BBW25 - Day 2 - Sponsored Showcase: XDC Foundation

partner to Boston Blockchain Week this year. Uh they're a sponsor of this year's event and have made it very possible to put this on for everyone. Um so we're happy to welcome today Billy Seel who's the executive director of XDC Foundation who's going to give a keynote talk on why trade finance is the biggest opportunity in blockchain. Please join me in welcoming Billy to the stage.

Thank you. [Applause] Okay. Uh, well, thank you for that intro. I thought I was going to have music like I was coming out of the bullpen, but I guess that wasn't the case. Anyway, my name is, uh, Billy Sebel.

I am the executive director of the XDC Foundation. The XDC Foundation was created to support the growth and development of the XC network, but I'll get into that more later. Uh it's it's great to be here today. I've been in crypto since 2018 and this is actually the first time I've had the opportunity to talk to my hometown crowd about the XDC network. I was born and raised in Boston.

So it's great to be here and I'm very excited about speaking here today and seeing what Ian has put together in the Boston area to really build the community here. So today I'm going to be speaking about how trade finance is the biggest opportunity in blockchain. And essentially uh what I'm going to get into really are two main reasons why this is the case. The first is that trade finance is one of the most critical economic industries that is currently being disrupted by blockchain and digitization. And that historically trade finance is also one of the least uh accessible uh actual assets available to people to invest in today.

And uh blockchain has a very eloquent way of dealing with uh both of these issues. Okay. So um before we get started I want to take uh into uh trade finance I want to take a little bit of a closer look into the market for tokenization and uh what what you see here is that uh there's a prediction that the market of tokenized assets will reach $16 trillion by 2030 and uh in the chart you can actually see where we are today uh according to uh RWAXYZ And you'll see that there's uh roughly just under $30 billion worth of tokenized assets currently on chain with total value locked. And uh you know the important thing to look at is just a couple years or a few years ago that number was below uh uh billion dollars and has grown significantly. And what we're seeing here is that there's not only significant growth that is happening within this market, but we're actually seeing uh geometric growth happening within the tokenized assets uh and TVL.

And uh one thing to also note is this doesn't include uh any stable coins uh of which the market cap currently is $300 billion. uh and uh so we'll move on to trade finance. So uh what is trade finance? And you know simply put trade finance is the financing required to fuel the goods and services around the globe. And if you can uh if you look at this chart, you'll see that the global trade finance market is a $9 trillion market, which is pretty significant.

And that uh when you take a look at that number and break it down a little bit, you'll see that roughly 90% of the value of that number comes from small uh medium and microsized businesses. And this is pretty significant in terms of when you consider the size of uh of businesses that are out there. That's actually about 400 million different businesses currently in operation today across the globe. And you know within this uh industry we also look at what we call the trade finance gap which is the gap between uh what is needed and what is being funded. and that roughly 40% of that gap is uh happening to these small and uh medium-sized businesses.

And this is actually an example of what we would uh you know call uh low competition when it comes to financing. And and this is actually in uh the least developed countries in the world, you know, that are dealing with this. And so trade finance really is uh and our focus and what we do is to look at how we can close that gap. And um the the the challenge that happens with this is you know when you can't reach these limits that you limit uh job growth, you limit global growth, there's less inclusion. But we also think that this is actually where the greatest opportunity is for trade finance and blockchain.

RWA tokenization will bring the fuel to trade finance. Through tokenization, trade finance is poised to enable the next wave of value coming onto blockchain. But first, let's take a look at how we got here. The first tokenized off-chain asset was really developed as the stable coin, and some would refer to it as the first killer DAP. And as I mentioned that market cap currently in stable coins is $300 billion.

And as someone mentioned earlier uh you know the the turn on that is in now the trillions of dollars. And um and these stable coins allowed for the on-ramp of capital from traditional markets into crypto ecosystems. circle and the integration of USDC into these crypto ecosystems set the table for RWAS to be the cornerstone of TVL onchain and as a result RWAS now bridge sustainable on uh offchain yieldbearing assets from traditional finance to DeFi across various ecosystems and protocols and RWAs are essential piece of the rails of investment into crypto ecosystems and the fuel for trade finance. Trade finance and tokenization were made for each other. Regulatory achievements in the last two years have set the table for this, making digitized trade instruments legally recognizable across the globe.

More recently, the passing of the Genius Act and Washington's new stance towards crypto is opening the doors for much greater acceptance and accessibility. And once digitized, trade instruments are easily tokenized and can then be used to raise capital within web 3. These tokenized assets for trade finance are in the form of typically invoice financing. There is an unrealized demand for this that investors have for trade finance assets which are historically the most risk averse and inflation resistant uh assets available today. So how is tokenization the solution for the trade finance gap?

Well, RWAs have opened up new ways to otherwise represent traditional trade assets in the form of invoice factoring and bills of lighting. By tokenizing these trade assets on chain, its rights of ownership can be held and traded. But most importantly, the ownership rights in trade assets reduces fraud and helps in turn allow more capital to flow towardsmemes in need of financing. Trade finance traditionally is a very fraudulent industry and very difficult to track in a paper system. And liquidity plays an important role here.

