The panel about the opportunities and challenges of issuing digital assets for financial markets is moderated by Bernard Nicolay, Adjunct Professor of Finance at the Solvay Brussels School of Economics & Management. Panelists include Thomas Jeulin, Head of Sales at Flowdesk, Victor Busson, CMO at Taurus, Kasper Luyckx, Head of Product at the Crypto Finance Group, and Viktor Banh, Digital Assets Markets at DekaBank.
Benefits and Challenges of Digital Assets
There are three main types of digital assets: cryptocurrencies, tokenized assets, and digital currencies. Tokenized assets are digitized private assets, such as equity, debts, and real estate while CBDC and stablecoins are examples of digital currencies.
Tokenization can reduce costs and settlement time, increase liquidity, and provide access to different investors in the market. With DeFi, actors that didn’t have opportunities to engage in the traditional financial market, such as many small and medium-sized enterprises (SMEs), will be able to participate due to the reduction of the counterparty risks.
<Read more: Tokenization – What Traditional Bankers Have to Say?>
Kasper explains that blockchain technology enables direct peer-to-peer transfer of assets without the need for intermediaries, which fundamentally disrupts the security space as it eliminates intermediaries that charge fees for simple handovers. And as the networks grow and more assets are represented on the networks, we will be able to reap an even more significant impact on capital markets.
However, scalability, standardization, and interoperability need to be considered. Interoperability allows different networks to communicate with each other using shared protocols and standards, and it facilitates a more seamless and efficient system. On the other hand, a lack of standardization creates additional costs and complexities for banks and other institutions. Having different regulations in different countries makes it difficult to carry out new projects, and investigating local regulations is simply time-consuming and complicated.
Factors to Be Considered When Building a Business Case
Profitability, scalability, and security are the important factors to consider for a business case. Victor states that, when building a business case, the first step is to choose a technological provider and make sure the tokenization is profitable. However, once the proof of concept is proven to be profitable, it’s crucial to analyze whether profitability and security can be maintained when the model scales up.
A lot of businesses will have to ‘unlearn’ things they’re doing today and learn new things… We will see a lot of disruption and some of these companies will have to rethink how they can stay relevant in the future.Kasper Luyckx, Head of Product at the Crypto Finance Group
What Roles Will Banks Play in the Future Financial Market?
Kasper thinks that as peer-to-peer transaction popularizes and transaction fees decrease, it will be unnecessary for a middleman to exist, and business models that rely on intermediaries will be significantly disrupted. Custodians, however, will still play an important role in the market because not everyone will be willing to maintain self-custody over their assets. The key for those centralized institutions is to open up their platforms and be willing to connect to the services and wallets that their clients want to use.
More EBC insights on traditional banks and cryptos:
- Tokenization: What Traditional Bankers Have to Say?
- Regulations Unmasked: Decoding Banks and Laws in the Crypto Realm
- Crypto Enthusiasm Soars! Traditional Finance Titans Embrace the Crypto Frontier
- When DeFi meets TradFi: Alliance of MakerDAO and Societe Generale-FORGE
The Needed Talents in the Market of Digital Assets
According to Thomas, the winners in the future financial market will be compliant firms that bridge the gap between traditional finance and crypto space, and firms that are agile, innovative, and strong in technology.
Apart from learning how technology works, Kasper emphasizes the importance of gaining hands-on experience. Only through doing and experimenting can we gain a true understanding of how the technology operates, where it adds value, and how it can make a real impact.
On the other hand, speaking from an individual perspective, Victor thinks that mastering the tech stack and possessing the ability to adapt to technical challenges are valued in the market. At Taurus, they are looking for talented developers that are positive, eager to learn, and agile in this fast-paced industry.
I’ve seen so many bankers who take expensive courses that teach DeFi while you can just get a wallet, connect to DeFi, and try it out yourself. I think it’s so important because you learn while you do. You interact with the technology and you see where it adds value and where it doesn’t.Kasper Luyckx, Head of Product at the Crypto Finance Group