Tokenization Opportunities Across Asset Classes | European Blockchain Convention 9

[Music] 3 2 1 [Music] GOI all right um thanks I hope you guys didn't get tired of me because I'm back now for another 50 minutes or so so I'll try to keep it light um this should be a really exciting panel tokenization is definitely one of the buzzwords uh around crypto these days I know for anyone that was at the event last night I think 80% of the conversations I was in talked about tokenization so um let's get into it but but first I just want to give each of the panelists maybe 30 seconds to talk about um what they do and and maybe just describe like one project one effort at tokenization that you're involved in so Adonis would you like to go first your yeah so hi everyone my name is Adonis um I'm a product manager at State site uh based out of Zurich but I work quite a bit out of London as well um I am actually in charge of the digital custody platform meaning that as you know um St is the second largest custody provider out there mostly for traditional Finance right now and we are building kind of a segue into the digital assets world uh by building this digital custody platform it's m have conf is it on now yeah perfect hi everyone my name is Barbara pleasure to be here um I work at DWS DWS is a large German asset manager with around 860 billion in AUM across all major asset classes including crypto soon hopefully tokenized assets at some point as well um I'm responsible for our digital products um digital assets is one of our Focus topics we're looking at three different use cases in particular one is building um a crypto Etc platform in Switzerland um the other one is um stable coins we believe there's a strong Market need for a european-based uh trusted and M regulated stable coin and then the third topic is tokenization a very strategic topic for us and here in particular we're looking at fund tokenization well hi everyone my name is Andres I'm responsible of the digital asset unit in BBA asset management and Global wealth and which means that I'm responsible for leading and coordinating the initiatives through this ecosystem across the world where BBA asset management is operating not just focus in Europe just also in in l America turkey and and the rest of the world um thank you for having me here my name is Kristoff uh I'm at Union investment um as of now I run trading um business um at Union um going forward I will be um one of the guys in charge of our strategic definition of tokenization and digital assets um we are on this topic for yeah at least four five years um having had a number of poc's um especially in the digital Bond area area and um also in the derivative space Hi everyone my name is Diego Miu I'm partner account executive at settlement uh what I do basically is support companies across Industries in the way they adopt uh blockchain from strategic advisory ideation to uh solution development and maintenance uh we do that through two ways one is uh support uh with uh all of the all of those processes and also uh we developed a set of tool of tools that makes it much easier and faster for companies to build all the founding blocks uh they need uh for their blockchain use cases for tokenization the ideas to help uh our customers build their own tokenization engine so they can actually own uh their uh their solution so Diego let's stay with you uh I imagine probably most people in the audience know what tokenization is but I just want to make sure that that everyone does so that you all stay with us for the next 45 minutes so could you just quickly Give a definition of of tokenization and explain all the different permutations uh within within crypto just the the different buckets that it might fall into all right um so we can start very simply by saying that tokenization is very basically representing the ownership of an asset on blockchain uh so those assets can be any different class of uh assets so actually when we talk about tokenization we'll um differentiate all the different tokenization use cases depending on the asset class so tokenizing real estate will not be the same as uh tokenizing uh bonds uh or gold for instance uh so what we try to do with at settlement is uh discuss with our customers with specific business lines and identify the types of assets they're interested in tokenizing understand the reasons why they want to tokenize it if there is something to be improved in the existing process if it's an asset that is a liquid if there are high barriers to entry like real estate for instance and then Define all the technical blocks uh that you need in order to make this uh tokenization happen right and and tokenization I mean it can spands a wide spectrum of crypto everything from stable coins like like tether um down to tokenizing gold and bills of lading and financial instruments kind of known as real world assets and I know we're going to get into all this on the panel um bar maybe going to you what would you say are the biggest benefits to tokenization it's a good question Stephen and I think one that is asked again and again and should be asked again and again because we're not trying to apply the technology for the sake of the technology but to realize some benefits right um I think in the answer you really have to differentiate per asset type and then also potentially per jurisdiction and and the Regulatory and and specifics of the the location um we at DWS we are in particular looking at fund tokenization given that these are the assets that we issue um for fun organization I think you can cluster the benefits into three different categories and that's a operational efficiencies B distribution benefits and then three the most exciting one probably additional functionalities something that stems from the inherent properties of the blockchain technology I think often the first category the operational benefits are discussed right faster settlement increased transparency maybe a change in the value chain maybe some dis intermediation of certain players I think here important is that there's many preconditions many trigger points that need to be reached in order to realize these benefits so if that's your short-term pitch to realize these efficiency gains I think it will be very difficult to be successful so I think this is