this and that and you know and in Trafy you you don't have that it's things are simpler but the world is going to AI and tokenized assets are software and if you're early you can build an advantage thank you Hardi um thanks for the advantages I hear in some of the statements already a little bit of pain uh obstacles challenges that you See, and I I appreciate very much that we have real practice practitioners here on the stage. So, let's dive a little bit more into it. Why is RWA's uh and to doization at this stage and not why we are not more advanced?

Yeah. Um Enrich, maybe to start with you, you have a track record being now already a unicorn. So, why wasn't it a possible to have this status already last year for example? Yeah.

Yeah, that's a that's a great question. I think uh with with Khu the strategy always was to um like win the US market first. Um and the the best way in in the prediction markets industry to win the US market was always to go through um you know the CFTC and the regulator path. Um and and that's why Koshi for like like started 2018 and for like through like 3 to four years they essentially like sued the CFTC which is is like yeah close to like one of the like worst things you you you usually can ever do as a startup. Um but yeah eventually ended up winning against the CFTC the the largest regulator in the United States and became the first CFTC regulator exchange.

Uh, and that was uh, you know, like the main competitive advantage for Kawoshi for for like quite a while just because there was no other player that had a CFTC regulation. Um, and now that Kawoshi has built a foundation uh through like the centralized regulator path, they're now looking to like build on top of the the that that kind like foundation um, and like meaningfully go onchain. So essentially like Khi is looking to like build an onchain experience that is like at par if not better than any of the other players in prediction markets and that onchain experience will be built on top of like Khi US or like Koshi the foundation that they built over the past six to seven years. Um so yeah I think it was around like strategy and timing of like when to do each each uh or like when to execute um in terms of like bringing Koshi onchain. Um, you know, like LA last month, you know, Koshi is like um is like growing exponentially in terms of volume.

Uh we we did 3 billion in volume last month and we're on track to hitting our uh second uh record month in a row in October. Um last I looked yesterday was like 2 billion uh just in October. So like in the past like two weeks. Um and and we just think we we can like scaled up scale that up even further as we like kind of both go international as we announced last week. We're now available in 140 countries.

Uh and as we also go meaningfully onchain and we just tap into like all the onchain liquidity across uh you know Salana base and other chains that we're like in talks with. Uh I think the beautiful thing about Kawoshi compared to like some of the other players that kind like decided to go the onchain route first and then like now come off chain is that we can be chain agnostic. So we can because we will build on top of uh like the foundation or like Khi offchain. We can essentially decide to tap into like the different chains as we wish uh uh over time. Um so we we just yeah I think we just have like a lot more potential or like opportunity in terms of like uh capturing onchain liquidity uh at Koshi.

Thank thank you Henrik. Evo is it the startup context that that's that gives you the most of the headache and and in in your scaling thingy or are there other basically constraints that you are facing when when trying to to build in your your business idea? Well um yeah just to come back to the previous question as well and also add upon uh what Khadi just said u regarding you know software speaking software to software

um so first of all I do think that you know RWA's um we haven't accelerated that much because the conditions weren't right second of all I think that the infrastructure is still not developed to the extent where institutional players and actual large scale on boarding of such assets can happen and um that's why we actually started Rio uh as a project and as a startup and the main reason behind it is that uh having a single point of failure in a startup you know somebody who is not proven you cannot give them like hundreds of millions of dollars uh on some smart contract you know uh or just a tokenized platform and I do think that people were worried about this. I think that people are still worrying about this and this is one of the things which uh we have focused on uh how do we um eliminate this trust issue when it comes on chain and how we have uh tackled this is basically we have included business entities as our validators on a consensus layer. So you know you have actually uh three different pillars. You have the tokenization companies then you have the scoring companies who actually evaluate the asset and um both onchain and offchain and then you have also an insurance company which guarantees the assets uh against default. So I think that the system as a whole up until now wasn't ready for large scale on boarding and it's normal um you know you cannot just trust one entity uh you know there's hacks there's bridges etc but also the transparency and evaluation of such kind of assets has proven to be problematic allowing everybody publicly to be able to score the asset or evaluate it and you know everyone else to be able to see this evaluation.

