Fireside Chat - Evolution of ISO Standards for Digital Assets Markets | EBC11

So welcome uh and thank you for for your attendance uh in the morning on the Friday morning. Uh I think you have a little bit technical topic but without this topic uh no order book no trading no is insurance no safekeeping would be possible in the traditional finance world and also in the digital final world. We have two I'm de delighted to have two excellent and very uh competent people here with Stefan and Rowan. And to start with Rowan uh Stefan Stefan sorry uh uh yeah Anna is maintaining since 1992. That's a a long a long way to go in the traditional finance uh field.

what's your perspective what tokenization is now uh regarding uh finan securities and financial instruments.

Yeah. Uh good morning everyone. Uh so tokenization uh for me is just another evolution right it's about a new technology being applied to the capital market. So when we look at what is happening with tokenization of financial instruments um and into this whole kind of umbrella of digital assets, it's really just the next step. It's a the the assets that we're looking at financial instruments leaving aside the crypto side are still the same assets.

You've still got bonds, you've still got funds. Um the nature of them is not changing. And so the needs that you have in the market for identification and classification of those for either regulatory reporting or for uh data management, risk management, compliance, all those needs are still the same. Um so that fundamentally hasn't changed. What has changed is the perspective so the uh from the market on what these things are in terms of uh new additional risks.

Um and that's where we have for example and I'll pass to Rowan then um to talk about the digital token identifier being able to understand the deployment of these assets on different DT networks and understanding the technology risk there. Yeah, great. Thank you, Roman. As a representator of the digital token identifier, founded in 1991 or two, I think it's uh to 20 20 21 only four four years ago. It's quite new.

Uh what makes you uh complement Anna uh and not compete with them and what makes your advantage uh uh in the tokenization field? Sure. So, first off, we are definitely not trying to compete with what's already out there with the ISO standard for security identification or with entity identification. This is just another tool in the toolbox for everyone involved in crypto and digital assets. So, the DTI what it does is unambiguously identify a token any type of token form using a distributed ledger technology.

So where you see this working with the other standards that are already out there, it's for example, if you see a DT based security or tokenized money market fund, it has the asset identification already, you'll generally know which entities are involved in that transaction, whether it be the issuer or investors by knowing the LEI, the legal entity identifier. What we do is identify the tokens uh at the ledger level to unambiguously identify the token and link it back to those other identifiers so somebody knows holistically what's going on with these types of tokens, who it belongs to, um who the issuer is and what asset it actually relates to. And that's why we've been working so closely with Anna and other um associations like Glyfe as well to get that mapping to essentially bring again that extra tool into the toolbox for everybody to use. So complimentary completely different reference data uh to facilitate the whole digital asset ecosystem better.

Thank you. Maybe for the for more transparency, Stephan, how can you uh uh explain us uh uh walk us through uh how a tokenized bond gets an ice in? What's the what are the main steps for for receiving one?

Yeah. So uh for a tokenized bond to get nice is no different than for a traditional bond to get nice. So Anna has a network of 123 uh members who are national numbering agencies. That's the NNA in the name there. Um and they are responsible for the allocation of for financial and referential instruments in their markets.

And so issuers who are already issuing uh or have been issuing traditional financial instruments for some time will have generally established relationships with those entities and those entities um represent key market infrastructures. Um so some of our members are exchanges, CSDs, data vendors, central banks, regulators. Um ultimately it's up to the local regulator for a jurisdiction to determine who fulfills that that numbering agency function. Um and so you will go to them. there's a general process of providing uh information about the instrument that you are looking to uh obtain an ISM for and I would like to point out so there's a suite of standards that we are responsible for is being one of them that focuses on the identification of the asset but there are other standards um that are allocated such as the CFI code which is a classification uh code or uh FISN code which is a descriptive code and all of these are used together in a compl complimentary way to identify, describe and classify these instruments and then now we marry that with the digital token identifier.

So if somebody is issuing a tokenized financial instrument um we will work and coordinate with DTI for that instrument to also then have a a DTI which as Rowan said is a a technical identifier for the token implementation. Um and maybe just to elaborate again, we've had a long collaboration with the global legal entity identifier foundation um which is issuing the LEI. So there you have a standard for identifying the entity level and again that becomes then a whole suite of standards that can be utilized together in a complimentary fashion to fulfill a number of different use cases in uh business operations.

