GBBC Future of Finance Conference: Key Takeaways
On Thursday 20 June we hosted the Future of Finance Conference with the Global Blockchain Business Council at our offices in London. The conference provided the opportunity for our lawyers and industry experts to delve into a number of topics, including tokenisation of real-world assets and institutional adoption. Below we explore the key takeaways from these two panels.
1) Tokenisation
The panel discussed how tokenisation is not a new concept and that customers are looking to understand the ability to control digital assets, how they can move them across workflows, and how to lend those assets out. We are still in the early stages with regards to adoption of tokenisation, but there are promising signs. It will take time, and require certain underlying capabilities to be in place, for institutional adoption to become widespread.
Tokenisation barriers
Connecting elements of the value chain across the new technology stack, lack of cash in the chain, and obtaining ‘buy-in’ at the institutional level were recognised as barriers to institutional adoption. Understanding client motivations and offering solutions provided by digitalisation may assist in overcoming such barriers. Going forward, we need to think differently about competition, barriers to entry, and the scaled nature of the business.
Hard assets versus securities
The panel considered tokenisaton of hard assets versus securities. In time, everything will be tokenised and will end up on the blockchain, despite currently not seeing the requisite demand from retail consumers. Stablecoins were discussed as having momentum in this regard, with the concept of a hybrid environment, in which stablecoins have to, and will, co-exist being explained as a reality.
The future of tokenisation
The panel concluded that innovation, combined with trust and resilience, will make tokenisation relevant in the future.
2) Where are we with institutional adoption?
This panel commenced with panel members discussing the reason for continued consideration of institutional adoption, given there is already real institutional involvement in the digital asset ecosystem. While many firms have progressed beyond proofs of concept, we are still in the relatively early stages, with the key test being commercial value. Technologies like DLT are believed to be the future of finance, but ultimately, there is, and must be, a key focus on shareholder returns and value as these are essential to widespread adoption. The value in what is being done must be demonstrated.
Overcoming barriers to institutional adoption
The panel moved to considering potential barriers to institutional adoption. Legal certainty and regulatory clarity were often cited as the primary reasons why institutions might be slower than others to get involved in digital assets but that much work is being done here. The panel discussed the nature of development and the need to break down silos, as work is being conducted on individual solutions, digital assets and platforms. What is needed is to build an ecosystem but this could be a challenge without interoperability and common standards, which require collaboration between market participants and authorities around the world.
Payment/cash settlements becoming an important part of trading digital assets
Payment/cash settlement are becoming an important part of trading digital assets. Cash on DLT affords the ability to orchestrate asset movement and transactions quicker and more precisely. We are already seeing the ability for cash on the chain to be deployed in various methods across multiple platforms such as tokenised cash, stablecoins and central bank digital currency. The bridge between the digital and traditional worlds is the movement of cash. There is over US$ 160 billion cash on chain moving in public networks regularly, and there are growing use cases. Further progress requires collaboration and some risk-taking, but there is not one solution or answer.