The Tokenization of Financial Assets is Finally Here. Are you ready?

[Music] for this panel as mentioned the entitled tokenization of financial assets is finally here are you ready my name is adrian zerhar i'm in charge of business development for nomadic labs which is a a subsidiary of the tezos foundation based in france and i am very pleased to have the opportunity to moderate this panel in the presence of very qualified professionals from the blockchain and the tokenization industry and i would like to begin this panel with this first question and maybe starting with you for instance nadia what is your perspective regarding tokenization is the tokenization finally finally here to stay or not thank you adrian thank you everyone um i'm nadia i'm a head of blockchain and crypto i said that question depo in france i think the oldest company of of this roundtable more than 200 years and what i'm thinking about that we heard a lot about tokenization uh since the beginning that we are talking about uh crypto asset and especially i think uh with ethereum and the smart contracts and it's not new and i think uh for finance it could be a real good idea to tokenize financial asset but not only financial asset that we can invest in and the the the constraint could be more in the regulation space and the real advantage that can support some in the internet there is to don't go there because if tokenization could make the system of uh and the finance infrastructure more efficient it also have some impacts on some intermediaries like csd for example if we are in classical securities it's one point but i think also that it could help us to uh make more people going investing in smes and to take more risk because you can invest in uh some small diamonds and you can approve more liquidity also on that so i think the future of tekkenization it's concrete but make ten time take times thank you nadia very much for your um your answer maybe sebastian could you have your point of view on on this question and maybe can you also add what do you think what could be the advantages of tokenization what advantage is bringing this organization sure i can so first of all um just a few words to myself um sebastian i'm senior product owner at commerce bank responsible for the dlt and blockchain activities driven out of frankfurt here we are working in uh five areas uh with regards to blockchain and three of them are also closely related to organizations so i'm very happy um to be here so for example um capital markets but also um payments and cryptocustody are very relevant um areas for us so very excited to be here so with regards to your question um is tokenization uh here to stay is the big question of course and i think um let me share three of my observations with you um the first one is that the tokenization is getting um more and more uh relevance at the moment if you look at market capitalization of different types of digital assets be it cryptocurrencies but also be it um tokenized physical assets or be it um securities which are going to be tokenized so you just simply cannot ignore them anymore um the second thing is all and that's what nadia also mentioned um just a few seconds ago is um the whole thing about regulation regulation is moving very fast here which will from my perspective uh lead to a certain professionalization and um with more of this legal secure environment you can offer products and services in a legal secure way to your clients um more and more players will enter into the market and this will also lead to to a further boost here and last but not least i was just saying more more players entering into the mark what i see um at the moment is that more more incumbents be it large banks or but also infrastructure providers are starting to accompany fin tanks and neo banks in this area so they are entering into the space which will lead to higher competition and higher competition will lead to more products and services and more clients so on so forth so i think what we see at the moment is that it is indeed on a very good way to come and also to stay with regards to the advantages and this is of course a major driver of why why everybody is looking into this so there are different perspectives i think with regards to digital securities if you look at capital markets i think the hope of being able to do optimization and saving costs is um is there definitely one of the uh major drivers and with regards to other assets and i think um other guys from the panels uh do have even deeper insights here um it's more like enabling fragmentation to specific types of assets which was not there making them more investable and enabling more business opportunities thank you sebastian um maybe thomas can you give us your point of view about this question and as well add um something about according to you what are the best assets to tokenize so do you believe that organization is finally here to stay and if so uh according to you which assets are the best tokenized real estate or financial assets or maybe pieces of hearts what's your point on on that sure thank you uh thank you adrian and and thank you for the uh to the organizers of the event for uh for having us today so i'm thomas a chief product officer at uh polymath uh polymath we're a software company that's that's driven by a vision of a world where everyone has equal access to economic growth and what we're doing uh to execute on this vision is automating and simplifying regulated markets through blockchain so one of the things that sebastian was saying just a moment ago around automation is a is very near and dear to our hearts and to uh to get there we're contributing to a dependable compliance-focused blockchain uh that can help connect market participants and grow the security token market when it comes to you know is the tokenization of financial assets there i would say it's actually we have to look back at the definition of what what we mean by being being here you know i think uh bianca from state street described it best by saying you know security tokens would come in a trickle trickle flood i think we've already seen some tokenization happening but that was more part of the of the trickling uh not yet the flooding for the flooding to occur there's still there's still a little bit of work to be done but what's been very interesting is to see the progress both from an infrastructure and regulation perspective i'm sure you've all seen the news about uh seven eight days ago with the the former cto of chain analysis uh being named the new interim director of fincen and i think what we can see there is there was already a strong desire from regulators to to support the initiative baffin for example um has uh um has made quite a lot of quite a lot of work there and so has the fca but we're seeing also not only uh that desire to better understand what it means as well as a strong desire to educate themselves and to stab themselves in a way that they can support that flood when that flood arrives so you know the tokenization of financial assets is it finally here yes yes it is uh the infrastructure is continuing to build up to support the flood but the trickling has certainly begun and and when it comes to which assets i think there's been a lot of experimentation we've seen a lot of experimentation happening around bonds we've seen experimentation happening around real estate around art right around uh private markets as well um in my opinion where we see the largest potential where i see the largest potential for those financial assets and is the in the augmentation of capital markets not the replacement of existing rails and so what i mean by that is there's a variety of assets that um organizations wanted to uh to securitize for a while and they couldn't because it was just not cost effective or there was no real um benefit