Globalisation of Digital Assets, What's Missing?

[Music] well good morning everyone uh welcome to the realworld asset tokenization session I am Lawrence winterm and the chair of global digital Finance uh I think the two big things that might have caught many people by surprise this year are one the SEC approval of Bitcoin ETFs and black rock having probably the fastest selling ETF uh in history uh there are 10 Bitcoin ETF are actually ETP issuers Black Rock then went off to set up a money market fund on ethereum uh and that whole Space is now moving the second bit was real world asset tokenization so I think many of you have heard Larry thinkink talk about realworld asset tokenization or digitization being the next Trend in the industry uh the numbers that are bandied around in this space are are really you know eye watering 10 trillion I think to 2030 was the last estimate we had so we're going to try to unpack that in the next 22 or 23 minutes and I've got two excellent industry experts here to help us do that and so Stella can I ask you to introduce yourself please thank you Lawrence um it is with a great pleasure to be invited by adgm to be here today to join all of you um partio is a joint venture Company by JB Morgan standard Char Deutsche Bank DBS and terasi so we are based headquarter in Singapore it's a blockchain based multicurrency clearing and settlement uh platform providers and Nick yeah thanks lawence it's great to be here my second time at Abu Dhabi Finance week great to be here speaking at the capital of capital um yeah and really excite to be here on fintech day um so Zumo is a OG uh crypto project originally in the UK um with a direct consumer offering where we built um custody and self- custody and an exchange service and compliant AML kyc procedures and a fe on and off ramp uh we pivoted a couple of years ago and we now offer that platform out to other digital asset firms crypto firms people offering things like tokenized real estate um to help them launch fully compliant Solutions in the UK and at some point over this year hopefully shortly we'll be moving into the UAE to offer that exact same model um we also help uh as part of that um companies in Europe be compliant with the regulat regime around sustainability indicators and that's one of the big incoming Trends we'll see in the space ESG principles being applied to the digital asset space so we also have a business unit that helps companies comply comply with that excellent and this is a very straightforward panel we have three questions for each of our panelists we're going to look at the challenges the barriers to greater mass adoption of digital assets we're going to look at the innovations that you need to pay attention to and you know the stuff kind of rolling up 2025 driv it onwards and then we're we're going to have a bit of a look at the future so Stella can I start with you from your perspective what you know and then you've got the the cast of tier one uh you know funders and partners in party or what what are the big challenges of the barriers that we need to overcome uh to get digital Assets in into a mass adoption setting yeah so as as we all know that digital asset uh tokenization of asset is not something for the future but it's already happening it's a reality right now so you would have seen many of the especially the tier one large financial institutions are launching various different type of and classes of assets over different type of solutions platform messaging is becoming the liquidity itself becoming very fragmented and in terms of the solutions and platform is over various different type of uh messaging standards platform therefore it has become a challenge in order to skill it has become a challenge in order to across jurisdictions where the policy can come together in terms of how they work together cross border so a lot of this aspect is is coming together in order for the digital asset to scale out we have to look at technology we have to look at infrastructures we have to look at the policy we have to look at the messaging layer so therefore where Paro we what we are doing is really provide interoperable platform solutions for all the various different markets where they can come together to integrate their traditional trade five systems with V5 systems in multiphased uh projects to be able to support their traditional asset launching into the digital world and and so I wonder if you could just give a a comment on some of the asset classes because you you know in the the community we've seen fixed income uh intraday repo you know has become really big and I think you know this is almost driving what we'd call the treasury token uh Market as well but Are there specific asset classes that that are are easier or more difficult you you think lending themselves tokenization yeah in in our conversations and experience where we are helping our clients to uh process on the platform there's so far it there's no specific classes that is more difficult or easier because this is where the technology we we heard about the the video we saw the video prior to our panel it explained about blockchain it explained about smart contract it explain about how you can program all this policy the rules into the contract itself and how it can settle and clear and process the different classes is the me of how you will clearly in terms of 24/7 Atomic settlements in that process itself and also how you want to uh diversify the asset whether we need a domestic Market or crossborder it again it comes down to how do we work with our