Where Finance Finds Its Future

Safe custody is the crucial service for crypto-currency investors. The theft, loss or destruction of the unique private keys to the digital wallets in which cryptocurrencies are held is irreversible and – unlike conventional cash deposits - they are not insured by any commercial provider or guaranteed by any government or government agency. Data analytics firm Chainalysis estimates that a fifth of...

Cross-border payments are, in the now familiar mantra of the G20, slow, expensive, opaque and inaccessible. This matters because, despite a slowdown in the rate of growth of world trade, cross-border payments are becoming more important, not less. Remittances and e-commerce are more than making up for any shortfalls in exchanges of physical goods. Consultants BCG predict the value of cross-border...

Part 2 of a Future of Finance interview with Vadim Sobolevski, co-founder of FutureFlow. No one central bank digital currency (CBDC) is ever quite the same as another. But so far every CBDC project has focused largely on the technicalities of making payments – by or to unbanked consumers or businesses, or between counterparties across national borders, or to prevent consumers and businesses underm...

Part 1 of a Future of Finance interview with Vadim Sobolevski, co-founder of FutureFlow. Many business decisions are baffling. But on the face of it none is as bewildering as the decision by banks, asset managers, wealth managers, private banks, insurance companies and FinTechs to spend hundreds of billions of dollars a year on Know Your Client (KYC), Anti Money Laundering (AML), Countering the Fi...

Future of Finance interview with Lisa Fall, CEO at BSTX and Jay Fraser, Head of Strategy at BSTX. BSTX is the first exchange based on blockchain to be fully regulated by the Securities and Exchange Commission (SEC) and licensed to operate on a national scale. It took the founders of the Boston-based exchange years to get there but they were clear from the outset that fully regulated status is the...

Artificial intelligence (AI) and machine learning (ML) are technologies subject to errors of pessimism as well as errors of optimism. Predictions of their eventual impact range from dystopias in which machines reduce human beings to helots, through mass, machine-led unemployment, to Utopias of universal leisure in which all the work is done by machines. In the financial services industry, meanwhil...

“We have yet to hear a convincing case for why the UK needs a retail Central Bank Digital Currency (CBDC),” concluded a report of January 2022 from the Economic Affairs Committee of the House of Lords. “While a CBDC may provide some advantages, it could present significant challenges for financial stability and the protection of privacy.” The Committee included a former Governor of the Bank of Eng...

For more information click HERE It is easy to portray the tokenisation of securities as a mortal threat to central securities depositories (CSDs). In principle, security tokens issued on to blockchain networks can dispense with all the core functions of a CSD in safeguarding the integrity of issues, maintaining a register of investors, settling transactions in central bank money, distributing enti...

Bond markets were a primary target of blockchain technologists. As early as 2017-18 bonds were being issued and auctioned on blockchains by banks and benchmark issuers, and proofs of concept continued throughout the blockchain winter that took hold in 2019. In the Spring of 2021, the European Investment Bank issued a tokenised bond on to a public blockchain without the intermediation of a central...

Growing institutional interest in the largest and most liquid crypto-currencies is now spilling over into staking via Decentralised Finance (DeFi) protocols and into Non Fungible Tokens (NFTs). While widening institutional interest in digital assets is partly explicable as a search for an income-producing outlet for crypto-currency holdings, it also attests to a growing institutional confidence th...

The Metaverse is notoriously hard to define. Those definitions which do exist describe a digital facsimile of the physical world, which people enter as avatars by donning headsets and hand sensors. Once inside, they walk around, talk to people, attend meetings and events, visit buildings and buy and sell goods and services, just as they do in the physical world. For businesses, it is the last of t...

A market in which the assets coveted by investors for use as profile pictures or digital avatars are branded as Crypto-Punks, members of the Bored Ape Yacht or Kennel Club, or as Pudgy Penguins, is redolent of the Pokemon card craze of the 1990s. As it happens, the popularity of these Non-Fungible Token (NFT) collections with gameified nomenclatures has sparked a rediscovery of Pokemon cards, whic...

