Real World Asset Tokenization: Merging Traditional Finance with Digital Innovation

so first of all thank you very much for all of you for being here today uh we have a great topic to discuss and we have really great people building in this space worldwide and um yeah so let's go ahead and um let's go into the first question it's a questions it's a question that I'm going to do to all of you I would like love to hear a reply for all of you and uh regards the adoption the current adoption where we are and uh how uh it's evolving so uh the question regards um how widespread is the adoption of real world asset organization currently and can you give us some examples about it so but first of all let me introduce Loreno ratti is the CEO of block invest Philip peeper is the co-founder of sworn Sylvio ventre is a head of innovation at Euro Mobil asset management and Loreno Moroso it's operation and strategy at Herkel uh coming back to the question is uh how widespread is the adoption of the real world asset organization currently and uh please can you give us some examples uh of uh real world asset that you currently working on tokenizing and uh yeah obviously yeah so um I'll start with uh um Phillip because you're you're the first one on my left side but yeah thank you go ahead okay so my name is Philip Piper I'm the co-founder of swarm we've been in today it's called realization or but before it was like security tokens and digital assets and whatever you want to call it but it's basically taking anything that is offchain off the original chain so even if you have a cross-chain use case that is an offchain real world asset tokenization because it's on a different chain represented on another chain um so the adoption is basically very big it's you know the most successful use case is stable coins yeah stable coins is a real world assets it's basically documenting that there is something in an account or something representing value um and the same applies to um any kind of commodity so we have gold paxos gold and others that amount to a couple billion we have sort of stable coins in in the 200 billion minus a little bit right now but uh yeah and then you know that goes down the chain of actually becoming more of a sort of a Securities evolved you know landscape we per we as swarm we do uh block you know stocks and bonds public stocks and bonds uh we have a gold product uh we actually give our technology to issuers that tokenize funds that tokenize their Commodities that tokenize any kind of use case and we give them issuance and secondary liquidity Solutions so it's uh widespread yeah thank you thank you uh just to um give um I would say an an answer that is not so similar because yeah well I would say their big adoption as as you say this for sure for stable coin and also pxas gold Etc but on the I would say most Financial instrument side we are also in an I would say an ear an early stage we are gaining momentum uh security token are gaining momentum but especially in Europe there is a I would say we need to have a shift of Paradigm that uh uh must must be changed because right now we have two different legs for Securities traditional Securities and cash legs with blockchain the shift of paring is having all in one just one technology which is blockchain for sure that will gain um for sure uh assess uh to I would say lots of uh people uh can give like operational uh um operational Improvement and so on and so forth but for doing it um I think that we need to shift Paradigm in a sense of compliance and regulation right now is like uh regulation try to follow the technology but it should not be like this because otherwise uh we can risk to have a regulation which is already hold for the technology that we that we are using so it's gaining momentum uh uh it's increasing in a much more sense of uh I would say um uh asset under management and for sure volumes but I think that uh we need to like step up on on that way thanks I'll try to be short it's not Eason okay first of all real world asset is very broad thing okay everyone is talking about rwa it's I mean but you can grab a lot of things okay when I started thinking about that was a long time ago the first thing I was started thinking about was real estate right guys in in Italy in Europe we cannot organize pH physical real estate we have notary we have bureaucracy we have uh a lot of uh public uh involved so you should like fire a million people to to I mean digitize land registry and makes possible this kind of organization so uh it's huge in terms of cash lag uh but just think about guys that the traditional Finance in one day can move easily let's say triple of the total crypto market cap in one day so it's it's still very small um I think there's a lot of potential in financial asset this is basically what we do at block invest uh I was mentioning in the in the question to the smart lawyer before about the monetary Market funds cuz I I see that this is the closest things to the stable coin okay probably the let's say the easiest things to tokenize in the in the traditional word that makes sense for the investor and let me say are also easy to understand for the investor cuz we have regulatory issue we have uh still I mean a lot of uner in terms of interoperability but I mean the thing is on average people and also web tree user doesn't understand properly the financial instrument so you I mean you need to know what is stocks what is a bonds uh it's not just a matter of speculation you need to understand the underlying asset so uh we will face for sure the risk challenges operational challenges but the first thing is educate people that real world asset is not just speculation is the exploit of a new technology and new infrastructure uh where every asset is a crypto asset so