Issuing Digital Assets & Revolutionizing Financial Markets | European Blockchain Convention

foreign [Music] good morning how are you good okay um what are the opportunities of issuing digital assets for financial markets use cases and the challenges type or here to stay are we talking about revolutionizing financial markets my name is Bernard Nicolai I'm passionate about education and finance I do not know exactly in which order I lecture in three universities in Brussels and in Paris at Celebration schools and I'm also a private investor in in fintech I'm doing that for the last five years and before that I had a more traditional career in traditional Finance but a lot of interest of defy um it's my pleasure today to steer an exceptional panel with except with distinguished practitioners such as Thomas Victor bison of Taurus Casper Lakes of crypto Finance group and Victor ban of digaban Deutsche Giroud Central in Frankfurt so please allow me to introduce briefly the panelists first but of course you can qualify all what I will say about you when you will have your turn to speak is head of sales at flow desk headquarters in France Flo desk was founded in 2020 and you've developed a trading infrastructure integrating centralized and decentralized exchanges right you focus on providing Market making Solutions and trading Technologies for the cryptocurrency markets as well as liquidity infrastructures for the exchanges and digital asset projects okay before joining flow desk you you were a director DCM derivatives do you know what DCM is the okay um a depth Capital Market relating to rates and and ethics at UBS Investment Bank and you are also a graduate of neoma business school in France you are chief marketing officer at tourist group headquarter in Switzerland uh you it was founded in 2018 and you've developed an advanced and complete digital asset platform which goes Way Beyond cryptocurrency custody this is what you what your value proposition you Empower financial institution to issue and manage tokenized Securities and digital currencies and you have announced this week um a raise of 65 million dollar led by Credit Suisse with participation from Deutsche Bank Victor and other shareholders congratulations for this in the current environment uh Victor and before joining tourists you were brand director at Procter Gamble absolutely I feel fascinating the conversions between traditional Finance decentralized finance and marketing don't you think so you are head of projects that crypto Finance Aggie headquartered in Switzerland founded founded in 2017. uh the crypto Finance group is part of Deutsche Bose group now and offers professional digital asset Solutions it's also fascinating how Financial infrastructures Group partner now with fintech in order to develop the system and in your group this includes one of the first finma so it's the Swiss regulator approved Securities firms with brokerage Services custody infrastructures and tokenization solutions for financial institutions as well as the first approved manager for Collective assets for crypto assets and before joining crypto Finance guess what Casper was in charge of digital asset at UBS and the Management Consultant at IBM last but not least Victor victorban you are busy with digital assets markets at daker Bank Central in Germany um Data Bank is the vert puppy house of the German Savings Banks and you've been finding innovative solutions for your clients for over a century including suya to stand for secure worldwide interbank as a transfer we will talk more about it it's a joint venture between Standard Chartered and between between your group as well and you provide various Services relating to tokenization a new joint 14 years ago and with a lot of continuity for your business so after this introduction maybe it's good for the audience also to define the scope if I might ask you a tomato major lamb we are talking about issuing digital assets for financial markets use cases which digital assets are we talking about please I'm sure to share some fruits um you know the first point I would mention is probably uh you know it may seems may seem obvious but we are not just talking about only cryptocurrencies there's a wide range of uh there's a wide range of assets with a you know a common basis where they are represented of the blockchain produce and on a distributed Ledger technology so I think that's the that's the common ground for okay for foreign look at it you know the way I tend to think about it is you've got two type of Assets in in my mind you've got native digital assets that are you know exclusive to the blockchain and non-native ones uh and I'm sure we'll talk about it but you know I'm thinking about uh Securities or assets representing uh you know tangible assets real estate uh you you know you name it plenty what I would add probably is um in the space that we currently know you know in the cryptocurrency space most of the assets you will be dealing with are utility tokens so I'm sure you know we'll talk about it during this panel as well most Services being utility tokens being the meaning but they Grant you the utility author of the blockchain of a service in opposition to you know security tokens that Grant you the ownership of something um in the space that we are that we are dealing with at the moment um and the clients I'm dealing with you know most of them are still looking mainly at utility tokens uh and it's the case also for for exchanges uh market makers as well that will be asking for legal opinion um but you know I'm sure we'll come back to this point later uh excellent thank you very much Victor bison would you like to to add something and specifically relating to your business what are the digital assets you are you are focusing on no absolutely so the way we look at the space regarding digital I said there are three pillars either cryptocurrencies tokenized assets and digital currencies so cryptocurrencies everyone knows it tokenize that big thesis here is about digitizing private assets whether Equity depth structural products real estate and then digital currencies is more CBD season stable coin so when here I think for the sake of the