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Where Finance Finds Its Future

SDX crypto-currency service is live

Season 1, Ep. 118

SDX, the digital arm of the Swiss stock exchange, has launched an income-generating crypto-currency staking service for clients of the private banks in Switzerland. Owned and operated by a separate entity within the group, the Cloud-based service enables holders of crypto-currencies to collect a yield on their portfolios by staking their assets to claim the rewards for validating or attesting blocks of transactions. Dominic Hobson, co-founder of Future of Finance, asked Alex Smith, Crypto Product Lead at SDX, what services SDX is providing for clients both now and in the future, how it is managing the recent volatility and the unavoidable risks and what adjacent opportunities it is exploring for the future.

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  • 159. How to make the digital asset markets grow

    20:39
    Part 1/1A Future of Finance interview with Gilbert Verdian, CEO of QuantThe time in which regulators observed rather than intervened in digital asset markets is now over, and regulators are starting to work with the private sector to design effective regulations that match the pace of technological development, but progress would be much faster if a single regulator was given responsibility for digital finance.The reliance of traditional finance on national forms of regulation is ill-suited to the genuinely global and highly mobile digital asset markets, as the constant migration of cryptocurrency exchanges in search of accommodating jurisdictions proved, so a major jurisdiction needs to establish a minimum standard all jurisdictions can support. The principal benefit of regulatory sandboxes is not to produce Unicorns or drive the reform of existing regulations but to prove that existing regulations are adequate to the task of regulating digital assets, which is of greater value to institutions that are regulated already than to new market entrants whose businesses test existing regulations. Experience has shown that existing frameworks of law are adaptable to novel conceptions of property such as natively digital assets, but at this nascent stage in the development of the digital asset markets, the flexibility of the law is less important than a clear line between what is acceptable within the law already and what must await the further evolution of the law.Governments can influence the rate of growth of the digital asset markets directly by encouraging equity investment in smaller companies and issuing government bonds in tokenised form, which would have knock-on effects in encouraging atomic settlement using tokenised central or commercial bank money as the cash leg of the transaction.
  • 158. Tokenbridge believes the funds industry will tokenise from the periphery not the centre

    52:14
    A Future of Finance interview with Stephen Ashurst, CEO of Tokenbridge.Tokenbridge is a software company which has embraced a tokenised future for the mutual funds industry. Its founders, all of which have long experience of the traditional funds industry, believe tokenisation can make funds cheaper to issue and service but – unlike most blockchain-based start-ups in the industry - their vision has less to do with cutting the costs of production and operation and more to do with widening distribution. The blockchain-based system Tokenbridge has built offers issuers of funds (fund managers) and distributors of funds (wealth managers) the software tools to make tokenised funds easier to find, compare and buy through a single app (aggregation) and in forms and combinations that better suit the needs of the investor (personalisation). The company strategy is based on the conviction that using digital technology to transform how funds are distributed is not a nice-to-have. The Boomers that dominate fund ownership today are yielding to a post-Internet generation that expects investment advice, and fund purchase and sales processes and reporting, to be digitised. Delivering this, especially to portfolios of modest value, cannot be done without transformative technology. Yet fund managers and distributors that fail to use technology deliver a full and compelling digital experience, warns Tokenbridge, will enjoy a smaller share of a global marketplace that tokenisation will enlarge massively. Dominic Hobson, co-founder of Future of Finance, spoke to Stephen Ashurst, CEO of Tokenbridge, about how to apply the experience of the past to building a bridge to the future that does not require a revolution today.
  • 157. A European blockchain-based funds marketplace that is delivering on its promises

    01:04:43
    A Future of Finance interview with Christophe Lepitre, CEO at IZNES and Valérie Gilles, CCO at IZNES.IZNES is a marketplace that enables issuers of funds (asset managers) and institutional investors in funds (such as insurance companies and fund distributors) to sell and buy and service funds in tokenised form on a Cloud-based private, permissioned blockchain. To avoid the build-it-and-they-will-come fallacy, IZNES has solidified its relationships with leading insurance and asset management companies by offering them equity stakes in the business. The strategy has obviously worked, because IZNES has already attracted 18 institutional investors and 36 asset management companies and has €18 billion of funds registered on its marketplace, and its platform is supporting both assert-backed and native fund tokens. Because its target audience is institutional, and institutions prefer to deal with regulated entities, IZNES has secured regulatory licences from two French regulators and used these to passport its services into other major European fund jurisdictions, including the two main fund servicing centres of Ireland and Luxembourg. The firm has also concentrated on providing services that alleviate obvious pain points in the funds industry such as entitlement allocation and distribution and especially the onerous on-boarding and regular customer due diligence checks needed to meet Know Your Client (KYC), Anti Money Laundering (AML), Countering the financing of Terrorism (CFT) and sanctions screening obligations. The longer-term plans include the development of a secondary market in funds, initially to support the less-than-liquid infrastructure funds now being encouraged by regulators. Dominic Hobson, co-founder of Future of Finance, spoke to Christoph Lepitre, chief executive officer (CEO), and Valerie Gilles, chief commercial officer (CCO), at IZNES.
  • 156. If Europe needs a single European CSD, who will build it?