basically everything we have in our world can be tokenized and put on a chain right so could be tokenize but probably we don't need that okay okay probably we don't need to tokenize everything uh but yeah me many things uh needs to be toiz but it takes time as we used to say one block at a time one block at a time thank you first of all thanks for having me here in this beautiful place and I mean it's fantastic uh I would like to start from from from the lasting Point uh because every asset should be and could be a digital asset not crypto because it's like a a broader category of Assets in my opinion and uh Finance sector speaking let's say in fact uh I would like to um to mention some data about it the tokenized asset Market uh it's very huge uh because the as of today the esteemed Market um for the next 10 maybe five years five years from from the Boston Consulting Group for example it's like 16 uh in the worst case 16 trillion and only of only uh I would say uh 5 trillion it's about investment funds that could be tokenized so of course there is uh a technology a new technology that is wides spreading all over the world in Europe it's quite uh slow instead of all the world because the most important example of the tokenized assets uh are coming from USA for example uh in the next in the next intervention of the of Petro uh during the the questions Loreno mentioned the money money market fund the money market funds are a perfect example of tokenized assets uh that wi it's that is wides spreading all over the world in particular in the US and it's really interesting because it's the uh the match of the traditional cash lag and the new cash lag of the traditional Finance finance that uh has to become uh a new tradition of Finance powered by blockchain so more or less there is the state-ofthe-art yeah thank you it makes makes absolutely sense so looks like the when we talk about the tokenization of realwood asset basically the first thing that are currently tokenized are Financial Assets in when we talk about the value right so uh this is this is great this is great so uh I have a a question for uh philli and also Sylvio I would love to come back to you and um it's the next step so what is the primary benefit of tokenizing reward asset we talked about earlier about uh stocks bonds and other Financial assets what are the advantages of doing this thank you so I I think for years already we've been obviously sort of drinking our own Kool-Aid and believing that you know sort of number one instance settlement is what drives everything and there's follow on derivatives that from instant settlement result in other secondary benefits so 24/7 tradability fractionalization instant settlement Global availability etc etc everything sort of has to do with liquidity at that point in time right so if we believe that basically a blockchain can deliver that then it releases a lot of capital that get would get lost in you know the seven different steps of you know of middleman and market makers and intermediaries taking fees and taking time and taking compliance efforts to do that so there's a cost efficiency that that might result from this and I'm saying that in a in a in a not a factual way because I think we as an industry still have to prove that out that that's really the case right um the second thing is that um it's about Automation in The Wider sense so automation meaning sort of you know compliance can be programmed into a token it can actually be leading to a much more efficient process of onboarding on documentation on actually connecting even data with the asset itself and making that asset better understandable from machine driven interpretation so um I mean the coffee example was a great one because every re has the same kind of data problem which means that it needs to be described in a conclusive non- intermediary way about what it is and that opens up a huge opportunity to actually build a data landscape that is conclusively connected with that dat with that asset which in the financial markets cannot be the case so good example is if you have a carbon certificate it might be described by seven different dimensions of data and you know if you only buy that on a on an exchange a centralized exchange you only see the certificate maybe have some documentation but you don't understand like um all the data landscape behind it you don't have attestations of how truthful that data is etc etc so that is probably the second most important uh piece that is going to lead to the financial markets to actually see this favorably because then suddenly with algorithmic interpretation you can actually build different Financial products you can have faster decision-making and you know F foundational analysis can improve great great answer I would say the same exactly things that Philip mentioned so I'm not going to recap all the advantages of oranization and benefits of course you can uh make different products and different experience in fact in my in my perspective uh one of the most important benefits that we can uh have from tokenization is the new user experience that you can give to the retail customers because in my case for example as an Institutional I make product uh nowadays um I I could say flat in a flat way I mean of course there is regulation uh risk approach and a lot of other details that characterized all the assets the traditional assets when it comes with tokenization you can build different products with different experience just because inside of the asset oh okay this is uh no worries guys we are covered okay everything good all good yeah okay so I apologize for this very impactful words very impactful very impactful wow wow W what a strong I would say very impactful okay uh guys just move it over there and do not let