The Future of Asset Management in a Tokenized World | European Blockchain Convention

[Music] hi good morning everybody uh I'm delighted to be back at the European blockchain convention for the 10th edition uh I've been coming for several years now and it's really quite incredible to see how much the team has done a good job at scaling this conference and seeing so so many familiar faces today so um I'm delighted to be here with uh with my panelists to talk about the future of asset management in a tokenized world uh there's a lot of ways to get into and lar kindly set the scene for us closing the the earlier panel but before we get into those details could I please ask my panelists introduce themselves and just give a little bit of background into the work that you do in in each of your organizations Yuri do you want to kick us off yeah sure hi everyone I'm good morning and really happy to be here my name is Yuri and I'm the founder and CEO of three Comas I've started this company 8 years ago with an idea of uh democratizing the use and trading in crypto so what we've done is that we've built a platform that uh especially a couple of years ago when the retail Market was on its rise was the biggest one in terms of automation no code Solutions uh no good solution in how people would trade in crypto with the the switch that happened in the market in the last few years our main focus now is um bringing the Asset Management tools for individual professional Traders smaller Asset Management small asset managers funds and uh I'll be really happy to share the insights on the technology and how technology is uh really shaping and shifting this market and uh setting up the stage on what's coming next in the next three to five years thank you thanks Bali good morning everyone uh I am Bernal biswal I am the chief investment officer at Hilbert Capital Hilbert capital is a crypto focused asset manager um we have been we Pro I'm not sure if we are the longest recorded track but one of the longest recorded uh track holder in the crypto hedge fund industry uh we focus on various active strategies uh trading l quid strategies that is within crypto um and Hilbert Group which is the parent company of Hilbert Capital also has other focuses um within the web 3 uh space broadly thatan Fabian good morning from my side as well uh my name is Fabian Dori it's a pleasure to be here and to discuss the future of asset management in a tokenized world in in this round um I have the pleasure to head the asset management division at Signum a global digitalized banking group founded on Swiss and Singapore Heritage and while we um provide tokeny service tokenization services on our own I myself in my role are much more focused uh about the investment opportunities uh the ways to improve portfolio construction diversification Etc arising out of tokenized assets thanks so much so if we could just take a little bit of a setback set back to set the scene a little bit before looking at you know the ways that organizations actually infl ing uh the future of tokenization um and asset management at that can can you maybe just tell us sort of what are the key drivers at the moment that you're seeing what what is influencing the uptake and what are the key benefits actually that you're seeing within Asset Management tapping into the web3 space Fabian you're nodding do you want to get it started good uh maybe one step back when we talk about tokenization I look at it from an asset management perspective so for me it involves three dimensions first of all the investment management per se uh second the operations part of it and third the structuring uh from an investment management perspective uh it's all about increasing the eligible asset Universe the invest the investment Universe um making it broader um accessing new sources of return new sources of of uh diversification on the operations part it's obviously all about uh efficiency scaling cost reduction through automation through programmability Etc and then on the structuring side um it's all about not only bringing assets on chain uh and in a digital form but also bringing portfolios and ultimately the full Asset Management um value chain on chain and I think um what drives right now the the tokenization topic is um that that mosa of different pieces that need to come together in order to have a proper and nice Mosaic together those pieces are coming step by step into place we have relevant assets on chain tokenized treasuries stable coins deposit tokens and the like we have Rel players interacting with those P puzzle pieces um Black Rock Fidelity um maker sky and the like so all those different elements are now coming together and help push forward the adoption thanks boli Yuri anything to add I would sorry I would just say that if we will again think of the what are the key reasons and what is happening when the traditional assets are being tokenized is first that you get fractionalized assets so you get instantly much more liquidity and 24 access to that liquidity which following to what Fabian said heavily increases operations efficiency and everything related to that the second big part would be the regulations and everything that comes there because as we see now with the Frameworks that are rising like maika for example this allows the new technology to actually be implemented on a much larger scale which again brings more buy side sside interest and uh right now in 2024 we can say that the industry has finally matured in a state where it can start getting adopted by the wide masses and the professional asset managers as we see here the like the last thing that I will mention right now is everything related to security and transparency which is usually a big problem and uh it's it's a tough challenge to to tackle but again technology plays a major role here allowing any qualified assessor of the situation to actually see what is happening there and then take um measures that are really needed at this stage yeah what what I would add is kind of a perspective on tokenization that's twofold right now one is the way traditional assets managers SL um Market participants view tokenization which is largely about adopting the blockchain uh technology smart contracts oracles Etc um that's largely from a point of view that reduces friction whereas the crypto World Views that as uh