conversation uh the focus will be more on ledger-based Securities so you have a legal it's actually for instance in Switzerland it's actually written in the law that literal based Securities are recognized which is actually simply a token that will be actually the share representing really Securities on the blockchain to make it as short as possible for this very good because we uh before we we come back to you Victor bison I'm I'm saying Victor bison because we have a Victor ban as well so so that you know you know um relating to the benefits maybe Casper relating to the taxonomy and so on you have your views as well so so please go ahead I think you covered the taxonomy quite well it was quite inclusive okay let's let's let's come back then to to Victor Dizon what are the benefits some say the perks are but maybe let's talk about benefits of of digital assets and for which main use cases in financial markets and please possibly with real life examples and it will it will be a question for all of you because you have a complimentary experience which is great but I suggest we start with you Victor absolutely so uh so today we completed more than 15 tokenization deals one five and one five and in terms of coverage that will combine benefit use case and the benefit to make it yes please as clear as possible so example number one would be tokenization of equity okay so for instance you actually issue shares that will be after custody by a regulated entity so when you do that for instance it would be could be in a view of a private placement I go for to optimize capital education so you can do in simple words simplified and digital fundraising that will be really fully legally in full compliance with the law at least in Switzerland I can comment later here we did it for instance with Credit Suisse so basically another integrated or platform toys platform with storage Capital this building the tokenization platform and then to always protect being the case study so you issue the token and then you it's more the tokenization is actually more than the smart contract deployment you need to issue so basically you deploy the smart contract then you call the mint function so boom you create the asset but then you need to lend it to a wallet okay and usually when it lend to a wallet again there will be important command component to take into account for a bank such as integration with the call banking system okay so for instance as tokenized immediately private companies which it was a liar okay in view of a private placement then we did the same for tokenizing funds so in English it's use seats funds I think in Spanish is oi CBM and here the full intent is to actually cut cost on the fund Administration as well as later on reduce settlement time and obviously the reason of this benefit we will talk later on which will be which will be liquidity okay when you tokenize you at least at the end you want to do liquidity you want to look for liquidity third example will be Structured Products so we should structural products for instance for peaked Von tabel and khalifies again and here the free intent is to focus on the shortening the settlement time so for financial instrument at t plus zero and two it was also reducing the cost of post height settlement so you have other examples but concretely the full intent and then I will enter all right so cutting costs basically also providing a increased liquidity and maybe access also thanks to tokens to to different investors in in in in the future possibly in terms of benefits otherwise what I hear from you it is just traditional Finance translate it into uh into into into tokens but which is great if there are benefits of course maybe um uh uh Thomasville complementary issues relating to that yeah [Music] one of the points uh I picked up from you Victor is about you know uh funding and dead Capital markets you know just think about what the fire brings to the table here you have the opportunity to know why don't the uh the market access to a number of people that didn't have access to to these markets and you know I'm thinking of either you know a retail users or or think about smes lots of smes don't have access to International markets at the moment to you know defend themselves with defy you now have a success and you you know as you mentioned you apply the mechanisms from traditional Finance but you're going to add to it being a counterparty agnostic a reduction in the counterparty risk reduction in the in the settlement risk reduction in the fees that you mentioned um so I think yeah just yeah it's probably the main place we mentioned all right thank you very much um Casper and Victor Urban maybe a couple of words in addition to that relating to the benefits if you think it's appropriate otherwise we might want to to shift to challenges of course please yeah maybe um I want to quickly touch on the um the disruption of on the custody chain yes please so if you look at traditional Securities today how they're custody if you hold for instance a share in your bank account uh typically uh the bank doesn't really do custody of that chair the bank will use another custodian maybe a global custodian or a correspondent bank or another bank that sits in between and there might be a multitude of banks actually in between uh that are subcustodians of each other and ultimately that chair will sit in a central Securities depository which typically we have one for each specific country so Spain has one Belgium has won the UK as one and so on and so on now if I have that chair in my bank account and I would like to move that chair because I'm changing Banks to another bank what needs to happen is that entire custody chain needs to be made aware that I want to transfer the chair and then actually that chair transfers at the CSD level where it now belongs not anymore to UBS but to a client of JPMorgan Chase for instance and that's a very cumbersome process which takes quite a long time and the same happens whenever we trade assets and if you look at what happens with Bitcoin is whoever owns the private key owns the asset and so if you start issuing Securities as tokens on a blockchain you can be your own