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1、Digital Monetary InstituteDIGITAL ASSETS 2024A LONG-AWAITEDREV-OLU-TIONARE THE DLT PROMISES READY TO TURN INTO REALITY?Supported by2OMFIF DIGITAL ASSETS 2024 2024 OMFIF Limited.All rights reserved.Strictly no photocopying is permitted.It is illegal to reproduce,store in a central retrieval system or

2、 transmit,electronically or otherwise,any of the content of this publication without the prior consent of the publisher.While every care is taken to provide accurate information,the publisher cannot accept liability for any errors or omissions.No responsibility will be accepted for any loss occurred

3、 by any individual due to acting or not acting as a result of any content in this publication.On any specific matter reference should be made to an appropriate adviser.Company number:7032533.ISSN:2398-4236Official Monetary and Financial Institutions Forum 6-9 Snow Hill,London,EC1A 2AYT:+44(0)20 700

4、27898enquiriesomfif.org omfif.orgABOUT OMFIFWith a presence in London,Washington and New York,OMFIF is an independent forum for central banking,economic policy and public investment a neutral platform for best practice in worldwide public-private sector exchanges.AUTHORSLewis McLellan Editor,Digital

5、 Monetary InstituteBurhan Khadbai Head of Content,Sovereign Debt Institute Julian Jacobs Senior EconomistKaterina LiuResearch AnalystEDITORIAL AND PRODUCTIONSimon HadleyDirector,ProductionWilliam Coningsby-BrownProduction ManagerSarah MoloneyChief SubeditorJanan JamaSubeditorClive HorwoodManaging Ed

6、itor and Deputy Chief Executive OfficerMARKETINGOphelia MatherMarketing CoordinatorAngelina Quinn Events and Marketing CoordinatorBen RandsManaging Director of Corporate Development,Marketing and EventsWhere the public and private sectors meet to shape the digital future of financeSPONSORSDMI TEAM K

7、atie-Ann Wilson Managing Director,Digital Monetary Institute Max Steadman Programmes Manager,Digital Monetary Institute Folusho Olutosin Commercial Director,Digital Monetary Institute Meriem Arrick Commercial Executive,Digital Monetary Institute OMFIF.ORG/DMI3CONTENTS4 EXECUTIVE SUMMARY New technolo

8、gies,new challenges8KEY FINDINGSThe 2024 survey results distilled10 CHAPTER 1:SETTLEMENTSEmbracing faster settlement 20 CHAPTER 2:CASH SETTLEMENT Solving for cash in a digital world26CHAPTER 3:BLOCKCHAIN BONDS RANKINGS Leading the future of finance 34CHAPTER 4:TOKENISATION Turning to tokens40CHAPTER

9、 5:MARKET STRUCTURE Overhauling market structures Digital Monetary InstituteDIGITAL ASSETS 2024410202640344OMFIF DIGITAL ASSETS 2024EXECUTIVE SUMMARYIT is tempting to think of blockchain as a new technology.But with the Bitcoin whitepaper turning 16 on 31 October 2024,the journey from a core technol

10、ogy emerging to its full-scale adoption in institutional business processes has proven long and complex.It did not take long for those in traditional finance to catch on to the possibility that distributed ledger technology might be the key to simpler and more efficient financial market infrastructu

11、re.The possibility of securely and instantly exchanging value between counterparties with no intermediaries sounded like a remarkable innovation and work began.Early signs of progress surfaced in 2017 with the bond-i the World Banks blockchain-operated new debt instrument.From then,the blockchain ta

12、keover seemed imminent and inevitable,causing market participants to swiftly begin looking beyond bond markets at other asset classes.Tokenisation,representing the ownership of an asset with a token on a blockchain,seemed like the next evolution of market infrastructure a means of simply migrating a

13、ny given asset class into a blockchain environment,from cash to equity or real estate.Complicated capital marketsThe peer-to-peer ethos of blockchain conflicts with the way finance has historically been run relying on trusted,regulated intermediaries to oversee activity and provide security.While di

14、sintermediation is a trickier proposition,policy-makers are open to the possibility that it will make markets more efficient and are launching pilot regimes and sandboxes to test that proposition.Both promises of blockchain immediacy of settlement and disintermediation conflict with the present orga

15、nisation of markets.But that does not mean they are not desirable.Policy-makers have long discussed making a move to shorter settlement windows,and the US adopted T+1 settlement windows as of May 2024.Desirability for regulators is as much of a consideration as for market participants on the ground.

