Is Crypto Still Attracting Institutional Money?

Is Crypto Still Attracting Institutional Money

This EBC panel about the institutional engagement was moderated by Sebastian Becciu, Senior Ops Specialist at Sygnum Bank. Panelists include Daniel Vegue, Partner and Chief Strategy Officer at Block AM, Maurice Mureau, CEO & Co-founder of HODL, and Lior Zaks, Legal Counsel at Stake Capital.

The conversation started with the panelists’ emphasis on the significant potential for institutional investment in crypto. They highlighted the need to attract institutional players to invest in digital assets and Web3 infrastructure. According to Sebastian, the inclusion of private debt, private equity, and private assets will increase the total market cap of the crypto market to a staggering $575 trillion!

Industry experts expressed optimism about the future of DeFi at the 8th European Blockchain Convention.

Regulatory Guidelines as a Bridge to Institutional Investment

The panelists acknowledged the importance of regulatory frameworks in facilitating institutional participation. They stressed the need for clear regulations to build trust and provide a bridge between traditional finance and the crypto industry. 

Daniel acknowledged the MiCA regulations as a positive development, positioning Europe as an advanced jurisdiction of regulatory frameworks. Lior encouraged people in Web3 to participate in conversations with regulators to shape future regulations.

More EBC insights on MiCA regulations and DeFi:

Key Factors for Institutional Engagement

Citing Consensys Insight Report, Sebastian identified the essential factors to attract institutional investors: custody, compliance, execution, monitoring, and reporting. Access to the crypto market needs improvement, but advancements in user-friendly technology are expected to address this issue. 

All panelists agreed that compliance with regulatory guidelines is a crucial aspect for institutions to enter the crypto space. The establishment of robust custody solutions will also be vital to instill confidence in institutional investors.

EBC panelists encouraged Web3 and crypto communities to engage in communication with regulators.

Convergence of DeFi and TradFi

Panelists expressed optimism about the convergence of DeFi and TradFi, believing that the distinction between the two will eventually dissolve. 

In Daniel’s opinion, Ethereum’s deflationary system and staking rewards that generate yields in a macroeconomic climate of inflation, for example, is a strong incentive for institutional investors to enter the crypto market.

Everything that’s now in traditional finance will be there in decentralized finance and improve. It’s not a question of “if” but a question of “when.” We’re going quicker than a lot of people think.

Maurice Mureau, CEO & Co-founder of HODL.
Watch this exciting EBC panel and learn why crypto is still attractive to institutions!

Tokenization: What Traditional Bankers Have to Say?

Tokenization of Digital Assets

This panel is moderated by Mariano Giralt, Head of EMEA Digital at BNY Mellon. Prashant Malik, Senior Technology Lead – Digital Assets at HSBC, Joe Leung, VP of Blockchain & Digital Assets at JP Morgan, and Esther Teuber, Senior Legal Counsel at ABN AMRO provide their insights on digital asset tokenization.

What Are the Benefits of Digital Assets Tokenization?

The speakers acknowledged that tokenization and DLT can address barriers in capital markets. Esther highlights that cost reduction is one of the main advantages of tokenization, driven by the elimination of intermediaries, digitization, and automation

Joe agrees with Esther and adds that tokenization can bring efficiency, liquidity, and new utility to financial systems and markets. He points out that the ability to instantaneously transfer value, fractionalize assets, and provide transparency are other key benefits.

From a client’s perspective, Prashant highlights that tokenization enables access to previously inaccessible assets and creates new, more efficient, and secure products. Tokenizing assets also fosters interconnectivity, and interoperability, and sparks creative conversations within organizations to explore new product offerings.

“Tokenization of Digital Assets” is one of the most popular panels at EBC23.

What Initiatives Are Banks Working On?

JP Morgan has initiated several projects on tokenization. The bank has issued on-chain bonds, built a cash-on-chain system called JPM Coin, and developed a digital financing app for intraday repo. They are working on building tokenized collateral networks (TCNs) to tokenize money market funds (MMFs) for use as collateral in derivative trades. In 2022, JP Morgan also conducted the first institutional DeFi trade in collaboration with other entities.

Esther mentions that ABN AMRO issued one of the first tokenized digital bonds on a public blockchain in the Netherlands. Prashant shares that HSBC has issued a £50 million blockchain bond on their bond tokenization platform Orion, which allows for native issuance, coupon payments, redemption, and secondary trading. They also issue commodity tokenization, where the platform integrates with the traditional trade life cycle to enable clients to benefit from fractionalized commodities.

This EBC panel allowed the audience to get inside the minds of traditional bankers and learn about tokenization!

