Institutional Instincts: Current Attitudes Examined

[Music] thank you so much for coming today I hope all of our panelists are sitting right under their pictures how they've been introduced um so um thank you so much for coming um fundamentally we are talking today about institutional instincts and we have a very unique panel because they are from different backgrounds but all from the trade finance and now in the digital world and what is unique is all of them are working in the region but have experience globally so what we want to talk about today is so much you know what can we learn from the other regions what is happening in Middle East what is the forward-looking uh aspirations in the next 3 to five years and I have just a few questions but I'm sure the panelists will be here after the session if you want to ask more um obviously over the last couple days you've seen so much that there is all the new investment into the region right now and there are very high targets and very a lot of interest from various players so maybe vakar going to you you are a connector across the world you know you've been working across Middle East and all the other different places what do you think about the market what do you think is driving the market in terms of you know the stable coins tokenization payments what do you see as the key priorities thank you for having me it's uh first of all it's good to be back to my second home I used to work here in this exact building for three and a half years about 3 years ago so good to be here talking about things I've done outside of this world taking all the learnings um yes the bank itself is u a long-standing bank we've got a 130e plus history in about 130 countries around the world and across the three lines of business that we run corporate and institutional banking wealth and Retail as well as Ventures digital assets are featuring uh quite heavily on the agenda going forward across all the Strategic pillars be it from cbdcs which we've been participating from the outside in Africa to the upcoming cbdc projects in Asia and Middle East um looking at digital Assets in general across all uh service pillars from security services to Capital markets to the trading desks um our Ventures have been quite prolific over the past 6 seven years in launching all sorts of product and services from Asia and the Middle East and wealth and Retail businesses began to catch up as well on distribution of wealth type products which includes ETFs and then hopefully very soon crypto um again yes we are a connector of the worlds we are a banker primarily and then all the services that build around it on the institutional side which includes custody asset servicing uh transfer agency funds Administration and then the underlying uh custody and servicing of those assets so we see a huge demand coming from from the large end of town to service this particular industry primarily because that the bank provides the protection layer from a balance sheet point of view which uh is quite hard to get because there are a lot of competing priorities in the bank everyone wants a piece of the balance sheet but to be able to commit balance sheet behind crypto is a fairly significant undertaken it takes a long time and effort but because there is um a certain type of clientele coming into the world primarily enabled by my colleague on the right hand side for coinbase and Lead from the front there is a lot of demand coming in from those who have never touched crypto they want to get into it but they're um not comfortable in Touching crypto without some kind of balance sheet support so yes we're connecting the world there we're connecting from the payment side we provide uh payment rails for some of the largest stable coins in the world we provide bank accounts for some of the largest crypto exchanges in the world and then from a tokenization point of view we're now beginning to invest in that site as well so that we can connect the crypto story with the tokenization story while having the banking rail behind it hopefully enabling people like coinbase and frankco Templeton in the long term thank you so much and I guess the Key summary there is that the ecosystem is super important which is why three of you are here uh Brett over to you from the coinbase perspective similar to all of us perhaps not me yet you have been coming here for 20 years to the region and you have seen the region grow so what do you anticipate are the key themes driving the institutional changes and what do you want to see more of great to be here it's a nice moment to be on stage uh next to one of the world's largest asset managers and largest banks um and of course coinbase institutional activating across all fronts U by way of introduction I run the institutional business which includes um running all the exchanges the spot International Exchange and Futures exchange uh the prime business that has within it custody trading staking financing and then the third pillar is asset management uh the scene setting I would bring is I've always looked at this region I've been coming here since 2001 it's been uh always a place as Forward Thinking I I remember back to a couple years ago when we had this very form in the big presentation when Abu Dhabi put up the beacon to the world to be the the lead Center of innovation and it was a really nice moment um it was anticipating perhaps a moment like this so the scene setting I would bring to you is we just had a huge milestone