Building the Rails for Issuance, Custody and Settlement of Tokenized Assets | EBC11

Hello everybody. We're going to do our best not to keep you too long uh away from lunch, but we have a very exciting panel ahead of us and there's quite a lot of us on stage here. So uh without further ado, my name is Irwin Valder. I'm the head of policy at the European Blockchain Association. We're one of the large uh EU trade associations representing the interests of our industry broadly across uh across Europe and globally.

And uh I'm going to just bring it right to the panelists to uh give a warm uh round of introductions about themselves and maybe say a few words before we dive right into the questions.

Uh good afternoon all ready for lunch. Yeah, nice to meet you all. Uh here from uh unit network we uh we've started uh developing a uh the next next economy basically that's going to uh do a lot of uh uh transformation in the pyramid. So far we've been talking about the top of the pyramid with the the regulations these regulations coming from everywhere. We're actually building out uh the next version of economies for various things but I'm I'm actually leading the development team.

So if anybody got engineering questions on blockchain development and decentralization please come and talk to me or ask me questions. Yeah. Thank you.

Okay. Hola Barcelona. Uh I am Patrick Hennis. I am from Det Private Bank in Luxembourg and uh so I am I think the only traditional banker here in the round but I'm not only a traditional banker uh I've been for 26 years in Luxembourg in investment industry but I'm also for a decade uh in DeFi and in blockchain. I was the project manager of the first um blockchain initiative in Luxembourg to tokenize investment funds.

uh and I'm advocating uh bridging trade and defy already for many years and I don't only talk about it uh I live it really with my team I have a half of my team uh has nearly 100 years of uh experience in traditional uh investment funds and half of my team uh are rookies and we are doing tokenization as well as normal usage funds uh every day. Okay, thank you. Uh first of all, we have banking ladies here as well on the panel and uh from B&B Parad and

sorry for this Vina and uh saying thank um I have been in banking 15 plus years. Um getting bored of not being innovative enough uh moved to fintech banking and later on into VC uh blockchain fund PE before founding Asotera. Acetera is as you could see already at the at the beginning an EU regulated trading platform uh especially for securities on chain and uh we basically have our headquarter in Austria Vienna and also regulated in Vienna uh from the Austrian Financial Market Authority on the MIT as well as on the Mika.

Hi, I'm Tobias. I'm co-CEO of um Stalker and um for you who don't know we are doing tokenization actually since 2018 uh we have right now um in real world assets around 1.8 billion um asset tokenized on our platform and they're really tokenized so you can really trade them in peer-to-peer in a in a close um environment with whitelisting contracts. Um we have built like this company in 2018 already and we have like seen like a long journey on the way and I think we will share a little bit on this panel also how how like the infrastructure and where we see actually the infrastructure going in the future. Hello.

Um, my name is Vina. Uh, thanks for having me. Uh, I work for BNP Parba Security Services. Um, so what I can bring to this panel is actually uh the point of view of a large custodian. Uh, the post trade side.

Um, and on our side we are actually uh dealing with u tokenized securities, tokenized real world assets. Uh, we not touching on cryptocurrencies. uh but we were very active in um the ECB trials. So uh looking closely at uh digital cash also being uh involved in several bond issuances in Europe. Um being about uh to extend the scope uh on that part and also working on funds tokenization.

Um and I think if I could give uh like one input uh related to the topic of our panel today um what uh I see as the main bottleneck when it comes to uh the tokenized asset market um is really fragmentation today and on the flip side um I think um consolidation and collaboration could really help us there to come to scale but we will see that in the panel I would say. Wonderful. Thank you for that. And uh Paul, may maybe we start with you. So um so you guys are building the uh the tokenization infrastructure kind of at the uh at the infrastructure level.

Um what what sort of um uh what sort of issuances specific use cases are you actually seeing uh uh crop up in terms of the the cross-section with the work you're doing? And um could you give us a snapshot maybe of how your platform is enabling those issuance rails in practice?

Hi. Yep. got the right microphone out. Uh yes. Uh what we're doing, we are developing a uh an opportunity for everybody, not just for the few in the the financial institutions and the ones that want to uh maybe tie into particular uh jurisdictions, but people who need now empowerment to uh raise uh uh capital, whether it be for community, for personal, for uh business.