I think that was like one of the keys and that's what we're focusing on and um overall you know we we have seen institutions being very receptive in that approach and uh yeah I think that um it was just too early now is the right time especially when it comes also to the regulation uh regulation aspect you know we have um our hands are untied let's say and um I'm quite confident that you know in the next five there's this is going to be one of the biggest markets ever.

Thank you, Evo Hardy. In in our prep call, we had a very uh vivid discussion about liquidity and and and the institutional view and and uh that institutional players need deep liquidity pools. Uh can you elaborate on on that a little bit more because it's obviously a very huge challenge for RWAs in this very moment. No.

Yeah, absolutely. Yeah. So I mean the first thing is that the whole RWA industry could disappear tomorrow and Trafi would not blink. So let's let's not uh you know everything is is still being built and there's a lot of exper even the largest people in this space are basically doing experiments today to try and figure out how to best approach this. Um then I'm also I you know one shouldn't be surprised uh I sort of count back to when Ethereum became kind of production quality let's say 2016 as when the clock starts ticking on this new technology.

So you're now 9 10 years into it. then it's not surprising that it's now that you're getting a confluence of regulators and executives and asset issuers and owners whatever getting interested. It takes it takes a while. I mean the super early people were very early but I think now you're at a confluence of uh of stakeholders that is making this happen. But the the big thing is you know uh blockchain when people when when when when people pitch asset owners about blockchain and say oh it will make an illquid asset more liquid.

This is not something that actually blockchain has delivered yet truly at scale. What it's delivered is transferability but not actually liquidity at scale. And this holds back some of the highest quality assets from coming on chain because they have so many other options in capital markets. Uh and so why should they go through the pain not just the immediate pain but also the ongoing expenses that you need to layer on to your organization to actually tend and maintain uh blockchain and tokenization systems. And and that's where you really need to be able to tell them look there there is liquidity here or there's liquidity that can come and this is where really then the buy side should be able to step in uh and come into it and say yes if we do you know assuming we like an asset and we've done the due diligence and etc then we should be able to stop up if somebody's selling and sell when somebody's buying and and and provide some measure of liquidity.

It's still today absolutely tiny. Uh the the industry is too small so far for the really the big traditional market makers to play. And so you're seeing it it coming through some of the institutional funds and so on. But I think until we unlock that um and it might be through linkages to DeFi, it might be through linkages to vaults through it's there's so many experiments happening right now about this but until you really unlock that uh you haven't fully delivered the promise that asset owners and issuers have been given from blockchain. Kristoff, you as an asset manager, you sit on on the liquidity.

What is still hindering you besides US regulation, Kaishi winning lawsuits against them? We that there's a change in the US administration. You hopefully soon will overcome your product process and and I feel your pain. I'm I'm doing similar things in my organization. So can you start to scale and and do a variety of investments bringing your liquidity from union investment uh to RWAS in the near future or are there other challenges still ahead of you?

Yeah, we we are we are getting there. Um um Got so so obviously secondary market trading for us as an active asset manager um we we don't have a buy and hold strategy um but we we are actively increasing decreasing um positions on a on a permanent um basis. So therefore, secondary market trading is key for us. And um um at the moment um it's um still the case um that you have um very um limited number of um DT trading platforms um alive. Um so in continental Europe um you you have the DT pilot regime um where we just have one um license and that's um 21x um offering the service in the UK.

We have the digital security sandbox allowing trading going forward for for um DT based securities but but also no no license um literally given um so um but but I said this ecosystem is evolving then um next important step is um that um we we need um repo functionality um for for for these type of products and that's why we are collaborating as an industry with with the ECB. So, so I think that's a topic which we should um have also sorted out in the in the coming months. And then um the the third um um pillar is um the cash on chain which which I mentioned um so here in continental Europe it's great um that we have with with the ECB um wholesale central bank money going live um in September October next year. Um so we just um start um next week with uh with with a pontis working group. So that's stage one for for CBDC um issued by by the European Central Bank.