other people and on the the I don't know what is that but same well it's a century building so basically was built uh in uh 1,400 but uh okay no worries all right let's let's continue I don't think that the other ones will will fall okay all right okay so apologize for the sorry for the this disrupting words that I was mentioned because so much disrupting impactful uh but anyway what I was saying the most important benefit uh that you can uh have through tokenization is the user experience that you can build on the product and inside of the product so yeah you can build different characterized great great great thank you thank you very much Sylvio um now I have uh another question for Loren and Loreno um this regards the how does talization improve access and the role of the liquidity of traditionally illiquid asset so we talk about the assets that are in the traditional Finance we know that there are hard to move hard to sell they are illiquid so what is the role that the tokenization of those assets um impact the the those those kind of assets that are liquid yes yeah first first of all um I will say that uh um assess of course is gaining with the uh secondary markets on tokenization which is something that is not so developed right now but is going to be there I would say in in some times uh so volumes are not so not so big that's why are really important in this stage to have like liquidity providers and market makers that could help the development of this uh secondary market and um for sure um fra fraction ability uh blockchain Atomic settlement new real time settlement using stable coins and similar are all the advantages of gaining real uh fast access and for sure um having illiquid asset to be more more liquid but um right now there is another I would say not problem but challenges um in in the face that all the tokenized asset or the majority of tokenized asset have a mirroring in the real world does that means that uh it's um on one way it's really easy to uh like issue a redeem assets uh toize asset but on the other way uh we need to understand that I would say lots of company have as Reserve the real asset so as collateral as yeah as collateral or as the real one yeah the real the real the real one um so in this way from one side you can like redem isue in a moment using stable coin so role of market makers or liquidity providers can be ramp on ramp off of uh digital asset to in to like Fiat money but on the other side in order to redeem those type of asset you need time because they are in liquid on the on the real part but clients want money in a fast way because you are G giving something selling that is liquid not in liquid so those gap of liquidity from like redeem the tokenized asset and redeem the real asset must be covered and how can be covered this using liquidity providers that can like give you access to uh lots of liquidity that give asset to like working capital in order to have I would say in a really less cost than a loan um access to liquidity in order to redeem all the all the tokenized asset of clients otherwise there always be a gap of liquidity and is not easy to like create big markets and big volume if we have like a delay of at least two days between the redeem of to of tokenized asset and the redeem of the real financial asset that you have as a collateral so I think uh market makers liquidity provider has a double role in that thank you great great Leno okay you touched a great Point um we we discussed about the the actual use cases even the big one like Black Rock in Us in all these use cases except one probably the only know one uh you have the digital twin on chain but the the registry is kep by the custodian Bank okay it's it's even public on the prospectus so uh probably a few people knows that the the the first Native onchain oper institutional operation are are not US based but we're done in Germany and in Italy that's it okay so we need to be proud of that um I mean the the we have a lot of risk associated with this lack of liquidity um it's hard to say after a lawyer but we have uh two different regulation one for the asset lag that is not even a regulation it's actually a pilot in Europe and all the nation are like putting in place their own National regulation and the Meer that is is coming I mean it's already there for stable coin but uh we we were saying before that every asset is a crypto asset but they need to be matched okay uh I mean the only way to make liquidity is first of all en reach the data so the the data matters more than a token okay create a token it's I don't want to spoiler my intervention later but yeah I I will focus on that okay to token it's easy um the also the liquid asset uh I mean let's Define liquid asset most asset are liquid because you don't have enough data to evaluate them uh we will toize soon uh a notes with the real real estate collateral very great great uh tier one real estate operation I think that I mean they will buy all the token in less than one day okay they will be piz um so I I mean if you have enough data to evaluate the asset if the underlying asset as a value here that the blockchain can UPS you a lot to do basically two things cut information symmetries cuz it's I mean it's the king of a liquid ass the informational symmet okay uh and the second is as syia was saying present this kind of Assets in a new way to the retail because at the end of the game we can work with the institutional whatever but it's a retail game okay this probably this the only Market the web tree Market is the only Market that is pure retail okay and it it needs to be that but to do that we need to make I think still a lot of steps to make safe secure for retail to invest in such uh let's say particular a more sophisticated asset CU it's not a Bitcoin