And what we have is a uh a an engine really that's going to be like we've got Bitcoin. We've had Bitcoin. Bitcoin does uh um transfer of funds. It does saving of uh of funds. Ethereum empowered people with the the contracts, but it's only applications.

What we do now is like take that one step further with economies. So people can actually build their own economies around their own industries for around their own cities, around their own business types. And individuals can also be involved in those economies. is they can have their own economies and people can actually say subscribe to their economies. So what we were doing is b basically making a uh what vitality used to talk about was the uh the Swiss master knife.

So we're going a bit further than that by making a whole kitchen and that kitchen is built with components or tools that anybody can pick and choose from to build out on the bottom level. So take something from an idea through to the equivalent of the oldfashioned IPO. So, uh this is uh what unit is doing and we have a uh a mainet uh uh blockchain now which is uh pretty solid been running for a year and we're starting really to get people more on board that I mean most of the people in the world are still not holding wallets and that is like a lot more of a problem or a an issue or a a pull factor for this whole industry than like taking care of like say the financial institutions that were actually being uh basically possibly phased out eventually. everything will be uh fragmented and everyone will have their own power especially with AI coming. Yeah.

So maybe I'm rambling on a little bit but I'll talk a little bit more later. Yeah. Thank you.

Uh Patrick, you know, as as a major bank that's that's playing in this space and you guys are on the forefront of building some of these products. Um how are you approaching uh custody for example? You know, how are you thinking about the segregation of client assets, key management, regulatory capital treatment? What's that look like in your day-to-day? Yeah, this is in fact one of my favorite topics because um for me this segregation everything uh is built up in fact what I say the digital custody layer.

Okay. And uh as we are in the traditional financial institution uh this layer is the most important for us uh because here is regulation in play uh real governance compliance and everything. So here we are looking to an institutional grade digital custody player um which is a topic very close to my heart and um yeah can ask now what it is what is really institutional grade and institutional grade is not only wearing a a suit okay so we have here on the panel also an institutional grade uh guy like Tobias he's not wearing a suit so this is not institutional grade but what is it really and um I can I can start with an anecdote on this. Um I I am scanning a lot the market and the providers in this area digital asset wallets things like that. So a lot of um companies are presented to me and then I make a full due diligence on them or a quick check whatever.

Um and I had already a funny situation this year. So I received uh a name of a company. They wanted to uh that I introduce them to the bank and I said okay guys give me some information and uh could you send me your organ or organizational chart? Okay. And uh this is not a joke now.

They sent me a photo from the Paris blockchain week on the party and then they said this is the team. So this is not for me institutional grade. Okay. But this is an anecdote. What is institutional grade really is not the product itself that I'm looking at at the first glance.

Okay. I'm looking also at the company really in detail. So we are a traditional uh institution and all the providers that we select um we they pass through the same process is a due diligence process is a risk based approach. So we have a look what is the corporate governance do they have auditable financial statements what is cyber security uh on their end uh do they have already a track record or a revenue record so even if you are a startup company we are checking this okay so this is for us institutional grade and then once they pass this first test then we will have a deeper look uh into the product itself and the solution that they provide to us.

Good. Thomas, um you guys are bringing uh fully regulated digital asset exchange uh capabilities to the market over at um at etc. What are the key technical and legal challenges of supporting tokenized securities for you? You know, how how do you reconcile for example blockchain based settlement with CSD style compliance? Um let let me first start with u a statement that the the regulatory clarity on the crypto side meaning uh certainly also helps to better understand what are actually securities onchain and what law we have in Europe a law for securities which is MIT which is actually currently applying.