in in doing this there was there was no real way to consume any value out of it with with tokenization now what we're seeing is is certainly a lot of interest in real estate but a tremendous potential in um in fixed income type assets uh with the automation that can uh that can come with it and what's what's even more interesting is there's also brand new products that are coming into play or brand new ideas that are coming into play um where organizations for instance come to us and say you know i'd be looking for technology that allows me to tokenize an asset and deliver this and and they start describing what they want to accomplish and and those are very novel a very very innovative uh way of looking at um the secretization of the securitization of assets so when it comes to the assets that we already know i would say real estate and fixed income have have phenomenal potential but there's also the part that we don't know yet because now that we have access to all these tools now that we have access to that technology capital markets is not short of ideas so i'm sure there's going to be brand new products that with respect to everybody on the panel would probably are not thinking about right now but 12 months from now we'll look at them and go well that was a brilliant idea how do we how do we get into this thank you thomas d'tun can you please quickly introduce yourself and let us know as well your thoughts about tokenization and the fact it will it's here to stay absolutely thank you very much uh and thank you uh for the organizers for inviting me here um yeah so so i'm uh dotton i co-star emerging technology and innovation at the london stock exchange group and much of my focus is is generally centered around driving the adoption of new technologies like blockchain and dlt and really um looking to scale this for digital assets uh namely uh looking at securities today um but but obviously you know that that spans much further beyond i mean i think for a tokenization perspective i recall all the sentiments that have been uh presented so far i mean we see uh across the space uh in the securities uh market there's lots of opportunity you know in the private markets around primary rockets issuance and automation of a lot of the commercial workflows that in the past have been generally led by large incumbents namely investment banks but today through digitization through tokenization and have really brought cost efficiencies and that really enable you know these services to be offered to new clients but also for um you know newer asset classes which is very interesting and then i think beyond beyond that when you look further afield you know there's lots of of activity now really looking at how do we plug the gaps in market infrastructure and for these digital assets how do we provide rails that allow them to be admitted to listing and traded and settled and bilaterally traded in in in private markets too and i think that's really where um the landscape needs to go and that's where the hard work is being done around regulation the regulatory compliance around technology infrastructure robustness and scalability and i think once you get past that point we're really going to start to see a snowball effect where innovation really starts to take hold where and you know the newer more innovative fintech can really build on these these infrastructures and really layer on new products and services and and new capabilities that will really benefit the markets thank you very much lat but last but not least jan we would be very happy to to have your thoughts about this question as well and uh and please feel free to introduce yourself as well thank you very much um yes i think it's very hard to to now speak after all of you gave you your great thoughts about it but i will try to give my two cents to it and i personally believe that the tokenization of assets is here to stay and actually it has product zeitgeist fit right now so we are right now in a of course crazy time after one year of uh corona and and what i personally believe is that that right now we are at the first tipping point of many and exactly like thomas said it right there will be more and more waves of where tokenization of assets actually comes in but if we're looking at this one it's actually driven by a young generation and they actually drive the change and we see that things are getting tokenized we didn't thought about the same way two years ago if we're looking now at the the sales volume of crypto punk which is around about 200 million we're looking that nifty gateway made uh 75 million revenue in february in a hundred million march these are things that that none of us i would not have added on that right and what we're seeing there is that actually new products completely new products are opening up that market and therefore then will influence uh the old products um that that are then changing over time because people are getting used to it and that's actually quite a common way right how the internet and and all of these things worked overtime and i think that's that's what's super exciting about it i think we are far like we still have some way to go until it touches the complete old world and all products but we're seeing that a generational change is happening and therefore this these are the new investors for the next 20 to 30 years and i think that's that's super interesting and then a very exciting time right it's a kind of um [Music] the next web 3.0 situation where we are actually maybe hitting a climax and um of course for us i have to say i'm biased yeah i'm we're running a startup called timeless we are fractionalizing rare collectibles like sneakers watches and cars and other kind of blue chip nfts we're based in berlin and we actually see a lot of traction of people actually wanting to buy shares of these assets that they could not afford before i could not actually invest into and um so my gut feeling there is i think um it's the first wave like thomas said and it's a completely different one that a lot of people expected but that also makes it very good this gives it the site guys this drives people to actually care about it and and therefore they'll influence big industries like the financial asset industry of all this right well thank you very much before jumping to the next topic anyone would like to add something regarding this this question all right so well it seems clear that tokenization is here to stay however um and i think it's a good transition uh with you yan uh i believe some aspects needs to be explored for instance uh the following one should we use private blockchain to tokenize assets or should we use public blockchains what is your opinion regarding this question uh maybe dotun what's uh what's your your um your opinion on this should we use private or public blockchain to tokenize our sets you want me to go first or you have to go first please go ahead okay i mean i would say um it's an interesting one i think i think over the course of time we'll see the realization of both i think um you know clearly there's a lot of activity going on in this space at the moment in in leveraging public blockchain i think the challenge is for very large and generally regulated institutions it's very difficult to engage with the public ledger obviously we've seen you know proof of values and proof of concepts that have been done in the past and leveraging the technology but you know when when you you're making considerations as an institution in that vein around taking the product into production and you know there are lots of considerations that one needs to consider and even from a regulatory standpoint and there's an obligation for a regulated institution to have a very clear understanding of who they're facing off to commercially when they engage in any kind of deal or execution