Where Finance Finds Its Future

Perhaps one jurisdiction and a half have actually launched a Central Bank Digital Currency (CBDC). But the second largest economy in the world (China) is now promising to turn its pilot CBDC into a full-fledged digital fiat currency as soon as February 2022. It would be surprising if a member of the G7 – and especially the United States, possessor of the dominant reserve currency of today -did not feel obliged to respond. The Bank for International Settlements (BIS), whose membership encompasses 63 central banks, has followed up its paper on the foundational principles and core features of a CBDC with a further three covering the design of CBDC systems, how users can be recruited to use CBDCs and how central banks can manage the likely impact on financial stability of issuing a CBDC. The infrastructural arm of the BIS, the Committee on Payments and Market Infrastructures (CPMI), is consulting on why issuers of Stablecoins – the original rival to CBDCs, which prompted the surge of activity by central banks since Facebook unveiled Libra in the summer of 2019 – should be subject to its Principles for Financial Market Infrastructures (PFMIs). With Stablecoins now locked in a symbiotic relationship with the emergent Decentralized Finance (DeFi) markets, questions are being asked about how CBDCs will interact not just with Stablecoins but with the crypto-currencies and tokenized assets that are driving the growth of DeFi. Answers are being sought to the potential risks posed by CBDCs to the funding base of the banking industry, the monetary sovereignty of nation-states, the innovative capacity of the private sector and the privacy of citizens. The benefits, in terms of financial inclusion and improvements to the cost, speed and transparency of cross-currency payments, are being trumpeted. At this webinar, Future of Finance returns to a topic that is already established as the most important, exciting and fastest-evolving of official responses to the threats and opportunities presented by the digitization of money and payments. Hosted on Acast. See acast.com/privacy for more information.

Greengage, which has been active in the crypto-currency markets for the last three years, has set itself a new mission: to become the merchant bank that channels the fiat currency deposits of crypto-currency exchanges to small and medium sized enterprises (SMEs). To that end, it is currently considering whether to pursue a banking licence, which would allow the firm to provide a full set of banking services across three fiat currencies. But transforming the fiat currency deposits of crypto-currency exchanges into loans to SMEs is just the first of the ways in which Greengage plans to fulfil its wider ambition of building bridges between the crypto-currency markets and the traditional financial markets. Dominic Hobson, co-founder of Future of Finance, spoke to Greengage CEO Sean Kiernan.  Hosted on Acast. See acast.com/privacy for more information.

New York-based INX Limited shot to prominence last year when it raised US$85 million in an initial public offering (IPO) that was not only tokenised but, because it was fully registered with the Securities and Exchange Commission (SEC), open to all kinds of investors. This broke with the established pattern of issuing security tokens to sophisticated investors only, placing INX in the vanguard of the burgeoning tokenisation industry. The company is already developing plans to tokenise OTC-traded companies, real estate, intellectual property and a variety of other asset classes on to its blockchain-based automated trading system (ATS). The company also operates a cryptocurrency trading platform and has acquired both a digital asset broker-dealing business and an inter-dealer broker. Future of Finance co-founder Dominic Hobson spoke to Douglas Borthwick, Chief Business Officer at INX.  Hosted on Acast. See acast.com/privacy for more information.

There is no shortage of challenger banks and neo-banks but it is often hard to discern what is being challenged or what is genuinely new. Most are doing nothing more disruptive than creaming off revenues established banks are too lazy or dysfunctional to retain. The character of five-year-old Chetwood Financial is harder to categorise. Its leadership emphasises the personalisation of its products rather than the quality of its customer relationships. By refusing to take ownership of its customers, Chetwood inverts the logic of the traditional bank. It sees customers not as cross-selling opportunities but as individual borrowers or lenders. It sees products not as either profit generators or cross-subsidies but as customised answers to particular problems. Chetwood knows what its customers’ problems are because it has used data to find and understand them in the first place. It is a perspective that not only makes it easier to manage credit risk – indeed, it enables the bank to reward improved risks with cheaper money – but subtly shifts the purpose of the enterprise way from making money for shareholders towards manufacturing the best retail borrowing and savings products it can, at least for its chosen clientele. Dominic Hobson, co-founder of Future of Finance, spoke to Mark Jenkinson, founder and director of strategy at Chetwood Financial. Hosted on Acast. See acast.com/privacy for more information.

Real estate is a primary target for tokenization. Its size and intrinsic illiquidity makes tokenization and fractionalization unusually appealing for owners and developers, and investors are attracted by the opportunity to gain exposure to the asset class at lower cost. So it is not surprising that the real estate sector spawned the flagship tokenization of shares in the St Regis Aspen hotel back in 2018. Among the real estate entrepreneurs that recognized the significance of that transaction three years ago was Ed Nwokedi, then working in the capital markets group at Cushman & Wakefield. Today he is the CEO of Red Swan CRE, a blockchain-based marketplace where issuers can raise finance for commercial real estate projects by issuing tokens to SEC-accredited investors. Dominic Hobson, co-founder of Future of Finance, asked him how Red Swan works and where it is going next.  Hosted on Acast. See acast.com/privacy for more information.