What Are the Challenges of Tokenizing Digital Assets?

Prashant says that it’s difficult for digital tokenization platforms to integrate with traditional legacy systems. Managing expectations around delivery and release will be essential. Additionally, the diversity of digital assets across different platforms may pose challenges in terms of custody and standardization.

Speaking from a legal perspective, Esther thinks that fragmented regulatory frameworks across jurisdictions and the need for a robust regulatory framework for market infrastructure are the two main challenges of tokenization. Prashant states that the regulatory complexities are even more challenging than building technical infrastructure.

Working in a large corporation, Joe says that it’s important to coordinate and align various teams across different functions. He emphasizes the importance of staying focused on building, identifying suitable use cases, and partnering with partners in this busy and noisy crypto environment.

Traditional bankers shared their journey of venturing into new frontiers of tokenization.

What Is the Future of Tokenization?

Esther states that the future of tokenization relies on achieving scale and interoperability in the market. Legal frameworks, such as the DLT pilot regime and Markets in Crypto-Assets (MiCA), are expected to pave the way for new business models and market growth. 

In 2023, JP Morgan will keep identifying valuable use cases for tokenization and they aim to collaborate with internal and external groups, drawing inspiration from the public space. Prashant says that externally, it’s important to bring various participants together and work on standardization while internally, it’s essential to acquire adequate talents to execute innovative ideas.

More EBC insights on regulations, cryptos, and DeFi:

Watch the full panel to learn why and how traditional bankers embrace digital asset tokenization!

Future of CBDCs: Achieving Interoperability and Collaboration

Shaping CBDCs for Consumers and Businesses

This panel of CBDCs was moderated by Erwin Voloder, Senior Policy Fellow at European Blockchain Association. Panelists include James Wallis, VP of Ripple, Nadia Filali, Head of Blockchain Programs at Caisse des Dépôts, and Laurent Marochini, Head of Innovation at Société Générale.

Along with stablecoins and native cryptocurrencies, Central Bank Digital Currencies (CBDCs) are one of the three key pillars of the digital money landscape. With CBDCs, the efficiency and speed of settlement can be improved, reducing settlement times from T+2 to T+0 or even T+15-minutes. The adoption of CBDCs facilitates cross-border payments and also plays an important role from the risk management perspective. 

When these three currencies co-exist in the future, what will happen? Will CBDCs be adopted in both wholesale and retail? What are the challenges lying ahead? Read on to find out!

Financial experts discussed the importance of CBDCs in the capital markets at EBC23.

Intermediaries Will Continue to Be Relevant in the Future

All panelists agree that intermediaries will continue to exist in capital markets, although the degree of their importance may vary depending on the country’s specific circumstances. The primary reason is that not all segments of the population can swiftly adopt emerging technologies, necessitating the presence of intermediaries for certain groups. 

However, panelists indicate that different countries will establish different CBDCs to better meet their needs. James believes that in some emerging countries where central banks do not function properly and a significant portion of the population remains excluded from the existing financial system, there will be other actors, such as startups or fintech companies, that assume a more prominent role in catering to the retail sector.

Nadia further emphasizes that banks’ role extends beyond currency issuance, encompassing services such as loans, savings, and a diverse array of products. In her opinion, intermediaries will still exist, but the products and business models might undergo changes

Laurent concludes that at the end of the day, the regulations and the conceptions of CBDCs will provide greater clarity regarding the role banks can play in the future capital market.

More EBC insights on CBDCs and regulations:

EBC23 convened esteemed speakers who provided insights on CBDCs and intermediaries.

Collaboration Is Key to the Interoperability of CBDCs

James points out that there are three types of interoperability: interoperation with existing payment schemes, technical interoperability between protocols, and cross-border interoperability for seamless transactions across different countries’ CBDC systems. 

He stresses the importance of identifying the specific goals to be achieved, as different methods, whether from a business or technical standpoint, will be required to attain different elements of interoperability. Nadia thinks that defining responsibilities and establishing bridges between networks will also be vital. 

All panelists unanimously agree that collaboration is crucial for addressing these topics effectively. Standardization is indispensable and there needs to be a willingness from different jurisdictions to enhance trade and business relations with one another. 

Laurent and James also point out that there have been CBDC developments and research worldwide. They emphasize the need for cooperation among actors, particularly in Europe, to avoid being surpassed by different countries across the world. Working with each other is the only way to achieve the goal!

Watch the full panel discussion to understand CBDCs from retail and wholesale perspectives!

