“Always be wary of any helpful item that weighs less than its operating manual.” – Terry Pratchett ||
Hello everyone, and HAPPY FRIDAY!!! I hope you have glorious things planned for the weekend.
I was on Scott Melker’s show yesterday, talking about the macro mood and its impact on crypto – you can see the video here.
If you find this newsletter useful, would you mind sharing it with your friends and colleagues? ❤
Some personal/professional news!
I’ve joined forces with two other tradfi/crypto veterans to form Triple Crown Digital, a digital asset advisory that helps founders, startups and step-ups with their go-to-market, liquidity and messaging strategies. Many of you may already know my partners Bea O’Carroll and Christine Sandler, two of the most accomplished, motivated, empathetic and trustworthy people in our industry – it’s an honour to call them colleagues and friends. If you’d like to find out more, feel free to reach out via our website or to any of us on LinkedIn.
Of course I plan to continue with this newsletter! So far, our work at Triple Crown Digital is deepening my insight into actual application building and market integration, and I’m excited about sharing some of that with you. And you can thank Christine and Bea for this newsletter getting published by 8:30amET every day 😋 – long-time readers will remember that it used to sometimes (cough, often) be quite a bit later.
IN THIS NEWSLETTER:
Observations from the tradfi trenches
Here comes a soft PCE read
If only things didn’t need to be shipped
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WHAT I’M WATCHING:
Observations from the tradfi trenches
Earlier this week I spent a couple of days hanging out with capital markets institutions at the annual conference of the post-trade association The Network Forum. I was on a panel with Ben Duve from the European Central Bank, Jennie Baisch from Swift, Peter Hubli from the Zurich Cantonal Bank (head of CBDC settlement trial Project Helvetia), moderated by Martin Lawrence of The ValueExchange.
The topic was, of course, CBDCs and tokenization, and one of the main themes was how “things” have changed over the past few years. Some argued that they haven’t really changed much: we are still far from actual adoption of tokenized assets, there are some live issuances but they’re sporadic and small, and the large institutions are sniffing around but have yet to dive into tokenization with enthusiasm. I counter-argued that the main positive change was the waning of enthusiasm coupled with an increase in conviction. Let me explain.
I’ve lost count of the number of conferences I’ve been to over the years in which entrepreneurs breathlessly proclaimed that “everything will be tokenized!”. The assumption was that the advantages of speed, fractionalization and transparency would attract issuers and buyers in such overwhelming numbers that regulators and traditional market infrastructure would have no choice but to get on board and adapt.
This assumption always showed a lack of understanding of how finance works. The conferences would be crowded with builders excited about “revolutionizing” markets, and with banks interested in new revenue streams; but there was usually no-one from the buy-side or the regulatory world. Sell-side and infrastructure aren’t going to invest significant economic or social capital in building or issuing without concrete signs of demand, and buy-side institutions aren’t going to provide the demand in size without regulatory clarity.
That dynamic has changed: there are signs of institutional demand, and there is movement on the institutional infrastructure build. Central banks around the world are experimenting with different forms of tokenized money, a key component of a regulated blockchain-based market (focusing on wholesale transactions, not the same as retail!). Commercial banks are participating, as are global institutions and large money managers. The “suits” are definitely at the table.
But the hype has died down. Those who like shiny new things have moved to the AI sector. Those who want to “revolutionize” are touting the productivity gains of large language models. Those who want to raise lots of money are using different buzzwords.
Those who care about improving capital market efficiency and access have stayed, because they believe blockchain technology can help markets evolve and they want to figure out how. Those who have stayed are not just interested in the quick profits and the innovation glory – they want to make a difference.
Personally, I much prefer this mood. It’s less buzzy and less hip but just as interesting, perhaps even more so as now it is getting real. Now, we have new types of “money” entering the market, from systemic institutions (such as the stablecoin work from SocGen, Nomura, JPMorgan and others). BlackRock has tokenized a money market fund. Franklin Templeton allows payment for their tokenized fund in stablecoins. The BIS is coordinating a long list of trials to test how tokenized money and securities can interact. I could go on, because the list of interesting projects and experimentation is long.
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