A Future of Finance interview with David Nicol, CEO and Co-founder of LedgerEdge. The US$124 billion global bond markets seem at last to be taking pole position in the race to unlock the efficiencies conferred by blockchain technology. Much of the effort is directed at the primary markets, where the telephone plays the part it has since the 1960s and the fax and spreadsheet continue in the roles t...

Central Bank Digital Currencies (CBDCs) can seem like nuclear fusion: a proven technology delayed by engineering problems. It is an analogy that Simon Chantry will enjoy since he began his career as a nuclear engineer before co-founding the blockchain-based digital currency technology provider Bitt in 2013. As CIO at Bitt, he has implemented the Bitt Digital Currency Management System (DCMS) on be...

It is not hard to see why centralised financial market infrastructures are more alive than other financial institutions to the opportunities and threats of distributed ledger technologies. They are the neutral entrepots through which data flows between participants in every financial market so, if every market participant can access the same data simultaneously, the occupation of any provider inte...

Fine art is often cited as a natural candidate for tokenisation. It is illiquid and traded amongst a small class of wealthy investors at prices which are not always transparent. Fine art also has a long history of generating positive returns, if not the sky-high performance often touted, chiefly through capital gains. However, the entry barriers tend to be high. Minimum investments can be large, a...

One of the signal achievements of blockchain technology is to highlight the inefficiencies of financial market silos in which the free flow of assets and transactions is obstructed by fragmented data sets that must be reconciled laboriously and repeatedly. A vision of the future, in which data and the technology which processes it are distributed and market participants are decentralised, is slowl...

The costs of financial crime are staggeringly high. The financial crime compliance officers that responded to a LexisNexis Risk Solutions survey of financial institutions in 26 markets around the world said they spent US$213.9 billion on compliance with financial crime regulations in 2020. If the main finding of a Refinitiv survey of 19 markets in 2018 still holds, and firms are spending 3.1 per c...

Traditional stock exchanges are confronted by a classic Innovator’s Dilemma. They have the installed client base and the revenues to match. But if their digital challengers lack clients, they also benefit from nugatory costs and a new technology powerful enough to extend their reach into whole new classes of investors, issuers and assets. Faced by a potentially long transition to a totally new mod...

In November 2021, the SIX Group issued a CHF 150 million bond onto its own exchange and into its own central securities depository (CSD). Nothing remarkable about that, you might think. Except that the securities became the first digital bond to be freely issued into a regulated environment. More remarkable still is that a majority of investors, offered a choice of the bonds in tokenised or tradit...

Fusang is Asia’s first fully licensed and regulated digital financial ecosystem for security tokens and assets. Licensed in two jurisdictions (Hong Kong and Labuan, Malaysia), Fusang operates a fully licensed and regulated digital ecosystem which includes Fusang Exchange, a regulated stock exchange for security tokens. Fusang’s driving force is its vision of making it as easy to invest into a comp...

Post-trade was an early target of the blockchain revolution. Yet progress has proved to be arduous, with legacy technologies, regulatory uncertainty and the protectionism of incumbents making it hard for even successful proofs of concept and pilots to grow into scalable innovations. Signs are now more encouraging, with blockchain-based investments poised to disrupt the securities and money markets...

The ingredients of a successful security token exchange are now clear. It must be regulated, focused on asset classes that will benefit from greater liquidity and secondary market trading, and be backed by strong, committed and widely recognised shareholders that are willing to engage actively in helping the exchange to succeed. ADDX, the security token exchange regulated by the Monetary Authority...

Central securities depositories (CSDs) have always led an unglamorous existence. They are overshadowed by trading and investment activities, even when the post-trade revenues they generate are more reliable or more profitable or even just larger. The rise of the digital asset has not improved their lot. They are threatened with disintermediation by securities tokens issued, traded and safekept on...

This year marks the twentieth anniversary of the PayPal IPO. At the time, the failure of the conventional payments industry to respond to the epic potential of e-commerce on the Internet surprised even the more thoughtful bankers. Two decades later, that institutional inertia looks negligent rather than surprising. The loss of payments revenues by banks to technology companies represents a loss of...