16、In this spirit,OMFIF conducted a survey of issuers,banks and investors.The 26 respondents(a majority of whom are public sector bond issuers)provide a valuable insight into the opinions of capital market participants on the introduction of new technologies.The share of the community that is looking t

17、o adopt DLT for debt issuance is growing,as is the share of respondents that ARE THE DLT PROMISES READY TO TURN INTO REALITY?A LONG-AWAITED REVOLUTIONbelieves DLT will form the future infrastructure of capital markets.However,there is still a distinct coolness towards the notion of shorter settlemen

18、t times and the operational challenges this would bring,and a sense that current infrastructure,such as traditional central securities depositories,will not be abruptly replaced.The OMFIF Digital assets survey has gathered the opinions of a range of market participants,including how the settlement o

19、f cash for tokenised assets should be accomplished,when they believe tokenisation will arrive and what new challenges that process will bring.The first chapter,on settlement cycles,explores the inefficiencies in bond issuance and the most desirable solutions to address this.Chapter 2 explores the po

20、tential and barriers to various tokenised cash settlement solutions for settlement,where survey participants clearly prefer wholesale central bank digital currencies over other forms of tokenised cash.There is potential for various asset classes to be tokenised Chapter 3 explores the factors affecti

21、ng the tokenisation of these,which would most likely occur in at least three years.Finally,Chapter 4 explores how DLT may transform market structures,particularly the role of central securities depositories.Adapting DLT to meet capital markets participants needs is an immensely complex challenge.But

22、 one of the most striking elements of the development of the crypto-asset market has been realising the reasons for various conventions and regulations to ensure development continues.We would like to thank the representatives from KfW,Slovenias Ministry of Finance,Banque de France,Swiss National Ba

23、nk and the Hong Kong Monetary Authority for enhancing this report with their insights and experience.Finally,we wish to thank our partners R3 and Stellar for their thought leadership.Their guidance and insight were invaluable in the creation of this report.OMFIF.ORG/DMI516%of respondents indicated a

24、 preference for T+0 or T+1 settlement.42%of respondents agree that blockchain will become the dominant form of financial market infrastructure.59%would prefer wholesale central bank digital currencies for settling most securities transactions over private tokenised money solutions.92%of survey respo

25、ndents think a substantial degree of tokenisation in financial markets is still more than two years away.36%of survey respondents believe that pilot regimes will show DLT can perform the functions of a CSD.65%of survey respondents believe that bonds are the asset class that are most likely to be tok

26、enised.28%of survey participants believe that workflow processes are the single biggest inefficiency in the bond issuance process.39 digital bonds issued from 2022 until the end of July 2024,totalling up to$3.83bn,were analysed for the 2024 digital bond rankings.KEY NUMBERSKEY QUOTESIn particular,we

27、 see opportunities for the industry to automate areas that are inefficient in typically non-standard instruments.For example,DLT could provide unique value to the private markets(private equity,private credit)by fostering more transparency and increasing efficiency.Nadine Chakar,global head,DTCC Dig

28、ital AssetsThe use of technology allows us to shorten settlement cycles,but we need even more mature and fully developed infrastructure,which could make settlement even quicker.Tim Meirer,senior manager,capital market innovation,KfWWere a long way from the systemic adoption of stablecoins.Natalie Le