    01:17:28
    On 17 November 2023 Christine Lagarde, the President of the European Central Bank (ECB), told a conference of bankers that “a truly European capital market needs consolidated market infrastructures.”[1] European capital markets certainly lack them now. They are a quarter the size of the American capital market yet support three times as many stock exchanges, and 20 times as many post-trade financial market infrastructures. The lack of a European equivalent of the Depository Trust and Clearing Corporation (DTCC) does not reflect a lack of regulatory effort. A succession of reports and schemes – Codes of Conduct, several pan-European regulations and even an entirely new settlement system run by the ECB (T2S) – dating back nearly a quarter of a century have largely failed to accelerate the consolidation of the capital market infrastructures of Europe. The price of that failure, in a higher cost of capital, a less resilient financial system and lower rates of innovation and economic growth, is more evident than ever in the aftermath of Brexit, amid a steady closing of open markets, and ahead of looming demographic and climate crises. So who and what can meet the challenge set by Christine Lagarde? That is the subject matter of this Future of Finance webinar. For further background on the subject, see the accompanying Future of Finance article, European capital markets are inefficient, so why aren’t European CSDs doing more about it? What topics will be discussed?What are the costs of a fragmented post-trade infrastructure in Europe?What explains the continuing settlement inefficiencies of Europe, despite the introduction of T2S?What has prevented the CSDs of Europe consolidating in the past?Is the current ownership structure of European CSDs conducive to market-led consolidation?Can a single programmable platform (a sort of Ethereum for CSDs) achieve the same effects as a single European CSD?What part does blockchain technology have to play in improving the post-trade infrastructure of Europe?Is the EU Pilot Regime a flop and will the UK Digital Securities Sandbox be one too?Will pressure to settle on T+1 accelerate or decelerate change in European post-trade infrastructure?Are there helpful technical solutions (e.g., “atomic” settlement, using AI and predictive analytics help improve settlement rates) short of consolidation?What is the fastest way to a more efficient set of CSD services for the European capital markets – consolidation, cooperation and collaboration, regulatory intervention, market-led competition or technology?Who is on the panel?Dirk Loscher, Member of the Executive Board at Clearstream https://www.linkedin.com/in/dirk-loscher-9220b6248/Chris Richardson, CEO at Percival Software https://www.linkedin.com/in/chris-richardson-26842923/Andrea Tranquillini CEO Advisor at EDAA https://www.linkedin.com/in/andreatranquillini/Bill Meenaghan CEO at SSimple https://www.linkedin.com/in/billmeenaghan/Martin Watkins CEO at Montis Group https://www.linkedin.com/in/martinwatkins1/Moderator: Dominic Hobson, Co-Founder at Future of Finance https://www.linkedin.com/in/dominic-hobson-49b8222/
  • 155. The clue is not in the name: AsiaNext is thinking globally not regionally 

    43:11
    A Future of Finance podcast with Neil Thomas, Chief Commercial Officer of AsiaNext.AsiaNext, a 24/7, Singapore-based institutional-only digital asset trading platform, opened for business in January 2024. Owned by the Swiss stock exchange (SIX) and SBI Holdings of Japan, AsiaNext emphasises its sound governance and regulatory compliance, which its owners and management believe are the keys to attracting institutional money. The new exchange has already secured two operating licences from the Monetary Authority of Singapore (MAS) and has applied for a third. But easily the most striking ambition of the new exchange is its commitment to a global strategy, in which AsiaNext will form a triad with the Swiss Digital Exchange (SDX, owned by SIX) in Zurich and Osaka Digital Exchange in Japan (where SBI is a major shareholder). To make a reality of this ambition, much depends on the behaviour of others. Technologists must create the tools to facilitate the transfer of digital assets between platforms (interoperability) and central banks must provide the trusted, on-chain fiat currency (CBDCs) to pay for them. But AsiaNext is moulded in the image of its parents and its management does not hesitate to speak of ten-year time horizons as well as the returns that are waiting to be collected on the investment in radical change. Dominic Hobson, co-founder of Future of Finance, spoke to Neil Thomas, Chief Commercial Officer of AsiaNext, about the origins, character and destiny of the first self-consciously global digital asset trading venue.
  • 154. Whither digital asset custody?

