If the digital assets market is going to be successful with investors, there needs to be an ‘ecosystem’ rather than a collection of separately developed platforms and ‘solutions’. This was the central point made by a panel of digital assets managers and service providers at the European Investor Summit, held by Societe Generale Securities Services at its Paris office.
The digital assets market continues to develop at pace – the AuM in tokenised funds has exceeded $500 million, stablecoins are recording daily highs, digital bond issuance is increasing in frequency and size and central banks are bust developing central bank digital currencies. Meanwhile, the benefits of digital assets and tokenisation specifically are becoming clearer to market participants.
“Tokenisation is a great starting point for traditional asset managers because it is much more familiar to them than crypto,” said Faustine Fleuret, chief executive officer for European association of crypto markets ADAN.
“It will help to open up new experimentation with new digital assets and more specialised startups. We’re really early in the journey but it is important that people start to get involved.”
Traditional asset managers are also expanding their work on digital assets and tokenisation. Some of the biggest names in asset management have been working on their digitalisation strategy for eight years or more.
The attraction for asset managers is that tokenisation makes it easier to transfer ownership or to use it as collateral.
The evolution of digital assets has been compared to the emergence of hedge funds and then ETFs. And similarly, the panellists agreed that solutions cannot be developed in isolation. Instead, there has to be an ecosystem.
The panel also cited the potential benefits of the underlying blockchain technology as a means to improve multiple processes, especially in the back-office.
“Blockchain can help us improve our processes, be that settlement or issuance, settlement in an atomic way,” said Christoph Hock, head of tokenisation and digital assets, Union Investment. “Processes will be much quicker, it can remove certain risks, create new roads, new competition and will drive cost down.”
However, collaboration rather than disruption will be key to the success of digital asset management, agreed the panel.
“The traditional market has tools that already work so competition is key, otherwise there is no incentive to change,” said Fleuret. “You also need the collaboration and a symbiosis between traditional finance (TradFi) and decentralised finance (DeFi). The former has the infrastructure and the compliance processes etc. We need everyone sat at the table combining our expertise.”
