The Future of Finance Research Institute paper, Priorities, Projects and Barriers to the Growth of the Digital Asset Markets, provides a snapshot of the attitudes of a dozen different types of institution as the crypto-currency and Decentralised Finance (DeFi) markets entered their first bear market for four years during the Winter and Spring of 2021-22.
Based on a poll of buy- and sell-side institutions, market infrastructures, technology vendors and consultants drawn from both the crypto-finance industry and the traditional financial services industry, the paper documents the adoption of a blockchain-based approach to the future that is proving highly resilient to the downturn:
- The current bear market has not killed interest in digital assets: half the respondents are expanding, launching or running a digital asset service for their clients
- The major reason for continued engagement is the massive potential for tokenisation, not just of securities but of real estate and privately managed assets
- Tokenisation is a priority for traditional financial market infrastructures, brokers and custodians and the new breed of digital exchanges but also for crypto-currency exchanges
- The relative lack of engagement by central securities depositories (CSDs) with tokenisation is surprising, given the threat it poses to their current operating model (1)
- The principal obstacle to more rapid progress is not current bear market developments but regulatory uncertainty – and that is true of unregulated as well as regulated firms
- Removing regulatory uncertainty will do the most to accelerate buy-side engagement with digital assets, bringing institutional money to the market
- Other barriers to progress include the cost of modifying legacy systems and lack of inter-operability between blockchain-based and traditional networks
- The introduction of Central Bank Digital Currencies (CBDCs) is a priority for traditional institutions concerned about loss of settlement revenues
- The introduction of a CBDC in one or more major currencies is the key to rapid growth in security token issuance and trading
- Distinctions between crypto-currencies, tokens, DeFi, Stablecoins and CBDCs make limited sense to market participants interested primarily in using novel technologies to make money
(1) https://futureoffinance.biz/future-of-finance-institute/
To read the summary and the full report see below
For further information please contact Wendy Gallagher on wendy.gallagher@futureoffinance.biz