Tokenization of Funds: Is 2025 the Year of the Take-off? | European Blockchain Convention

[Music] [Applause] what an energy uh so good morning to all of you hola Barcelona thank you very much for the invitation you cannot imagine how I am glad to open the ceremonies today in the main stage and uh in this very beautiful city of Barcelona so Barcelona is not only a very beautiful city Barcelona is a very good football team but now it has become a blockchain hub so uh welcome uh to all of you I'm Laura Marini I will be the moderator of the panel tokenization of funds I'm head of innovation for societ General Security Services I'm also blockchain and crypto leader crypto leader for societ General group so uh I have started to work on the blockchain now 10 years ago in 2014 and my first proof of concept was the tokenization of fund so 10 years before it was my my uh my first proof of concept with 10 major Bank in uh in Luxembourg so what's going on now 10 years after will there be a takeoff finally of the tokenization of funds so to answer this question I have a lot of expert uh with me expert of token ation that will give you a lot of insight about what the future will look like what the future of tokenization of FS will look like so uh I suggest to start with the lady of course the idea will be in the first question who you are where are you working and what's your current focus in your organization two three minutes each so go ahead n thank you lauron hello everyone hello Barcelona and thank you again for Victoria and Mister because the organization this year I think it's uh higher than last year in this new places for the second time so I'm Nadia filali I'm head of uh Innovation and business development at K Deco group and uh I worked on the subject of blockchain and crypto now uh from not 10 years but 9 years I I'm older than lauron but not in the crypto area and uh we began at KDE Depot with launching lab chain a consorti on blockchain and crypto with banks startups and academic uh because in 2015 it was just something really new for traditional actors and we need to understand what it are the opportunity there and also the risk and how we can work more more uh on the subject and for work on working on the subject for us it was evident to work with startup because we are a a French Development Bank and uh working alone it was not the issue and working alone on blockchain area is not an issue anymore already and um so we are also a custodian for for the French government so we are a Casp already for four years now we launch some um not only um uh poc's but also we launch a company that was working on tokenization of asset even with s General agle next and and BNP the name was Liquid share but it was I think three or five years earlier that what we need to do but it was a good experience and we work also on the digital identity we launch a a gen Venture named archipel with the French post Ian group uh NG and electricity of front and it's live it's working and we are working on Epsy on that thank you Naja Simon Okay so uh Simon I'm working as head of digital assets at hul of Al Lampa it's not a very nice to spell Bank name we already discussed it yesterday um we are a German private bank and we had actually like second custody license in Germany we are also um having a Manco that's issuing crypto funds and uh we also have and this is kind of the discussion as of today the so-called register license uh according to German law which enables us to put uh Securities but also fund shares on a blockchain uh previously I was in the same role as head of digital assets at deuts B group uh and before that at Commerce Bank so but to be honest uh with h off I'm now like a first time more deeper in the fund space so happy to discuss thank you Max good morning everyone and thank you for for being here my name is Max bonen and I've been in crypto since 2013 it's been 11 years now at the time I was working at Gman Sachs I was an interest rates Trader there and I told my team that I was trading Bitcoin on the side that no no idea what it was and so didn't say anything I think if I did that today it would you know show me the door quickly um thankfully I you know I flew under the radar at that time and then in 2015 I I quit that job to launch a company called B2 C2 and it's become the the main dealer in the crypto market now providing liquidity to to Robin Hood to revolute Etc um that was acquired by a bank in 2020 and I run a small startup now called p one and what we do there is that we put government bonds on the blockchain uh not as funds as everyone does but as actual bonds um and we're looking in the next couple weeks hopefully hopefully two weeks to launch our first uh corporate bond on the blockchain issued by a crypto company natively digital issued against stable coins and the first English law Bond ever to be put on the blockchain like that thank you very much aard the last one yes uh hello thank you thank you for coming and uh thank you for invite me to Stage uh my name is Hova kson um my crypto Journey started in 2017 uh we started a uh crypto broker in Norway and uh was there in startup scene now I moved over to the government side it's a little bit different but uh trying to do some Innovation there as well what we're working on right now is building up uh test environments sandboxes uh we're using uh uh open source hyperledger technology and um trying to kind of have the conversation in a very very technical way um and uh get the government into the conversation um yeah it's uh and but in Norway it's kind of a little bit hard to do it because like the payment system is already uh very very good and we already kicked out visa and Mard out of the country so we don't have the same kind of problems as as as Europe has and uh yeah with digital ID we