29、wis,partner,Travis SmithWhat we need is some form of consolidation or“co-opetition”between the platforms:a basic layer of shared technical infrastructure to reduce the number of chains that need to be interconnected.Philippe van Hecke,head of product management,Luxembourg Stock ExchangeTheres no reg

30、ulation that says a trade has to be settled in three or five days,its just a matter of habit and tradition.Raja Palaniappan,co-founder and chief executive officer,Origin MarketsThe future is not a binary choice between the replacement of CSDs by DLT infrastructure and the continuation of the status

31、quo.CSDs are also working hard on the adoption of the technology some think will disintermediate them.To preserve the level of stability necessary for institutional confidence,stablecoins will need to be backed by combinations of cash and high-quality liquid assets particularly short-term government

32、 bonds.The future of tokenised cash lies in achieving global standards and interoperability.6OMFIF DIGITAL ASSETS 2024KEY FINDINGSTHE primary markets provide ample evidence that adoption of distributed ledger technology is gathering pace.As of 31 July,there have been 14 blockchain bonds totalling$1.

33、2bn.This is almost as many as the 16 bonds issued in 2023 reaching$1.7bn,and almost double the number of bonds issued in 2022,with only nine bonds totalling$909m.A more detailed breakdown of blockchain bonds issued in the last two years can be found in the league tables(see page XX).Our survey revea

34、ls a story of slowly shifting attitudes.The share of survey participants who are considering adopting DLT and/or blockchain has increased by 9%to 38%this year from 29%in 2023.The increase in issuance is more pronounced,indicating that those already active with blockchain debt issuance are accelerati

35、ng more rapidly than new entrants.DLT ADOPTION NEARSCBDCs FAVOURED OVER OTHER SETTLEMENT SOLUTIONSSURVEY participants demonstrate a strong preference for central bank digital currencies as a cash settlement solution for tokenised assets.CBDCs were chosen by 59%of respondents but only 23%favoured ban

36、k-issued stablecoins.While stablecoins can provide a means of settling cash on-chain,their relative novelty means that market participants are reluctant to embrace the new risks they may present.One survey participant highlighted this concern stating,only CBDCs completely remove unnecessary credit/c

37、ounterparty risk.Another said,only CBDCs issued by trusted central banks will be accepted for financial transactions.No survey respondents selected Non-bank issued stablecoin as an option,suggesting there is a reluctance to trust non-banks for financial market transactions involving tokenised assets

38、.Source:Digital assets and market infrastructure survey 2023-24Share of respondents looking at adoption of DLT advancesAre you looking at adopting DLT and/or blockchain in debt issuance?Share of respondents,%20232024020406080100 Yes No CBDC 59%Bank-issued stablecoin 23%Tokenised fund unit 14%Non-ban

39、k issued stablecoin 0%Other 4%Source:Digital assets and market infrastructure survey 2024Clear preference for CBDC as settlement solution What solution do you favour as a solution for cash settlement in financial market transactions involving tokenised assets?Share of respondents,%OMFIF.ORG/DMI7TOKE

40、NISATION MAY BRING CHANGES TO MARKET STRUCTURE MARKET MAY NOT BE READY FOR FASTER SETTLEMENTSURVEY respondents are confident that tokenisation is on the way:92%believe that financial markets will experience a substantial degree of tokenisation at some point,although all said that it is at least thre

41、e years away.The largest share of respondents believes that substantial tokenisation will occur within 6-10 years(52%).One survey respondent added the caveat that it would depend on uptake and the direction of technology.Survey participants activities also demonstrate this thinking 65%are not workin

42、g on incorporating tokenised assets into their own operations,while 15%are considering it.The final 20%are presently testing use cases.OPINIONS on the most desirable settlement cycle continue to vary.Policy-makers tend to prefer shorter settlement times over longer ones.The US Securities and Exchang

43、e Commission adopted amendments to move the standard settlement cycle to T+1 from T+2 in the US market earlier in 2024.Respondents still showed a preference for longer settlement cycles.T+2 and T+3 settlement cycles were chosen by 24%and 20%of respondents.Though shorter settlement cycles are benefic