We also have a DT pilot regime which just started but there is no traction yet. Um on the other side uh we see the the legal challenges actually at the beginning of a project like uh Patrick Gin mentioned you need to do a due diligence of the project you need to do a KY of your client uh actually you also have to have a product governance you need to read the white paper which is now under mik similar to what is actually already done under the mi and uh if issuers come to you they apart from not having all the KYB information they even ask you how to design a token I have no idea how to create the financial instrument and that's actually already the beginning and if you want to get private market assets on chain that's the very first thing we have to actually um scale or kind of clarify and the legal companies also actually um I don't see any legal companies here to be honest and they are best positioned to get you a ready token in hand as a security to distribute and put on a platform like ours for trading. Um the second thing and by the way we have 150 token in our supply engine uh which we're currently also offering uh to other companies to partners in the crypto space basically cryptocurrency exchanges uh to distribute securities onchain on their platform under our license. So distribution is the one thing which is actually key right now because uh without any distribution successful distribution you don't have any liquidity you don't have any trading trading is nice to have all the capabilities but we see it on our own uh if you have not kind of done the distribution properly then certainly liquidity and trading will not happen. Uh on the other side when we speak about uh the um kind of everyone is building silos which I do understand from the protocol blockchain level I also do understand that you're going to have uh different platforms doing their own USB their own setup their own module can know their own client acquisition but however they are not speaking with each other therefore we had to build actually a bridge for uh bridging an avalanche token into our blockchain system to get it actually available for trading purposes but that's something which need to happen.

I'm not sure if it happens soon if consolidation uh kind of supports it but we have to have more uh on the interoperability between different chains and platforms and uh the the final thing is um we built everything on chain. We do have atomic settlement for the settlement finality uh doing the clearing and also doing the custody actually self custody or non-custodial because in the end uh if you start also looking into the CSDR which is definitely necessary for MIT compliant products then we are not innovating anything if you're going to do the same legal structure like we have today like uh running an order book automatically or doing the custody we actually need to bring traditional markets the regulation into blockchain rather bring blockchain into traditional markets and that's actually what we are doing fantastic Tobias um Stoker was one of the early pioneers in bringing compliant digital securities to institutional investors so from your experience what's been the biggest hurdles legal operational etc in bridging that onchain issuance with existing uh investor protection networks

yeah right [clears throat] so so when we started with our idea In 2017 there was no specific law for for for crypto assets at all. So we were starting right in the void. But what we said at that time already we want to comply with securities laws. We want to bring securities on blockchain. Right.

So we we are start saying from the start okay we will um comply with European capital market rules. We will obviously set up structure which are compliant with um corporate law. we are setting up most of our issuances vehicle in Luxembourg where um this is easily easily possible. So that was like the main main challenge actually to know what what you can do and what not. And um and when you think about um asset tokenization, it's not only about the tokenization like bringing like the securities on the chain, right?

It's also like providing um a payment layer. So you have always like a cash lag um to the operation. You have to solve both problems at the same times otherwise you not have finality and and settlement in the issuance process. So um there's like another regulatory um hurdle then now in in the in the space because when you do like stable coin um transfers um in the future you definitely need a Mika license. We will see what else you will need.

Um but but this is very essential and what we do at stalker with um with our assets we provided like this kind of asset lag and cash l at the same time and and of course when you say okay regulation regulation is always um very beautiful but you can uh you can make you can make it also applicable right especially in the security space because in the end the tokenization part is just an evolution. So on this side we had like very um a lot of like successes also in the beginning. We we got like approval from the buffin for certain products. we got approval from the IMF because when we were targeting retail investors obviously have to um comply with all the disclosure requirements of the planet right and um and then on the on the on the payment lag right this is very interesting because like our investors right now 99% of our investors on our platform paying actually with stable coins so without the stable coin um access and tokenization is is is totally useless Um right um just like for a history purpose um because like also like I know this conference was very EVM um based um we started actually with Ethereum in uh in 2018 and then later on we integrated and since 2021 we are tokenizing on bitcoin meaning um using like liquid is like a layer 2 solution and it's basically based on the bitcoin um blockchain and we see bitcoin is actually the future financial backbone on of the financial industry. Um we see it already happening in US.

You see it also as this conferences. People talk more and more about Bitcoin and from our perspective Bitcoin is also their only decentralized really truly decentralized exchange because it uses energy. Um any other chain you're using as a as a financial base layer is in our view a little bit too risky. But of course we are always open um open to explore possibilities, right? because like for the asset lag it's not so it's not so important in the end um um that it's like super super secure because you have always like a snapshot of all the transactions live right but on the on the payment like um definitely there's um there's like a security question um one regulatory hurdle I see right now and I think we we mastered all the regulatories on on the way we are like we have we are licensed by Luxembourg regulator we will get now the Mika license for the payment payment lag.