really a long-term game right where we live in a tokenized vision tokenized Future Vision where you know assets and funds and money and everything is tokenized then yes I totally believe in these operational benefits but shortterm it's more difficult I think the other two categories is something maybe where short-term benefits can be more easily realized and that's the the second category where distribution benefits so what if we tokenize a fund and now we distribute them to traditional retail and institutional clients what if we now can reach wallet based investors right it's just a new investor group for us and that would be a a very very nice benefit for us to realize and then the third one is very interesting as well um new functionalities so for example there's some asset managers that they're tokenizing money market uh funds to use them as payment products and asset managers normally don't issue payment products right so these are new benefits um where we can think about are inherent properties of the technology that enable us to realize new use cases adanas I'm curious um the state treat perspective I mean one of the the largest uh biggest custody banks in the world and and you're building a bespoke platform for tokenization uh what is the thought proc process there thank you so the huge Advantage we've been having at State Street is that we basically already do everything that we would be doing with a digital custody platform we already do that in the traditional world so we've been custody for 600 years and the reason why we've been doing this P into the DCP world in the digital custody world is simply because we've been reached well clients have been reached out to us and we've been driving this Inon as well as in we already cover basically a lot of these things that um the funds are looking for so we do fund accounting we do taxes we do so it was only a matter of time for us to basically take on the last legal block right there which is the key management system so a client might have have um an Etc fund or he might they might have basically some block some Bitcoin laying around or it might even be tokenized assets and they already do maybe FAA with us so they do fund accounting and now they want to they want us to basically hold their keys for them because they just don't have the capacity for that they don't have the knowledge for that so it was just the basically a very logic step for us to move up the value chain from the low added low value ad services such as FAA taxing and all of that to basically holding uh the key for the customers as well great um Andreas this might be the most important question on in the entire panel uh so no pressure but tokenization is not necessarily A New Concept I mean it's been around for seven eight years at at this point I mean going back to 2015 2016 when companies were kicking around the idea of of privatized digital ledgers to take advantage of blockchains without necessarily having to use open protocols but regardless um there's been lots of Pilots there's been lots of PC's but we're still have we still haven't seen that one big mainstream use case that's been adopted at scale uh I'm interested in your thoughts as as to why and and why this time it might be different okay maybe maybe we can discuss of topic after the panel if seven years is so long time to take enough in in the financial industry but assuming that that is true I think that there are at least three three keys in order to understand why it's taking so long the first one is all the noise all the Boost and controversial that was surrounding the Defi and the digital assets industry in the last years triggered by probably the terraluna collapse and then other episodes such as the three arrows capital and fex or something like that the second the second point from my point of view is the regulatory issue we that the European union members are making a lot of efforts in order to establish the boundaries of the playing game with Micah and even it should be not a one shot regulation that should be updated in the future in order to make the scope bigger the thing here or the challenge here is is is to to establish the boundaries as I said of the field game where financial institutions will feel comfortable playing with or playing in and the third one is that if we are looking for business case and if we are looking for the mass adoption in the financial in the blockchain technology or using the blockchain technology there is an special ingredient that is the mass and if there is one thing that the institutional and the financial the traditional Finance system has is mass because in our case in BBA asset management for example we have approximately 80 billions of asset under management in Europe and that's the most challenging thing trying to trying to transfer that offchain assets and their management to the onchain system because as Barbara said we saw clearly operations benefits in order to optimize our processes but the path from today to a fully onchain optimized processes in our industry will take probably double digit period in order to make yeah and sense appreciate that uh Diego would you like to wa in maybe jumping in um sharing a bit of my experience also dealing with um uh Banks uh across uh countries in Europe um I think uh the slow adoption also is um is kind of due to an approach towards blockchain adoption where basically at this moment blockchain adoption within Banks is driven by blockchain Enthusiast within Banks so uh people that are given budgets uh within Innovation teams to try stuff uh with blockchain um that's great uh at this stage uh when they launch something and try something out this is the only fact of using blockchain is considered to be a success uh but now I think it's about time to actually adopt the technology and uh achieve convincing Business Leaders that blockchain um uh creates value and for that the question is not what can I talk tokenize is why would I tokenize so you wouldn't be you're like you wouldn't have the right answer for any class of assets because it makes more sense to start tokenizing some assets rather than others because for some of those assets you have some real life challenges um so what we try to do uh at settlement when we have this type of discussion uh is try not to show a catalog of