Yuri was pointing to uh synthesization meaning you're bringing these two really same part of the finance world but you're bringing them onto same operating system so to speak um so what happens from a crypto asset manager point of view we all of a sudden see a a bunch of much less volatile asset being brought on chain which is then which then can be used for collateralization other such things ultimately leading to probably dampening of volatility and more synthesization between the two works I mean so that's really interesting and I think it paves the way a little bit into the next bit of the conversation which when we were chatting ahead of this one of the big things that we were focused on was sort of around the risk management angle and how by side asset management at that are looking at risk management protocol of tokenized assets crypto assets more broadly speaking and so maybe you'd want to turn to the investment managers in the room to sort of like hone in on that a little bit and so butar on your point what what are the differences that you're seeing from a asset management side on the you know the risks of tokenized assets versus crypto assets and that traditional assets as well and how is sort of buy side from a more broader perspective looking at that risk sure um I will qualify this answer saying there is the Utopia and there is today's reality um the Utopia is that you know everything will be extremely um easy to or rather the user experience will be multiple times better than that what we have in the traditional Finance World we're not there um that's that's the ideal um and then the the risk angle that your your question is guiding tours that's several fold right uh if you think about traditional um any asset manager that you take one of the key risks that they do have but do not visualize in an acute man manner as much because of Regulation guard rails and infrastructure around it is actually counterparty risk um and and it gets it's so papered over and be Beyond sort of or abstracted away from the day-to-day Trader slash portfolio manager SL asset manager that you know that that pain is is there but it is not publicized enough Visa crypto world where you know we have a counterbody blow up pretty much every few years so far so um however if you think about what tokenization is actually doing for the traditional assets it is removing a lot of those kind of both credit counterparty related risk that exist in that system due to the frankly Antiquated technology that it's built upon um whether that is settlement or we're talking about um you know uh even just access to trading um in in over the weekend or 247 um those kind of things actually do M they they actually cost dollars in in any trading book it's not Quantified enough away from obviously inside any big bank or any big firm that is Quantified but not to the public so to in my mind there is the risk management when it comes to investment side of the things then there is the risk management that is more operational slash infrastructure related um and I'm sure Fabian actually will have more to say on this um from because they sit kind of in the middle of many of the other things but in my view it actually does mitigate a lot of these age-old issues that we have had in traditional Finance so Fabian do you see that sort of bifurcation between the two kinds of risks that Bali was mentioning yeah very much agreed to what anali said first of all we are not yet there where Utopia hopefully brings us so my answer is very much out of the trenes uh and I would say or I would look at it out of two Dimensions um one being the single asset class Dimension and the other one more being the the portfolio Dimension uh from a single asset Dimension I think it's very much what you said Bali right the the the risk catogories are still there there's still credit risk there's still Market risk there's still liquidity risk there's concentration risk and so on but the nature of those risks might change when you bring an asset on change for example the liquidity risk might improve because there is now a potentially a second market around a forly eLiquid asset so there's an improvement on that side uh possible on the other hand the counterparty or the credit risk might um might might become more difficult or more challenging as you now have also to deal with additional uh technology risk contract risk and the like so on a single asset Dimension I think that the the question is more complex but from a portfolio point of view there's clearly an advantage in the sense that the tools are there to construct a better risk return profile broader investment Universe decorrelated assets um smaller ticket sizes to handle with um and then obviously what you said um keeping the operations in mind where to store the assets what are the liquidity values uh what are KL topics to be kept in mind so the the complexity I would say increases on on those on those levels that's super helpful and and very interesting so just to of highlight a couple of the the pieces from that and then maybe turn to you Yuri I think I mean the on the operational side at least like the programmability element that sort of helps reduce the risk around like a lot of the sort of what I think Bali M was the Antiquated technology that sits behind a lot of traditional uh Finance uh financial asset management uh Yuri in the work that you do how do you see sort of the AI piece uh facilitating uh more like more of that Automation programmability and how is that actually going to influence the future of asset management from your perspective I will answer this in the following way so first of all let's think about the trends and what is happening in crypto in general because I'm I will be more talking about the technology and the crypto side compared to the traditional Asset Management side so first of all think of who asset managers in uh crypto world really are right so yeah you have the big guys who are sitting in the banks and now they get more and more exposure to crypto through ETF and other different funds then uh tools I mean and then you have traditional crypto native funds that were around since whatever 2013 I would believe who would just invest in Bitcoin and uh other stable or let's say robust crypto assets and their main problem over all these years was how do we make the compliance