Could I could I also just add just taking a step back as well? I know standards might sound really boring and a little basic as well, but if you just look around this room, there are generally ISO standards everywhere. It's kind of like the hidden infrastructure for trust. Uh I'm looking at the fire exit at the back. I'm pretty sure that's an ISO standard for actually being able to get out the doors using this the exact signing.

I think the projector back here, it probably has some kind of ISO standard for the health implications. So it doesn't take out my eye when I look at it. They're generally everywhere in every type of industry and what we're doing is just for the financial industry and specifically for the crypto and digital asset industry for the DTI. So they're really everywhere. You just don't really know about it because uh they generally seem to work pretty well under under the under the hood.

So and you're focused on uh on uh tokens and identifying uh tokens beyond uh mikar and dora and so on. So you you what are advantages to have an NFT and to get to get your identifying?

Yeah. So the the DTI it's really for any type of token implementation. Uh we support uh security tokens for example anything uh tokenized or natively issued like uh uh DT bonds tokenized money market funds uh it can also be used as the underlier for crypto derivatives for example and uh ETPs. It's just another way of saying yes this is what's in my fund or etc. We also cover stable coins um and also the wider crypto universe.

Uh NFTTS has been also brought in in the version two of the ISO standard. Uh and it's really just another way of everybody to unambiguously point at a certain token uh with precision talking in an ecosystem by just using an identify code that links back to all the reference data behind it. It's really a simple barcode at the end of the day. Thank you. Great Stephan.

We talked about uh up front the meeting about you have 120 members or associated members now. So worldwide institution uh and that's remarkable. Uh just this question why is it not more why is are still countries not have Anna as a agency?

Yeah so we covered the the main capital market. So as you said 123 numbering agencies globally that number continues to grow by a handful every year. There are a lot of uh countries out there which have underdeveloped capital markets. A lot of uh islands uh Pacific islands um other countries uh for whatever reason. We won't go into political reasons u may not make sense uh to be involved in in global capital markets.

But we have changed the model um over the last few years. Um so for example DTI foundation is now also a member of ANA. While they do not represent a specific jurisdiction which has been the historical principle that we've had um we have looked at um identifying scopes of activity. So we have uh for example another institution called the derivative service bureau which is the numbering agency for OTC derivatives globally. um DTI Foundation in addition to the work that they do with DTI allocation um focuses uh also or we've designated them as a numbering agency for crypto assets.

So you have now license for bitcoin uh for tether etc all the stable coins and that is part of again a seamless process that we've tried to implement uh to create efficiency in getting uh uh assets or to and tokens and uh and the DTI at the same time but we continue to grow um the landscape is changing a lot of jurisdictions are cropping up which are not uh geographical jurisdictions but we've seen the um the the birth of free trade zones um and that becomes then another opportunity for us to look at organizations to bring in to fulfill that function in those markets.

Thank you. What about DTF and the development on your field as it quite is it quite new uh uh agency and department

uh in terms of uptake and what what's what's going on? Yeah. So I guess in general when for example regulators or market infrastructure or any new player really wants to enter a field uh generally the step one is okay how do I manage my data and how do I transfer this data if there's an ISO standard for it that's generally uh what organizations do just because everyone's quite familiar with the open ISO governance structure and it's there open and available able to just use and pick up. You generally don't need to compete on these types of data elements to build your own product or service. So regulators have been uh picking up uh the DTI um for additional transparency and understanding what's going on uh in the market as well.

Um for example, the DTI is the key uh crypto ID under Mika. uh both ESMA and the FCA are also looking at the DTI to complement the IS part of their uh MEIR uh reviews for financial instruments that are DT based uh and I guess at a more global scale uh the OECD there's a crypto asset reporting framework uh that's also looking to leverage the DTI as just that key crypto identifier so everybody can be speaking the same language when uh crypto brokers or other participants just in the whole ecosystem at talking about specific cryptocurrencies or stable coins or any other DT based financial instrument. Um then I guess there's market infrastructure when they're creating innovative products using DT or they want to they want to uh offer DT based financial instruments. Uh they can leverage both the Ison and the LEI discussed before and also the DTI. It's just another data element uh that everyone's starting to pick up.

Um I didn't mention as well but data vendors are also starting to leverage this um for the enhanced insights. so everybody can actually understand uh what what the insight is about in the cryptocurrency space.