neighbor country or country in another time zones how do we do the different time zon so you mentioned about um realtime crossborder with the technology right now they're able to do atomic settlement and not limit to follow the Sun so anyone in us and anyone in Asia with a 12 hours different time zone they able to do a deal over the blockchain technology you know I think that's a most important point because you digital custody or Atomic settlement aren't the way that the cap markets work now even though the technology lends itself to doing it so that's a that is a big barrier of sticking space and and Nick if we look at the pivot that that you've made in your organization and we think about you know what what what are the barriers to adoption or some of the challenges we're coming up what are you seeing in this context and and you maybe can you give us a bit of in an insight into this discussion or topic about interoperability and how this is all going to work yeah and I would look at that through two lenses so interoperability of Technology um you know there's probably far too many different chains out there at the moment and there probably needs to be some kind of consolidation at some point and some kind of consensus over what will be used by large institutions what we will be used in specific regulatory situations and I'm sure we'll see that as part of this as part of this cycle some some winners emerging and hopefully the winners are the ones which actually have you cases CU there's clearly lots of blockchains out there at the moment which don't have any particular um particular use case other than the value of the token so I think that's one of the one of the things we'll see in this cycle um once the first bit plays out is um the chains which actually have utility um beginning to work and chains which can interoperate so you know we're looking now you know the institutional side of things that Banks thinking Banks who've been using blockchain internally how do they externalize it how do they plug it into into external systems how do they use it for its like real purpose things like crossborder payments um the other piece that I would say that kind of goes hand in hand with that is interoperability of regs so a consensus globally around regulation for Securities real world assets crypto stable coins um you know if you go back two years um there was almost no kind of consensus globally around that and the good news is we're two years down the line and there's significant move forwards over the last couple of years the the u m or micro EGS coming in in Europe at the end of this month um means that there will be a common set of regs across 30 countries in Europe that's a huge huge um Step forwards the FCA and the UK is moving towards a full authorization regime obviously we're going to see this massive unblocking in the US with a kind of pro crypto Administration coming in and you know management of The Regulators changes but I think having a consensus around how stable coins are treated having consensus around how Securities are treated again will lead to it's all you know that each each part of it has a halo effect so as institutions adopt more institutions will adopt it as there's consensus around technology it becomes easier and there's less friction there's less nuan decisions to make around technology that probably not that many people really understand very well they just need to understand what it does and there's been too much focus on what the technology is rather than what it does so hopefully we'll see that Focus you get that in new tech the tech is obsess about what the technology is and actually all anyone really cares about is what it actually does and we'll definitely see that we'll definitely see that change in this in this cycle as well so I think that they're the they're the kind of cornerstones of this regulatory alignment um across jurisdictions um you know more probably you know a set of Technologies which everybody agree works and have utility which can all work together um with each other and then institutions and and retail customers having the confidence to you know to join that on mass rather than the you know whatever it is 7 to 10% of retail customers in you know that kind of engaged at the moment well you you raised a couple of very important points I think we should pick out for for the audience which is uh the fragmentation the number of protocols or blockchain ecosystems around uh and you know again some of the issues around permission blockchains in tier one institutions run cont to the benefits of blockchain which is you know the pooling and the interoperability of data and then particularly liquid liquidity collateralization uh you know if you're focused on things so I call that token Island and I think we see token Island now is starting to get connected up in a better way moving into 2025 to to to help things uh Move Along that's an excellent point so Stella what what are the Big techn Technical innovation that you're focused on now uh that we we we can expect coming into the market next year that are really going to you know power on adoption yeah so our main role is really to help the the financial institutions to be connected um not only in the domestic Market but also internationally cross B so for example we are onboarding our first uh financial institution here in this part of the world Emirates NDB in order order to help to power embd to be able to do crossb offering the solutions to their clients in this part of the region around the world so what we're really doing is