already had that for 15 years so yeah but I think we're doing some interesting stuff yeah thank you very much so we are going to talk about tokenization of funds in 2025 so will there be a takeoff yes or no so before going to the Future it's always good to make a step back to the past to the past two years to see what's happening in your respective Zone we are quite lucky to have today some uh Visionary from Germany from UK US France and Norway so the ID will will make a quick Round Table about what's going on in your respective Zone regarding tokenization of fun so let's go to Simon directly what's happening in Germany because we see that you are very active in Germany all banks especially yours but all banks are quite active so what's happening in Germany yes so actually Germany has introduced already three years ago a law to put Securities on a blockchain and that law had been extended to fund shares um already also two years ago and we now see actually the first fund shares also that have been issued on public blockchains which is uh kind of nice so you could say even though sometimes the term tokenization is a bit problematic but I mean we have tokenized funds already and also used by institutional clients in Germany right now they are not taking off in terms of volume size numbers whatsoever but I think like at least like having that already in a fully regulated manner as a regular fund and share in Germany is something that is that is kind of interesting and we are here having discussions with really large issuers of funds so Manos and uh basically all of them are interested to do it but nobody really knows what to do with it right now so it's like right now still something that is in an exploring stage yeah to put it like in the in the list where it's located Maybe but I think it's really really nice to see that it's not anymore something like you have a regular fund share that's not really regulated for the crypto or blockchain space but it's really a dedicated regulatory regime for tokenized fund shares and I think this is the basis for growth yes and I think now we have to do transaction transaction transaction transaction to learn and then to actually also show the clients what we can do with it because right now it's just basically a fund that that you already have and you tokenize it uh we can go into details later on like how how it works yeah but that's not really a benefit right but what I see is and this is uh the first questions we get from the man C how can we use it to distribute funds differently and this is a yet unsolved question I think that we will discuss here later as well yeah of course so we can see that the plane is quite ready for the takeoff in uh Germany So Max from your respective Zone what did you see and observe I think there's um the market for tokenization is a small market and the tokenization of fund is a subset of that small market so overall it's quite small there's actually two different markets One Market is underpinned by crypto wealth so it's people who made money of crypto family offices it's private wealth plus a handful of crypto institutions funds like block tower um Maven 11 Etc and then you've got the institutions yeah the real ones you know HSBC and others the the real tokenization Market the one that's underpinned by crypto wealth is around $2 billion now when I say $2 billion it means there's projects like Ono superstate ours pv1 where people have taken stable coins and used them to purchase government bonds in different forms sometimes as funds sometimes directly as bonds and that's $2 billion on the other side in the real institutional Market HSBC alone has issued like a a 1 billion Hong Kong dollar Bond or something of that magnitude so when you look at the POC the the proofs of concept of the big Banks and every time they do a deal it's hundreds of millions of dollars or a billion dollars and the actual real Market is only $2 billion then it just goes to show that those things have nothing to do with one another on the one hand the institutions are trying to reinvent the wheel somehow because their systems actually work if you trade bonds as an institution it it it's fine it works um and so they're kind of Reinventing the wheel but on the other side on the crypto side it's really new products it's products you use not to have access to HSBC has been trading and issuing bonds for decades maybe centuries but if you own stable coins if you own usdc or tether it's only been a year that you've had access to the RIS yield and I think one of those two things is not like the other one of them is a potential true Revolution a parad Time shift the other one really is just just more of the same thank you very much and yes we we have to say and add for the tokenization of funds that this year we had the tokenization of Black Rock the bidle one and I think that they have tokenized up to 500 million so it's it's a big amount but yes indeed for Black Rock it's not so big but it's already a good way for the tokenization as well as a Templeton so we can see some us giants that are doing tokenization of funds right now so let's move to one of my favorite country because I'm French of course uh let's go to let's go to frost uh yeah Frost has been uh at the Forefront of innovation since a while regarding tokenization and crypto so what's happening in France uh thank you lauron SP on France what's happening in France I think first of all um we were was one of the first country to a load uh tokenization of assets and uh tokiz of asset on National Law not European one for and it was about bonds um phones and securities and this is something really important because it was a real volunteer of the French treasury at the Parliament and I think also of the French Market Authority IMF to push this market and so as