and everything else suitable for the proper investors right now um let's talk about the things that were happening in again 3 years ago and then that we see happening now for example could you call like meme Traders and the everything that is related to this hyp about mem coins or nfts or anything else that you know come and go as a trend can you call this can can this be called an asset manager and asset management uh is it is it an asset really and uh what tools and what requirements are there so a good example of that would be there is a growing interest for for people and proper funds buying locked secondhand tokens of big projects for example right we know what happened with FTX and damida and how a huge portion of locked salana taken tokens for example got locked in there other tools and uh methods and Technology on the market that would allow for you know proper assessment of what the value is of and how do we actually manage that how could we package that and bring these products into the market now coming to what you were asking about AI actually AI would play a huge role here on every level of everything that I was talking about so first of all proper datadriven analysis and being able to actually figure out new models and or even Implement old models but uh relay them to the conditions of this Market AI would play a huge role here if we would dramatically switch to everything that is actually like web 3 native and talk about smart cont s how are how they are being executed and how uh tools that are built there they need some parameters to work on right so think of a system of a portfolio management system purely working on chain web 3 and everything else well AI would impact greatly in terms of how quickly the system can adapt how quickly can it be how quickly this strategy will be executed in the end it all comes in terms of better efficiency for people who are actually using that so AI has already changed our world in a multiple multiple ways being able to interact with this huge amount of data and actually make qualified decisions so in the next we see this happening this year but especially in both asset manager you know on the traditional way and then on the pure web 3 tokenized Way the trend and the big companies that are raising huge rounds right now from Mig combinators and you know crypto native startup funds this is all related to how do we now well it will pretty simple how do we Implement technology like C gbt and others into making this qualified decision that we really need to make every day and how to make them as efficient as possible and I think that's that's incredibly important when you're thinking about that future landscape as well like what are sort of the influences in terms of that decision-making process so thanks for walking us through that um I do want to give a bit of time to at least the title of the panel which is the future of asset management in a tokenized world and so I think that's something that I spend a lot of time thinking about within the work that I do at gdf and that's really thinking about what are the models going to be looking like in you know that that projection 5 10 years time are we looking at a model of convergence or you know sort of I suppose separation where you see different entities sort of a bit silent I suppose and barar to your point I I wonder for you in the asset management space are you seeing sort of a stronger convergence between um a stronger convergence between management of tokenized assets crypto assets at that and traditional Finance too how how are you seeing that unfold I I think it's this is a broader question in my view because uh the immediate benefits of tokenization and when I say tokenization I do not mean digitization but actual usage of distributed you know Ledger technology and peerto pay peer trustless transaction um from that point of view within the asset management landscape it this is more likely to have the first impact in more IL liquid sort of uh um Arena whether that is the VC funds or private Equity or um you know art and intellectual property carbon credits whatever um any any of those because those are easy to sort of understand the pain point and really address it with the technology or where the technology is today um largely that boils down to injecting additional liquidity via tokenization that's one and number two is providing fractional ownership SL ACC access to whether that's retail Traders asset other liquid asset managers Etc um so I feel that's where majority of the immediate demand is largely probably going to come from uh on the other side of the world which is more liquid in nature if you if you see what sort of like the largest um asset managers currently are focused on they're largely bringing yield on chain in one format or other whether that's black rock Frank Franklin Templeton bny I mean we can go around and see different Pro projects that they are involved in but in one form or the other it's providing real world yield when I say real world I mean traditional yield onto the crypto uh user base um from as in that frame the liquid asset managers for for us it's largely about it's actually extremely beneficial as Fabian was mentioning in portfolio and risk management right because it just provides easier diversification um a stability to the collateral base Etc uh but I do see further kind of to Yu's Point Trend towards more uh datadriven newer forms of security that are part tokenization part crypto uh in its real sense um but how that sort of changes the market structure in my view is still to be seen gentlemen anything to add well I would continue this and make a example of uh so you you made some examples of what uh assets were tokenized already and then coming back to your idea about what the Utopia was and what we actually have now let's talk about real estate for example right so again the whole notion of all the projects what 3 to four years ago that well real estate it's uh it's a very good asset in in one regards but but the other thing is that it is very liquid it is very hard to on the uh on the compliance side to put it on the books and actually work with it so okay tokenization crypto will solve this right we will tokenize everything and then it will actually work well what we see four years ago that I wouldn't say that it doesn't it actually does in some