that i think that makes it very difficult from a from a super non pseudo anonymous public ledger perspective in order to concretely um fulfill your obligations in that respect and so i think what we will see is you know growth and maturity of private networks probably managed and operated by either market led consortium consortiums or by um large-scale fmis and then building on from that we'll see interoperability and connectivity into public ledgers where you'll have assets that have much more mobility and and allow for much more uh innovation in terms of service provision that's built off built off the back of that very clear very clear thank you very much jan you just mentioned that you are you are running a startup within the tokenization industry um my question is the same but i would like to add something if you tokenize an asset on a public blockchain and there is a hard fork how do you handle such a risk and i'm very curious to to hear you about this because as you mentioned you are running a tokenization project yeah i think first of all um the way of like how do you decide if you go private or public or in in between i think there overall is a very clear way it will all lead towards interoperability and it has to right if you're actually closing something and it cannot float then it doesn't make a lot of sense that's the one thing and i think that's what we're all kind of waiting for right so all of us most probably are in this in this industry for quite some years and then we are all talking about these different things and then as we always evaluate it from a standpoint what makes sense right now what is for us for example we have end consumers right what is the communication way that they understand and so i think it's it's a it's not an easy question to answer and of course it's quite clear we our investors is eos vc fund so that actually of course then shows that the blood the main ad that we're pushing that on and um also therefore of course we leave us um some some options in the future to see where it actually will evolve yeah overall the the whole discussion and then of course let's say for example the different risks that are associated this is one of the beauties i like about this but also one of the crazy things right so no one is really sure what will happen so there is if we as a startup try now to make a let's say risk assessment on all of these different things i would not concentrate on marketing finding great assets getting users all and so on and so forth so yes we're thinking about this but it's kind of like um we put this on our list we make first assumptions we then see how we can kind of do it the best way right now and then also put it high on the agenda if it actually seems to be uh something that's happening and that's causing a problem yeah and and overall i think right the the more the more you try to build a transparent clear product and that's also implemented into the smart contracts and also in the way of how you communicate but also build um everything around fast nfts and the easier i think it will be to actually face certain challenges and then actually uh find the right solutions for it uh without and that's the problem right um causing problems for your users because that's what it will end up with it will end up with with a community or users that are not happy and yeah that's that's the way how we approach it as a young startup but most probably sebastian can say something from an institutional point of view towards these parts now i i think everything that you are saying this is completely right i was thinking when hadrian was asking um this question how to how to structure it and what what are the inputs into the function if a public or private uh blockchain um would be suitable for me um there are there are two different um things to to to look into or to put into this function the first one is um for me always on the um the type of asset we are talking about and the second one is the time so how it is evolving and um my perspective my two cents on this are um if you if you think um uh of the different uh assets which we see at the moment cryptocurrencies um all this stuff is of course staying on public chains because um they are born their ecosystems evolve there will nothing change um with regards to electronic um securities i assume there will be a shift from public so when i say securities i mean uh like like bonds equities and so forth i assume there will be a shift more towards permission blockchains um why do i think so because i see large infrastructure providers already building um solutions there and they tend to like more permission chains because they think that it's better for scalability better for data privacy um transaction finality and also this is a very important thing on the flexibility and the governance which they can put upon so this is this is on the on the second and um so this will from from from more public to more um will will go from more public to more permission i think and then last but not least if you think about um all the um tokenized physical goods like art like like real estate so on so forth um i think that this is going to be more on but not solely on public blockchains or because this is this is what i see at the moment what is happening and and small ecosystems are already evolving there um nevertheless um tokenization of physical assets i'm still not sure where this is going to be in the end okay thank you very much sorry sir please go sorry i just just wanted to add something to what uh what sebastian was saying because and i think we talked about public we talked about uh private uh the um the hybrid uh approach of a public permission blockchain is actually one that you know we've we've considered and and decided to uh to embark on you know you cited the the issue of the the contentious fork and how that could create a duplication of assets that's that's a real issue there's ways to solve this but i think the bigger problem points back to something dotun mentioned which is as a regulated entity you need to understand who is involved in that transaction and when we talk about a blockchain that goes all the way down to who the the the block producers are who the miners and node operators however you want to call it but who takes your transactions puts it in the block and and deploys it and so um the approach that that we thought uh would be would be best and that was you know after engaging with a with a variety of of large banks and like large institutions was to go and use a public permissioned blockchain because the public side of it gives you that transparency that is still a very valuable pop up part of blockchain the permissioning addresses the issue of understanding who the who the counterpart is and who the participants are in that transaction and what's what's interesting with that approach as well is as regulation evolves so if a number of years from now regulators and banks are comfortable with not knowing who they are paying a transaction fee to then that identity that that identity requirement for every participant on the chain can be removed we believe that it's easier to relax those requirements that it is to take a system that was built for pseudonymity that was built for anonymous transactions and just chew on capital markets into this saying we're going to add all these different pieces that will kind of make it work but you're still not going to have any visibility until it's too late until you've paid that transaction fee as to who participated and you know there was a there was another approach that could be considered which is to sort of segment the chain and say there's going to be a subset of the block producers that are known and identified but then now you have to look back to what sebastian was saying around considering every type of asset is now you're