invest in uh a pension fund is not invest in Bitcoin okay so you need to understand what you are doing um but the data is the only thing that can solve the problem makes sense makes sense absolutely uh staying on the regulation um logic and framework I would like to have to make a question to all of you because I would like to hear uh different opinion about this um because one of the most important challenges regards the regulatory framework so um what are the main regulatory challenges facing the tokenization of rward asset and um how can they be addressed and uh how you are addressing them because we we are different uh uh uh Loreno it's in or so different backgrounds so uh yeah with regulatory difficulties uh so first of all I left America that was okay that was the easy answer to because this was in 2018 we were sort of very clear that the American Securities regime would not give us the ability to exploit the blockchain for what it what it is everything that we see in America right now is basically built on alternative trading systems and these are basically batch auctions but not real incremental price Discovery you can take one asset from one to the other Marketplace so it's it's not really a blockchain driven Market um we've been for four and a half years now in the um in the European specifically German regime uh now we're in Italy and Austria and heading towards MAA um as much as I'm a Hu huge proponent of what's been happening and I I think it's going to give a lot of clarity into the market there's a lot of inconsistencies that exist and you touched on that a little bit right give you two examples um one is uh the current definition of a crypto custodian under MAA specifically is for crypto assets right but all the use cases that we speak about are not crypto assets they can be defined as crypto assets and some regulatory bodies do so because they have no good answer to that question but the question is what are you easy to use use cases where you have a custodian which we need to actually drive further adoption how are we going to deal with that that you cannot have a crypto custodian holding those assets so you almost have to drive the institutions and everyone who wants to adopt in this space into self- custody because that's any anything else is not possible right now under these regulatory um circumstances I'll give a second second example we talked about data and data data is obviously the T differentiator here in many different respects and we have a lack of actually good data um examples that have been delivered so far but this this is going to define the future of this space now under European data law and gdpr being one of them you have the right to be forgotten you know any document that you put on the on any kind of decentralized infrastructure which contains a name is basically something that has to be deleted or deletable which obviously if you put it on ipfs is is not possible Right secondly if you actually have a a settlement system that is built on public blockchain infrastructure you know we we do everything we can to connect identities with different wallets and we make that easy to connect whatever wallet you choose with your identity so there's no correlation between the two right but in the end um if we were to build a really good system we would have to use zero knowledge proofs and basically hide not just identity with a transaction but also hide block sorry trade sizes trade offers so that the the the system cannot be interpreted from the outside what block trades are being done right if we go on this route we will immediately fall into the tornado cache uh situation so yeah and so we have we're getting hugely conflicting opinions by Regulators right now saying oh on one hand we want you to be data privacy proof on the other hand we don't want you to do that I see I see priv privacy is another topic that uh I hope we have some time to talk about thank you and so how's it going to be resolved time or tell time will tell yeah um I think it in Europe we always say Innovation by regulation know and something that uh also in this case is like really real because we have two different regulation one is a pilot regime the other one is Mard that is coming palot regim is I think from March 2023 at milori uh we also have yeah we have miit but yeah we are trying to shift this uh uh DT pilot regime is trying to uh like uh regulate something that is not so easy to regulate because they are they want to in my in my opinion that's my opinion uh I will Regulators want to like maintain a similar structure as is of the traditional market and like mirroring on the blockchain which can be done but just in a part we cannot have the same roles too much roles in the capital markets like this so you cannot uh uh have the same roles because it's not the same Technologies so that that that's important so pilot regime can help to like start something doing something about that and it's really important uh but on the on the other side maybe in one year this this type of Regulation is uh already old we are already we already cover up all the points that are uh related to Clearing Houses and similar so why why do we need this type of factor and uh yeah on this side on the on the Mika side yeah um I think it's really important to have a regulation on that on on crypto asset topic because yeah uh we are talking about about money we are talking about a like a market that is growing and growing so having a regulation is is okay but I'm I mean uh also on that case uh we need to better understand um I I would say uh how mikar can impact all the market and should Mar impact in a bad way or a good way this this is the the real question because in three months we have the answer time will tell us we said but um I mean uh same