The biggest challenge is um bringing back um big stable coins to Europe, right? Because Tether left um because of regulation um because it does not fit with the business model. And here you see um there's like definitely a need um that the regulator will open again otherwise I think Europe will just like miss the train. I don't believe when that every bank is building its own um stable coins that this will work. I think we have like to um work with existing um capital market pools and um and liquidity and liquidity is right now in US.

So um I'm a little bit um concerned about um this kind of development and I'm curious when um when Europe will come and say okay we we allow also like different business model as like as provided in the Genius Act as the other panel said before right because in Genius Act you can also um like have like an underlying um treasuries right and this is like for example like the business model of Tether and that's why they left but they will come back again hopefully soon um so we get like a lot of liquidity again also like in the in the Europe European market otherwise I think um people will um move over um the pawns.

Reena, we've we've heard it mentioned a few times throughout the panel so far talking about uh silos in one way or another. So brings us obviously to the to the topic of fragmentation. Um and it's a challenge when you're trying to build uh bring digital assets on change and build the associated infrastructure. So could you could you elaborate a little bit about how you guys are tackling that and and and and specifically for your clients?

Yeah, sure. So um let me maybe give a little bit of context to your question. Um so we started out at BNP very much as many of our counterparts uh by uh learning about the technology trying to understand what it is about um doing testing together with our clients identifying um technical providers that can help us with their solutions. Um moving on to real life experiments um and I think now uh it's fair to say that we understand the tech. uh we also have a good feeling for uh use cases um that can bring us value and I think that's uh now the crucial point to um find out how we can generate uh scale and value around these um use cases and I think uh on industry level we kind of approached it in a non-coordinated way which is normal because it's a new space we didn't build anything and so everyone started a little bit individually uh building up um pieces of infrastructure, pieces of um yeah like rails uh for digital assets and for services.

Uh and we now face the challenge that we need to find a way to interoperate uh among all these islands. Um to make sense of out of it um and I think there uh some kind of consolidation could really help. Um so that's not to say that we will end up with one single blockchain for all capital markets around the world. I think that's not really a realistic scenario. Uh but maybe we will have like a dozens of blockchains gaining traction.

Um so some uh that already exists may not gain this traction. Others let's think about the Swift announcement only two weeks ago um to build their own letter. Um so networks that do not yet exist may traction in the future. I think it's not decided yet. Um but uh we will see some kind of consolidation to the benefit of the tokenized asset markets.

Um and that also brings me to the second point on how we approach that for our clients. Um so uh as a custodian we see it as our responsibility as part of our service uh to enable connectivity um to different DT networks for our clients. Uh so we need to find an agile way uh to connect into these uh networks um and to enable our clients uh to uh purchase digital assets on those uh networks um and um so on PNPP side uh that's why we invested uh over the last couple of years um major efforts in building an abstraction layer um so uh one point of entry uh into the different uh DT networks uh which enables us to uh open wallets on behalf of our clients uh safeguard underlying private keys um yeah uh servicing digital assets as we service our clients for traditional activity today. Um so that's one major uh point we we were focusing on and on the hint side uh this abstraction layer also ties into our existing systems. So our legacy uh which is uh a huge part actually of the challenge uh we face as a traditional player.

So we have our traditional stack, our legacy infrastructure um and very uh similar to uh the fact that we believe there will be several blockchains that coexist. We also think that our legacy u infrastructure will remain and will need to coexist and to interoperate uh with DT networks with the digital world let's say. Um and so um that's a challenge but what we actually target is to come up with one uh operating model for digital and traditional assets uh and not having a dedicated model um for digital assets only which also makes sense because we would like to propose to our clients uh one consolidated offer uh across these different asset classes.