Projections put the size of the security token markets at US$8-9.5 trillion within just four years. That is bigger than the US$7 trillion invested in the privately managed asset markets that are presently seen at the most promising axis of growth for the tokenization industry. The rewards are easy to list. A lower cost of capital for issuers. Increased liquidity, and access to a wider range of asset classes, for investors. Automation of costly asset servicing by smart contracts. Faster completion of customer due diligence checks. Lower transaction costs, thanks to disintermediation. For the most part, security tokens fit comfortably within the existing securities market regulations in major financial markets. The technology to support issuance, secondary market trading and post-trade servicing is in place. Service providers, from trading platforms to custodians, are open for business. Yet the actual number of issues remains remarkably small and tightly concentrated in a handful of sectors and geographies. The sums raised have fallen far short of expectations. This webinar will seek to explain why an industry on the cusp of explosive growth is failing to detonate, and what it will take to make security tokenization happen. Hosted on Acast. See acast.com/privacy for more information.

The wealth management industry is under pressure. Profitability depends on scale, and in the United Kingdom there are more than 27,000 firms vying to advise clients on the management of their savings, from independents with a handful of clients to the wealth management arms of global asset managers and private banks. Clients are increasingly demanding, forcing their wealth managers to invest in technology to provide digital interfaces and reporting. They are also more sensitive to cost, and likely to opt for less lucrative passive investment strategies offered by the likes of Vanguard than the expensive active alternative. New entrants such as Monzo and Revolut are tempting investors with free brokerage, while platforms are also offering simpler and cheaper alternatives. Yet there is widespread recognition of the value of well-informed advice, especially if it can be provided at a reasonable price. The answer to the conundrum obviously lies in technology. Which is where Wealth Wizards comes in. The firm, acquired recently by Royal London, enables wealth managers in the United Kingdom to offer financial advice to clients in a purely digital form, making it affordable and accessible to a much wider range of investors. Dominic Hobson, co-founder of Future of Finance, spoke to Simon Binney, Business Development Director at Wealth Wizards.To find out more go, click here. Hosted on Acast. See acast.com/privacy for more information.

Growing institutional interest in crypto-currencies, not least as a hedge against rising inflation, has spawned a range of custodial services to safeguard the private keys without which nobody can access the digital wallet that contains the assets. Hex Trust, the Hong Kong based provider of institutional grade digital asset custody services, was among the first in the field. Since it opened for business in March 2018, Hex Trust has gathered a diverse clientele in the private banking, wealth management and asset management industries. Future of Finance co-founder Dominic Hobson spoke to Alessio Quaglini, CEO of Hex Trust, about how he sees the crypto-custody market developing as non-fungible tokens (NFTs) and security tokens are added to the list of eligible institutional investments. Hosted on Acast. See acast.com/privacy for more information.

It always takes time for revolutionary technologies to establish themselves. Blockchain is no exception. Although the pace of mass adoption is speeding up – the telephone took 70 years to achieve 50 per cent market penetration among consumers, while smartphones managed that in three – blockchain is more akin to a general-purpose technology such as electricity in its ability to transform a wide range of commercial activities. As such, it must solve engineering problems that constrain its growth, of which lack of speed and scalability is the most obvious. But blockchain shares with all forms of digital technology the ability to scale exponentially once the engineering problems are solved. This webinar, hosted in partnership with Trade and Invest Wales and Fintech Wales, will assess how close blockchain technology is to taking off into exponential growth and how it could change the entire shape and structure of economies. Hosted on Acast. See acast.com/privacy for more information.

Cross-border payments are notoriously expensive. They are also slower, less reliable and less transparent than domestic payments, in which transfers are now (or soon will be) both instant and instantaneously visible. One reason for these inadequacies is that an oligopoly is at work. There are around 25,000 banks in the world, but almost every cross-border payment ends up being handled by just 15 of them, all of which have relationships with thousands of correspondent banks. Unsurprisingly, given that cross-border payments are also cross-currency, the 15 banks are more or less synonymous with the banks that make up the foreign exchange (FX) oligopoly. CLS, the FX settlement utility set up by the major central banks, is able to cover 87 per cent of transaction volumes across 19 major currencies with a user-base of just 70 member-banks. A mere 14 of the CLS member-banks offer CLS services to the corporates and asset managers that ultimately drive FX activity, as opposed to servicing other banks. Many banks have withdrawn from correspondent banking altogether – the number is down 20 per cent since 2010 – chiefly because of the compliance risks of customer due diligence: banks do not know their customers’ customers and fear being fined for breaches of anti-money laundering (AML), countering the financing of terrorism (CFT) and sanctions regulations. In other words, more than 99 per cent of banks are just processing foreign currency payments for their own domestic or regional customers and relying on the services of the members of the oligopoly to actually send money abroad. This is why it takes an average of 2.6 banks to move an estimated US$1.5 trillion a day across borders. Yet cross-border payments are vital for economic prosperity, international trade, global financial stability, continuing growth in international e-commerce and international travel and especially in poverty reduction. Remittances worth US$707 billion passed through the system in 2019, US$529 billion to people in low to middle income countries, at an average cost of 6.82 per cent in transaction charges. This is why the G20 has made improving cross-border payments a priority and asked the Financial Stability Board (FSB) to come up with solutions; why the United Nations has set a target of reducing remittance charges to 3 per cent by 2030; why the Committee on Payments and Market Infrastructures (CPMI) has published a list of 19 “building blocks” to enhance cross-border payments; and the Bank for International Settlements (BIS) has pondered whether central bank digital currencies (CBDCs) could provide the key that unlocks for companies and consumers the value currently being eaten by banks. Hosted on Acast. See acast.com/privacy for more information.