Financial institutions that have been discussing the transformation of assets such as bonds and currencies into ‘tokenised’ forms for years now acknowledge a delay in the shift towards blockchain-based trading. This delay is mostly due to investor hesitance towards the concept.
Through tokenised assets, which typically involve using blockchain-based tokens to represent traditional assets like currencies or bonds, banks aim to enhance efficiency, speed, cost-effectiveness in trading, and simplify ownership documentation processes.
Industry experts and leaders in digital assets forecast that a significant portion of global assets will be tokenised through blockchain technology. HSBC and Northern Trust even projected that by 2030, 5% to 10% of all assets could be tokenised.
However, speakers at the recent Money20/20 fintech conference noted a sluggish pace in the transition towards digital asset versions.
“To be frank, the progression in this space has been slower than my initial expectations,” remarked Ryan Rugg, the Head of Digital Assets at Citibank’s trade and treasury solutions business during the event in Amsterdam.
“Although we have experimented with money markets and bonds, none of these initiatives are currently operational and scalable. The only active application we have involves a tokenised deposit,” Rugg added.
Nevertheless, Rugg expressed her ongoing enthusiasm towards tokenisation, aiming to establish a tokenised deposit capable of being transmitted 24/7, 365 days a year, thus circumventing disruptions due to different time zones or banking holidays.
Client demand for such services has been steadily increasing, and the token has been operational since the previous year, Rugg further confirmed.
While several experimental projects have been launched, such as blockchain-based bonds, the absence of a fluid secondary market poses a challenge to tokenised trading.
Having invested seven years in reconstructing its software infrastructure around blockchain, the Australian stock exchange eventually halted the project and declared last year that the upgrade would no longer involve blockchain technology.
Monica Long, the President of the US crypto firm Ripple, informed Reuters that numerous US banks have currently put their digital asset services on hold.
Ripple, which acquired the crypto custody firm Metaco last year, is progressing well, highlighted by a recent collaboration with HSBC, as communicated by Long.
One of the significant obstacles in trading traditional assets on blockchain networks is the fact that banks are constructing their individual frameworks. This situation makes it challenging to conduct cross-platform trades, according to industry executives.
“Fragmentation hinders the adoption process, as investors are reluctant to connect to numerous disparate networks,” explained Julien Clausse, who heads BNP Paribas’ digital asset platform AssetFoundry, in anticipation of the event.
“It is highly probable that we will continue to function in a hybrid environment for the foreseeable future, with certain sectors being more actively tokenised due to perceived benefits, and others remaining within conventional models,” Clausse concluded.
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