Wonderful. you know, you know, from my view at least, I think what we see is this uh emerging ecosystem of different of different players in the space. You have the you have the the infrastructure, you have the protocols, you have the issuers, the settlement networks, etc., the custodians. Um, you know, and and one thing just kind of broadening on that discussion is this issue around uh around standards because a lot of these things are are are living on their own on their own ecosystems and there's still a lot of gating.

So, you know, I you know, it's an open question to the panel. I'd like to get your views on that. you know, do you think or how important do you think composability in terms of standards will be? You know, are we talking about baking these in to the to the to the token layer or at the protocol level? You mentioned Swift, you know, they were doing pilots with uh uh Capgeemini back in 2022 and three.

We have, you know, Project Agora from the BIS speaking of a unified ledger. What does all of this mean generally when we're talking about the way that standards should develop to create scale or unlock scale? I I will take it. Okay. Yeah, standard is something very important that we are looking at.

In fact, when we when we talk about tokenization or infrastructure itself and um probably you have seen um a few weeks ago there was announcement of a new ERC standard the 7943 um and there was a debate u long debates on on LinkedIn about uh ERC 3643 or um the it's named normally the T-Rex standard um against the ERC 794 43. But for me it's not u one standard against the other. The standards must live together. They must be interoperable. They must be composable.

Otherwise uh the infrastructure and the ecosystem will not work. And I can take um an example um to make it less techy I would say. Uh and you can compare it in fact to travel plans. There are people they want to have uh all-incclusive travel plan. Okay, they know everything is uh done by one provider.

Okay, and there are people they want to travel and they will they want to do everything on their own. And this is the comparison between ERC 3643 and ERC 7943. the year6 um the year 3643 is the all-incclusive stuff and it's specifically uh important for specific use cases like for example usage funds so in the traditional uh fund industry the ESC36 is uh 43 is perfect and if you are more in the RWA token private market uh infrastructure then you can build with the ERC79 943 the architecture and the ecosystem that you want. You can take one module of this, you can one module of this and they are interoperable. But both standards need also to be interoperable between themselves.

It's a little bit like swift. Swift is one standard with a lot of message types and inside these me message types you have also two different standards which is the MT and the MX. And depending on the use case or uh the infrastructure of a bank of a financial institution you have the MX or you have the MT. Now the the most important thing is that the standards can communicate uh between each other because in traditional finance and um fund industry I have seen my whole career that asset managers moves from one asset serviceer to it to another. It was during many years my my bread and butter to move those asset managers from one to another.

So if I have standards that are locked inside themselves, it will be very difficult in the future that asset managers will move from one depository bank to the other deposittory bank. So when I take the case of our bank, we are a depository bank and a transfer agency with 170 billion under custody. So if I have now an asset manager who is on one platform with one standard and he wants but he is with another depository bank and he wants to come to us. I need to take over the keys from his digital infrastructure. Okay.

So if the standards cannot communicate the transfer or the migration will become a nightmare. And I can tell you that with old technology so and sorry for the Oracle guys but it's old technology for me it's already a nightmare. So so if in case that we have different standards that cannot communicate then it will be very difficult. So it's very important that the standards align between themselves and I'm not talking now between standards of blockchains themselves. So here I'm just talking about Ethereum polygon blockchains.

Thomas, I think you wanted to pick up on that and and then maybe we'll get to Tobias or or or other

I'm quick. I'm quick. No. Um Erin, you mentioned a key word here. It's ecosystem and the ecosystem for securities onchain simply doesn't exist.

Um securities exist for I don't know first uh stock exchange was live 1850 something. So it exists over 200 years. It doesn't exist for securities onchain. Um having said that we are competing on the primary on the secondary on the custody with existing traditional financial markets who are as you said also functioning for 200 years. So um therefore it's even more important to have uh uh the digital cash onchain meaning stable coins whether it's a euro stable coin or to some extent USDC or uh or uh British pound but we need this digital cash onchain or if it's a money market fund uh tokenized onchain even also this works as a pair for one of these security token so in order to disrupt the securities onchain we really need to work on the ecosystem make sure that actually is from primary secondary the training uh sorry custody uh fully functioning.