Investors or buyers of tokenized trade finance assets can now provide the needed capital to fund the loans for places not historically available outside of the trade finance industry. This new access to capital is a big component of this opportunity. So blockchain's role in trade finance opportunity is really multifaceted. Digitizing trade finance instruments allows participants to move away from paperbased siloed and expensive processes that have been in place for hundreds of years. Tokenizing these digitized trade instruments positions them for accessibility in ways they have never been accessible before.

Blockchain now provides much greater forum for raising capital for these tokenized instruments. And as I've said, trade finance is one of the safest and most inflationresistant asset classes available. But it it has also been one of the most inaccessible asset classes until now. Now about the XDC network, uh the the XDC network was really purpose-built for the trade finance opportunity. As an EVM compatible blockchain, interoperability with other chains and transferable smart contracts are routine matters.

Near zero fees, fast finality and secure governance platform provide infrastructure for full scalability in any application. A few important things to know about the network. XDC has what we call private sovereign networks with relayers and checkpoint smart contracts for institutional grade privacy and compliance that connect seamlessly to the XDC public network. The XDC ecosystem is also aligned with ISO 20,022 messaging standards and since the beginning we have worked on advocacy uh for policy advocacy that is and so some examples of this are the unicrol mletter law in trade uh the electronic documents act of 2023 in the UK and we also work with the digital pound foundation in the UK the US digital chamber of commerce in Washington and the Canadian Blockchain Association uh in Canada. And uh with that, we really look at the XC network as being a highly collaborative ecosystem and the backbone for unlocking liquidity in global trade.

So XC network has really created an integration to build opportunity within this space and these are some of the integrated protocols, platforms and partners within the XDC ecosystem. XTC network is a member of the trade finance distribution initiative, a contributor to the DNI uh uh initiative for digital documents. active participant in the International Trade and Farfading Association and we work closely with plug-and-play accelerator sourcing real world blockchain use cases and building one of the most complete RWA ecosystems in blockchain. We're also integrated with uh securitize arch and nomix which are all platforms for compliance issuance and that list is growing. Blockicity is an innovative blockchain notoriization and documentation infrastructure verifying the authenticity of tokenized assets on chain.

Layer zero chain link and circle are all part of our crosschain interoperability. Curve finance brings DeFi liquidity on XDC. USDC integration brings institutional capital to XDC. And all of these add to XTC's position at the heart of global trade innovation. As we like to say, success depends on your network.

And this speaks to both people and the integrations that happen on the network. really the more tokenized trade finance assets that you have lead to more institutional participation, excuse me, which lead to greater liquidity in narrowing the $5 trillion trade finance gap. And when you include the ethos in our goals behind this of all boats rising, it's really the network effect at its best. So we look at this as the opportunity that's been put together here at the network with the innovation and regulatory clarity behind us compared to where we were just a couple short years ago. Now is the time to really put things together for the trade finance industry and execute by bringing institutional grade capital from trade finance onchain.

This was something that was very difficult to do just uh even just a year or two ago with the lack of clarity that's been happening on the regulatory side. And this now uh oh and uh USDC will actually be natively integrated on the XC network within the coming days and weeks. And we expect this to bring billions of dollars worth of traditional finance onchain scaling global trade inclusively especially formemes. As one of the leaders of the RWA tokenization movement, the XC network is poised to disrupt trade finance space and provide solutions to the trade finance gap. So what does this road ahead look like?

Well, we intend to scale the tokenization of trade finance across multiple markets, expand partnerships with banks, fintexs, and regulators, bridge tradi and defi with compliant on-ramps like USDC, push for continued adoption in emerging markets, and as an example, uh we have Vert Capital, uh which had recently announced, excuse me, had recently announced it that they will tokenizing a billion dollars worth of trade receivables on our network. And if we look at the tokenized private credit market, you know, we could take a little bit of a different perspective at this. The tokenized credit uh private credit market is uh roughly a 15.8 8 billion market and uh total loans within the space have really been closer to about $29 billion as written but currently at 15.8 and these figures are mostly void of trade finance assets.

Uh but we're seeing this change starting to happen now. And for perspective in in Tradfi, the private credit market is a $1.6 trillion market. That's its total value less trade finance assets. So when you consider the $9 trillion trade finance market that we were discussing and the $5 trillion of which are the financing gap where those needs not are not being met.

Um we see that with access to trade finance now coming on chain that these numbers will explode in the near future and uh tokenization will essentially be invading the tok the uh trade finance market and it's really been a market that has been very traditionally dominated by banks and institutional partners uh and has been really as I said inaccessible within the private markets and This is again an area we're seeing lots of change. Now, RWA tokenization growth by sector. If we break this down just a little bit, uh as reported by RWAXYZ, uh commodities onchain in the last year have grown 151%. Treasuries over 200 uh 50%. Global bonds 227% and alternative funds institutional investment funds like hedge funds and VCs as an example have grown uh over 482%.

