Regulations Archives

Tokenization: What Traditional Bankers Have to Say?

June 24, 2023 by SzuTung Chen

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!

How To Restore Trust in the Crypto Industry?

May 23, 2023 by SzuTung Chen

Resilient systems are essential in the crypto industry just as people would expect banks to have the highest level of security measures to protect their assets. This enlightening panel underscores the significance of security, transparency, and education in the endeavor to restore trust.

Panelists include Léa Narzis, Core Engineer at Parity Technologies, Carlos Fragoso, Principal Subject Matter Expert at Maltego Technologies, Thanos Tsavlis, Co-founder & CEO of Cyberscope, Gabi Urrutia, VP of Security at Halborn, Yasir Qayam, Co-Founder & COO of KwikTrust, and Michael Fasanello, Crypto Compliance Officer at AnChain.AI.

Security is Key

Thanos emphasizes the importance of securing technical systems to prevent smart contract exploits. He suggests that the best defense is a combination of securing smart contracts and education. Only by implementing both measures can mainstream adoption be achieved.

Gabi emphasizes the importance of educating clients about security. He argues that people often overlook the importance of security until a security breach occurs. Security is paramount; he thinks this is the first step to establishing trust.

“While we are here discussing the technology and how we can leverage it, it’s down to us to build the reputation, do the right things, and have a longer-term vision.”
– Yasir Qayam, Co-Founder & COO of KwikTrust

Léa, Carlos, and Thanos discussed the importance of building trust in the crypto space.

Education on Security is Essential to Restore Trust

Yasir envisions a free space without governmental intervention, but he acknowledges that we are currently in a transitional phase (Web2.5) and not yet prepared for full self-custody. As he explains, “When something goes wrong, we still need someone to be mad at!”

Carlos states that humans are the ones implementing technology, and it’s the people that can be good or bad. It’s thus crucial to continue building secure tools and providing education. Educating both companies and users is vital to increase awareness and empower users to prioritize security in the crypto space.

“Technology is not the problem, humans are. A system based on trust is trustless. Humans are the weakest part of the chain, unfortunately.”
– Gabi Urrutia, VP of Security at Halborn

Panelist Gabi Urrutia explained how they help clients establish secure systems and why security is key to restoring trust.

Can Regulations Help to Build a Safer Space?

On one hand, Michael acknowledges the role that regulations can play in driving mass adoption as customers may feel more comfortable trusting the crypto system.

However, considering the flip side of the coin, he raises concerns about overreactions and hasty bans by legal entities. He advocates for collaborative efforts to educate governments about the advantages of blockchain technology.

“It’s a whole new ballgame for people. We’re literally seeing the law being built in real time. I don’t think I’ve ever been in a part of something that’s so new and exciting, it’s fascinating!”
– Michael Fasanello, Crypto Compliance Officer at AnChain.AI.

Watch the full panel to learn more about how education, regulations, and security can help restore trust in the crypto industry.

The Future of Crypto Market-making: What’s the Role of Regulations and AI?

May 14, 2023May 11, 2023 by SzuTung Chen

The increasing adoption of artificial intelligence (AI) and the ongoing discussions surrounding regulations are two important factors shaping the future of crypto market-making. How will policymakers’ decisions affect the crypto industry? How is the crypto industry using AI?

A very enlightening discussion took place during the 8th European Blockchain Convention with Joseph Hall, Reporter at CoinTelegraph, Guilhem Chaumont, Co-Founder & CEO at Flowdesk, John Murillo, Chief Dealing Officer at B2Broker, Patrick Heusser, Chief Commercial Officer at Crypto Finance AG, Stef Wynendaele, Head of Commercial Strategy at Keyrock, and David Tunian, Head of Business Development at WhiteBIT.

How Is Crypto Market-making Different From TradFi?

In a cocktail party analogy, market makers are the party planner that manages the risks, provides the necessary support for participants to enjoy themselves, and handles the logistics of the event. They play a crucial role in maintaining order and stability in the market.

Market makers in the crypto industry are more open, transparent, and willing to cooperate compared to players in traditional finance. In TradFi, market makers operate in a highly competitive and fast-paced environment where speed determines performance. However, the crypto market is more decentralized and fragmented. Crypto market making is often offered as a service and the risks are shared among several different stakeholders. Market makers need to collaborate to manage risks and advance the market.

“I’d rather have a collaborative approach and not an “Us v.s.Them”. At the end of the day, the market will decide what is most efficient and the market will decide what’s most interesting to have on the balance sheets. So let the market decide, but we have to do it together!”
– Stef Wynendaele, Head of Commercial Strategy at Keyrock

The panel “Market Making is Key for a Crypto Market Recovery” at the EBC23.

Regulations Can Help Bring the Industry Forward

All panelists acknowledge the importance of regulations, but clarity, transparency, and optionality are the key elements that they hope regulations can bring.

“I’m actually looking forward to regulation and clarity. It will at least be clear about what are the rules and the boundaries. It will help the market be more liquid and more people be comfortable going in. I’m really looking forward to it!”
– Patrick Heusser, Chief Commercial Officer at Crypto Finance AG

Despite being supportive of regulations, Patrick believes that there should be two parallel ecosystems in the crypto industry. One is the decentralized ecosystem where users can trade any token without restrictions. The other is a system for users who may not want to manage their wallets. He envisions that the decentralized system will be the innovative one that helps make the traditional system more efficient.

“In the end, it would be very Darwinian. The actors that are bad and not transparent will be mechanically excluded from a business perspective and those who bring value will obviously have more business and they will make progress.”
– Guilhem Chaumont, Co-Founder & CEO at Flowdesk.

Click here to read more about MiCA and regulations at EBC!

How Are Market Makers Approaching AI?

When looking at the quantitative market-making and technical perspective, a lot of machine learning and AI technologies have been implemented for years.

Patrick also views AI as a potential support for crypto businesses as the technology can be used to follow updates on multiple protocols, monitor blockchains, and evaluate risks in smart contracts, which are time-consuming and challenging if done manually.

However, Guilhem thinks it’s very unlikely that AI will disrupt the crypto market-making in the next five to ten years. The crypto market is heavily fragmented and there’s a lack of ground infrastructure and a high necessity for less scientific discussion and cooperation, so he thinks it’s hard for AI to make groundbreaking innovations in the short term.

Watch the full panel to learn more about the future of crypto market-making!