Yeah. Just a just a few words on the on the on the standards. I think it's also a very European um discussion like you want to create like standards before like there's a real real market, right? Um I always say like we are like in Europe we always like put like the traffic lights before we invent the car. And um I agree maybe at one point of time there will be some standards developing but I would um rather see like that the market is um um accepting like certain solutions right what you see for example in US it's like it's like very beautiful for example Franklin Temple they don't say okay I'm tokenizing on Ethereum or something like that no they tokenizing on Stella they're tokenizing on other blockchains they have I think seven blockchains and the like and then you will see where is like the biggest market demand and also like where is like the where's like the cash link coming for the specific blockchain because um for example for our investors when we have like um bitcoin um yield products on our platform right I cannot convince like um a bitcoin maximalist to buy a c20 token it's just not possible so you have like to to to to find also like a blockchain to to a specific market need right um as we are right now at 1.

8 like million I think we are leading the market definitely in Europe um and but in US you will see you know nobody will talk about standard standards until like the market is like fully developed and I think this is very important to consider whether you call it um what whatever your number you give important is that it it's actually works and it's accepted by the market and the market trust it and um and then in addition we are talking also about blockchain I think then we have already like a um a trusted um infrastructure you can you can blindly trust because that's like the value proposition of blockchain. Otherwise, we don't need um also also blockchain for for asset tokenization um um cash tokenization and and and the like. You know, I um I'd like to dig a little bit deeper into uh it's a bit of a regulatory topic, but it it brings us back to some of this uh substance over over over uh discussion that we've been having on uh for example on DT pilot regime. I' I've listened to some other panels throughout the day and they've been they've been been discussing this and you know in Esma's uh Esma's own opinion on on on the DT pilot regime they they identified some certain areas for needs needs of improvement and um and since a lot of you are kind of facing also that that CSDR side of things what what do you think really needs to happen to bring that sort of sandboxed environment to a full production mode? Like is it is it just the issuance caps?

Are we talking about more so on the settlement leg as well? Uh what what is it that we really need to unlock the the tokenization of of of real world assets at scale for equities, bonds and and securities in Europe?

Yeah, I think uh basically for unit network for example, we we have our own uh standards. uh we uh were I've got a lot of background in logistics and how logistics uh industry was very fragmented and uh governments and customs and so on would try and use standards to actually say get these shipments across uh uh and through to the uh the destinations. Uh I'd say the uh the thing is like most of these standards are very similar. Yeah, China's got standards, America's got standards. They're all going to evolve and they're going to be like say you got the ERC20 which is like say the the the the core identity of a token.

Yeah. So it's obvious you got a a person token which is very cont uh um um maybe not so comfortable for a lot of people in the world. So it's it's probably not going to work really. Uh corporate I mean corporate is like also very difficult to manage but people can always try. Yeah.

And there are like say movements and there's a swift standard that's like work very effectively with uh uh with banking uh transactions. But in terms of u the the evolution of things I mean basically whatever works for you on your platform these are the standards you can work with and it's not that difficult really to say if you want to work with somebody else then you adopt and you bridge across to their standards. So it's not like a a primary uh challenge really. It's just like one of those things that needs to be done to actually say interact with different chains. We we interact with like 16 chains and uh we're posting tokens across not just our chain but other chains and there are standards of like bridging and so on.

Uh in terms of the um uh the the the specifications that we we've been talking about today, I mean it is like sort of it's a it's an effort that goes on forever. I've been in technology and doing these sort of things for like probably about 35 years and uh really I I've I've seen like efforts and it's like you've always got um conflicts. I mean China somebody some country or some industry leader wants to do it one way the competitor wants to do it a different way. So it's it's basically it's it's a it's a uh not a big deal really. It's just the semantics of things and as long as you understand your standard with your semantics going across to another chain, you can present that to the other chain or the other uh entity and like basically work with it.