in the US we had a presidential election that election has removed arguably the biggest barrier to institutional adoption which is the regulatory friction so things are moving at much much faster Pace uh than anticipated um what's also remarkable is that the US finally even before the presidential election in in Period of great uncertainty and Regulatory doubt launched uh Bitcoin ETFs Franklin uh was among the leaders along with Black Rock and some of the world's largest names and what's interesting about that moment is those huge those huge names uh attached their legacy to crypto and to bitcoin and not only do they do that U they set um a series of incredible records so the the Bitcoin and ethereum ETFs collectively combined or singularly for Bitcoin have been the most successful ETF launches in all of time and so really what that means is it's the it it makes crypto an alternative asset class that has been legitimatized it's been supported by the biggest the biggest actors in the world and it's drawing in a collective of different types of of clients and so that's the the big picture framing um I think the the putting the beacon here to bring the world's capital I think it's been a smart one and now it's up to us to capture the moment and and keep accelerating faster thank you so much and Christopher you know uh we touched on the regulation point on the US election how do you see the regulation moving forward what are the key themes impacting now how is it going to change perhaps from the Utility side and perhaps on the broader side as well sure um and by way of you know introduction um so you know my name is Christopher Jensen with with Franklin Templeton uh so Global asset manager um not quite haven't been around as long as Standard Charter but you know over 75 years and and we managed close to I think around $1.6 trillion uh with offices all around the world and we've been here uh in the UAE for for decades um you know this is an important uh you know kind of strategic capital of of this part of the world and globally and um and so you know what what the way we approach digital assets at Franklin is really twofold one is uh we are active builders in the space so we're we're customers of blockchains we're users of blockchains um we are you know part of that kind of movement of tokenizing real world assets and putting them on chain uh one of our kind of Flagship products there is a a tokenized money market fund um and in addition to being builders in the space we're we're also you know investors in the space and so being a global asset manager recognizing digital assets as a new emerging legitimate asset class um you know then it becomes a question of well how do you build out a comprehensive investment product sweep to really cater to this new asset class and to retail investors but also institutional clients you know worldwide and so you know the with the mention of the ETF we think that's you know extremely important um the Advent of spot ETFs you know in the US and obviously they exist uh in other parts around the world but you know just a great way to access this a asset class through lowcost you know kind of Market beta these single asset ETFs and we think we think there'll be more and we think there'll be you know multi-coin ETFs and really we're just getting started there um and then in addition to completely passive um there's obviously ways to get exposure through blockchain Venture Capital uh so we're active in in that part of the market as well uh in addition to kind of best ideas for for tokens uh and putting together portfolios of this new asset class of of actual digital asset tokens and their kind of claim on the value that these networks and these ecosystems can create um and so it's it's it's really exciting times right because you have this transformational technology that is the blockchain and everything that you can do with it and then you have this new asset class uh and so your question around you know regulation I think really impacts both of these um and a good analogy that I like to use is at the at the blockchain level right so we're we're taking products tokenizing them and putting them on chain and we believe in you know open permissionless public blockchains um but there's obviously more than one blockchain there ethereum and and salana and so our our product right now is on eight different open public permission list chains and each one is is you know the analogy here is that each chain and ecosystem is a little bit like each country and Regulatory regime around the world and and the goal is to decrease friction and really improve interoperability between different parts around the world World As We access you know this technology and this asset class and then underneath the hood you know interoperability between these ecosystems so I think the regulatory piece is extremely important as it you know decreases kind of friction and allows for the the transfer of assets and wealth uh between regions um and you know as as as my colleagues here have have referenced you know I think as we look to 2025 uh there's a lot to be excited and optimistic about in the US here in the UAE uh and abroad so I think you know we're we're going to see regulatory Catalyst really kind of open up a more constructive and friendly environment for kind of getting business done uh and and and then also as interoperability between these ecosystems improves I think we'll also see greater utility uh done at the kind of blockchain