use cases a cat catalog of possibilities but start the discussion around what the business people around the table have and identify as a challenge so we take one example real estate for example what are the challenges we see in uh the real estate market an important challenge I see is high barriers to entry in order to access the real estate market you need to have a very high minimum investment that means me personally I cannot access this Market I would love to have a toiz solution that fractionalize uh real estate assets so I can jump in in that in that market you know so it's the kind of approach and methodologies uh that I think would accelerate um blockchain adoption and I want to get into um the different asset classes umis I know you wanted to weigh in but uh Christoff do you want to weigh in on this quickly as well S I would like to um jump in on on this topic do we have a slow adoption or not I would would kind of disagree when when looking at previous um Innovations in in the web space web one when when the inter interet was invented um it took a couple of years um before it was before there there was really Mass adoption uh you you've had number of issues in terms of connectivity uh it it was slow um then then the pipes broke down you you lost uh connection and also when we're looking at um uh web 2 with uh the the platform strategies um kicking in um when Amerson initially announced um that they will sell books online everyone said I have a um Bookshop here around the corner I never ever will will purchase books online or even clothes no one really could imagine to purchase cloes online Google Facebook um exactly the same uh Google there was initially the question um uh about um what what what is in the business model how can they monetize exactly the same with Facebook so therefore I I think we are absolutely absolutely on the right track uh right now with with poc's um so um as as a kid when you want to learn swimming uh you you don't buy a book uh reading about how to learn swimming but you just do it in practice and I think that's what we um realiz what what we see with the poc's and the looking at um one area um I guess which is quite prominently represented um in digitalization of assets um uh digital bonds um we we've seen um uh this year and and previous year we've seen a number of issuances and I guess it's a kind of hockey stick Evolution um as it was said here we we have regulation now in place um uh we we see investors um gaining trust with with blockchain technology um you you have Regulators um uh also being ahead of the curve on this topic so I wouldn't be surprised um to to see really um Benchmark issuances coming in the next uh one or two years great thank you um I'll add a last comment on that as well is that because colleagues have made very good points around regulation um as well as the use case identification another point I'd like to raise more from a product manager perspective is that well um Whoever has already done uh Enterprise grade transition uh in an IT context at a large Bank knows how complex that is sometimes that can take up more more than a decade and so basically it is it's a fair question to ask of course um but you have to keep in mind that the tech rails are we have a lot of technical depth a lot of Legacy depth and so to to get that moving because the point is not just to slap a blockchain on top of the existing Tex Tech and make it even more complex you're trying to reduce complexity enhance efficiency and so for that you're basically finding the right spot to plug in the blockchain and that just needs times to get all the teams rolling all the different appc applications integrated as well so it's a huge technical depth that takes years and years to leverage and to figure out what to move and where to move it we can help you with that actually just in my guess just a quick note to what Diego said I think that sometimes we are looking for the the biggest business case and we are trying to find it understanding the blockchain as a goal and not as a technology or as um the the tool in order to First make more efficient our Pro processes and then offering our clients Crypton native or digital native products that will be attractive for them I think that that it should be clear that blockchain technology should be us use as a tool and not as a goal instead got it um no thanks for that I know this was a a question that um I know we talked about a lot in the in the pre meetings and and it is fair to to wonder like what is an appropriate amount of time to to see progress because the internet has taken decades to grow and and uh I mean you guys are all in the financial industry I I used to work for a bank too and I understand how hard it is sometimes to to root out um billions of dollars in Legacy tech for for something new one of the areas where I see um challenges in wide adoption of tokenization is moving from um a PC to a pilot to production um because orders of magnitude in difficulty technologically um organizationally bureaucratically going from those stages uh I I'd like someone to just quickly for one explain briefly defined PC sorry pilot PC for the audience because they're not the same thing even even though I know they're used interchangeably a lot and and just go over the the difficulties in moving from those stages Barbara would you like to go um sure so I think um pilot I think there's different definitions as you say uh I think pilot for us is an internal exercise PC is then external and then a scalable use cases as the name says right scalable um I think generally for asset managers because we manage fiduciary money right we don't manage our own money but the 860 billion that we manage is is client money it's always difficult to do poc's right client money is you know should be protected and and you know we we need to discuss them with the client if they're interested in that POC as well it cannot just be for our benefit but it needs to be for the benefit of the client um I think what the and that links very well to to what you said before what the poc's um are helpful for is pushing fragmented parts of the value chain because the asset management and overall financial industry Mark a value chain is quite fragmented across different Market players the poc's are pushing different Market