really helping the traditional Finance to look into how they can manage their their projects implementation from technical perspective and also emerging with emerg with the new world requirements and customer requirements you mentioned earlier both of you about the uh customers confidence whether from the retail Market of customers or from the wholesale fi of customers so a lot of these digital asset when they skill it also needs to meet The Regulators uh requirement in terms of compliance risk assessment every jurisdiction has different paste into doing that and how a technology provider and platform provider like Paro can we equip all this information helping them to do cross border because when they're in different pce it will meet a lot of challenges in trying to do the deal in different places so to they the financial institution is also looking into diversify their their Investment Portfolio and helping their clients to to look into different markets so this is where we come in to to help them to integrate into domestic markets integrate between their traditional Finance systems and the Future decentralized Finance systems so a lot of time we we are coming in to play the role of how we can partner with the whole ecosystems uh not only with the financial institutions but all the other partners potentially Zumo into the area of how we can connect together globally so if we we you know again getting back to the interoperability leg I know that uh there's always a you know some sometimes a so much attention on the retail Market it's a bit disproportionate from my perspective but I got more of a capital markets bias and you know things like fragmentation come up clearly compliance is an issue self- custody always you know comes into the question but you're looking at the real benefits if you're an asset manager or a biger bigger Bank collateral eligibility is you know probably one of the bigger things we see uh you know as one of the benefits coming into 2025 and maybe Nick I wonder if you could give us a you know balance view where you see that going across retail or into wholesale markets and you know some of the other Innovations popping up that are are going to help us get through this and help solve some of the custody and and and settlement issues that we see yeah I mean again probably look at it through uh a sort of regulatory an Tech um Nexus kind of u a moment so if you look at something like um real world asset tokenization for example um absolutely key to those platforms now beginning to succeed is baking in the ability to have kind of bespoke compliance elements to the smart contracts that they're based on so that's how you answer the question of a regulator who's concerned who's maybe in the FC you know in the UK digital security sandbox it's pretty nent it's only been up and running a pretty short period of time there's not that many companies that have been running through that through that program this is the Bank of England security sandbox which is you pretty amazing Innovation Bank of England FCA yeah but you know there's great so to me they'd be able to answer those to be able to answer those questions and why should real world assets be available to um retail investors at the moment they're only going to be available to professional investors in the UK key to that will be the tech being able to align with the regulator requirements and build those in so that the regulator has confidence that those assets have parity or you know maybe even better parity better than parity from a transparency point of view um than the kind of the trafi options so I think a lot of this comes down I I you know the tech is kind of there right that you know there's lots of companies that can tokenize an asset for you there's lots of companies that can um but inverted commers around issue it because they can mint and that asset can they actually issue it in a compliant way in most markets the answer is no that's why most of those platforms haven't grown in the way that they could so what you're starting to see now in that in that particular subsection is the winners in that tokenization space are the ones who understand how you bait compliance into the product so that when when companies like us go to the regulator with a with a real world asset tokenization um platform you're able to say yeah the token in the UK Market the token in the UAE Market the token in the Singaporean Market will align with exactly what's happening on this type of security in in your space so to me again it's that as I say I think most of the tech innovation has been done uh in in that particular space it's about now how you get it to work really really well and removing the barriers and most of the most of the barriers now you know back to Stella's point they cross this interoperability point of view so do they inter do they interoperate with other systems from a take perspective and do they interoperate with how the regulator sees the world it definitely moving in the right direction well and and and you rais a good point I mean for the benefit of folks here that don't uh know what the bank of England digital security sandbox does uh given the fsma ACT uh that was pushed through Parliament last year the sandbox can take in firms and if if they feel they need to change legislation to ensure that Securities can be issued digitally they've basically got the mandate to do it which boy I think that's pretty Progressive in it's its own right but I know you know if you look at Ma and project guardian they're focused on Smart contract standards for