Um so the ecosystem is built and um I guess it's kind of normal when when having a technological transformation. you you have this type of um hockey stick where where you have a kind of slow adoption uh initially uh and and then all of a sudden you you have this um exponential growth and I guess we we are somewhere there where we will see um massive acceleration over the next um coming years and by the way when when we're looking um years backwards um web 1.0 zero um upcoming of the the internet. You you've had similarities. Uh stage one was described by by skepticism and then um all of a sudden this topic was flying through the roof also web two and um so therefore it's kind of kind of normal.

It's um significant investments which need to be made by the entire industry by by fintech and also by the traditional ones. Um but we are getting there.

Super. Thank you. We need to come to an end. One last round. Four minutes left.

So I would like that everyone sticks to one minute. Yeah. Uh my question 3 years from now and this is for this industry quite an eternity. I know. Yeah.

What would you like to see from a real world assets perspective that is already realized by then? And what would on the contrary very much disappoint you that it's not already existing or at least started to to to to happen on real world assets tokenization. Hardy maybe you you you start it off.

Um I I'd like to see that there is a lot more institutional engagement in liquidity around assets that have a longer term than one week. This is, you know, this is one of the main uh circles that that DeFi hasn't squared. Defi wants one day to one week liquidity for getting higher yielding assets. you're typically going out one year plus and that hasn't been squared and it won't get squared until there's real institutional liquidity about being able to exit and enter longer termed assets in a more liquid manner.

Okay, Evo. Yeah, me personally, I'd like to see um as what I said like what we're focusing on as well is actually structuring uh the infrastructure in such a way that these assets are um how to say it evaluated correctly so that we can actually attract uh bigger liquidity as well uh so that these assets are uh also being able as I said touch upon what Kadi said uh data is something very important uh having KISS trading those assets uh and um being able to access all of the data on chain straight directly it would be a huge benefit and uh yeah as I said if the assets are um you know more quality assets more longer term I think that institutions will uh pour further liquidity into the system as well so yeah that's that's about it

thank you Evo Henrik continuing with you

yeah I I think uh taking a step back, I think like in crypto only uh like tokens have had like 100 billion plus dollar outcomes with uh you know like companies like exchanges and stable coins primarily. So like companies like Coinbase or like even OKX uh and then stable coin companies like Tether or Circle and I generally believe prediction markets are the next frontier and are you know potentially going to be like the next hundred billion dollar outcome is going to come from a prediction market. Um so that's kind of like what we're pushing for at Koshi and we hope that you know in the next uh you know months to come a lot more uh kind like liquidity or volume on Koshi comes from uh kind like the onchain side um compared to you know where where we are at right now. Christoff.

So in three years time we we are very close to the fact that um token is um the the kind of new normal um so um getting rid of um the the legacy um um physical global document. Um we will see a much broader offering for our investors when we're looking at RWA. So, so not thinking about um not only thinking about equities um bonds um and um and and um traditional fund shares we will have um especially in the illquid space uh we will have significantly broader offerings for the investor and I guess we we also get closer to the 24/7 trading and um to a t0 settlement um given the fact that um we we have very established um cash onchain mechan mechanisms and um we we also um will have a central bank uh fully in place uh with um wholesale and with um retail CBDC.

Thank you Kristoff. Thank you all. Uh it was really great to to to hear the argumentation representing different perspectives on on on RWAs. Yeah. Uh I hope you also enjoyed it.

Um yeah, let's make it happen. Let's be let's hope and let's work on the on a setup that if in a year from now if we come here to Barcelona we can say that uh maybe 2026 is the year where the hockey stick starts to build uh for for for RWAs. Yeah. Enjoy the rest of the convention and uh thank you for your attention.

Thank you.

Thank you.