communities and countries there are Frameworks that actually make it happen but on a global scale it still didn't happen why well because compliance and Regulation and security plays a huge role in this so when we talk about the next you know 5 years of what's going to happen first of all I I am a strong believer into FR fractionalization and then bringing more and more liquidity into into into the space because well we cannot deny that this is happening right but I would also say that for every good thing that the technology brings there are also challenges that are brought with uh all the pyramid schemes and uh with all [Music] the global movement of trying to push regulation as you know as and ban them as far as possible and then what we see that well the governments and uh The Regulators they do not appreciate that and then it affects the industry in a bad way so it's like a bad and back and forth process but the trend I guess you cannot deny the trend that uh tokenization and then crypto is playing more is bigger and bigger role in uh the whole asset management class and it will continue to go there again implementations of AI either that's risk management or taking better decisions better and smarter and quicker decisions is um the next level thing it will all heavily depend on the compliance and regulation side which is actually I'm always saying it's a good thing like the more compliance here is the better because then we'll have a proper set of rules and then we will be able to adjust the rules in the way to bring the value that that that we need to and the last part would be the actual technology because the way technology matures well everyone who is in crypto knows that every I would say at least a year but actually quicker you have this huge changes that are probably not visible to the masses but which make very very complex things possible things were that were not possible before so the the the the switch is there either that's stable coins or traditional assets or real estate or something else so um yeah definitely a lot of um a lot of big and interesting changes in the last five in the next five years a lot of green shoots to be paying attention to uh suddenly I know that need to hold my mic a little bit more like this um Fabian I want to turn to you to I suppose hone in a little bit on some of the points that Yuri was mentioning so from a asset management perspective Yuri was alluding to the different challenges and bide adoption challenges more broadly speaking that we're seeing uh you know custody comes to mind for example broader cyber security concerns and so I guess it's that risk element but managing that risk what do you think of those bar like the strongest barriers to entry that we're seeing from a know traditional Finance side moving on chain and then with that I suppose as well uh moving on chain towards both tokenized assets and crypto assets more broadly speaking the simple as it sounds I think a key barrier is still the lack of knowledge um um we need to educate and train people enough that they understand the benefits from the organization that they have the trust in the infrastructure in the smart contracts and so on so I think a key barrier is still lack of knowledge and lack of understanding that can be addressed obviously um a second one then I guess is that um slowly but steadily um the infrastructure and the playoff and the regulation is emerging very much to what the um URI and B said before right I think we are not yet there in terms of what it really needs needs to have an Institutional great platform and infrastructure and ecosystem to um include tokenized assets fully into into traditional portfolios that requires actually that the full value chain becomes onchain that is investors being onchain assets being onchain the portfolios being onchain the vendors being onchain so that step or that Journey still uh needs different steps to be taken um but I guess with education with the advancing of the infrastructure if itself with uh additional trusted players coming into the ecosystem that will that that will evolve step by step Fabian I have a question for you so again walking around the stance here what it will take institutional players and is there a real need to implement the new newer asset classes again let's talk about meme coins so what it take what would it take for institutional uh clients to actually get interested in offer uh let's say meme coins ETFs uh for their clients and do you see this happening in the next 5 years well thanks for the question I'm not sure whether meme coins would be the right the right uh point in case to for for institutional investors to think about going into the S class let me ask let me answer it a bit more generic I think what what is needed for institutional investors to come into the space is that they have that they understand that there are really new sources of return and decorrelated sources of return now that can be provided either by tokenized real world Assets in the sense that that asset those assets become now investable become liquid become accessible and the likes become um tradeable Etc so that is that's one point making existing assets um becoming an investable assets uh the second the second element I think that um through crypto assets mainly there are additional use cases to be to be um invested in decentralized finance maybe web three gaming and the like so they are new use cases new sources of return to be to be accessed um again I think that Journey will take will take a number of steps but ultimately my vision would be that there's no distinction made between traditional assets and crypto assets but rather that we still speak about the same asset classes but wein the asset classes have different risk return drivs let's take fixed income you have the traditional corporate bonds treasuries government bonds Etc plus you have decentralized Finance Revenue sources right credit lending liquidity provisioning Arbitrage and so on and that helps you diversify your fixed income portfolio with additional risks but additional return coming with additional risks I would add I think this that that's that's a debate wrongly framed because I didn't frame it that was the whole idea no no the the the point I was making not from like in terms of whether what what what I take issue is not everything is meant to be