that reason the question is you know how much of the Regulatory Compliance can you actually build into a smart contract uh in the ecosystem so we watch the watch this space in 20 2025 yeah right we've got a couple of minutes left uh for each of you and and so you know we're always hearing well we we we've heard a lot about crypto over the last uh 15 years um you know spectacularly with FTX uh you know becoming bankrupt and now things have certainly recovered and most of you have probably noticed it's a bull cryp market crypto Market in the US after the the election so we're paying attention to that but let's talk about FIS financial institutions beyond all of the tech innovators and crypto protocols you know Etc what role do FIS need to play in in really accelerating this rwa uh you know tokenization World we're heading towards the uh you have rightly mentioned about that the world is emerging so it keep evolving to the change so the traditional uh fi institutions are also looking into ways on how to diversify their investment and also how to serve their clients better so that they the clients can enjoy faster cheaper and also more transparencies in in the investment itself so a lot of these uh financial institutions are going through the the phases of how they can combine their traditional assets with the uh digital assets into that area so it's still a journey it's still a journey for them however because of this these are licensed financial institutions therefore the uh the trust of their clients are is there very important and also for them to it's very easy for them to look into the they will tend to come very strongly from the compliance and risk perspective where the customers can have confidence in their product and services but ultimately it will still be a major collaborations between the FI the technology providers the suppliers and also The Regulators to come together to define the framework um for the markets not only within domestic as uh Nick has rightly mentioned between the US market the Middle East Market the Asian market how can everybody come together because there's a phrase that we probably have heard many of us have heard if you want to go fast you go alone if you want to go far you if you want to skill your business you have to come together as a community otherwise you are just building a Solutions or offering a product just within the domestic Market within the small the small group itself but in order for a longer longer term you have to come together as a as a ecosystems and Community together I I you know it's difficult for me as the chair of a a not for-profit open Innovation community that has a lot of the tier ones and the larger protocols in it to say this and you you know Nick and Zumo rememberers I'll Tee It Up but I would say in this space we've got a great degree of global collaboration on Innovation and advocacy with the regulator to try to move this on so institutions do hang out with crypto protocols and all sorts of people in the community because we're actually all working to try to move it on and you see that a bit more in the community in London we have Nick but you want to comment on the the role of FIS and and uh you know some of the things we might be seeing coming up next year and getting them engaged in in in what we're doing yeah and I again I'll just give a quite a specific example so um in the incoming European regulations we have the first set of ESG sustainability indicators anywhere globally as part of any regulatory regime for digital assets and that is massive ly important on a number of levels so not least because um blockchain is great but it uses lots of electricity and there should be a a company should have to report on the amount of electricity it uses and ultimately they should have to mitigate the electricity it uses that's that that creates alignment with the broader Financial Services sector certainly in Europe and and a a lot of other jurisdictions um so that's coming into play that has been driven by the fact that esma the European regulator wants to align the digital asset space what what's happening in traditional Asset Management so when the Bitcoin ETFs and etps launch in Europe they will have to comply with article 8 and article n of the sfdrs they will have to be they will have to provide those those sustainability indicators and that's important for Real World Adoption it's also very very important for consumers because although they're not directly buying into this space young people are extraordinarily interested in making sure that things align with ESG princi principles cuz they're the people who are going to be here in 50 years 20 30 50 years time and living with the consequences of climate change and and sorry I know I know we're on time but just just to wrap up we're also on the verge of this enormous transfer of wealth from people who are not digital and don't care about the environment to people who are only interested in digital stuff and do really really care about climate change so it's just a great example of though you know regulation upward and downward pressure coming together to create change and alignment with what's happening you know with the global mro I I love that I'm going to speak to adgm to get my 14-year-old daughter here next year because she loves what you've just said and fully gets a lot of it at 14 which I'm impressed by but Nick thank you Stella I'm Laurence winmire from Global digital finance and I'd like to thank all of you be being so patient and listening us today so thank you thank you thank you [Music]