Financial Services Embrace a Future of “Simultaneous Lanes,” Say EBC Panelists

A New Era for Financial Services

The panel is moderated by Lex Sokolin, Chief Cryptoeconomist Officer at Consensys. Emma Lovett, Markets DLT – Credit Lead at JP Morgan, Matthew James, Head of Special Projects of Fasanara Capital, Jose Luis Perán, Head of delivery for financial services at VASS, and Jason H. Jang, Group Chief Information Officer at Centurion Invest all provide their valuable insights in the discussion.

The EBC panelists envision a future where blockchain and crypto revolutionize financial services, enabling seamless transactions, lending, and repayment. They emphasize the potential of this technology to empower individuals with control over their own data.

More EBC insights on the future of DeFi and cryptos:

What’s Wrong With the “Old” Financial Services?

Jose thinks that the current financial services are not wrong, there’s just room for improvement. The industry is becoming more digital and he believes blockchain can help financial companies and customers to have something faster, cheaper, and better!

However, Lex points out that it’s different to work on Web3 native financial projects than to integrate emerging technology back into a gigantic venue that’s doing huge volumes and has already established process flows. Emma agrees by saying that not only the technology needs to be considered, but regulations also need to be taken into account. There’s a need to revise the whole current system, but it has to be done bit by bit. 

The Auditorium is full of the audience attending the panel about financial services at EBC23.

How Can We Improve the “Old” Financial Services?

Jason argues that blockchain and cryptocurrency can facilitate fast and easy cross-border transactions. While blockchain can improve traditional finance in certain ways, it cannot replace it entirely. He thinks the focus should be on improving UI/UX and building user-friendly interfaces.

Matthew thinks that tokenization can benefit funds in the long term, but the complexity of the system should be understood first. The short-term goal is to address accessibility and cost efficiency. The ultimate goal is to bring a globalized approach to financial services while respecting what has already been built and doing so in the most effective way.

What Can We Expect in the Future of Financial Services?

At the end of the discussion, Lex compares the future of financial services to transportation options. Just as we have a variety of transportation methods, we will have different financial services to choose from in the future. But even though new ways are emerging, it doesn’t mean that the traditional methods are obsolete. In his opinion, this is why the financial industry is exciting, with different players working on different things, and tackling problems from different angles.

“These are all simultaneous lanes in the same way that you can find a horse today and go on a horse ride. Or you can get in a car that eats up gasoline. You can get into a fully electric car. You can simply get on Zoom. All of those sorts of transportation methods are available to you, it doesn’t mean one doesn’t work.”
– Lex Sokolin, Chief Cryptoeconomist Officer at Consensys

Watch the full panel to learn more about the future of financial services!

Exploring Web3 Opportunities From the VC Perspectives

Web3 - Where Is the Opportunity in 2023

This Web3 panel was moderated by Joseph Hall, Reporter at Cointelegraph. Panelists included Cathy He, Investment Associate at NGC Ventures, and Jingwei Li, VC Investor at Fidelity International Strategic Ventures.

Joseph, drawing an analogy, described Web3 as a high-tech hipster neighborhood within the vast city of the internet. It represents a decentralized and interconnected digital economy where applications and platforms seamlessly interact and transact. Individuals can become their own banks and transact without intermediaries.

Experts from Fidelity and NGC Ventures expressed their optimism about Web3’s opportunities in 2023.

Web3 Opportunities in 2023

Representing Fidelity, Jingwei shared that his company has been making investments in the space, particularly in crypto custodianship. He also highlighted their interest in investing in the underlying technology that enables institutional investors to enter digital asset markets. 

Cathy, on the other hand, shared that NGC Ventures has been actively investing in the Web3 and crypto space. She emphasized the power of self-custodianship and the idea that individuals can safeguard their funds without relying on traditional banks. 

Looking forward to 2023, NGC Ventures is exploring opportunities in modular blockchains and technological advancements within Web3. Cathy states that modular blockchains are an opportunity to push the boundaries of the scalability trilemma, making blockchain technology faster, cheaper, and more decentralized. 

Watch the EBC interview highlight with Cathy He to learn about the VC perspectives of the crypto industry!
Jingwei from Fidelity International Strategic Ventures shared his opinion on Web3’s opportunities and challenges.

What Are the Challenges in the Coming Years?

Regulatory scrutiny, in Cathy’s point of view, might create short-term challenges but is expected to lead to a better-regulated environment in the long run. The panelists expressed optimism about MiCA’s open-minded approach to Web3 and its potential for growth.

Jingwei has been following closely the inflow of funds into Web3 projects. He shared that while there has been a positive trend in recent months, there is still a need for greater institutional adoption and inflow of funds into digital asset products.

More EBC insights on MiCA, DeFi, and crypto:

Watch the full panel to discover more Web3 opportunities from the VC perspective!