level and just to double down on this question I've been working quite a lot with the regulation and back in 2017 there was no regulation around blockchain right but all the different consultancies they started with looking into the risks around the blockchain do you see that there is a potential of Regulation stifling Innovation or do you think it will continue at PACE The Innovation you know yeah I I think I think it's an unlock so I think I think the pace actually will improve and continue and get better uh in the US um and abroad I think you know all of our firms here have Global Footprints right and so we're trying to uh take advantage of the global footprint and these different Reg regimes but I think in each one we're seeing uh improvements uh and so I think it will only accelerate Innovation and adoption and that'll be driven by um you know kind of this this unlock or this release of just a more friendly attitude towards towards digital Assets in crypto all right thank you and vakara over to you so we are coming towards the end of 2024 right but if you were to make predictions in the last uh in the next three to five years what do you see at the key opportunity but also the risks glad you didn't ask me about the Bitcoin price um so um okay so we're coming at a point in time now where scale is needed I mean up until now if you look at the market crypto Market is what three four four trillion 5 trillion give or take right three and a half almost now three and a half yeah so um if you look at the markets that Standard chared Security Services um operates on the total custody size of the world is between $250 to $300 trillion these are the kind of assets that are floating around so the markets are marketly different and given what Franklin does and what coinbase does and Brett been in and around investment Banks uh most of his career the scale requirements are going to be massive and next year is all about scale right so large key institutions entering the space with real scale enabling digital assets not just crypto but non crypto digital assets is the is the actual real use case next year whether you talk about collateral management whether you talk about lending whether you talk about prime whether you talk about you know outright coin lending right so all of these things to be really successful after the legislative process in the United States and then some of the adoption by the bis in The Wider credential uh regulatory regimes as well as Micah scale is number one priority at least from the bank's point of view we need to be able to support our existing clients and new clients that are coming on board to give them the backing of the bank either that is from our custody platform our tokenization capability our balance sheet our capability to lend and uh connect different parts of the world into a singular Ledger as much as possible so if this time next year if the banks haven't come in and started to offer crypto custody from their balance sheet backing and they haven't been able to lend to some extent or provide some liquidity behind some of the crypto activities I think it's going to be a bit of a m opportunity but that's what all of us are geing towards all right and just a question because there was a lot of conversation about the Bitcoin and the price which keeps going up and I think Eric Trump mentioned it's going to be a million a couple of days ago what do you think okay um I we have a very distinguished uh digital assets research team quoted all over the world their view is that we are not too far away from 200,000 for a start in the longer term up to um seven figures easily but uh just to finish up so should people be investing or it's likely to [Laughter] crash we ask you're asking an Institutional Bank whether something will crash of course I'll say no um but genuinely speaking okay let's look at the actual building blocks in the industry at the moment so you for the past 10 15 years the spot Market has been you know bubbling away then you've got Franklin Templeton you've got Black Rock you've got other you know ETF providers coming and now what's happening at the back end of that is there's a whole treasury team risk management team sitting there watching the books and they're putting Hedges on they're playing in the money markets they're playing in all sorts of instruments to make sure that yes they can protect themselves yes there is a there's a level of hedging that you can do that you sort of completely don't miss out on the upside but genuinely speaking there are some you know levels of protection that are in the industry that I don't expect it to go 20 30 40% down let's just say that you know I just want to pull I want to draw a point out so um I'm not going to weigh in on price predictions I don't think it's helpful but I want to make sure the audience doesn't miss a really important point so which is Franklin Standard Chartered everyone who's an institution is trying to activate across a number of things in the AET class so activity is not limited to a single point in time of buying some Bitcoin that's not what it's about and so instead it's an expansive thesis about Innovation and disruption and when institutions want to enter they need everything from start to finish so they need to be able to safely buy it effectively at a good price use Smart order routing have a qualified custodian to safely hold assets uh to receive trade financing to perhaps receive passive income from assets held where they want