players to start adopting right because if we want to invest into a tokenized bond we cannot decide that on our own right we need someone to issue the bond um a bank needs to be involved a custodian needs to be involved the fund accountant needs to account for it our trading system needs to allow for it right there's so many different parts and these poc's are really pushing these service providers to start and you know there's some intrinsic motivation on their side but of course if the client comes and asks them you know to really start adopting then that's the The Helpful part right and and then I think we need to move over you know finding a bridge solution a one-off solution where maybe you know a State Street where our custodian find a oneof solution to custody something to us to to actually build the rails to scale that then right so so what State Street and other custodians are doing so so that we can not only one off invest into a digital Bond but in all future tokenized issuances and I think this is what linking to very what what has been overall said in the panel um what's happening at the moment it's it's very much this infrastructure that is being built for tokenization across different parts of the value chain that really needs to happen and sometimes that might look slow hopefully in retro perspective if we look back in 5 years and 10 years we say this is exactly what needed to happen for us to be able to adopt I want to get a couple more perspectives Kristoff would you like to go next yeah when when I want to uh add um from from our perspective when getting involved in PM the key question is what's in it for client we uh as as an asset manag firm we have fiduciary role we play for for our investors and um clearly we wouldn't um Implement new technology just because of the sake uh because we believe it's sexy technology uh we uh not not implementing for the sake of Technology itself um there there has to be a clear benefit for for for the end investor so that's uh for for us really um most essential and when looking at uh most recent poc's um um beginning of this year um we we purchased um a tokenized cement bond um Point number one we we've had a quicker settlement um meaning less uh risk typically uh when when having new issuances you have a t+ 5 you have a t plus 7 settlement meaning you purchase a bond and um the transfer of um the bond itself and and the exchange of money happens um happens 5 to S days later um when talking about um Bonds on chain um I'm sure in in a in a couple of years time we will get to a stage where we have Atomic settlement t0 settlement um with the seens bond it was a uh it was a t plus2 additionally um Barbara was eluding to the fact that it's also about um um uh uh having smoother processes um intermediaries were taken out of of the system which made it cheaper for for zans and a part of the benefit um they passed on in form of a higher yield um to us as as an investor so that's as mentioned really essential for us what's what's in it for the client and and not just implementing technology for the sake of Technology Andre quickly I just want to get kind of a big Bank perspective on this too from some of the projects that You' worked on what have been the the challenges that or not necessarily challenges but but what have um what have you had what have you learned moving across stages sorry I I didn't hear you I'm sorry what have you learned moving from between pilots and PC's and so on and so forth at at BBV well what we learn is that blockchain is possibly there is a possibility to go with blockchain that's the first learning the second learning is about how we optimize our processes and but I I want to say first of all that PC's and Pilots are we need pilots and PC's in order to to we don't have a comprehensive regulatory framework it's a new it's a new war one m so we need we need we need this kind of Pilots because in our top of Mind as traditional Finance institution and very regulated institutions we have in our top of Mind our fiduciary duty with our clients so we can go we we can go with a production with with something to produce to go something to Market with a new technology if we don't test it before and I think that the pilot is as Barbara said is are very important and PC's also so the learnings are there is possibil there are possibilities probably we have to go step by step and as Kristoph say and I agree with with him we are in the right track and and coming back to your question that is taking off is less than too much taking off because we have to go first pilot then proof of Concepts and then go into production and 7 years probably is not so long time very I want to ask Diego um you started talking a little bit about what types of assets make the most sense to tokenize because there's a wide range like tokenizing dollars and Euros to to gold to to to real estate I'm I'm interested like if you can go a little deeper and explain what um what assets make the most sense and and to what extent does the current economic climate impact any of that I I I get especially Diego what you're saying that um we're talking about like five and 10 year periods probably um but at least like right now especially when we're looking at like illiquid Investments or money market fund and this heighten interest rate environment and sort of Bizarro world of financial Financial um economics like what assets make the most sense um maybe uh my answer will disappoint you um but actually I'm I shouldn't be the one answering that question because I'm not a business Expert meaning that I work across Industries obviously right now there's a big focus on uh financial institution what I bring to the table is the technical expertise how to bring that blockchain related ideas uh to life how to handle uh the whole Project Life Cycle and the idea would be to get that answer from those Business Leaders so when I sit down uh with a bank uh talking with different uh business lines I will have Experts of their own fields and these will be the the people that will be able to confirm or share the challenges that they have so that we can say okay he you have this specific challenge blockchain can bring uh a solution to that uh I thought uh your uh comment on the seens um Bond tokenization was really interesting cuz the result here uh