They they love their standards. So, this possibly answers the question. Maybe it doesn't, but I've done me. Thank you. Yeah,

I I think the we should have used the MIT regime to make it blockchain fit because we do have a a securities law me if you're going to issue a financial instruments you have to comply with with it regulation and uh this should have been done blockchain fit because if you're going to create a token on chain you are complying with the the MITIT law. On the other hand um it's a Anything can be done on the mi fit like the primary like the secondary and uh as said earlier the CSDR certain also might be to blockchain fit

and sorry if I can maybe add just one point on regulation. So I think uh that we see overall uh really a great progress also on the regulator side. So they're up to speed on the technology. Uh they really engaged. Um and I think if we uh take a look at um the roles and responsibilities as they were uh defined or rather not defined some years ago, I think we can really see the progress.

uh and of course it's still uh work going on but it's work going on uh not only on regulation also around use cases around how we build uh operational um models around uh them and so overall I would say nevertheless a quite positive uh trend there. No, I fully agree. But even more important is that the regulators know what crypto means, right? And also what the blockchain can do, but uh we see a lot of regulatory arbitrage especially when we about mika and on the mika we do a bug fixing right now. I see.

But this is something which at least we have the regulatory clarity which gives us a framework maybe too much in detail. However, I see that and we could also see it in the other panel. It's currently bug fixing and uh we have a lot of u yeah it's bug fixing actually

just quickly on the you asked about the pilot regime right

so I think like the pilot regime the problem is with pilot regime you have obviously have like the the the amount the maximum amounts I think it's around 6 billion or something like that and you have also like issuance limited um for depth I think it's 1 billion or something like you know around this we have like when we want to create like a secondary a centralized secondary market we need a lot of liquidity And we will see whether this is like now sufficient because um the pilot regime was definitely built um to keep like like innovators out and um and make us make a safe zone for for incumbents. But it it's also called pilot regime. So um I hope that somebody considers also this as a pilot. So we will see soon like a um a proper law um for for for security token exchanges in in Europe which everybody then can apply and then I think this will just happen. We do it already.

For example, we are listing um with Bitfinex security. So we listing on decentralized exchanges. So we're making mainly use um out of of platform outside of of Europe. But we would love to see also like more players coming in. I think 21x is like the only one right now um who has a little bit of a trading volume and the right license but um we hope that also other exchanges are are coming into this play.

Okay, I will close probably then with uh with the regulation or poll afterwards. Do you want to say something about regulation otherwise I take it now?

It's regulation if

you wanted to say something on regulation.

He was going to he was going to take it.

Yeah. Can you hear me? Yep. Uh regulation is good of course. I mean basically it gives us guidelines to work to.

Uh but the world is a very big place and again it's like very flat. So uh regulations are very good to like say maybe uh bring people into line but there's a lot of maybe say uh company uh countries and individuals who basically uh um circumvent these regulations. So it's important but uh maybe it's not the uh the key thing. I mean last year there was like I went to an event in New York and it was all about whether they're going to move forward, what's going to happen the CBDC's and so on. Suddenly we got Trump and like the whole of America changes.

Everything's open again. Yeah. there's like no more talk about this this boring subject of of regulation of of standards and so on. Let's get on and create something. Let's empower people to like say make use of AI, make use of robotics, make use of like say um quantum uh physics and so on.

The world is changing place. It's very hard for the banking institutions and so on to keep up with all this because the juggernauts they're actually say not very keen on like changing from legacy background. So in a way it's like nice to talk about. It's nice rhetoric and so on and it gives people like some comfort really in the world of banking. But really when I look at like say the the history of banking, maybe it's time for change and maybe there's like sort of opportunity for like say people to be able to like create those regulations and to introduce like say maybe uh a little bit more um freedom and there'll be like governance across the uh the populations and so on to make sure that like say bad actors are are eliminated.

It's just like the internet works now in most of our it should be worked this way where there are no controls. There's a lot of controls in some countries of course, but then like say blockchain is just basically an a layer on top of the internet. Yeah. And basically it should just run. Yeah.

It should be like a invisible really, but it's just like a layer of value that actually say enables us to to hold value to transfer value to to assign value to uh to objects or to to businesses and so on and to be able to like say uh continue our business without worrying about like the uh uh the value being double spent or whatever it might be. And it's very simple really. Yeah, thank you.

Just just very quickly, Patrick, and then I got one one last question.

It's very quick. It's just to demystify a little bit Mika. Okay. Um because uh Mika is not a a new regulation for me. Okay.