making this as part of the requirements or the properties of this asset which means that the risk the risks are going to change based on what asset type you're talking about because you may have a different subset of block producers that are involved that subset may be tiny which then could be could make an asset subject to potential blockchain manipulation uh to sort of make a difference from market manipulation yes and if i if i can go on i think for my part there is many answers that have been done and i agree with but i think for the moment uh all is not really clear and uh for our perspective we decide to be a little bit agnostic on the subject we understand the point of that it's really important for a company like us or financial companies to answer to the the problematics of compliance governance and cyber security i think it's really important to be sure of who is playing your blockchain with going to put the transaction on i'm i'm really agree with that but also that in the beginning i think all of us in the in the big banks or financial infrastructure will be going by pocs and sometimes public and sometimes really private blockchain is one node thing like this and i agree with thomas that there is some there is a way in the middle because playing with only private blockchain with one or some nodes is not really uh working with blockchain because you need transparency you need more velocity and you need some decentralization playing with public blockchain and the first of them like uh bitcoin or ethereum sometimes it's really difficult in companies like us because we don't know who managed that and we can have some fear about that but i think slowly we will go on a public permission at blockchain and it's important in the this time to work with everyone and to try to find a way to make some different opportunities and technology be interoperable because in the beginning all will be not mature and defined and it's in that way that we are working now for example we are working on the on commercial interbank currency related to settlement on security and we decide to work on a different blockchain public and private on that subject and to try to make them working together and to try to permit and it is that could be an investor for example to uh to choose where they want to work because if you are looking to the market there is different actors uh who develop a asset for a tokenization or infrastructure they are not all playing on private and or public and they are some of them all uh really interesting so we need to to try to understand how we can work how we can also uh sacrifice of some uh some point of on regulation and how we can also innovate on that because for example if you are talking about uh property of assets and if you are in europe or in france you will not have the same definition who is the real property or who have the property of the asset and where is the transfer of value and if we are working on the blockchain the the property of the the asset is not in france in germany in the united states or in uk and it's a real real um subject to um identify where we want to go and how we will manage that because it seems like really simple but if we are talking about who had the asset in the register where is the register if you are even in a permission a public permission blockchain you are not only in one country or one area so it's one of the points but i think it's what is really excited to don't know where we go exactly for the moment just quickly maybe can i speak directly to this uh as i think it's very interesting that as you said your company is 200 years old ours is two years old so we're exactly the opposite but the problems are the same right yes the point of this so much is not clear to a certain aspect and that they they're of course you look at all of these different options regulatory i'm fighting is the wrong word but i'm in deep discussions with the baffin now for quite some time with our startup and everything else and trying to figure out and of course they don't have all the answers for certain things but we as a startup we need answers and then also we have the next aspect they said like okay what's going to happen on the protocol level and then for a startup this of course means let's just do it and let's drive traction because waiting is not an option because then we're running out of money but then of course for you with a company that's 200 years old that's excellent um exactly not the option just to try it out and then later find out what it is but what what this situation i think shows on the one side very big opportunity on a lot of different levels but an unbelievable amount of uncertainty we actually cannot you just have to do educated guesses i think a lot of times and then you have to say okay if this actually pops up then we have to find a way but before it before it's not really like blowing into our face we have to concentrate on the rest and i think that's a very complex thing and i'm not happy but it seems like you as a 200 year old organization have the same problem as we as a two-year-old startup there but i think the the paradox here is that we are all talking about technology and we are talking to our regulate the technology but in the fact before you never decide what technology you use to to work with your securities you never talk about technology and because the technology is coming from crypto assets and from cryptosphere in the beginning everyone go on the regulation on technology and the subject is not regulation of technology but how you use are you your secret security your market and what are the transactions between the people how you can manage your kawasa between the client and the invest the the banks or the clients and the investors and it's a real paradox here that it's difficult to manage and i think we need to find a way to work together startups corporate and regulator to more understand the point that we have to uh to explore and to debate on to find a way to work because for the moment we are sometimes turning around the points and many things work technically but the regulation and the technology are not working together as well i think sorry adrian i go on the question and maybe i would like to add something because we all know uh understand the the problem of having a transaction fee paid to a validator we don't know on the public blockchain but just to give an example to people listening to us let's imagine we have commerce bank with sebastian issuing um a financial asset such as the bond under the form of security token and sally selling it to case the depot to nadia sebastian will do a transaction on the network on the on the public blockchain network and will be ending paying a transaction fee to a validator or miner on ethereum or to pay the the validator that will include the transaction in the block that has been produced and what about this baker or miner being in north korea for instance i understand that this could be a problem i just wanted to explain that so for people not as much familiar as we are with this this problematic and this is a point you addressed uh just uh earlier thomas so i i understand your point and maybe yes i don't know if if it's the solution to have public or private or public permission let's see talking about regulation and legislation maybe we can jump to another topic regarding the way we can perform deliver versus payment operation for security token and i'd like now to discuss the the cbdc topic and its relation to tokenization we all know that many central banks are currently performing experiments on central bank digital currency cbdc and my question is do you believe that having a cbdc in a country could be useful for the tokenization industry for instance if could be useful because you could for instance perform a 100 unchanged legal versus