reducing risk and settlement time that's actually business leader language because these people they don't care about blockchain and they shouldn't care about blockchain blockchain is a means to achieve something and here the purpose of the PC I guess uh was to to convince those business uh people that blockchain has a true impact uh that can be measured that can be uh linked to a concrete business value uh and this is what we aim to and the way I try to see things is that uh when we explore uh projects when we explore opportunities with banks is to gather the right people around the table uh so that everybody pitches in with their own expertise and uh their own say because I'm not the one who's going to give a handson perfect solution for uh asset managers or for uh real estate brokers etc etc Barbara I know you want to weigh in here yeah so I'll also disappoint you I don't know but I think he wanted to weigh into to disappoint me yeah okay but it's it's the Central and the critical question right and I I think many of us don't know yet right because if someone would know we would see further adoption there's only really one use case for tokenization that has scaled so far and that's uh stable coins right there's a considerable I don't know what is it20 billion US doll market cap or something something yeah something like that I think tether itself is $84 billion consider a market cap right and and why has that use case worked because there's a clear use case for stable coins right stable coins are used for multiple different use cases but it's mainly for trading on centralized exchanges right trading I don't know Bitcoin against usdt or usdc for example and then for defi use cases um and that's I think what we have to do for other asset classes we have to go through them and really look at what are some the pain points so you mentioned before real estate that one of the pain points is limited liquidity in real estate right I mean there are some solutions for example we have retail funds that are available for for retail investors to invest also very small amounts I can send you an offer um for for for uh real estate products but for real estate I don't see why blockchain technology would necessarily help us to increase fractionalization I don't think really this is the pain point today right it's again and again cited I don't think anyone has really again I'm not a real estate expert so it was some kind of guess that I had uh when when I'm discussing with real estate uh experts within Banks uh and I say okay I have a look at this uh asset class I see there are high barriers to entry yeah blockchain can provide a solution maybe it's not the perfect solution and let's assess together if blockchain actually is the right solution because they will be the ones answering that question not me yeah yeah but maybe maybe sorry maybe maybe just for example the alternative Investments private Equity make it fractionable in order to make secondary markets in order to redeem part of the investment and make it easily will be a a good pin point because the you can make an attractive product if you if you provide with liquidity something that is liquidate due to the fraction ability I'll be the devil's advocate here bit so the I love Devil's Advocates go ahead the the alternative fund tokenization use case that we've seen in the market I think it's great effort and and I really applaud the companies that have done it but what they've done is they've used um feeda funds which is a constract that very well exists uh in the traditional world and just tokenized them and through these feda funds they were able to reduce the minimum investments from I don't know frictional numbers right from 100K to 10K right so so really broadening it up to to to more investors that were then able to to invest into that asset class but really you could have done that in the traditional way right so so the question really is again asking what and I'm a big fan of tokenization right I'm not trying to to to say this doesn't make sense but we really have to see not tokenized for the sake of it and it sometimes FS with these poc's but really think about what are the inherent properties in there so beautiful properties about blockchain Technologies and how can we leverage that right and I think that's kind of the the critical question I don't have the answer for it but I think everyone is looking for it yeah I think we're trying to figure that out uh adanas I know you wanted to to weigh in right and then uh Kristoff I'll I'll come to you quickly as well um so I'll just maybe two seconds I'll spend two seconds on the pilot part prior to answering this question as well because I can get to it from a productive liment perspective is is the huge difference I see between pilots uh PC's and prod is obviously in in a pilot case you really need to make your case your analytical case for why exactly you're pilot especially in big Banks where you have many Pilots that are competing against each other you need to make a can what are you bringing is it are you increasing top top line bottom line you need to make a case for that and then if it moves on to POC that's where you need to get the other people in the bank involved so you need to get risk involved you need to get AML involved so they can chime in prior to you basically asking for prodg go life and the PC part is also most often the part where you get contacted by other Banks or other consortiums to basically be included in that and that's where you need to weigh out does it make sense for me and that's not so much a p&l question it's more about if you're left out of that Consortium what impact does it have for your future as well so that is to answer the PC um prod and uh well to the prod part well that's the most complex part obviously especially from a regulatory perspective that's where most people uh are stuck so um that's basically for the first part of the question the second part of the question for tokenization there is the the large dichotomy that we see is between private and um and public markets and so for p you need to differentiate between are you adding efficiency or utility or maybe both and the best case scenario and the private markets uh you're most often really adding utility as as has been rightfully said simply because you're