Thank you. Uh Stfan uh we heard a lot about uh financial market regulation like Mika like Doro like uh on the banking side uh what what could help you which regulation which legal clarity could help you on the on the is on the field to to make it uh uh more binding that every digital asset has a identif identifier. What's uh what could be uh a main field for you to on the legal clarity? Is it only on the financial market side or is it on the legal basis of the tokens which lacks in many countries uh uh uh uh that they have no legal clarity that that the token is transferable that the token is is is uh when you get get lost that they have a civil and property rights on tokens. Is this a is this a field you are you are you that can improve?

Yeah, I would say the the the legal basis is is some so we're agnostic basically to um regulation. So the the function of identifiers is really about acknowledging their existence and being able to uniquely identify them. Regula regulation becomes one use case for the identifiers. Um but where I think your your question leads to is less about the identification of the asset because once we've identified and this is the approach that we've taken as we've um evolved the license standard to be applicable to crypto assets and and digital assets more broadly. Um and then again complementing that with the the DTI identifier is the classification um standards that we have.

And so that I think becomes then a mechanism for regulators to better understand and we have this by the way already in uh my in Europe where CFI is required for um uh transaction reporting to understand particularly what type of instrument something is. You know obviously you have very simple um uh ident uh classification bond stock and whatnot. But then you also have many different structured products. you've got um things like preference shares could fall legally to equity or debt uh depending on uh certain aspects. So I think the same thing then applies um for all of those traditional financial instruments that classification scheme would still apply but work that still needs to be done and this is important to acknowledge is that classification scheme being rolled out and expanded to include crypto assets.

I'm I'm conscious that I I haven't also given like examples I guess on where we kind of see these uh identifiers together. So, for example, if you're wanting to deal with uh everyone knows Benji Franklin Templeton's uh tokenized money market fund, uh if you want to uh deal with collateral mobility, if you want to manage your collateral, if you want to use the tokenized money market fund as a variation margin or something like that in the future, which Franklin Templeton Benji do you actually want to use? Uh there are actually three doiciles of Benji. So there's one in the Virgin Islands uh with a Virgin Island is there's a US is doicard in the US and there's also Luxembourg doicard with a special Luxembourg uh identifier as well. If you want to just uh accept the collateral of the Luxembourg doicile on Stellar, then you know exactly which Benji you're going to use.

if you use the Ison of Luxembourg and the DTI of the stellar implementation of that asset in that collateral mobility move and that's the specificity that you get with these identifiers. You can't really do it any other way.

Thank you. Just some some short words at the end. Uh radio strategy uh until 2030. What's your main focus until 2030? at Anna.

Yeah, absolutely. So, I mean the there's no endgame uh in in the evolution of the capital markets and that's something a lot of these panels like are we making progress, are we not making progress um it's going to keep going, right? Everything and things are going to catch up. Technology is going to far outpace everything else. It's going to outpace regulation.

It's going to outpace the work that we do with standards. So on the one side, the raising the the education and awareness around the existence of these standards, promoting the adoption and implementation of the standards is an ongoing effort. Um and and we'll continue to to see that and and work on that and and continuing to evolve the standard. The marketplace is going to change. So we have to make sure that the standards are fit for purpose.

Um that the use cases uh continue to evolve for the standards. And I would say the as I touched on before we still have a lot of work to do in the in the classification standards.

Robin, just some short short remaining. I read about your secret as well and I remember that 10,000 DTI are uh a goal from you. So you reach not 10, you reach 20,000.

Uh no, a number isn't really our main goal. The main goal is to make sure if if somebody wants a DTI for a certain token, we can facilitate that. It's it's not really a numbers game for us. It's it's about quality and usability. Um but I think the main thing for us is there's a whole lot of collaboration.

There'll be announcements coming out again. Um but for us, distribution is the big key. uh we're going to be distributing more on the traditional rails which financial institutions in getting more involved in the web in web 3 and tokenization they'll be uh leveraging the ISM plus a DTI route traditionally but also we're looking more at pushing this onto the blockchain so it's also there in the web 3 space uh right now we're centralized but uh the sky is the limit in terms of where we can distribute this to for usability in the future So thank you. Thank you both for your insights and your clarifications. Thank you for listening and uh I wish you we wish you a a nice and fruitful day.

Thank you.

Thanks. Have a great day everyone. Thank you. Give it up for opening fireside chat.