    01:08:22
    This podcast will cover these regulatory developments and other issues, all of which are also raised in the second edition of Future of Finance’s Digital Asset Custody Guide (DACG2), which can be accessed here. The event will open with a presentation that draws on Future of Finance proprietary data about licences, registrations and certifications secured by digital asset custodians to illustrate the changing structure and geographical compass of the digital asset custody industry – and what it means for the service providers and their customers. This will be followed by a discussion between the online audience and a panel of experts, moderated by Future Finance Co-founder Dominic Hobson.What topics will be discussed?At what pace are regulated custodian banks approaching the digital asset opportunity?How important is custody to the unexpected success of Germany in tokenising and digitising issuance?How large a factor is SAB 121 in deterring the engagement of American custodian banks in digital asset custody?What does the proposed “safeguarding rule” introduced by revisions to the 1940 Investment Advisers Act mean for custodian banks?What do registrations to provide custody services tell us about the evolving structure of the industry?Why is it so hard to obtain a licence to provide custody services?Why are digital asset custodians so enthusiastic about professional certifications?Are custody markets, regulators and providers aligned on the ultimate destination?PanellistsTariq Rasheed, Partner at Reed Smith https://www.linkedin.com/in/tariq-zafar-rasheed-81b22018/Thilo Derenbach Head of Sales & Business Development Digital Securities Services at Clearstream https://www.linkedin.com/in/thilo-derenbach-2102031/Marius Lunding Smith Director Strategy and Growth at Finoa https://www.linkedin.com/in/mariuslundingsmith/Mark Mayerfeld Chief Revenue Officer at GK8 https://www.linkedin.com/in/mark-mayerfeld-0566874/Moderator: Dominic Hobson, Co-Founder of Future of Finance https://www.linkedin.com/in/dominic-hobson-49b8222/
  • 153. 21X: The European token exchange with a reassuringly German personality

    01:09:20
    A Future of Finance interview with Max Heinzle, CEO of 21X21X is a Frankfurt-headquartered token issuance, trading and settlement platform built on blockchain technology, and underpinned by a group of long-term investors, that expects to be the first to receive a licence to operate under the EU DLT Pilot Regime that allows operators of market infrastructures to test blockchain technology in the issuance, trading and settlement of tokenised financial instruments. The boldness of the company strategy is evident in its preference for a public, non-permissioned blockchain network, and the fullness of its commitment to automating as many functions as possible by the use of smart contracts. That said, the founders of 21X are astute enough to recognise that it will be easier to attract issuers and investors by working with rather than against the incumbent institutions that currently own those relationships, and within the regulatory frameworks that institutions prefer. They are confident that the shareholders of 21X support their long-term strategy and that the regulators would like to see the business succeed and thrive within the parameters set by investor protection and financial stability. Interestingly, 21X has also chosen Germany, the surprising market leader in digital asset market innovation in Europe, as its initial base of operations. Dominic Hobson, co-founder of Future of Finance, spoke to Max Heinzle, CEO of 21x, about where the company came from, where its I now, and where it intends to be in five years’ time.
  • 152. The Swiss token exchange creating a market for small company shares

    49:44
    A Future of Finance interview with Nicola Plain, CEO of Aktionariat. Success in tokenising equity is unusual. Most issues of tokens are asset-backed versions of existing bonds or fund shares. So the fact that Zurich-based token platform Aktionariat has succeeded in attracting a variety of small company issuers is a considerable achievement. The goal of the firm is to help start-ups and SMEs, initially in Switzerland but eventually around the world, raise equity capital from third parties at low cost. Its strategy is to reduce dramatically the costs of issuance and post-issuance operations such as settlement and registration. Aktionariat has also formed a string of partnerships with specialist service providers and with SDX, the digital arm of the Swiss stock exchange, which helps the company secure access to the clients of the Swiss private banks. An ingenious liquidity model, based on the principal-based trading of shares in mutual funds, meant that by the end of 2022 Aktionariat was already host to 29 issuers, had as many companies again preparing to issue, and had identified dozens more on a target list that ultimately spans the entirety of the enormous Swiss private company market. Dominic Hobson, co-founder of Future of Finance, spoke to Nicola Plain, CEO of Aktionariat, about where the company came from, what it has achieved so far and what it plans to accomplish in the future.
  • 151. What We Know and Do Not Know About CBDCs (So Far)

    26:45
    A year and a half may have elapsed since the last central bank digital currency (CBDC) was issued. But the work at and by central banks, banks, supranational organisations and technology vendors has continued. The accompanying output of policy statements, academic papers, discussion documents and accounts of experiments is a vast but rich source of experience and information. Which is why a team at R3, a leading force in the digitisation of financial markets and a participant in multiple CBDC projects, embarked on a review of the literature that has accumulated about CBDCs. Dominic Hobson, co-founder of Future of Finance, spoke to Alisa DiCaprio, the Chief Economist at R3 who lead the investigation, about what the review unveiled about how CBDCs are being designed, issued and operated, and learned what CBDC designers everywhere still lack: a trove of empirical data about the impact of CBDCs on the behaviour of money, markets and especially consumers.