of the pilot regime I don't want it this A regulation that is already old for the technology because the Technologies are running really really fast and the regulation I don't know if it's running really fast as as technology so it's a it's that it's not yeah but thank but time will tell time will tell I mean in a while uh my intervention I will explain according to us why organizing a real world asset it's a m but let me Focus briefly on the inconsistencies um now basically apart from mikar We are following the Mii too okay uh cu the the DLT pilot regime is a pilot if you if you need to work like us with uh financial institution that uh needs to allocate investment in long term to do something the pilot name doesn't help so we are quite lucky probably the first time in history as a European to have at least a common framework but uh I mean at the end of the game the crypto are really easy it's simple uh but when you when you you need to put a distributed Ledger into the Mii 2 believe me it's a mess okay you need to find the best compromise and adapt what really the smart contract could do balancing to Mii 2 on one side and gdpr on the other side just to make a very precise example uh when the the national regulation came up uh I mean last December uh we raise our hand saying okay this is an inconsistency with the gdpr so you are obliged me to put on chain this kind of data but this is a gdpr data so what should I follow and also because I mean it's it's it's hard for the financial institution for the regulator as well to embrace and understand something that is born to be totally unregulated and totally decentralized cuz this this is the thing this is the the art part let me say also the the interesting part of our work okay find find the the common ground that it's it's very slight but I mean we we will make it sooner or later we will make it of course I agree with all of you guys about the questions about the the answers um I can speak about the finance sector which is one of the most regulated in every other sector uh so it's very difficult to build new products uh the the real problem it's not the regulation itself uh it's uh of course to build a product in the asset management sector for example uh you need to focus on different regulations so usit you have taxonomies you have uh miit gdpr and so on so it's not only one regulation of course in Europe we have DT pilot regime that could be a real framework and it's the first one so it's a great opportunity for us in the uh in the space to operate and to imag new products of course uh we are living uh in a uh in a sector in which US does and Europe uh Europe uh regulates you know uh more or less the the same the same sentence of Loreno before H so the what are we doing we are trying to understand all of the Frameworks and how we can uh operate interoperate uh with all the Frameworks uh the new Frameworks and the old ones in order to build uh new product that respects all the regulations but it's very difficult so at the moment uh it's difficult to see uh real examples of tokenized assets uh in Italy for sure in Italy it's it's really difficult because we have even another regulation which is the decret of inch more or less uh the same the DLT pilot regime but it's another regulation to respect and of course the technology is moving on really fast so the regulation is kind of paid just right now and uh there is another pain point for the industry uh we are studying all the the topics around the the creation of new products but at the end you have to um help the retail investors and uh uh to how to say uh make him uh Pro protect from his Investments so it's really difficult because it's when when you speak about Finance you speak about a very sensitive topic for the for the clients at the end yeah absolutely thank you thank you very much uh absolutely makes sense and uh Thanks for for for the qu for the replies I will have a last question to all of you um then we're going to give the chance to some question in the audience um we going to go back to the point where we started and um I want to ask what are the next steps for the advance advancing and the adoption and implementation of real a world assets organization so give us the big picture where we are going and uh what is your point of view of uh of this um adoption coming in the next years please Philip uh so I'll I'll touch on on three things I think first of all um with all the undercurrents of Regulation that we've been discussing um so we have come to the conclusion that there's there's a way to build a sort of a peer to peer offering system that allows also Securities on the blockchain to be offered from one peer to the other I think we have enough clarification not just in Europe but elsewhere as well on the issu and side so I think it's it's undoubtedly that there's a prospectus regime there's different ways how to issue that's not the issue the issue be begins actually when it comes to what are the trading venues how do you deal with custody Etc all all that kind of stuff right so so we believe that the the markets are going to look somewhat different than Unis swap they're going to look more like you know billboard systems on steroids where you as an individual can say you know I'm offering up my asset to maybe some qualified person on the other side but you define how that person is qualifi qualified and then basically the price Discovery happens within that transaction but it's not the platform that is doing the price Discovery but it's actually the the offer system that is doing that so that's a key thing to actually drive the ability to have a market which as we discussed before is one of the key benefits of actually tokenization um the second thing is I I think the um the custodianship has to be clarified