In the area that we are acting, in fact, we are acting under Miffy 2, we are acting under AML56, we are acting under Dora, we are acting under PSDR, PSD2, whatever. So, Mika is just helping me to classify in fact my token. That's what I'm doing with Mika to see if uh when I have a tokenization project uh I'm concerned by Mika or am I in the MiTit 2 security and then I don't worry about Mika. Okay, for us as a traditional financial institution with a full banking license, Mika is really a smart part of our regulatory burden. Final question, maybe 30 seconds from each of you, it's almost the end of the year.

We're almost into 2026. Fast forward 2029, we meet here again. What does a tokenization landscape look like? you know, are we talking about fully abstracted frontends where, you know, BT B2C users, for example, have have no idea what the heck is behind them, but they don't care because the rails are moving. What does it look like for institutions?

Um, what are your what are your views on that?

Uh, well, I would say that we can compare, say, blockchain with AI. Blockchain has taken already about 15, 16, 17 years to really get to this stage and it's not really got that far. Yeah. uh AI over the last one or two years has just like revolutionized the way that people work, the way that people live and it's basically got a much bigger impact. Now when AI hits blockchain then it's going to be like say 2029 we got quantum physics and so on but that's going to just affect the cryptograph cryptography but then what's going to happen is like there's going to be like say invisible layers of uh this this layer on of finance of value on the blockchain and people aren't going to see talk about blockchain really they don't don't talk about the way the internet works for example don't talk about how cars work they don't talk about like say how uh uh reg maybe not regulation but uh things like but um yeah it's going to be a uh interesting but it's about time that blockchain got got a a move on really in terms of like say opening up to uh to everybody yeah thank you

okay let's meet again here in 2029 and I will answer I have no crystal ball so it's quite difficult but I prefer to answer a little bit more in a philosopher way and I want to take as I'm also a little bit a risk manager make a lot risk-based approach analyszis. I want to answer a little bit with the most ancient uh risk based approach which is the Socrates three thieves the three filters and we can apply it to tokenization or to to blockchain or digitalization in general. Um and the three seats are is this thing true? Yes, it is true. Blockchain is true.

Tokenization is true. Digitalization is true. It's no longer a hype. It's really something that will be integrated into our daily financial world. That's is this like it is.

The second is is it useful? Yes, it is useful. It will completely change my value chain. I am working on this every day. So, I'm completely revamping a traditional value chain with digitalization, with tokenization.

And it's not a game that we are doing. We are really thinking about it. We have teams uh BNP Parib has digital asset service teams, associate general, all the big banks are creating those teams. So it must be useful. And then the third is um is it good?

I say yes. Full stop. In 2029 we're going to see a distribution on a large scale. Uh the second thing is that the regulators are more and more being a sparring partner for uh the whole space the ecosystem whether it's Mika whether it's me if it's security or cryptocurrency and uh the the third part um is actually more about uh the the the secondary trading. I'm not sure when this is going to start but uh first we need to uh get you know distribution done and make sure liquidity is coming in.

I think for me it's like whether we will meet um here in 2029 or maybe in US right um I think um a lot of things will happen I believe in uh in market forces so I don't say which blockchain will um will be like the base layer my guess it will be bitcoin at that time and most of the assets will be actually tokenized on the bitcoin um blockchain but I also have like the fear that um I think with like a little bit of an overregulation like too much belief in regulation here in Europe people miss also like the the big tokenization train which is right now happening in US.

Yeah. And I think from my side um if in 2029 we would talk less and less about the tech itself and more and more about uh the actual use cases the actual value we can bring to our clients that would be a good thing. Um ideally our clients use blockchain as they use their phone today. So they don't care about the underlying tech. Um and we see it as our role as custodians to absorb the additional complexity that comes uh with the technology.

Um and maybe uh one last word, I think if we uh can succeed in um consolidating a little bit the fractionalized uh ecosystem and if we uh collaborate and agree on um common standards, I don't see any uh reason why we shouldn't move to scale. Well, I think that brings us to the end and I'd like to thank each of you for sharing your views, your perspectives, your opinions. And uh if we could please give our speakers a round of applause. [applause]