I said before we we began all together with the first um company named liquid share but the the it's not work and I will explain why it's not work because I think it's one of the point of what could be the future of that and now we saw that we have the European uh Parliament working on that we have uh maika uh we have the the sandbox of the pilot regime we have the experimentation of the European blockchain of the UBC and all these things are important but what I can see also is that we trying to work collectively uh with the different initiative pushed by parl for example that we are in and we will have an event with bank def France Euro clear par europ plus and Cas Depot in December on the tokenization of asset because it's really important and there is some kind of dynamic but and I agree uh with uh with Max uh there is a paradigm that we need to to break I will not say that the traditional institution are trying to reinvent the the road the rulers I think it's more complicated than that they part of them want to move because there is some um advantages to go on tokenization of funds there is advantages in in distribution there is financial advantages of on the cost of all of that and um there is potentially some some new market the matter is how you can make move traditional actors and move their their revenue or their balance sheet in something different it's the real problem that there and so I'm not sure that the the new um actors are not themsel doing the same road they do the traditional one so I'm I could be careful on on that point so I think we need to try to to move on and to continue to experiment but to find some uh business model that will be will open the mind of even the traditional actors if I may add um to be fair coming from let's say traditional financial institutions I would actually be with Max here to some extent um because indeed what we have seen is that technically also with regards to tokenization um the the crypto space has been really a forerunner and and the traditional institutions are here a bit to be honest lacking behind and then they sometimes try to get features of this space more and more into the traditional world World um and and at first I'm happy and thankful that the native crypto space does this yeah because otherwise you wouldn't get the institutions moving at all and on the other hand as you pointed out yes you make Market access available to something that hadn't been there before which is really really great and still though it's a small market and if we only stay in this space then it will be simply too little to reach the society in total yeah so I always think about my parents if I want to sell a crypto fund share to my parents and I come from the crypto world only with the fancy stuff they'll be like I don't know the you're talking about and I won't install a note and do nothing on it and especially not with a stable coin from somewhere I don't know yeah but I think on the other hand it's good to push the institutions from the crypto side and uh it's our job within the traditional institutions to always push these institutions further to what the crypto world does and I think coming from the other side of course the crypto space and we've seen that with Mika coming in the in the European space has to face then more and more of the regulatory stuff that traditional institutions already had to to some extent which then also limits the Innovative power of these institutes that had been Without Limits before so so I just wanted to add also from traditional institutions I agree I think it's good that you push and I think we need to come closer from both ends yeah thank you uh always good to have a debate as you can see uh so we can see that we have a first part of takeoff in Europe what about the Nordic countries I is it is it something that is really important the tokenization of funds and the tokenization I think probably you have other priorities in the noric countries yeah it's there is a tokenization there uh it's I feel the regulatory landscape in the nordics is um kind of a little bit uh harder I think especially Norway and so a lot of startups uh move away from Norway and kind of do their experimentation and do stuff in other countries but you have like as I said earlier uh in Norway we already have a digital ID we had it for like 15 years uh it's not kind of tokenization but you still have your uh I kind of you can uh show your age or whatever if you're buying alcohol you have these like small um uh you have this um small uh kind of functions that the government and the they have kind of made it's it's not really tokenization and uh also they're tokenizing now the um to restaurants if they want to sell alcohol you get like this is they tokenize the system to see if uh people are allowed to sell alcohol or not um yeah it's it's mostly in the this sector you of course you have tokenization tokenized or funds from of tokens um this you have had for like I don't know five seven years but uh uh yeah like the the Innovative startup scene is uh not very uh active in in Norway I would say it's more kind of from from the governmental side yeah thank you very much so uh when we are speaking about tokenization of funds we need to think about the value chain in the current value chain we have investor like our mother our father our parents our kids in the in the future so the new generation is coming we have the distributor we have the asset manager we have the asset servicer so uh to have a successful uh tokenization of funds we need to have value added for all the different stakeholders you know otherwise it make no change no no we we it make no no change here so uh what do you see as the main benefits and challenging in the future Max you see me so maybe you want to answer first that's exactly exactly