ANNA fireside chat: From Traditional to Tokenized: The Standards Powering Tomorrow's Markets | EBC12

Okay, congratulations. So, we can begin, right? Yes, with slides. Perfectly. Greetings to you all.

Today we have a very interesting topic for infrastructure, as blockchain is rapidly developing and growing. It is estimated that by 2033, the capitalization of on-chain the capitalization of on-chain assets will reach 18 trillion. And since I'm from Liechtenstein, from the government's side, of course, digital regulation is always a priority for us . I think we in Liechtenstein were the first in 2018 to introduce token regulation. And now we have two real experts on registration and identification: from DTFA and Anna, so let's start the discussion with a simple question.

We are used to identification in traditional finance traditional finance , but why do we need it in the token segment? Why can't we use token codes or even project names to identify, register, or trade tokens? Why? Roman. Well, perhaps it would be best to first outline the situation regarding all the traditional identifiers that we use now.

And I think you're the best at dealing with this. So, good afternoon everyone, and thank you, Heinz, for the introduction. Perhaps to provide some context: ANNA, the Association of National Numbering Agencies, is our global member organization. We unite 125 national numbering agencies around the world. These are organizations world.

These are organizations that include stock exchanges, market infrastructures, and in some cases, data providers data providers . They are responsible for assigning ISIN codes for financial instruments in their jurisdictions. So, ANNA is responsible not only for the ISIN, but also for the CFI, the classification of financial instruments, and FISIN—the instruments, and FISIN—the abbreviated name of the financial instrument. We also work closely with other standards-setting organizations like the DTI Foundation, but Rowan will talk about that in a minute. We are also working with GLEIF on the Legal Entity Identifier.

Regarding tokenization: for ANNA, it is simply an evolution of capital markets that does not eliminate the need to identify your digital assets, your tokens. We are convinced that instrument identifiers will remain as important in the digital world as they were in the traditional financial system. And finally, finally, a few numbers. We recently updated our reference database , ANNA Service Bureau, to also cover the specifics of digital tokens. So, we have a total of almost 150 million ISINs, including digital tokens and reference instruments.

And as I said, we are working closely with the DTI Foundation as we also added DTI for digital assets and XT ISIN for reference instruments. So, I think, Rowan, you'll talk a little bit about that. Yes. Thank you, Karen. All of these traditional identifiers have proven themselves well in the financial industry, and now they work in the cryptosphere as well.

You can take into account all the details of the security . You can take into account all the issuer data. Blockchain simply has an extra dimension: where the token is located, how it is actually represented, and how it is linked to these types of assets and issuers. If you start using tickers or project names, your investors, operations departments, or risk and compliance specialists will start scratching their heads trying to figure out what exactly they are dealing with. That is why ISO standards such as the Digital Token Identifier, the ISIN and the LEI make it clear what, where and who is associated with these tokens when they are implemented.

And this is where scalability and interoperability become key components. Thank you. Yes, but you were both absolutely necessary and critical to the industry so that the blockchain infrastructure could get organized and operational. Maybe you could give a small example of how a third-party tokenized equity asset works , how it's represented legally, and how it's wired up to make it work for the industry and the business. Is that so?

By the way, I noticed that we are really standardized even in our shirts. Ahem. Market standard. Going back to tokenized stocks, I recently read about the case of AMC and Robinhood, and it's a great example of why identifiers are needed , because in tokenized stocks there are three categories that can be distinguished. Firstly, there are tokenized shares secured by the issuer, and it is important for an investor to know what exactly he is investing in and what his rights are.

For example, if you invest in tokenized shares backed by the issuer, you often have the same rights as if you were buying the underlying shares. There are also third-party custodial tokenized shares and “wrappers,” as in the case of Robinhood. So, these three categories have different property rights. Therefore, it is important for an investor to know what he is investing in, and this can be done by identifying the underlying token. So underlying token.

So , at ANNA, we have also reviewed and refined our ISIN recommendations to take into account, for example, these three categories of tokenized shares. We have updated these recommendations to reflect market evolution. And in addition, our DTI registry is a central registry for all of these token identifiers. It actually started with the crypto space, then evolved with stablecoin offerings, then the slow development of DLT bonds development of DLT bonds , tokenized funds, and of course, most recently, most recently, tokenized stocks. And this figure has increased significantly.

Just this morning I read the ESMA risk report published last week: I think last week: I think the volume of tokenized shares has increased sixfold . And tokenized shares are still a rather confusing topic. And I think it all depends on all depends on what type of model it is. You mentioned that there are several of them. There's Superstate, DTCC, Kraken, Robinhood— they all have different views on the relationship with the underlying asset: whether it's custody, a derivative, or direct interaction with the issuer.

So all of these models have a unique "fingerprint unique "fingerprint " in terms of the relationships between ISIN, DTI, and LEI. For derivatives or trackers, you essentially see these shares as the underlying asset, as opposed to custodial or natively issued, which are directly the shares themselves. So, if you look deeper, these identifiers create a standardized way to understand what exactly you are getting with this tokenized stock tokenized stock . Thank you. Do you think untested, unregulated tokens will continue to exist on the market, unregulated tokens will continue to exist on the market, given the lack of clear regulation?