custodian and so I worked for instance in Investment Bank where we issued Structured Products directly to Distributors for instance out of Switzerland to Canada and we can just transfer those assets directly over the network all they need is for instance an ethereum wallet and they can be the direct custodian of the assets so we don't need to rely on that intermediary chain anymore we don't have to go to the CSD we don't have to ask them to issue the asset we don't have to ask them to transfer the asset we can just do that bilaterally peer-to-peer and the more assets you have on such a network uh the more benefits you get because it's a little bit the same as with social networks the more users you have on a network the more interaction points you have and then you get exponential value out of that and so if we have large networks where we have these assets represented and there's a large amount of those assets we can transfer those directly peer-to-peer all across all across the globe plus if we also have cash on the on those networks then those assets can start to of cash around as well and that's where I think you will see really the the fundamental disruption coming into the security space all the intermediaries that are charging fees for for basically doing a Handover or something like that those will disappear and that will have a fundamental impact on Capital markets on the whole security structure as we see today okay thank you very much Casper for uh for explaining very well the issues relating to custody and to the and to the lots of intermediaries that exist once you want to to to buy you to buy your securities it goes back to the benefits stated by Victoria decreasing cost because less intermediaries but then uh brainstorming or or or or or hearing you I'm also saying to myself well maybe a potential benefit is also the the decrease of risk then the risk involved in the chain with all the intermediarism including counterparty risk but then you you might have other risks if you are your own custodian but that will now uh if we switch to to the challenges Victor pan with your experience in in Germany with the environment of of the Savings Bank when talking about digital assets tokenization so on what are the main challenges starting maybe with stake you know and confidence and and the maturity of Technology if I may yes I'll add some points so the the points because in Germany we are happy that we have the electronic skills act right so that's why you don't need a CSD but you need somebody who has the crypto register license so this is like Germany where we have very happy that it it starts with that and then the DLT pilot regime really comes close to that too they give with the three points like settlement system they give somebody else the chance to be a csdr so we're going on that point but one thing is because we are always talking about tokenization is that um the traditional assets uh word is very big right so one point is only already mentioned so you have to put it on chain to get the options and with the law you can put also digital assets on it so it should be a mix because otherwise you need somebody who weighs liquidity and so if you got a chain this is like this white approach also where you can mix different uh asset classes on it you get volume on it right and uh also we with our partners so um normally some sometimes when um when a new fintech is coming it needs a business cases right and we are like you mentioned like three strong Partners like um lbbv Standard Chartered and us so we are also always working on on the business side also for the use cases to collaborate to get volume on the Chain so this is I think one point and the technical standpoint as it asked me so scalability is one point so on the first time I would say in my words normally the financial markets all build its own systems right and for me is the first time that it seems that the financial markets agrees to The Standard DLT blockchain I wouldn't say which chain should it be but as always I would say the first time the the market accept extension every bank and looking into the technologist activities so this is a chance to get a standard over this technology all right so in terms of stacks case scalability seems to you to be the the main challenge Casper would you agree qualify and maybe you want to slightly challenge that because I think banks also agree to use SQL blockchain is a technology I think where you where you get the benefit is if there is a shared protocol that everyone uses and everyone talks the same language and then you can start interacting with each other a little bit like the internet does today and if you don't have standardization if you don't have shared protocols if the networks are not open if they're closed Gardens if everyone has their own little Network you don't really get that much benefit compared to the the traditional space and if you are are if you are operating a bank and you have all your traditional networks you connect to and now all of the sudden you need to connect to 15 different new networks because everyone has their own little private network with their specific use case from the bank perspective now all of a sudden your network cost doubles and even though you might get a little bit of a benefit on the new networks because your cost goes through the roof and you can't switch off the old networks you don't really get the benefits and I have another another example of a challenge is I was working with the direct Investments Group of a bank and what that group does is it raises capital for companies all over um all over the world like a private Equity use case or private debt use case and it places that Capital directly with investors that are connected to the bank and we wanted to tokenize that capital for the banks because today a lot of that Capital still gets issued in the form of paper-based shares which investors hold they're not visible to the bank they don't count to assets on the management you can't do lending against it and so on but one of the challenges is that you raise capital for companies all over the world there might be a good company in Switzerland there might be a good