basically Widing widening the the investor range it can go from only Pension funds to down to family offices and then uh private Banks High net worth individuals and then you go basically down that Pipeline and you can reach uh customers with a more modest Networth so to say so there you're probably mostly adding util um utility as for public markets as Barbara said it's mostly about efficiency really it's about operational costs that you're reducing so that's the large decoty that we see it's mostly private versus public right now Kristoff go ahead yeah but then it's about cost adism uh which will be passed on partially also to to our investors um lower lower cost um so so looking at um products we've uh when we got involved so far in terms of tokenization I I mentioned in the introduction um bonds um for for me is really a key theme uh we we seen a number of number of um High scale issuers like European Investment Bank um um two days ago um world bank and they came with 100 um uh million euro Bond issuance in a tokenized form where we invested in semens uh as first big corporate beginning of this year so there believe we will see a significant acceleration or we we are also in discussions with with a number of issuers about um projects which will be launched quite soon um then in in the derivatives world uh it's it's about um OTC derivatives uh which uh from our perspective can easily be tokenized by by making use of smart contracts um from next year onwards um um tokenized um shares will be uh will will be allowed um to to be issued so that's in the kind of um traditional asset space and what what I would like to highlight tokenization is not just a stupid um copy paste from um the the global document world into into a tokenized world a token uh as Barbara was was highlighting before can can deliver significantly more when when it comes to reporting when when it comes to Golden sources of of data which is key so uh a token is a highly sophisticated format of of what we uh know today as as a rapper and then going forward I'm I'm also a big believer that the investable universe will expand significantly so I'm not talking about vintage cars or or paintings which will become tokenized I think that's for for us as a large asset manager not really a business case um but what you are mentioning in with with real estate I'm I'm uh sure we will see um a number of projects in in the next year where real estate um will be tokenized and and also made um fungible and so tradable um uh in in secondary Market um so that's for me really the the next uh big step uh where where really the juices coming in from an Investor's perspective uh we we can offer products um going forward um where where retail investors um can't find access um to right now and fractionalization of of these token in combination with what we see as democratization of of of investing um going forward will be a key topic so so retail from from our point of view um due to the expansion of investable universe will be one of the big beneficiaries that's one of the big um sorry D I'll come to you in a second just I I would like I would like to to say to what Adon is what Adon say about the private markets and I think that we have to drive carefully what our clients will expect from the tokenization in private markets because if you ask uh ultra high Network individual or ultra high Network investor or affluent invest investor probably they they expect uh to pay a prime to to go through those markets because of the fraction ability and the democratization of the access to to those markets but if you ask to an Institutional maybe a small size like family family office or something like that they will expect a reduction of the access because of you are you are making the market more efficient so you they they will expect cheaper cheaper opportunities so maybe we have to expect different things if we talk from the perspective of an individual from the perspective of that institutional I appreciate that uh so one of the big debates that we've kind of covered here is just like what types of assets make the most sense to tokenize what are the use cases and I think we had a really nice discussion uh a big point of demarcation too that we haven't touched on yet is the public versus private sort of debate um like there are some projects especially ones related to to Big banks that don't necessarily want to touch uh tokenization initiatives on top of public blockchains like etherium and then there's others that that do uh Diego maybe just because like you're kind of um like in the factory on this um what do you see as the the pros and cons for each approach um I'm going to take the example of a project that we're carrying out with a partner that is present here uh with a company that will not uh name um where we're exploring the benefits of hybrid uh architectures so so far tokenization has been mostly delivered on private networks meaning that the to token circulate on a closed it environment making the benefits of blockchain kind of uh fade uh because if your token is not able to circulate outside of the initial environment blockchain doesn't make a lot of sense but we still find uh some benefits in using those uh private blockchains so what we're trying to do for instance is as a pilot uh see how we can create uh tokenization platform SO trading platforms uh where primary Market is mostly handled by a private uh Network and then seeing how we can enable uh those token to circulate on a public Ledger uh mostly to um search for new liquidity sources because when we mentioned the benefits of uh tokenization one of the words that come uh the most is uh access to new liquidity sources if you're using a private blockchain it's is going to be very difficult for you to access those new liquidity sources so the idea is to see how we can enable those tokens to circulate within uh very controlled uh environment but also enable circulation in public uh environments by setting up rules within the smart contracts to say for example uh we can wh list the addresses that are allowed uh to um trade uh those tokens and maybe enable the token to go from one tokenization platform to another so we can actually reach that uh liquidity uh objective of course here the main concern is around regulation uh because the whole um you