Do you think this is a gap that needs to be filled, or do all tokens need to be regulated to work with you? Regarding cooperation with us Regarding cooperation with us , we adhere to neutrality. We essentially identify what the industry wants or needs to identify. So, whether a token is regulated or not, it essentially just means that the token falls under the under the regulatory framework of that jurisdiction, unlike another token that may be outside of another framework or whose regulatory framework is still being formed. So, from our perspective, as long as we can figure out what this token is and verify it, or—if it's on a private network— private network— confirm it through the administrator of that network, it can have an ID ID .

This will allow everyone to use it as part of their disclosure , reporting or record- keeping, as an additional element to enhance data reliability and potential reporting to regulators. So yes, for Anna, that's exactly how it is . We are neutral on regulation. We, of course, sometimes often respond to regulatory consultations together with the DTI, of course. Standards are generally important to regulators.

So, of course, it is useful when a regulator refers to a standard, but for us it is just another argument in favor of why standards and identification of financial instruments are needed. Yes, "neutral" is a good word, but of course regulators, whether it's MiCA reporting, IRS reporting, or oversight bodies, need reporting. They need reporting on releases, and of course they then focus on your side. Do you have any requests to regulators for greater interoperability, as each jurisdiction has its own rapidly evolving regulations, except perhaps the states? But, of course, regulation is active is active , but these norms are not mutually compatible.

Yes. I think this is a very important point for market standards and best practices coming from the industry: the industry can align with them, and that actually mitigates any potential fragmentation in terms of the regulatory terms of the regulatory framework, which might require something different, whereas the industry does it in a standardized way. So these identifiers can be used in different jurisdictions. The specific regulatory framework does not matter, and that is why it is so important for the industry to understand the process of developing such standards, because they belong to everyone here, to the entire industry. Regulators, yes, they are very interested in this kind of data presentation.

They, perhaps more than anyone else, want to understand exactly what is happening on an activity-based basis to ensure investor protection and market integrity, and , although this may not be to everyone's liking, tax collection. So, there are tax authorities that use this. You mentioned the US Internal Revenue Service, they use DTI as a standardized format for crypto reporting in this area. In a broader context, the OECD also uses this as part of its cryptoasset reporting framework, and closer to home in the EU, it is used as a standard crypto identifier under MiCA, in the Canadian regime, and more recently within the UK's crypto regulation. So it's really interesting to see how this standardization is being implemented not only by the industry only by the industry , but also how regulators are adopting what the industry has already created for this particular data.

As for the industry base, I think I can say this as a representative of a market body that works with the banking sector and the industry base, and you see how the blockchain see how the blockchain industry is developing rapidly. The banking industry, as we discussed earlier, is now implementing its own blockchain projects. How do you assess the development in this direction? They created their own blockchain blockchain infrastructure within their companies. This becomes more difficult to ensure compatibility with other clients.

How do you see this developing in the future or next year? Yes. This happens very quickly. Yes, that's a really apt observation. I think we've seen a lot of pilot projects by now.

Everyone is building their own blockchain blockchain system. I think the key question will be how to make them all compatible, and I think that was mentioned on another panel yesterday. If you want to achieve scale, you need this interoperability, and this can only be achieved through the use of standards. Of course, there are different standards at different levels. I think we are talking about business- business- level standards.

Obviously, there are also standards at the token level or at the more technical blockchain level. So here, in terms of business here, in terms of business standards, I think it's no different from what exists today in the traditional financial world, where standards also help to communicate in the same language. It will be exactly the same in the field of DLT and blockchain. Standards will help bridge the gaps between all these digital projects, digital islands, so to speak . So, I think this is where standards will be absolutely necessary to help create interoperability.

Yes, there is always a big risk when you see an announcement about a new platform, to think: what will they do differently than everyone else? Will we have to go through a painful adaptation process if we want to join this liquidity pool or liquidity pool or anything else they offer? And I think it's becoming more interesting now when you see a lot of opportunities for collaboration where the industry is coming together and also working with regulators within their "sandboxes" or some kind of pilot regimes. So, I think there's a huge amount of useful work that can be done with all the participants in this area. I think from our perspective, these are critical data elements that everyone works with.

Yesterday, in the panel discussion, I mentioned that depository activity is the grease for the mechanism, and I think the same about standards about standards : data has to flow through everyone's organization, and the friction in the transfer between the market infrastructure, the investor, or anyone else in that ecosystem will be reduced when everyone speaks the same language. And we're working on a language of identifiers, which is probably the most fundamental language that can be agreed upon. So, as a final question to wrap up: in your opinion, is the industry not ready for 24/7, not ready for cross- ready for cross- product transactions in 2 seconds, at least from the compliance side. What do compliance side. What do you think your approach is to help the industry meet these commitments to customers who will soon demand it, and the US is already partially meeting these commitments.

What is your approach to meeting customer requests for doing business 24/7, in 2 seconds in cross-border transactions, which is of course possible in the registry? What is your role in this then? To answer briefly: speak the same language and you will have significantly fewer headaches in the future. Secure and manage your data now, before you have to establish dozens, hundreds, or thousands of connections in the ecosystem connections in the ecosystem . Yes, I think standards are a technical thing.

It may not be very attractive, but it really helps to achieve 24/7, and... it helps to achieve the ultimate goal, which is what investors really want. I would say that this is part of the foundation for achieving 24/7. So thank you. It seems we are running out of time.

It was a short 20 minutes. Thank you for your discussion and for your ideas as the foundation of the industry ideas as the foundation of the industry , as a critically important and necessary infrastructure, and I sincerely thank you. Thank you.