But we see the biggest number in private credit at 15.8 billion only having total growth of 6% in the last year. And uh we believe that this speaks to uh the ease in tokenizing some assets today uh as opposed to the early years when trade finance uh have been more difficult financing uh challenges based on the nature of the industry and a lot of the regulatory um makeup across the globe. uh and and what we're seeing here is that the gears now are shifting and uh that there is now a focus on the tokenization of these assets especially with the regulator regulatory clarity more at our backs and the beauty is that once this tipping point happens in the industry we expect to see significant growth. Trade finance we believe will change that number and this is why we believe that trade finance is actually the greatest opportunity in blockchain.

Thank you very much again. My name is Billy Seabel. I'm from the XDC Foundation. If you want to learn more about us, you can check us out at xdc.org.

You can follow us also at XDC Foundation on Twitter. [Applause] Where are the customs brokers? Where do they fit into this ecosystem? They're pretty uh influential custom brokers and then like the e merchants council for you know like Etsy $800 and below like or are you just talking about major kind of transactions? Yeah, we're usually working more directly with non-bank originators who are uh dealing with the financing side of the transactional process.

So um we do have uh we do have on the network uh one such uh project called the XC trade network which is working more directly within that full stream and so uh it's actually this is the thing which is a a huge challenge because of the amount of documents that have to go with every single trade and how many people really need to to handle it. I think the the biggest challenge in making that trade happen is you know one being able to verify from all these independent sources what actually is real and what you're actually getting. Uh so largely what's happening is for us is we're focusing on those non-bank originators that are already have the pipeline of uh you know businesses that they've already identified that they've got um credibility with and they're taking that kind of offchain securization and starting to bring it onchain. So, well, ultimately I'd say yes. I mean, I think uh as as I mentioned actually, you know, Blockicity is one of the um companies that have integrated and and protocols that have integrated with us.

uh they're actually here today in the audience and um you know one of the things that I think is really important about what needs to happen in trade finance is that you need to have that attestation of what's going on throughout the entire process from the source and you know I think that uh from the conversations that we have and looking at what's going on it's really almost an impossible market to really address globally you have to start going in with specific industries and say here's something where we can affect and what you'll end up doing is looking for originators who can come in who were within that industry and those that are already financing within that industry to really start building there. Um because I think it's really of course untankers, you know, you can't boil the ocean, right? Uh you just have to deal with one problem at a time and we're just trying to get that movement of money uh less friction and the ability formemes to get financing and get paid that much quicker.

Yep. Um, I know from my experience working in trade finance that in emerging markets like Latin America and the Middle East, there's just a lot of fraud. How would all of this help reduce that fraud in terms of like moneyaundering, invoice fraud, and things like that?

Yeah. So, I mean, the first thing is that anything that uh when you're shipping the document, which is the electronic bill of lighting, is really the gospel when it comes to who has ownership of that particular good. And so uh what we've really focused on with the digitization and the uh benefits of immutability in blockchain that you can actually have a digitized document that you know is the authority on that particular ownership. And so um I think that's really the first place to start. In a lot of cases you'll hear stories about how somebody might have a electronic bill of lighting and they're going out and trying to get financing like three, four, five times over.

And so people are financing these but there's no product behind it that they actually have ownership of. So that's the first place in which we've been working to try to focus on the digitization and then to be able to go back to the sources uh like I mentioned with that testation to be able to know exactly where uh these are coming from at the source verifying what they are what the goods are and being able to track exactly what happens you know from the time it leaves say the producer to the time it arrives uh you know to its destination. So, but it's a challenge. That's a really big challenge that happens within that and it's going to take a long time. This is part of the reason why trade finance, I think, is one of the more slower growing yet great opportunities that you have in blockchain because, you know, there's a lot of barriers to get to where we are today and there's still so many more just to to move forward.

But the opportunity there is is really tremendous when you consider the need for financing for job growth and you know just the movement of goods across the globe.

Yeah.

Yeah. Well, you know, um, in part, I mean, I think the thing with messaging is being able to have, uh, a system which is reliable and, uh, yeah, ISO 20,22 isn't there's no registration for it or anything to that extent. It's more a matter of whether you align with the standards as best as you can to do that messaging. So when we're talking about what your question was around you know some of the movement of goods and other things um having uh those standards on the network uh you know within maybe an application that can apply it uh it's going to lead to quicker uh flow of uh financing and you know we're not really dealing with delays in terms of payment and and so I think from that purpose it's important. I also do think it's, you know, if you actually watch anything around, you know, if you're on Twitter and you're watching what people, oh, ISO 20,22, this, this is turning on tomorrow, blah, blah, blah, blah, blah.

You know, a lot of this stuff is just things that people really don't truly understand, you know, but we think it's important to operate around at least a standard and to follow what we consider to be what would be the industry standard. So, that's really why we've had a focus on it. So, thank you very much. You've been a great audience.

All right, ladies and gentlemen, our next session is going to begin at 3 p.m. So, our next session will begin at 3 p.m. There were refreshments over in the lounge tents, and we will see you back here at 3.

Thank you.