44、ial for avoiding settlement risk,they bring additional operational challenges.Because of this,24%of respondents believe that settling on demand might be the best option.We must stay flexible on the settlement cycle because it can be difficult for some issuers to reduce the cycle.However,it should be

45、 possible,stated one survey participant.2023 2024Tokenisation still more than two years awayWhat timeframe will financial markets experience a substantial degree of tokenisation within?Share of respondents,%Source:Digital assets and market infrastructure survey 20241-2 years3-5 years 6-10 years Neve

46、r6050403020100T+3 T+2T+1T+0Variable.302520151050 Settlement on demandSource:Digital assets and market infrastructure survey 2023-24No consensus on ideal settlement cycle What is the most desirable settlement cycle for syndicated issuances?Share of respondents,%8OMFIF DIGITAL ASSETS 2024KEY FINDINGSP

47、ERCEPTIONS of cybersecurity risks are growing:the share of survey participants that identified it as a risk of digitalisation increased to 76%from 48%in 2023.Innovations that may be incorporated into digitalised systems might expose new vulnerabilities.A survey participant explained this risk in the

48、 context of artificial intelligence:the combination of AI and quantum computing can make all existing security arrangements inadequate.A similar issue may emerge for the operational functionalities of a digitalised capital markets system,which was an opinion shared by 52%of survey participants.Digit

49、alisation might increase the exposure to operational deficiencies and vulnerabilities such as technical settlement failure,said one respondent to last years survey.SECURITY RISKS A LEADING CONCERN FOR DIGITALISATIONATTITUDES TO POTENTIAL ROLE OF DLT ARE SOFTENINGMARKET participants are eyeing the gr

50、owing role for DLT in capital markets infrastructure.Some 42%of respondents believe that blockchain will become the dominant form of financial markets infrastructure.A net 27%viewed the role of DLT positively,with the remaining 42%remaining uncertain.However,the progress of the UK Financial Conduct

51、Authoritys digital securities sandbox and the European Unions blockchain pilot regime may shift opinions.These projects present the opportunity for testing whether DLT architecture can perform the functions of a CSD.At present,36%believe that it can.All other respondents were uncertain,but it is not

52、able that no respondents were sure that DLT will not be able fulfil that role.Source:Digital assets and market infrastructure survey 2023-24Heightened concerns for security risksWhat risks might digitalisation cause?Share of respondents,%2023 202480706050403020100 Security risksComplexityOtherOther

53、operational risksLiquidity fragmentationSource:Digital assets and market infrastructure survey 2024DLT increasingly viewed favourably Blockchain will become the dominant form of infrastructure for financial markets;Initiatives like the digital securities sandbox and blockchain pilot regime will show

54、 that DLT can perform the functions of a CSD,share of respondents,%50403020100-10-20Blockchain will become the dominant form of financial markets infrastructureSandboxes and pilots will show that DLT can perform the functions of a CSD Agree Disagree Net OMFIF.ORG/DMI9BOND MARKETS WILL LEAD THE PATH

55、TO TOKENISATION FASTER SETTLEMENT AND REDUCED COUNTERPARTY RISKSURVEY respondents generally see asset tokenisation bringing a range of benefits.Most notably,74%of participants selected faster settlement,followed by reduced counterparty risk at 61%.The use of smart contracts may support these benefit

56、s as they facilitate transactions without the need for intermediaries and lower transaction costs.These top two benefits highlight the priority for balancing faster settlement with reduced counterparty risk.One survey respondent explained that tokenisation and blockchain-based trading and settlement

57、 infrastructure greatly increases transparency,and thus lowers the possibility for abusive trading practices and failure to deliver.THE likelihood of tokenisation for various asset classes is not uniform.Given the positive outcomes of numerous tokenised bond projects,it is not surprising that 65%of