company in Spain there might be a good company in Tel Aviv and every time you want to issue Equity you have to look at the local regulation and you have to check how can I tokenize equity in Tel Aviv how can I tokenize equity in Spain and it's very different depending on where you are and it makes it extremely difficult uh to to to roll that out if you're working in international space and then have kind of an overview of of or or similarities between the different equities that you want to issue if the law even permits it which might not be the case depending on where you're trying to do it now though thank you very much casperia you talked about tech then you switch to regulation which is great because in terms of challenges it's uh it's it's really it can really be an issue but then maybe to to go to to go deeper when you look at the regulation landscape right now what's the key hurdle you know when you talk to clients are hesitating you know because they say in terms of tech it might be a challenge as we all understand and in terms of regulation what what do they they say what's the key issue or the key hinder related to to regulation right now in your experience I mean it's a bit like I mentioned uh there are different countries there are different speeds like we in Switzerland are a bit lucky uh that the Swiss regulator moves relatively quickly um and there we were able to play around uh very early on if you look at the EU pilot regime I think it's a good step in the right direction but we're not not fully there yet there's still quite a bit of restrictions and we'll have to see at the end of this grace period what happens with this regulation if you look at the US it's still quite difficult uh also in Asia so we're not quite there yet I think the this is a very slow moving Market which is developing very slowly and unless we have like some good standards that can apply into multiple jurisdictions um we won't see kind of the exponential benefits that everyone wants to see out of this kind of a big change that we have to bring on to the financial industry okay no that's uh that's very clear I see you are you are all nodding me as well so I think I think it's it's time now to to move to a very important element that we that we touched already um in terms of opportunities and of challenges you can talk about tech regulation but at the end of the day for financial institution there must be a business case a business model so maybe Victor will be so in your experience also you have elaborated about a lot of benefits and perks what about the challenge of the business case maybe the depths of the market I don't know I think here there will be two two ways to see them first thing girl is when you learn to walk actually to be a simple analogy when you learn to work uh you do a proof of concept okay so you do a tokenization case honestly in terms of profitability I would challenge anyone to tell us for first proof of concepts for the learning curve to find a to do tokenization to make tokenization profitable so profitability comes with a scale okay over time once you industrial industrialize it okay and what's important is that when you actually pick a provider as an issuer or other bank or when you choose your technology provider but when you will start doing your first proof of concept of tokenization on whatever the blockchain is on whatever the smart contract is you actually need really to pay attention to security so basically once you do it once will you be able to do it 10 times at scale to put in place all the cost efficiency all the network effects that goes with it and so first you need to really pay attention to the security second do you need to pay attention to governance for instance about all the approval workflow for instance if the digital asset is issued by the ECM or DCM desk as we were mentioning earlier the asset everything will be managed by another team so you need tokenization and custody integrated you need to take into account integration within core banking system also which is quite a complicated element need to be regulated so do you have many many things to pay attention to and basically the business model will become profitable only when you scale and I think this is an important angle and then the second angle is more depth and liquidity obviously but that goes more when actually you start to you learn to work and then you can run and we are building the market obviously and with the regulation with a standardization that was mentioned obviously it will come and I think everyone here will agree uh okay very good so we've covered the the domain opportunities the main challenges maybe not uh for the sake of time time has come to to look at the future and then the main players in financial markets according to you relating to tokenization and success in financial markets tomorrow who will be the winners I think there will be a lot of businesses that will have to and learn things they're doing today and and learn new things and have a look at their business model and see what their main revenue streams are and see whether those revenue streams will still be there uh in the future we talked about intermediaries that charge costs for basically handing something over or being in the center of something and and being orchestrating something I think a lot of those business models will disappear because the cost of transaction will basically go close to zero will become instantaneous will become very cheap and you won't need somebody in the middle to orchestrate that anymore so I think there you will see a lot of disruption and some of these companies will have to rethink how can they be stay relevant in the future if you look for instance at a bank I think a bank will remain relevant in the future because they bring trust in financial markets they have been custodian of assets for a very long time they do that in a very good way and most people who hold their Assets in the bank they don't worry about whether their assets will still be there tomorrow and banks have played a very good role in that sense in uh for a very long time and I think that role is still very valuable if you can do self-custody of