pretty soon and it will I think um but with that I think we'll see a lot more use cases that will like smell look and feel for anyone involved more like web 2 Services because then the investor doesn't really have to know what a wallet is what a sort of how that functions maybe the trade execution is not really something like metamask is horrible for from that perspective so so I think that will from a complexity perspective be hidden away which will allow a faster adoption abstracted abstracted away and and build good consumer experiences as a result of it whether that's for the retail customer or for the sort of institution or something in between that that's that's something completely different um and the third thing I think that um so with this wallet infrastructure being cleared I think we're going to see like very unconventional participants in the equation come to play it won't be necessarily the financial institutions or the exchanges or the traditional way how we think about a financial transaction but it will be more the digital wallet providers from the web 2 world that are already in our phones that are already like if you if you look at you know Theo example or the Robin Hood example are already actually giving very easy way for someone to comprehend what they're doing and engage but that will extend much further deeper into those kind of infrastructures and um that will drive a huge adoption we won't we as participants of protocol devisors we might be in the back end but the front end will be just within the phones and you know be a good experience yeah great great Loreno yes thank you uh first of all uh I completely agree with you especially on the cast part I think that institutionalization of of custody especially if we talk about uh security token and we talk about uh yeah tokenization of financial instruments so it's really important to like shift that so from uh the crypto custody as we intended sometimes uh especially sometimes ago like Ledger and similar yeah we need to be like a more two Web Two services on that so because people that like stay in the crypto Market from like here ago perfectly understand I Works May a private key but I mean not all the people knows that so web to Services sft shift is really important in my opinion and uh second part as I said before secondary Market secondary markets are really important because if I like take a tokenized part of a real estate and then I cannot sell to anyone I'm not creating a liquid Market I can I can like I can put this wall in my house too and it's the same because I blocked in my wallet I I don't have like the the liquid part so it's important secondary Market it's the real important part I would say great great thank you okay uh I think that it will I'm popular opinion it will take longer than we expect uh a few change Generations has to come not not so long not so long this is for the toiz of land registry probably my nephew will see it um it it will take longer but it will be probably bigger than we thought even bigger than the Boston Consulting Group report uh but to do that uh you need to build and now the industry is building um all the institutional player are building uh we we will be soon in the digital as week London and probably will be our like first startup and there will be all the main financial institution of the world in that in that Vue so it's it's a good sign um but the main thing are digital identity I think for sure user experience and a real real cash leg on chain these are the main train pillars to move on otherwise I mean thank you thank you thank you yeah for sure the the blockchain is going to uh disrupt all the finance industry because it is the technological stack uh behind all the new assets that you can create and the traditional assets that that already exist so it's a long way to to change all the uh the way in which we are considering Finance right now uh for sure the user experience is going to be the one of the most important in my opinion uh because as I was saying before Finance uh for people is a very sensitive and important thing so um whenever you are going to log in into your bank account you want to have everything in order everything clear uh uh an in a really great uh user experience uh just because you are seeing exactly uh your your wallet you know so digital identity is for sure one of the one of the most important topic of the of the blockchain related space uh user experience and uh one of the most important for the asset management industry in particular is that uh uh the focus that you that we can see we will see in the next year is the um the interoperability which um with the traditional Finance platforms so uh like Bloomberg for example and the new uh the new ones and maybe the blockchain itself in order to to have the cash lag in on chain uh the asset lag on chain everything on chain in order to optimize all the supply chain uh anyway uh in aom mobiliary Asset Management uh we are really happy to say that we are moving on exactly in this direction in fact we we're going to start um a project a strategic study U exactly for this purpose so to understand how we can interoperate uh and we can develop something new uh we're going to do all this strategic study with Loren and block invest so uh it's really important to us to uh make it make real this is a spoiler this is like a quite spoiler okay it's written on chain oh okay okay it really polygon nice yeah oh thank you very much uh so everyone I apologize we don't have much time for the questions but I hope our speakers will uh kindly reply to the question afterwards because we have to move on but uh thanks a lot for for replying to our questions everyone let's give a round of applause thank you much right now thank you thank you right now