58、survey respondents believe that bonds are prime candidates.Survey participants also expect commodities(52%)and public stock(50%)to be tokenised.However,the net opinion for public stock is much lower(35%)due to the extensive regulatory hurdles that need to be overcome before tokenising public stock b

59、ecomes feasible.One survey respondent highlighted the distinction that these assets have high transaction costs and rely on asymmetric information of investors and/or managers,and are very unlikely to be tokenised.Other asset classes where public information is paramount are more likely to be tokeni

60、sed.Likely Unlikely NetBonds most likely to be tokenisedWhich asset classes are most likely to be tokenised?Share of respondents,%Source:Digital assets and market infrastructure survey 2024Bonds6040200-20-40CommoditiesPublic stockReal estatePrivate creditSource:Digital assets and market infrastructu

61、re survey 2024Faster settlement a clear benefit for tokenisation If financial assets are tokenised,what benefits do you see this bringing?Share of respondents,%01020304050607080Faster settlementReduced counterparty riskExtending operating hours,ensuring ease of FX hedgingNew functionalityMore flexib

62、le use of collateralReduced cost10OMFIF DIGITAL ASSETS 20241.SETTLEMENTSThe move to one-day settlement for primary bond markets brings obvious benefits,but there are also risks and not all investors are fully on board.KEY FINDINGS1.Workflow processes were identified by survey respondents as the sing

63、le biggest inefficiency in the bond issuance process,particularly the manual preparation of documentation.2.Automation was the joint-most desirable solution for improving efficiencies in issuance.This will speed up documentation processes,making faster settlement achievable.3.Faster settlement was l

64、isted as one of the top two solutions to improve efficiencies in post-trade processes,marginally behind the standardisation of investor identification and classification.4.Only 16%of respondents indicated a preference for T+0 or T+1,highlighting the risks and concerns for a significantly reduced set

65、tlement period.The most popular response was T+2 or a variable settlement period.EMBRACING FASTER SETTLEMENT OMFIF.ORG/DMI11AT the end of May,the US the worlds biggest capital market moved from a two-day settlement period to one-day,or what is known in the industry as T+1,for the trading of securiti

66、es including equities,corporate bonds and municipal bonds.This was enforced by the Securities and Exchange Commission to reduce market and liquidity risks from unsettled trades.On the face of it,it makes sense to reduce settlement periods and raises the question of whether Europe and the primary syn

67、dicated international bond markets will follow.But while there are obvious benefits for a one-day settlement period in bond markets,there are risks too.Admin woesThe bond markets have long been criticised for being behind other areas of financial markets in terms of innovation and technology.The set

68、tlement period is one stark example,where typical syndicated bond transactions in the primary market take five days or sometimes even longer for cash to change hands between issuers and investors.Theres no regulation that says a trade has to be settled in three or five days,its just a matter of habi

69、t and tradition,said Raja Palaniappan,co-founder and chief executive officer at Origin Markets,a fintech aimed at digitalising debt capital markets.As well as habit and tradition,it is also down to the time it takes to get all the admin done for a transaction,the vast majority of which is documentat

70、ion in terms of preparing it,signing it and admitting to lawyers,issuer and paying agents,and central securities depositories.A period of five to seven days allows ample time to get all this done manually,which has been the case for decades.Documentation is ubiquitously seen as the most inefficient

71、area of bond markets.In OMFIFs 2024 Digital assets and market infrastructure survey,workflow processes were identified as the single biggest inefficiency in the bond issuance process,followed by post-trade processes(Figure 1.1).THE REALITY IS THAT THIS STANDARDISATION IS UNNECESSARY.ORGANISATIONS AR

72、E ALWAYS GOING TO WORK IN DIFFERENT WAYS.Charlie Berman,co-founder and chief executive officer,AgoraSource:Digital assets and market infrastructure survey 20241.1.Workflow processes single biggest inefficiency in bond issuance processWhere are the biggest inefficiencies in the bond issuance process?