have to take into account the whole kyc requirements uh tax requirements Etc so um there's still some thought to be put in that process but yeah I think we believe at settlement and with our customers that the future is hybrid future is ZK and enabling access to those uh public uh uh environments Barbara I know you want to weigh in um so I think the critical keyword here really is Network effects right um any blockchain be it private or public it needs to Garner sufficient adoption right and and network effects we know from web 2 with with you know large web 2 platforms like Facebook can be very very powerful one that once they kick in and I think the the issue is we've seen I think in the history of tokenization these Cycles right it was Private first then there was a such period of public then private again at the moment there's some high-profile public issuances like the Zan bond that Kristoff mentioned before I think the the big so I personally am a big fan of public blockchains um I think the big um argument for public blockchains is that they already experienced Network effects right and ethereum blockchain already has a considerable market cap already has um a significant degree of decentralization a significant developer communic a significant amount of um certain standardization for smart contracts of deps that are running on the platform so I think that's one of the key Arguments for a public blockchain uh of course you can build a private blockchain based on these standards of that public blockchain but I think uh yeah that's that's really the network effects um getting that critical point might be easier with with public blockchains and then we can really even more so than with private blockchains profit from the network effects of course with public blockchains there's unique challenges um there's regulatory challenges as as you mentioned right there's security challenges like what's with data privacy issues for example um but I think that's the question right can can we solve these um um these issues but completely agree with your assessment it will be a multi- Chine world and depending on the use case there's probably the distinct advantages and distinct disadvantages of public and private blockchains and different public and private blockchains we'll try to to have to combine them and just then look at the interoperability issue Christoff I know you want to weigh in here but I kind of want to build on that discussion a little bit too because I think if there's one thing that that's clear about token iation is that there's not going to be one siiz fits-all approach even if it's public or or private I mean there's going to be different permutations regardless and then uh if we then throw in central banks around the world kicking the tires on cbdcs and and trying to find ways that those can be integrated into these systems alongside uh tokenized commercial deposits and and all these different systems um so so Kristoff my question to you is really kind of like where do you draw the line first between public and private and then like two what thought has been given to trying to find a way to make all these different systems find a way to communicate with each other so that all these different tokenization projects don't um even if um as they become mature um become mature in their own silos yes so in on the discussion um public versus private um Regulators are nowadays focusing on uh permissioned versus uh permissionless so so when when're talking about Regulators about the setup of the the blockchain that's currently the big debate and from a regulatory perspective um um permission blockchains um are the the favorable ones right now because of the validation process of of the individual blocks you can control who's validating these blocks uh what um based on um permissionless blockchains what what you can't do however we um we we see in in the market um various setups so so one eib Bond was on a on a um public ethereum blockchain another one was was on a private blockchain Network um set up by by Goldman's um uh so so us is very stricted about the the topic um um permission blockchain and um most recent transactions we we we had um they again were on public we're on public chain um on on on polygon um so that's to this topic at the end I I believe um um public blockchain chains uh uh deliver more benefits than than the disadvantages as Barbara was describing and that's um what what we believe where the journey will go to um looking at um how to connect all uh all all the dots uh so at the moment um I I guess we are somewhere at kilometer 5 or 10 of of of uh the the marathon so so it definitely will be a longer Journey at the moment the focus is on on the issuance process um what what clearly is required that we have a functioning secondary Market um activity going forward meaning all the bonds all the equities um all the tokenized fund shares um how can they made tradable on on Exchange um so this from my perspective will be the next big challenge um and with with the DLT pilot regime which was kicking in in the eu27 uh back in March this year um I I think we will see a number of offerings coming quite soon and then the next big topic uh will be not only asset on chain but but also cash on chain um Barbara she mentioned um stable coin uh we are with uh with with the ECB and with German bundesbank in in-depth discussions about um um experiments with uh Central Bank digital currency with a digital Euro and when talking about a digital Euro uh we we shouldn't mix it up with a digital Euro for retail but but we in Asset Management in the finance industry we are talking about a wholesale um uh cbdc which will be uh clearly um be required to have all the synergies then between assets on chain and and cash on chain and make it a functionable ecosystem great uh adanas I want to give you a chance to weigh in here and then um Andre um you a final comment and then I want to leave a minute or two for questions so go ahead thank you Steve so um well it's a very interesting debate uh public versus private that we've been having in TOT only at State Street as well I can give you one example uh I mean I have very competent risk colleagues and so when we were implementing public blockchains one of the big questions that came up is you're sending money to