payments operation having the security leg and the cash leg on the blockchain and maybe um i'd like to have your point on that dotune and and sebastian and nadia as well after i know you are running an experiment on a very similar topic with digital currency for inter bank settlement maybe dotun you can what do you think of this uh of this question i think detune is not anymore with us so sebastian please the floor is yours ah okay perfect so a few minutes more for me um no i think i think um all the tokenization in capital markets is around as i already said optimization cost optimization so and so forth and thinking about the cash lag here i think that you definitely need a cash like there to unleash the full potential so that's for me 100 clear do i need a cvdc for this well i think um a cvdc for interactions between sort of the settlement interactions between um banks could be of help there it could be either issued directly by a central bank or it could be something which is at least of the quality of central bank money so i'm somehow backed by um signature bank money at the same time i think that we also have to consider um things like commercial bank money as we have it today but in a tokenized form for use cases where you do not necessarily mean uh needs to take um central bank cash um we did a couple of experimentations here i think last year and the year before and we were issuing something um for an ecp issuance which we did um based on the e-money regulation um so we issued e-money on ledger which is a good to be used in a closed circle but what we need is a more fungible interchangeable thing which we can um which our customers also can can uh change amongst each other while there are customers at different banks so i think with with central bank money you always have risks of disintermediation refinancing issues that could potentially erase at banks risks of a a going down credit supply so on so forth and my perspective is that we definitely need to also let space for um commercial banks to provide an innovative solution there but nevertheless um the thing is i think we need something a cash lag um to to unleash the potential in the meantime until uh all these things are there and there are also some um more or less smart um solutions being developed um who are connecting blockchain business networks which with established payment systems for example so bundesbank ran an um pilot there um they were having a security transactions which triggered the payments in central bank cash um on the target system and um i think um in the meantime until we have these cache on ledger and the way we need it we should also think about trigger solutions which could help us in the meantime as a bridge technology thank you very much i think many people want to intervene maybe the tune come back yeah apologies i got us connected um i mean yeah i would echo pretty much everything that sebastian said i mean we're actually exploring this very extensively so we have a project um in the fca's innovation sandbox looking at um post-trade setup into digital securities and namely uk equities and it's interesting um we we haven't yet uh explored this in the context of the cbdc but we projected that something like a cbdc would exist at some stage in the future and what's interesting is you know when you look at public markets and because the function of settlement is essentially centralized um essentially through the role of a csd then it does get give you some optionality so as sebastian said either you have a cbdc that is issued by the central bank and then you can you can leverage that to perform um atomic settlements on chain or you can provide essentially a mechanism that proxies the cash leg or just um settle the securities lag on the ledger and essentially provide an integration to an off-chain uh existing uh uh uh cash payment system class shutting system essentially and that would allow you to run dvp through almost like two atomic settlements on two separate subsystems so there are mechanisms to enable that i think what's interesting again is you know there are lots of lots of opportunities to leverage m1 money or commercial bank money in a tokenized form we're seeing projects across the ecosystem exploring use cases whether that be through around into bank payments and whether that be through trade finance and other other other opportunities then i think when you look at solutions like uh finality pushing for building you know tokenized fx markets for wholesale uh financial settlements and that again there were you know there are lots of um use cases where we see you know a clear value of commercial bank money on the ledger but i think cbdc is interesting in the context of providing essentially direct access to risk-free cash which has very strong implications in terms of some of the services that csts provide today in enabling them to bring them on to the ledger and for digital securities and in in the context of public of public markets but then similarly you know there are other other use cases where cbcs may find a lot of value in the in the retail retail and finance financial market side so we'll see how that evolves yes if i can adrena i totally agree with what uh said sebastian and dutun because really we work on tokenization of assets now from 2016. we launched liquid share with different banks and csd and the french next course and we know that it works but always we have a work that we said in france where is lapatkash so how we work with the cash leg and we work in the beginning in lab chain on the poc on something like euro token and looking about stable coins and now we are working with two bands pnp and credible and to a provider that took any and the blockchain xdev on that because we think that it could be really a solution to go ahead on the how to work on settlement on security and that could be also interesting to work on that with the discussion that there is on the different regulatory or central banks now because the the fact that perhaps we will have a digital euro or a usd token or something else will happen but we will not do transaction directly with the central bank money we will have some question of how about the intermediaries how about the banks and how it could work in an interval perspective so i think it's important to go on the subjects for the moment it's i don't know in indo in uk or in germany but in france it's a little bit new because we heard a lot about the very good really good initiative of the bond of france but for the moment we don't heard a lot about the commercial initiative you can heard about private initiative like like dm and central bank and between that you don't hurt many things but if you are looking what happened in i think in usa with the authorization of the controller to for the banks to use stablecoin and what happened in china with the central bank and other commercial bank from the area of korea china and japan it's interesting to see that the things are moving and i think perhaps we could have go more quickly on this this subject than on securities and could uh have a solution to develop the the things on on the other asset after on securities and others and i i agree that also it securized from where it's coming the cash because if you are looking for the transaction in some public blockchain we have always the subject of compliance and stability of of the cash leg think maybe just sorry just to add one more point uh to nadia's point and also in the context of dvp specifically and settlement finality and it's it's very interesting and it kind of segues back into the question of public versus private ledgers too when we look at that um because it's very difficult in the context of let's say for example a public ledger to enable um a settlement finality which in essence is a legal construct where you have essentially