institutionalized I mean cinos are a legitimate industry for years and years so why are we even discussing institutionalizing meane tokens or you know certain things that are part of any sort of emerging market right I mean whereas some of the things that yri pointed out which I think is hugely helpful for for crypto as a whole is regulation or or more than regulation it's really rules of the road and as a driver on the road or an asset manager or an institution you would like to know that if you are dabbling in a newer emerging technology SL markets there are certain things to fall back upon and and I think that's that's the real value ad of whether that is improvement with respect to institutions finally embracing and I'm not I don't mean large asset managers embracing but actual governments and you know infrastructure around uh Regulatory and compliance control and those things simply bring trust the technology by its own origin will improve that's the nature of Technology there is always is there 2.0 following 1.0 no of course there isn't I mean I would really agree with that so I me just wearing my gdf hat for a sec um you know what we do is try and bring best practice standards to the Market Drive adoption for that for you know across all Market participants and I'm a very firm believer in the like the rules the the the road rules are there for a reason they're there because we have a financial system that actually requires like that backbone and it's based on a value system like it or not that there for a reason because when there have been problem problems in traditional financial markets you know they've been put in place to essentially Ure that when that happens again because it can happen again that the rules of the road are there so very much agree uh to to your point on that Manali um I think so we're coming down to the last few minutes of the panel and I suppose I just want to do a little bit of a Roundup on you know we we touched a lot on what this future looks like know I know you you have like a very particular view especially with the the piece but um I suppose what I want to think about right now and just give Food For Thought for the audience is what do you think is going to be the most significant transformation in the upcoming years it's going to sort of make that shift at least take place or facilitate that shift within the asset management space a little bit more so maybe uh Fabian if I can start with you well maybe coming back to my very point at the beginning I think um it goes far beyond the tokenization of assets per se it really includes the sort to say bringing the full asset management value chain on chain that means assets portfolios uh the different vendors and and functions that are needed to to manage a portfolio in an Institutional sense so also the depositories custodians uh the transfer agents the the eny calculator and so on so to bring all of this onchain um if I look back what happened over the last 5 years and um look forward to what might happen over the next 5 years I'm confident that we make a big big step forward there so that ultimately really the full value chain on asset management is in a certain sense tokenized or on chain and benefiting from the various um advantages that this technology offers Bali um yeah I I think it's hugely uh interesting that the regulatory framework across the world regardless of jurisdiction but most importantly in the main jurisdictions is actually moving towards truly looking at the space and creating um Frameworks that the market can uh work under and and kind of move towards the next level that in my view is is beyond just tokenization but definitely tokenization plays a very critical role in again to my original Point combining those two elements of the financial world uh um what's super interesting is in 2024 obviously we've seen sort of the in the introduction of or adoption of us CFS and related regulatory developments in in that space but it has also seen a host of tokenized uh assets being brought on chain um just taking that Trend forward what I envision is that the there there is likely going to be lot more tradable assets that were previously not available um in the traditional World due to their the the nature of uh their construct whether that's a liquidity whether lack of fractionalization yeah etc etc um and that widens up the opportunity for asset manager to try and find Alpha from different sources um and I I think that that makes for one of the most interesting part of the market any any in any of the market right now and I can agree more but can I ask Yuri to close up for us I would say that um let's think about this in the in the following way so the compliance conferences were there 20 years ago and regulation conferences were here 20 years ago but blockchain and AI conferences were not there so in this lifespan of 15 to 20 years we've seen at least two major Technologies maturing to a level where they actually help to solve real world problems so everything that Nal was saying about basically bringing more liquidity and everything that we've talked before you know improving operations and everything else compliance security blah blah blah it it all comes down to why we are here and we are here because the technology is actually changing the world so we see it with our own eyes with with with this particular asset well area in know for example in our in our asset management sphere right so um I would say that the we kind of know where the technology is going and we can figure out what will it help us to improve in the next 5 years but the trend is as everyone was saying here in the end more liquidity fractionalize assets and uh on every level implementing the new technology that we have to make our world well easier better and more efficient well thank you all I hope that gave everybody a bit of food for thought but certainly I mean I think um again with my little gdf hat it's very much in line with a lot of the movement that we're seeing uh in terms of signals for institutional adoption and not also when to B Ali's point that there isn't well there isn't the the need necessarily from the Baseline uh at that so thank you very much for uh your input really enjoyed the discussion thank you for keeping it Lively um and uh Round of Applause for my my panelist please thank you very much thank you