Citi’s Digital Money Symposium brought together experts and businesses in the industry to explore trends and future developments in the digital money market.
How valuable is blockchain?
In the panel ‘Money, Tokens, and Games: Blockchain’s Next Billion Users and Trillions in Value’ interesting points were raised by Dr. Ruth Wandhofer, a partner at Gauss Ventures, who spoke on how developments in digital identity need to be made so that customers can retake control over their data at their own volition, rather than relying on algorithms to curate their online experiences.
Ronit Ghose, global head of future of finance and digital at Citi Global Insights, defined the term ‘disruptive technology’, explaining that disruption comes from the margins rather than the big players in the industry. He used e-commerce and online instant payments as an example, stating that AliPay came up with a solution to a problem in the payments system – they were not an incumbent looking to revolutionise the industry, but they did.
Aaron Powers, co-founder and CEO of Hunit, added that the rise of smart contracts is a major contributor to digital identity.
Becks Perfect, founder, Nifty World NFT, noted that the rise of individual digital identities will give the customers and online creators more control over their own data which will completely transform the creator economy and shift away from the dominance of social media.
Perfect explained that gaming is an emerging industry, especially in East Asia, and this will become more prevalent as it continues to adopt Web 3.0 technologies. However, the adoption of gaming will rely on how quickly it evolves, therefore it will not be a rapid rise but a slow climb.
Can digital asset frameworks be efficient?
A panel of experts discussed the progress of digital asset frameworks in the next session ‘Building the Institutional Digital Asset Infrastructure’. The panelists were all working on technologies that are pioneering developments in digital currency.
Jens Hachmeister, managing director of issuer services and new digital markets at Deutsche Borse, stated that the digital securities industry is approaching the market from too much of a technology standpoint, where instead they should be targeting efficiency in the market.
Adrien Treccani, founder and CEO of Metaco, explained the tenets of the blockchain industry: “We have to remember how blockchain and Bitcoin was invented. It was invented for decentralisation. Therefore, there is so much cryptography into it because the idea was to put the coins directly in the hands of the user to avoid any form of identification application. The best way to have a systemic protection and to avoid systemic risks in to avoid banks, because if you can avoid banks through mobile hotspots, it will concentrate all of the wealth and you probably won't need institutional custody.”
Tongtong Gong, COO at Amberdata, expressed that it is hard for financial firms to build digital asset infrastructure due to a lack of understanding of the fundamentals on how decentralised the data is, the market risks, and expertise when it comes to smart contracts.
“The biggest hurdle that institutions need to overcome when it comes to digital assets is lack of access to transparent, yet distorted data,” Gong stated.
Isabella Chase, senior policy advisor at TRM Labs, observed the significance of interoperability between transaction chains, as there is a prominent financial crime issue in the adoption of blockchain. She adds that different tools need to be developed in the ecosystem to confront these challenges for organisations to understand the modes of how digital assets operate.
Hachmeister noted that data integrity is critical especially in context of legacy: “Talking about transparency, identities, data integrity, not only within a kind of distributed system, but every at the kind of edge towards legacy that will be another critical factor. We have the we have the decentralised identities, transparency, zero knowledge proofs, and more, then you have the traditional world. To a certain extent, we need to synchronise data integrity. This is bigger than anything when it comes to solutions, which doesn't typically go above and beyond only one part of the ecosystem.”
He went on to add that data is critical in producing assets in the future and that the developments around crypto are a huge catalyst to generate revenues moving forward.
Decentralised technology such as blockchain is slow to evolve, but once it reaches the point where it is efficient and active, then it creates a community of both retail and institutional users, explained Treccani.
He continued that the next steps are not de-fi or tokenisation, but how the protocols are being addressed and satisfied. How will institutions build on this technology, transform compliance, and make trades and settlements? The level of complexity will be increased, and the management must evolve alongside the ecosystem.
Finishing the panel with the question, “If you had the funding to create a startup, what industry would you focus on?”, the panellists each had their own take on what the future holds for digital currencies. Treccani talked about AI, the next big disruption in the digital asset industry, and various forms of decentralisation, while in contrast Hachmeister stated that it is now the time for incumbents as consumers are looking for trusted institutions, therefore he would not invest in a startup.
Gong closed by saying that she would have done what she did the first time with Amberdata, as while she was worried about being slow to the movement the first time around, there is still many advancements to be made in the digital assets sector.
In the next interactive session, the audience was able to see and hear from people in the metaverse, in which experts spoke on the collaboration and new developments emerging for NFTs and online applications of VR. Jacob Loewenstein, SVP of BD and strategy at Spatial, spoke from the metaverse on the extents of the space from gamified experiences and online sharing platforms, and Dave Starling, head of emerging technologies at Citi Innovation Labs, explained how banks are currently exploring the metaverse as a possible space for people to meet and interact in order to offset carbon footprints.
How will defining digital assets facilitate regulatory action?
During the ‘Regulating Digital Assets’ session, the panellists discussed the constant swirl of news circulating in the digital assets sector and how regulation is looking stabilise the market.
Nicole Sandler, head of digital policy at Barclays, explained that digital assets are classified in a variety of ways by different regulatory authorities. She cites that a calling digital assets a ‘currency’ is inconsistent as there is no set price for digital assets, which is why CBDCs are not considered cryptocurrencies by regulators.
On crypto policy in the UK, Monica Sah, partner at Clifford Chance, stated that there is limited regulation beyond AML. “Where we are going is the interesting question I think,” she said, “until about two months ago, I would say that we weren't going far. There was a very purposeful approach to incremental regulatory regulation in the UK. The focus was twofold, initially in 2021 and 2020 to early 2022 was about regulating crypto marketing; bringing the marketing of those assets into the regulatory regime for the protection of retail investors because of scams.”
Sah continued that looking to regulate stablecoins is important for market stability and there are new comprehensive cryptoasset policies coming to the UK, such as licencing regimes and the definition of cryptoassets.
Ijeoma Okoli, director of the Digital Economy Initiative commented on what developments are happening in the US, explaining that there is political cover for regulatory bodies to act under the Biden Administration, but the developments and bills need to be drafted in Congress. However, the SEC is going after the crypto sector, but along with the downfall of Binance’s there are several new developments in the industry that is slowing down the process.
Okoli explained that there is no timeline for the development of crypto policy, but there is a securities routine that is being implemented. On the definition of various cryptocurrencies, she clarified that Bitcoin is not considered a security, but a commodity, and the CTFC and SEC are unresolved on if Ethereum is a commodity or a security.
“In relation to all the bills that were proposed relating to stablecoins relating to the dividing line between the SEC and the CFTC, for those who don't know, there is this current quiet battle going on between the commodities regulator and the securities regulators to have the vast majority of regulating the sector. Both the CFTC and the SEC obviously want it and they have been going after this sector aggressively,” said Okoli.
Sandler observed the rapid growth of crypto and the diversity of digital assets and how they are defined: “I think the role of the global standard setter is really valuable. When I first started doing panels on this topic, I said there are 300 different types of crypto assets. Last week, I said there's more than 19,000. Today we'll say there's more than 20,000 different crypto assets. What that means is they're not all created equally. They've got different use cases. The definition we rendered earlier is really, really important because if you don't know what you're regulating, how do you regulate it? What would be really valuable in the global standard setters is helping with a global taxonomy.”
Professor Lawrence Deju-Wiseman, director at PwC Forensic Services detailed that he does not believe that there will be global cohesion in cryptocurrency. He stated that is not an issue, but there should be global cohesion on a uniform on the framework used.