probabilistic consensus and because if you if you if you don't have a clear picture of where your transaction finality has occurred then it becomes very very tricky to determine you know what point can you say or can a regulator say um that yeah settlement financing has occurred and therefore you know the relevant protections um that that are that are offered by that and can be passed passed along sorry i would later after but i agree and it's why now we are working on different technology and we are sure and that the issuer of the the cash have to be really involved if what or when it's done and have to be responsible of the governance of the cash you can not let something that you don't know be the the leader of the governance of that and today it's one of the the k points if you are working on the public chain i think so we are looking that one but i think thomas wants to erect yeah i mean just on on the points that turn the tune was making regarding probabilistic finality versus deterministic finality and and and i think you know it points back to uh i believe i saw a comment uh that a member of the audience made around you know let's consider the asset and determine based on that asset where it should be deployed if it should be on a public chain or a private chain and if so which one and i think ultimately all this points to the criticality of interoperability between blockchains because where a cbdc may be may not be where a security token may be for for a variety of for a variety of reasons but for a transaction to occur there's going to there's going to need to be a securities leg and a cash leg and how do we make sure from a settlement perspective that that operation can be conducted as automated in an automatic way in an atomic way um while reducing or protecting basically reducing the risk for uh for counterparties and so the the finality i think applies to both on the security side and on the cash side um and and that's something that you know we we've certainly uh looked into quite extensively and that has driven a lot of the designs on on the work that um that we've done um but the uh the interoperability in the end is has to be a priority for anyone that's working in blockchain and and i mean to to take an example for us the approach that we took was to build that ability to perform interoperability directly within the settlement engine of the chain so that that that way you can have tokenized cash on that chain or you can have tokemas cash on another chain or you can use regular rails you can use swift if you want to uh to uh to perform that transaction because cash legs and securities lag are going to move at different speed from a technology adoption perspective given that different set of requirements from a um anti-money on laundering to control of monetary policies and everything in the middle and so that to me that all points to that the criticality of having a solution that's interoperable okay okay thank you very much um let's discuss one last topic before taking the the question from the audience and i can see that there are a lot of questions well we all have seen we all have been witnesses of the success of non-fungible tokens recently and in certain ways it's a kind of tokenization of assets as well so my question is how do you link nfts non-fungible tokens and the tokenization industry they began you can enlighten us on these points um yeah so i think of all what we're seeing right now in nfts right this uh crazy way of how the last three months went with people now with park uh uh launching with sotheby's you already have kind of a little bit of a decline in this whole industry and but overall but what i personally think right there's a very big movement towards these things but also what we can see is that it's not the traditional things that get tokenized or get become an nfp to a certain aspect but rather and the way that completely new ways i looked into so before we had the part of real estate uh it gets tokenized a lot of startups raising huge amounts of money on the whole part of real estate the problem that i personally most probably see in that case you have a lot of very well established companies who do real estate investments for let's say the last 50 years they have really big teams they have a lot of access to cash their real advantage to move everything of this towards the blockchain and tokenize it and make it available for everyone is not that big compared to other parts and other verticals where you don't have that kind of professional companies in the background and on the other side and don't have let's say really big companies who have a legacy of 50 years in doing that for us that means for of course if i'm buying a specific all time i'm buying a specific watch i'm competing with most probably a really rich guy who tries to do that and i'm trying to offer it to my community so this gives us of course leverage and therefore of course the adoption in these cases and why people actually want to do it because we actually get assets that are really good right if we're seeing like if you want to buy a house on the champs-elysees or let's say a flat there's actually no chance most probably that you're getting access to that deal because there are a lot of big companies are already buying that um and so so coming back to the question what what do we what do we see right now in that market and what is happening we actually see again an adoption in a not natural kind of industries we see it with nifty gateways we see with people right 69 million um paid in ether by someone who owns a lot of people other kind of artworks and but now he's actually i think in the top five of the living artists and souls artwork so it's madness in it all i think there will be a lot of new concepts coming up and then slowly the old world will follow up on that and and what we have to see whereas in adverse um selection in a certain way where do you have big players in the industry that don't have any interest to to introduce blockchain they say we are really happy that no one really understands how a business works we do this while inviting you to big steak and in a nice red wine and that's why you are selling to my family office the house on the chandelier and i think this this where this whole way is going but also that's why we see the adoption so strong that we have companies that have not been on any radar for uh three years ago that are now making 100 million euros in revenue we have an artist who did yeah art over 13 years and now is one of the most successful artists that we have here and we have complete new ways of how artists can actually make money with royalties but this can be so easily um connected into brand owners into all different other kind of aspects in the business so yeah that's that's that's my take on on what will happen there and that again we have a completely different approach how society went towards the trend the same way how it was with bitcoin right in ethereum these were not the big banks who backed it right so they're slowly now coming towards that sorry for that sebastian but um i think also it's a generational move it's it's a new group of investors that are believing into certain things like for example that a digital art piece has a lot of value and that's what we're going towards and it's just a small beginning of an overall tokenization of assets and i ultimately believe everything will be tokenized and most probably it's down the road of 10 years but then um and this can actually make it to everyone accessible however and that's the last point i think there's still a lot of players in the industries who are not interested that a lot of things are accessible and so we have to look at the industries where it is and then actually provides the normal people the possibility to invest in these things thank you