the problem the value chain is the problem at Big institutions the value chain works and all that they can hope to do is e out a couple basis points in cost no one gets excited about cost cutting whereas in crypto you've got stable coin issuers who are now capturing 100% of the pie when you have a dollar in stable coin every year Circle makes five cents out of you per dollar and that that's the value chain in traditional Finance the value chain is you know it cost a 0.01 basis point to move an asset and maybe it will CA 0.001 basis points to move it on the blockchain it really changes nothing and the hard truth is that most of the people who work in the digital um areas of big institutions really they are crypto Enthusiast working to fight uh they they're they're fighting the machine from the inside and they're not really interested in the tokenization of funds or any really specific single project they're just doing everything they can such that one day perhaps those institutions are going to buy Bitcoin or something like that that's that's the goal the goal is not to save $5 million a year to the bank that's not the goal the goal is for those institutions those people hope to start embracing crypto properly and I don't think that 2025 is going to be the the year that fund tokenization takes off simply because there's a prerequisite before institutions do that the prerequisite is that they need to adopt stable coins not cbdc not Central Bank stable coins actual privately issued stable coin that everyone that everyone else uses and so tokenization of funds maybe is going to work as a second step to um the rwa uh Market in crypto today the one that's $2 billion it's not going to take off at the big institutions before those guys start to use table coins I think that's what we should be talking about is 2025 going to be the year that institutions buy stable coins so before speaking about tokenization of funds we need to speak about the not tokenization of cash but mainly stable coin so do not hesitate to come to me we have a stable coin at societ general for institution Simon uh we spend a lot of hours together in different panels since four or five years uh Asset Services they have spent millions and millions and millions of Euro to maintain the Legacy systems the transfer agent activity and so on uh what is the incentive to move forward in the tokenization space do they have the choice or what do you see I think you always have a choice which is good like in general in life but um no to be very um specific here I think the incentive for existing institutions is very simple if you believe that the structure of the market will change and you don't move you'll lose what you have that's very easy and that is also how you calculate business cases uh to to like uh set up new projects as like tokenization of funds so so max I'm with you the cost case is not so interesting but if you say to them guys you're a board member now you have five billion assets on management if you don't do anything in 10 years it will be two then they are incentivized you so that helps better than the cost cutting part but also to be very blunt I think uh I completely agree also that the cost cutting or just like making it more efficient that's a case that we used as a a carrot yeah to get the people start moving but to be honest it's not the truth it it will not be the future that we have just the same value chain as of today bit more efficient bit more Le bit less costly but it will be necessary for the whole topic of tokenization of decentralized infrastructure to fundamentally change the structure of the market this is the the underlying narrative that we have to bring to the organizations all of us here especially those who are working in the traditional institutes and the reason is very simple if I don't change the market structure I won't have a structural change and the initial idea of decentralized infrastructure stays it's the peer-to-peer nature of transactions we need to get closer with everything and every project that we do in our institutes to come to peer-to-peer transactions because it enables business in a way that we cannot and will never do today within our existing infrastructure and I will try to make like one example here with tokenization of funds the idea is that you really use the tech techncal capabilities and SC scalability of the technology in a way that you enable for example individualized funds that you can really put together fund structures on your own together with the initiator Manco whatsoever in a way that you really say yes this is my investment strategy I want to put it in a fund and then for example others still can join while are buying funes and you can even distribute them theoretically directly to them and I think this is like how it's moving forward people maybe still being on trade Republic revolute and Co but they invest directly in fun shares of people that they trust directly in a peer-to-peer fashion thank you Naja do you have any observation regarding the benefits and challenges I have observation and I have remarks on what I heard before I'm not sure that people who are working on the subject in in in big institution are only here to try to make our our institution by Bitcoin I'm not sure about that because as a head of innovation if I try just to do that it would perhaps appear but sometime we buy Bitcoin but we buy Bitcoin for the custodian so the service so it's normal but the point is not here it's the point is that uh if you are a big institution and Cas the depot it's more than 200 years now and we launch uh the first uh Institution Insurance in France for example uh we launched the first uh climbing uh company in the ski in the world we launch many new things okay and the point is that the the the society is moving