to earn incremental yield to be able to put money at rest into stable coin and to earn yield to be able to stake native Assets in crypto I could go on and on but this is like the coinbase platform and so when you think about their visions of what they like to do in the asset class it's really super important to have a product platform that has a holistic experience across all these different things that's an important point we can be future you we can think about the price in the future Etc if you can't invest safely if you don't have a a seamless experience across a number of different products it's not going to work and it won't scale so I do believe in your point on scaling and I think we're all developing platforms that'll do exactly that yeah thank you and CHR the thing I would add there you know as we decrease counterparty risk of engaging with this asset class then we can really just focus on the fundamentals of these you know digital assd tokens and so you your question was was almost a little speculative in nature where where is the price going is it going to crash but you know I spend all day actually looking at the fundamentals of these ecosystems and networks and through the toonomic design of a protocol you know is there a way for any of the value that that Network or ecosystem creates to ACR back to the price of the token and this really is you know we believe rooted in fundamentals and can be looked at like you would look at traditional asset classes so you know we try to borrow best practices from equity and credit and commodities uh all these mental models and Frameworks and valuation techniques and apply them to this new asset class there's a ton of nuance uh it's not a one-size fits-all you know but but we're firmly of the belief that that you can actually come to a fundamental view on value for these things and as the um you know the the the chain you know again as counterparty risk comes down and it's safe and trusted with who or where you get your tokens from where you custody it um then you can just really focus on on the fundamentals of of these protocols and these tokens yeah so I think generally the conclusion is uh you are helping the customers to be safe and secure while scaling and this is going to continue in the region as much as possible I guess if I leave uh because we have a couple of minutes left and uh if we just do one key takeaway from each one of you would they very short and sweet for the audience what would it be um I can go I can go first I think we're going to see um and as you introduced us right you talked about how we're we have traditional Finance backgrounds and now we're kind of fully immersed in in digital assets and and the digital world and I I think 2025 we're going to see more blending of these two worlds I think the ETF uh was you know the digital asset crypto ETF was a great Innovation to take that traditional wrapper of an ETF and wrap a dig really native product I think we'll see more uh use cases of that applied we will put the ETF wrapper on um more different kinds of digitally native products and bring access that way and then the opposite will be true we're already starting to see you know traditional assets and funds uh be tokenized and put on chain I think that is the endgame more and more assets are going to come on chain uh and so you as we looked at 2025 I think the blending of these two worlds will happen you know along both of these uh dimensions the one Mega Trend okay is institutional adoption and it's happening in every Subs segment of of the universe whether it's hedge funds Asset Management corporates wealth platforms payment providers and all of them want to use platforms that are regulated and trusted and operate well across all the world and this is going to be a competitive mode for anyone that opts into regulation and can provide that trust and seamless experience that's the big point I sort of echo both of the sentiments in a way where the key aspect of um enablement for utility of digital assets Across The Wider Financial Services sector requires harmonization of approaches and some consolidation I'm not suggesting that there going to be massive m& activity but as large institutions do come in you would see Banks asset managers um hedge funds the really big EMP who've been playing in the field for decades and decades um look to provide these services and that is something that you will see become a norm which wasn't the case a few years ago so to be able to achieve that you need connectivity uh you need cross communication being able to talk to your trafy people within your bank about new and you know wonderful things with the help of people like Frank Frank templon coinbase and standard shouted that's I think where the world is going in the next 12 to 24 months so one forward looking point which is what comes next and what comes next is institutional activity on chain and I'm looking at my CBM colleagues in the audience that have the diamond platform that are going to bring issuers and investors together on chain so look out for it thank you so much uh so we are out of time uh thank you so much to the audience as well for listening the Bitcoin question wasn't preprepared I was just quite interested because I was asked by the media about it today uh and I thought it may be interesting to the audience as well I guess our panelist will stay around if you have any burning questions and thank you so much for being with us today thank you thank you [Music]