course but then you you're kind of the risk is with yourself and not everyone wants to do that and I'm sure there will be better Technology Solutions in the future but I do still think that custodians will still play a role in the future um but if banks are charging a lot of fees for FX for instance and that's kind of a big uh income driver for them I think things like that will become really uh under pressure and they will have to open up their platforms a lot more to connect to kind of services um that are outside if you look at some of the the D5 wallets like if you look at for instance what coinbase is doing with their coinbase wallet they allow you to connect directly to UNI swap or to Ave so for for trading for Lending Etc even though it disrupts kind of the main offering of the centralized exchange they understood that they will have to open up their platform and connect to the services that clients want to use but they still want to be the Central Point by being the the wallet of the client and buy kind of curating uh by providing advice by telling the clients look these are the best services to use and by connecting them directly from the wallet to those services but they will have to open up their platform and if you look at Banks today their platforms are very closed they build a lot of the services themselves and they don't really have an open platform which is something that will have to change uh all right I see all of you are are nothing but you are talking about change and evolution or revolution maybe Victor Urban how are you positioning your group your financial group to cope with this Evolution and then Victor vision and Toma you can react also wait four minutes left but let's let's do the best we can so as you see we are um taking this topics seriously and um I think I can agree to most of our points I think that the door keeper or something a safe person should be the bank as functions and yeah the business model will change but you have to look at when the bank is also a risk taker taking credit okay helping some something so yeah I think dot is something to stay okay and if I may Victor and Thomas if you can make the switch to the talents as well the talents you need in the market in order to help your clients evolve in this kind of Revolution please I think I will bundle the talent with uh with the previous points which is the winners because actually it goes together and there is no winner without talents uh here the focus is about the space from a technology provider which is really our angle the space is moving super fast before it was all about layer one after it's all about Layer Two now it will be all about the ZK um and tomorrow it would be something else after it will be privacy transactions so you need to master the tech stack to adapt because you don't know which blockchain is going to be people are going to use you know which smart contract for which financial institute instruments will will have to be used and to do that actually the focus is really on developers okay so that's that's basically the the focus and what we look for is really eagerness to learn and to adapt again you see the space six months is like five years in another in the Netherlands right financial markets so it would be honest to learn uh obviously hard working and positivity so that will be again you need you will have always technical challenges popping up and ability to really adapt so uh and we are really insist on this mastering the technology to really ensure that you give Choice ultimately to the client because you don't want the client to be locked on a protocol while all the rest of the world basically has moved yeah maybe two two quick points that we that we discussed already but um you know first point is um I'd say the winners will be you know that the talents are will be the the compliant firms I think you want to apply what you know from you know Trot file and replicate it to to a space uh I really think that you know you want compliant firms to really be the the bridge to the through advice space to to enable from you know more adoption and and more users uh the second points uh it's signed with what Victor mentioned you know about talents it's about you know agility Innovations and links back to to to the films that will emerge stronger to me it's about it's about tech and I think Casper you mentioned it but it's about you know today connectivity there is still um and we see it on a daily basis at flow desk but there is a there is a very large fragmentation in liquidity um in uh in exchanges to trade on whether it's centralized or decentralized in blockchains so you need to be able to build the right connectivities and for that you need to be uh to be able to uh to adapt as you mentioned later maybe if I can add one more last word relating to Talent Development I think it's uh what's really important is as everything is becoming more and more digital assets are going digital uh everything is moving on to a blockchain etc etc all the stuff we talked about today it's really important to have at least some understanding of the tech and to really understand how things work but also really to try it out I've seen so many Bankers who take expensive courses that teach you about defy while you can just get a wallet connect to D5 and try it out yourself and I think that's so important because you learn while doing you interact with the technology you see where it adds value and where it doesn't and then when you're defining use cases within your organization you don't just copy what you did before like in with a new technology but you really look to apply the technology in a way that it kind of really makes a difference and we see a lot of that in the financial industry where they're just copying the olds into a new jacket but it doesn't really add that much value and I think if you really understand the technology and you play around with it it will become easier to spot these these opportunities um thank you very much um Victor Casper and Thomas for your Insight I claim a big Applause for our panelists and we thank you very much you the audience as well for uh being there and being interested thank you very much