the needs of the society is moving the needs of people is moving and we just need to to see if tokenization of asset and tokenization of funds will answer to a question about the clients our uh partner our asset management or the custodian or other thing in the the value chain I'm coming back to your question lauro and for example in in France we has a uh we have a a point because people are saving money it's not a a point but they don't know how to invest in the real economy and they don't know how to invest in the smmes for example and thees is just the the center of the economy in our countries I think uh obviously in Europe and if you if you launch new products they help all the system to be more efficient if help the people to uh go through a directly in invest in some funds there it could be interesting but it need as I said before to change also um the nature of the intermediaries and the market and how they sell it's not only I'm going to my bank and I will do that and it's the point now I think and I think the things will happen if they need to happen but I need the will happen and it's not something also to be a a pastor of in our companies to to try to work like this because uh we can push the the the wool but we need to work together and to Ard everyone so for example at K Depot we have a Doctrine on on this that was validated by the comx and we are um we can uh launch stable coin we can can buy stable coin we can do the custody we can tokenize assets we have some rules that we cannot have a uh algorithmic stable coin we cannot do some kind of things that will not be uh good for our strategy but we are allowed to do the things but if we do the things the things need to make sense for uh the society and the company yeah so uh I can see the hour moving uh a last question I will just ask you to answer in 1 minute each uh Crystal B question will 2025 will be the year of tokenization of funds if yes uh okay if no what will be the alternative Max you will be the first but I know your answer already 2025 will be the year of what let's think of a more interesting scenario I think 2025 in Europe might be the year of capital flights because taxes are coming it's going to be crazy um we've already seen the first the first uh part of the battle there France is going to tax the hell out of its middle class it's going to be insane and crypto makes it much easier to move your Capital your Capital around and I think that the building blocks have been put in place especially stuff like us crypto companies have had to go after different licenses in all sorts of countries because one day someone in the UK governor wakes up doesn't like crypto boom all of crypto is dead in the UK we have to go to Dubai we have to go to Singapore we've had to do that a lot and so we're very Nimble now as crypto companies and I think that when the whole of the European middle class starts to worry about the about whether the government is going to seize their assets there's going to be insane Capital flight and that's going to be made much easier with crypto it's going to be much easier to incorporate companies in other countries place your assets there ear earn some risk-free yield or maybe invest in funds uh with your stable coins and that I think that could be a massive Catalyst in 2025 or 2026 aard one minute uh yeah I don't know uh at least not in the nordics maybe I think a lot of cool stuff is happening in um in Asia where they're kind of a little bit um further ahead but yeah as I said like token ation or digitalization in the nordics is extremely like far ahead and I think uh uh yeah it will it will go go even further in 2025 but yeah uh nordix is not ready for full tokenization in 2025 no I wouldn't say that okay let's see for next year in the same panel Nadja what uh I'm not sure that uh the the people INF France will put their asset out there because if they are really in the middle class for the moment they don't have many assets it's the it's the matter sorry about that but we're financing some things with with taxes there in France you're rich if you make €3.6 th000 a year a month that's I saw that in the French Press today you're rich in France make 36,000 it's not the majority really and the the point is uh I think we will continue uh to uh organize more organization experimentation I think the the difference now is that before we were on the poc's and now we are in real live or uh experimentation I think we also all uh understood that we need to work more together and uh blockchain and tokenization of funds is a question as you said of of value Pro process so so we need to work together with all the value chain and all the inter intermediaries because if we want to have a market it's not only to have one operation here one operation here but to make live also the secondary Market there thank you Simon 1 minute 2025 will not be the year of the tokenization of funds but 2025 will be the year of of stable coin adaption and this will be a trigger point for later organization of funds okay so uh I can see that uh we have only we have only two minutes thank you uh very much uh dear panel member uh it was a pleasure to discuss with you as you can see 2025 will not be the year of tokenization of uh fun we still need to continue to work together probably it will be the year of the stable con if we can comply with regulation of course I did not see a lot of point with regulation because Mika is moving and uh we need to work on that thank you very much maybe uh it's a good transition for the next panel which will be the crypto Asset Management in the future because they will need also to have a stable coin so stable coin will be at the center of the tokenization of funds and in the center of everything thank you very much and big Applause to the panel thank you