either a validator or a minor be it on bitcoin or on ethereum can you identify who that is and if you can't we have an issue because you're sending money to someone that could be a sanctioned party out in Iran or in North North Korea so that is some of the blocking points that we facing when it comes to public blockchains basically though I do agree that on a personal my personal opinion is that they hold a lot more advantages because the the network effect is already is already constructed basically so you have the decentralization you have the um you have the the network effect as I said so that is basically for the first part but thus the the current lack of regulatory um Clarity around that leads to a very funny situation which is that ultimately the huge uh selling point for blockchains was like we're all on different databases let's all get get onto the same one and reap the benefits of that now the funny thing is that most more and more institutions are going to private blockchains and the issue we're seeing is that they're all basically siloed in their own consortiums so you have one Consortium where you might have Bank a BC then you have another Consortium they're in on a different blockchain and you have four Banks there then you have six other banks on another Consortium and so we we're getting back into that Silo mode that we're trying to avoid but this time in a blockchain world so um thankfully the good thing is that the public blockchain market has already identify that that problem and is already trying to solution for it I'm thinking about some of the uh net networks such as cosmos or others such as the subnets that polygon has launched but also Avalanche which are basically playing the r The Hub of a blockchain where you could have multiple private networks on the same Hub so that you don't have the risks of interoperability based on Bridges because as we all know that's where the most rise currently lies just I agree with with all of you I think that I'm I'm a supporter of public network also but I think that I think that this dilemma is part of the game and I mean I mean probably we we we need to go first private in order to start our journey and then go public because in my opinion private networks is good to are good to test and public networks are good to trade and because and what I mean this have no sense a private network if you have short positions and long positions with a big spread between them because they are not crossing the bid and ask will not cross and you only you are only going to to to optimize your process and but the the operations will not will not be Fable in in in that in that kind of of networks if you don't fit that network with a lot of volume and probably the volume will came through public networks great I I think we have time for one or two questions if anyone in the audience has uh down here front so we're going to bring you a microphone hello thank you everyone for your speeches it was quite interesting and full of insights uh that I will bring back to my teams and uh I was one wondering I was wanted to uh focus on the operational cost efficiency that the blockchain solutions provide for headphones especially on the back end side we've all seen that the velocity of the transactions is quite amazing and uh in this regard um you mentioned how PC then Pilots then production is uh is the way to go but uh have you then uh tried the sandboxes and how is your experience with them with with it uh we we as a cust solution we have done that and we've seen that even so we find acceptable your period of time from 3 to seven years until we find the solution for the final customer even so as that with the tokenization of hedge funds uh tokenization of participation of uh H uh a fund uh the question is how in the translation of this costs for the final customer would the operational see off offset the uh and the liquidity that brings blockchain with the tokenized world uh be enough to uh to justify this uh translation to the End customer I mean I mean sorry for the long uh question but you mentioned that the Cal customer doesn't see don't see doesn't see the the the the benefit it is just back end and operational cost but since there's more liquidity since there's a more uh markets that will create itself uh on secondary markets would that be enough justification for the final customer to see the benefit in blockchain but without seeing the blockchain itself and thank you that's really good question I think at the end um the the customer won't realize uh whether transaction are uh done uh with making use of blockchain technology or not it's even when uh when when you take your smartphone today you you have a number of apps already being based on on blockchain technology do you realize it's it's blockchain uh as an end user clear answer clear answer is no and um that's also my expectation uh going forward the end user uh will will benefit from from a more user friendly um approach uh from uh more um efficient processes from from from higher yields uh because intermediaries are taken out uh but but but at the end um the end user won't see that it's due to uh blockchain um coming to your topic on um on on secondary markets um I believe uh for for an interim period um you will have underlyings tradable uh in in the traditional format and and also uh going forward uh uh on on D on DLT platforms What's um I I don't want to go too much into the technicalities but but I guess what's clearly a requirement is that you have one identifier um for for this security regardless whether it's traditional format or tokenized format because this guarantees um fungibility of uh both types of assets uh and and switch and Arbitrage uh from from one uh to uh to to the other format great and and that's uh it's it's a it's a bit of a technicality but but it's a key requirement um to to have not a parallel Market um for for tokenized products but um a connected market for traditional and for for tokenized ones thank you for your question uh we are at time so we have to cut this off I'm I'm sorry sir but I I think everyone's going to be here probably for at least today and and probably tomorrow so uh anyone else that has questions you'll be able to find us uh thank you to our panelists thank you for attending enjoy the rest of the event 3 2 1 go