very much and nadia you want to add something i i think the subject of nft is not new really and with my team we developed something that could work with the nft five years ago so i think it's not new and the the real point is to see where it could be really interesting for the users and what will happen because if you can buy a flat in chandelier by 1 000 people okay but if you don't have any use of that it could be only by waiting that the price of your flat in challenger will increase and that everyone wants to sell it in the same time and it could be difficult and this exactly exists already many people buy flat in marbella for example or in spain uh coast and uh it was not really uh working it's the situation that we see so i think for real estate it's not really new this this kind of things but i think it's more interesting for her art for example or some really rare objects and perhaps it will have something like a game for um i don't know if you know about sandbox for example in in asia but perhaps there is something around the the game industry and uh perhaps also it will have something about uh how you can uh tokenize some uh ip of uh object or are for example i i design a chair and i want that chair could be reproducing anywhere but i will share a part of the ip with with others i i think it could be a good day but i'm not sure in the real estate that what you are doing now with securities and phones on real estate one quick thing and then i'm happy to give it to sebastian and i think at that point right there's so many concepts that all of us heard that we all like that we here for five years now and i personally believe follow the adoption not follow the money but follow the adoption where do we actually have people who care and and and put down with their wallets in the end a sign that they do it because there's so many things that we all know that is there yeah from let's say decentralized autonomous organizations it's a crazy good concept they're not so big adoption but it will come so and i think right now we have the first big wave of adoption at certain points and a lot of others will follow now happy to give it to sebastian no no not not really having uh to add something to to what you and uh nadia said um knowing that i come from from a commercial bank um being since 150 years i might have a little um less uh on how how to say in english um um yes i'm i'm a little bit uh more traditional uh with my perspectives but everything you said and also what what nuggets had come completely right so nothing to add sorry i said i think just to pick up on some of nadia's points i mean so prior to my time at the lcg actually uh co-founded uh a start-up and we were looking to build and it's probably about three years ago now uh a solution for uh digitizing and tokenizing video game assets and we were looking at non-functional tokens and fungible tokens i think what was it what's interesting when we see kind of the modern wave of um of nfts is that um you know obviously there's a lot of there's a lot of interest there's a lot of a lot of growth and a lot of you know nation activity there and innovation it's very very interesting but i think i'm you know through some of the analyses that we did in the past it's it's very interesting when you explore some of the the fairly open questions around structurally you know what what makes a good asset what what makes a good asset for tokenization whether whether that be as you know the form of an nft or or in the form of a fungible token and or otherwise and i think that you know it comes down to questions of you know if it's if it's a physical asset that you're that you're tokenizing and you know what's the core utility of that asset how is that utility consumed and is there an is a way to build an inherent link with that physical assets and the token whether that be through a mobilization or some other other mechanism and if it's an intangible asset um is it is it a better construct or a non-bearer construct and i think there are questions around you know if it's a barrier construct it makes it relatively trivial if it's a if it's a non-bearer contracts construct such as a security let's say you know a deed around a a physical asset is there a legal register that exists today already that's apart from the blockchain that dictates um essentially ownership and so there are lots of interesting questions around that um you know the digital art is a very interesting one for me having a technology background and digital and assets that are not tokenized generally don't maintain the property of economic rivals right we so trying to tokenize them it makes it very difficult because there's no inherent link between the two so there's still lots of open questions around you know what is the only structure how does it actually work and where is the where is the true value in these things and i think a lot of that will will be explored more and uncovered over i time quickly also i'm mentioning on that i think one of the the biggest things right now if we're looking in the industry there's there's a huge bubble coming right so we're in the end ultimately with nfts in ico 2.0 and 97 most probably of the nfts will not hold their value we we and then the question will be what what actually has real value the same way like you're saying right is it connected is it just digital is it connected to real security does it have a real use case let's look at so rare yeah where in the end they actually made nfts that are now usable in their game and so on and so forth but we can already see also there that there's a huge adoption of people towards that kind of combination of gamification and to certain financial aspects and collectible aspects and but does this look like a bubble holy yes yeah that's a that's a really really crazy thing and then the question again is what what are blue chips right crypto punks actually launched before there was a kind of the the the nft standard erc721 on on ethereum but they rather had an idea of of how would we do that and then very strongly i think influenced that and um therefore it's a crazy situation on the one side but also like you're selling right everything what what comes with games what comes with other collectibles there there are a lot of people working on it and um the problem that that money is programmed into the overall idea of course will lead to let's say a lot of sad faces most probably in six months down the road but ultimately it will stay the same thing like ico state right there were a few really really successful really great companies that had a lot of ideas um or actually a very good white paper and then actually delivered on that but there were most probably also a lot of scammers who just ran away so maybe maybe uh let me add one thought here the one thing i'm a little bit worried about is indeed and this is related to what you are just saying um when i think back um to the year 2017 uh 2018 um is the whole nft discussion something which is going to push the blockchain discussion and the distributed network discussions again or will it be the next thing which is bursting and throw me back three years or four years um again making me need to uh to describe and to explain everybody that blockchain is not a a very very bad thing for everybody yeah so there's a little little thing which is worrying me about the whole nfp discussion thomas now i was going to say to to sebastian point i think you know when when we say nft we perhaps are a little too focused on the technology and not enough on what the asset what's the asset that's underneath it and from a regulator's perspective it's going to be a matter of fact and circumstances if that asset is a security nft or not it's a security and it's going to have to be subject to transfer restrictions and kyc and and all of these things so that i