• Summary

  • The New Face of Finance, Where Finance Finds Its Future. Future of Finance has one overriding goal. It is to host meetings (at the moment virtual meetings) that bring together long established members of the financial services industry (banks, brokers, asset managers, insurers, financial market infrastructures) with entrepreneurs (challenger banks, technology companies and FinTechs) and market authorities (central banks, regulators and policymakers) to explore how the financial services industry can grow faster by being more open, more innovative and more trustworthy. If you would like to get in touch about featuring on a podcast, please email wendy.gallagher@futureoffinance.biz

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    © 2021 Where Finance Finds Its Future
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Episodes
  • May 19 2022
    “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 England and a distinguished economic historian (of the “What would Keynes do?” school). Despite such sceptical voices, the Atlantic Council CBDC Tracker lists 78 retail CBDC projects currently being pursued by central banks around the world and only six that have a wholesale component. Of course, every jurisdiction is different. Each country that has issued a CBDC (the Bahamas) or is experimenting with one (China, the Eastern Caribbean and Nigeria) has its own reasons. For most, the limited reach of conventional banking systems is a major factor. A related concern is the possible cession of monetary sovereignty to crypto-currencies or Stablecoins controlled by private interests. Some (Iran and Russia as well as China) see a CBDC as part of a geopolitical strategy to undermine the dominant position of the US dollar and circumvent reliance on payments systems controlled by geopolitical opponents. In the developed economies of the G7, the momentum is shifting from retail CBDCs back to wholesale CBDCs, where the potentially disruptive effects can be contained within the existing banking system. The emerging use-cases include cross-border payments, trade finance and securities settlement, where numerous experiments led by central banks have proved the technology works. However, concerns that a CBDC might disrupt correspondent banking networks, or undermine the funding of commercial banks with consequently deleterious effects on their capacity to lend, might be fostering an unduly conservative approach in the developed economies. After all, CBDCs also represent an opportunity to re-think the relationship between monetary policy and fiscal policy and how credit is created and distributed in a sophisticated modern economy suffering from pockets of inequality as well as illiquidity. At this webinar, Future of Finance re-visits the arguments for and against retail CBDCs, examines use-cases for wholesale CBDCs and asks whether central banks need to see CBDCs as a massive opportunity to re-design the way money and data flow throughout economies rather than a systemic threat to financial stability.

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    1 hr and 16 mins
  • May 17 2022

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    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 entitlements and maintaining accounts for custodian banks acting on behalf of investors. That is why most of the discussion about the future of CSDs since the tokenisation of securities was first broached in 2018 has focused on the escape routes rather than the paths to the future. CSDs could appoint themselves operators or “governors” of the private, permissioned networks that looked likeliest to be adopted by incumbent financial institutions such as investment banks, custodian banks and asset managers. They could run the Know Your Client (KYC), Anti-Money Laundering (AML), Countering the Financing of Terrorism (CFT) and sanctions screening checks to filter the issuers and investors that aspired to belong to these networks. CSDs could offer their classic services to the new classes of asset-backed tokens that were expected to emerge from the real estate, fine art, fine wine and collectibles markets, by developing digital wallets and atomic settlement services. By these means, they could make even the Decentralised Finance (DeFi) markets safe for institutional money. Unsurprisingly, when confronted by such defensive tactics and a diverse range of options that were not strategically coherent. many CSDs seemed unable to act at all. Lately, a more positive outlook has become clearer. Central Bank Digital Currencies (CBDCs), by putting central bank money on to blockchain networks, appears to solve the biggest obstacle to settling security token transactions. Even the adventurous institutional investors, dabbling in crypto-currency and token investing for the first time, have made clear they prefer to do so in the company of regulated financial institutions and financial market infrastructures. At least some of the two dozen or so security token exchanges that have emerged incorporate a CSD function, partly because unreconstructed securities laws and regulation insist upon it, but mainly because institutional money feels more comfortable with it. At this webinar, Future of Finance joins forces with The Africa and Middle East Depositories Association (AMEDA) and sponsors Percival Software, a leading provider of CSD systems, to ask: Is tokenisation the nemesis or the apotheosis of the CSD?


    Some of the topics to be discussed:

    1. Will tokenisation of securities kill, maim or transform CSDs?
    2. Does the current size of securities token markets argue for a masterful period of inactivity?
    3. Has the idea of saving issuers and investors money by disintermediation died?
    4. Are the costs of post-trade intermediation so high that they warrant disintermediation?
    5. Which intermediaries are at greater risk of disintermediation than CSDs?


    Panellists


    Vipin Mahabirsingh, Managing Director at Central Depository & Settlement Co. Ltd


    Chris Richardson, CEO at Percival Software


    Andrea Tranquillini, Senior Post Trade Market Infrastructure Executive


    Mark Smith, CEO and Co-Founder at Symbiont


    Vic Arulchandran, Co-Founder at Nivaura


    Moderator

    Dominic Hobson, Co-Founder and Editorial Director at Future of Finance


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    1 hr and 54 mins
  • Apr 21 2022
    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 securities depository (CSD) or a custodian bank. For a time it looked as if that one deal might finally transform promise into reality. A year later, a familiar pattern is restored: experiments without lift-off. Issuances and transactions in high volumes are conspicuous by their absence from the tokenised bond markets, which remain a cottage industry in a global marketplace capitalised at more than US$120 trillion. True, a new breed of token exchanges such as ADD-X in Singapore and SDX in Zurich are now hosting bond issues, but they too are still proving the technology and technique works rather than riding a rocket ship. Fulfilment of the signal promise of blockchain technology – namely, cost-cutting through disintermediation – is proving worryingly elusive. The FinTechs and exchanges which have identified the bond markets as an opportunity ripe for tokenisation are careful to stress that they have no intention of disintermediating investment banks, CSDs, custodian banks or issuing and paying agency banks, or indeed anybody else. As if to emphasise this point, the R3 Corda blockchain that turns existing intermediaries into members of private, permissioned blockchain networks has emerged as the technology provider of first choice for bond market FinTechs. The alleged remark of Clinton adviser James Carville (“I want to come back as the bond market. You can intimidate everybody”) certainly seems to apply to FinTechs, whose reluctance to challenge openly the banking stranglehold on the bond markets is almost palpable. Instead, investors and issuers are promised a more efficient primary market process, with less use of paper documents and the telephone and more use of simultaneous and controlled digital access to useful information such as initial term sheets, contractual agreements, prices and holders of particular bonds. Yet it is possible that such modest ambitions could conceal a revolutionary outcome, if not intent. Bond market FinTechs could morph into information entrepots that displace CSDs, issuing and paying agency banks and custodian banks by a gradual process of encroachment into the crucial data flows that makes such intermediaries evidently redundant. Who needs a CSD or a custodian when you can issue bonds on to a blockchain in fully registered form and settle transactions the same day? In theory, investors on a blockchain network can transact directly with each other without waiting for a bank to confirm it has received the cash or the securities. And nobody will need an issuing or paying agent when the coupons can be paid by smart contracts. All of these functions will be fulfilled by efficient data flows rather than by reconciliation of separate data sets. This Future of Finance webinar will ask whether the apparent timidity of the bond market innovators conceals something much more threatening to at least some of the existing intermediaries.

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    1 hr and 41 mins

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