do share to some to some extent sebastian's concern as well all right all right to to continue i propose we take some questions from the audience and let me find one actually while you do that i just wanted to answer to one that that popped up regarding uh so there was a there was a question or a comment uh based on cbdc's on swift and i think uh perhaps uh i i wasn't wasn't clear when i talked about interoperability so when i mentioned swift it was in the context of interoperability between the securities being be within being on a blockchain and the cash leg potentially being settled on on swift not about putting cbdc's on swift because as it is very clearly described in the comments it would be uh and i'll i'll paraphrase it will be like giving someone a microsoft excel spreadsheet and asking them to calculate the cells with the calculator so it was strictly in the context of of interoperability that was that i was talking about swift not about putting cbdc's on swift at all we just want general question regarding [Music] regulations we have a question [Music] and i mean yeah how long do you think it will take for regulators to accept tokenization in contract transactions for instance for relay states i think it's a difficult question because regulations are not the same in all places of the world but anyone would like to to jump into this question i don't know it's dependent i think it's depend on on what we are talking if we are talking about securities i think we know that it's in europe something about me feed and and the sandbox of that uh it's now uh go on on the on europe uh if you are talking about crypto uh you are talking about mika so it's about about what you are talking about and what are the the [Music] what it seems like it's a it is a financial asset or not i think it's not only about smart contracts smart contract is not a contract it's a code and i think it's really state of code and if you do the link with ia for example and the question about who is responsible the machine the algorithm or the people who is the issuer we will have the same question here so [Music] another question any comments about the tokenization and regulation of charity donations anyone would like to take this one maybe may i have a question for you sebastian um we we are seeing more and more uh commercial banks maybe it's a question coming a little bit more than to traditional tokenization with financial asset but we see more and more commercial bank issuing assets using smart contracts do you believe that the the the fact that commercial banks are using a smart contract to issues financial assets such as bonds or options or i don't know is motivated by cost reduction or by efficiency in in the way the asset is uh is issued i i think what you what you say is completely right when i think about uh using um smart contracts and whatever assets uh to be issued or handled along the life cycle along the uh value chain which we which we have in the capital markets um it's it's uh mostly driven by uh the ability to somehow uh reduce cost speed and reconciliation be it for corporate actions um be it for uh cash handling so on so forth so um i think from from that perspective indeed um especially with regards to capital markets and um everything which you see there especially in the post trading um area uh i think it's all mostly driven by uh by costs and smart contracts are vehicle to enable optimization and the cost reduction there so my next question related to that is it seems to be clear that it's very cost effective and it's a huge it could be a huge cost reduction to automatize the issuance of financial assets uh by using a blockchain it can be a private public or public permission one my question is in europe at least we don't have yet secondary markets regulated to um to trade the security tokens what is your opinion on that do you believe that the fact that more and more commercial banks will issue financial assets using blockchain will push the development of regulated secondary markets or do you think that because we don't have secondary regulated markets for security token uh the adoption of the tokenization will be very difficult and it's an open question to to to all of you and maybe dotune and please feel free to answer yeah i think to chime in here as a you know as a regulated market provider um the lscg i mean from from our perspective we i would say that i don't think there's a there's anything specifically that prevents existing mtfs and market providers from you know providing their services to digital securities in a sense that there's nothing inherent in whether an asset is digital or otherwise that uh limits its ability to list on on a trading venue and have it have it traded on a on a multilateral multilateral trading facility if you look at the trading model in the crypto assets sphere it's very much the same you have centralized venues that poor liquidity you have buyers and sellers that place bids and offers and then it's really downstream of trading once you get past you know execution and on the book and then it goes into post trade that's really where the gap is it's on the settlement side and so i think i think once you have a solution to solve for you know how do you bring regulated csds onto the ledger how do you provide settlement infrastructure for dlt based assets then ultimately there's nothing stopping you know the lscg deutsche boss and you know six and others to to start to to list these instruments okay outside of will thank you very much yeah it's it's such an important topic for people like uh like us working with this documentation industry and um hopefully regulation will advance quickly in europe to have the possibility to to to list and trade with order book security security token because today when you do a sto security token offering the question of liquidity is always problematic there are some possibilities we built in board for instance but it's still an issue to be solved and i believe the risk is that at least in europe we see other countries allowing such infrastructures maybe yeah so yeah let's just say maybe maybe um let me um at one point here because i think i'm not so so pessimistic on the regulation um which is which is really happening so first of all i think in germany um um the regulator is quite progressive here working on the law for electronic securities which is going to pass um um i think um still this year also in the eu with a pilot regime uh on dlt-based market infrastructures this is also going into the right direction so um i'm not so pessimistic we are not so um far progress as switzerland for example um always a little bit jealous when i talk to the guys from the swiss digital exchange but nevertheless i think especially in germany i have to say unexpectedly um but also um outside in the eu i think it's going into the right direction there yes i agree with sebastian we began in france with spatlow and so it's a load on non-listed the really point it's what we can do on listed securities but i think we are going on quickly i think victoria is looking the time yeah i think it's time to to conclude this panel well very well i think this is the end of this panel about tokenization of financial assets and i'd like to thank all of the participants to this panel and to thanks as well the audience for its attention i propose to to stop here thank you thank you thank you so much for your participation for your discussion very interesting and i think it was also cool to have organizations that are 200 years old 150 polymath i don't know what how many like four years five yeah three and a half yeah okay and london stock exchange also uh quite all and then a younger startup thank you so much for discussing this we will continue now in the next session so you need to go to schedule and then continue there thank you so much