73、Share of respondents,%Workflow processes 28%Post-trade processes 24%Pricing 16%Book building 12%Other pre-trade processes 12%Allocation 4%Other 4%12OMFIF DIGITAL ASSETS 2024The actual pricing of a bond takes 20 seconds you get on a call and agree on a price,said Alexander Malitsky,director,fixed inc

74、ome syndicate and origination at TD Securities.But its everything after that which requires a few days on everyones side.Automating documentation Survey respondents identified automation as the joint-best solution for improving inefficiencies in issuance,alongside common templates and frameworks(Fig

75、ure 1.2).But while issuers and market participants have toyed with the idea of automation,it has not really taken off.The biggest obstacle to widespread use of automating documentation processes is often said to be the lack of standardisation for legal documents due to the various types of issuers,d

76、eals and issuance programmes used in the bond markets.The need for the standardisation of legal documents was identified as the main area where improvements could boost efficiencies in pre-trade processes by survey respondents.But is this lack of standardisation really a bottleneck?It is a challenge

77、 to get lawyers to harmonise their different terminologies,let alone adopt standardised documents,and it is quite difficult to see all issuers doing that said Charlie Berman,co-founder and chief executive officer of Agora,a fintech focused on digitalising debt capital markets by connecting all major

78、 market participants with the use of distributed ledger technology.The reality is that this standardisation is unnecessary,said Berman.Organisations are always going to work in different ways.Our platform is designed to each issuers natural language programme documents so its not generic or standard

79、ised,but rather an easy-to-use user interface which allows document creation bespoke to each issuers specifications and requirements.This view is shared by Palaniappan.You dont need to standardise documentation across different types of issuers,he said.You just need documentation that is digitally n

80、ative and can be automatically,rather than manually,drafted.Therefore,the technology is there,ready and available.But the issue seems to be more about getting market participants on board with a newer way of doing transactions and moving away from legacy infrastructure.The bond markets are still ver

81、y manual in the way they operate with documentation and workflow processes,such as the use of emails and physical signatures.However,there have been developments to modernise this.In April,Euroclear and Clearstream announced the launch of electronic global notes that will allow all documents associa

82、ted with issuance under this format to be signed electronically.These moves away from physical and manually signed documents will allow for the scalable transition to shorter settlement periods for bond transactions,if thats what suits the needs of issuers and investors as well as the intermediaries

83、 that serve them,said Berman.This could be the start of embracing a modern way of operating in the bond markets.Over the last few years,there hasnt been a catalyst to start changing,said Malitsky.Hence,we dont see a broad adoption in the automation of documentation processes,although individual inte

84、rnal improvements are clearly happening.Risks to financial systemWhy is faster settlement needed?On one level,it is about making bond markets more efficient and reducing settlement and counterparty risks,with issuers receiving cash sooner,dealer/bank balance Source:Digital assets and market infrastr

85、ucture survey 20241.2.Automation and common frameworks identified as solutions to inefficiencyWhat is the most desirable solution to improve inefficiencies in issuance?Share of respondents,%The actual pricing of a bond takes 20 seconds you get on a call and agree on a price.But its everything after

86、that which requires a few days on everyones side.Alexander Malitsky,director,fixed income syndicate and origination,TD Securities Automation 28%Common templates/frameworks 28%Data harmonisation 24%Blockchain-based settlement infrastructure 12%Other 8%OMFIF.ORG/DMI13sheets being freed up and investor

87、s receiving the bonds quicker to trade or fit into their portfolios.But there is a more profound need that goes beyond bond markets.Having a long settlement period brings risks to the financial system overall,said Malitsky.If an issuer has a settlement period of five days,there is a risk that,over t

88、hose next five days,a syndicate bank or investor could fail or any individual part of the complex transfer of cash versus assets could fail too.This is a risk not just for the issuer but for the entire transaction.This is a very important point that particularly strikes home given the collapse of Si

89、licon Valley Bank and Credit Suisse last year.Banks and financial institutions can fail,so reducing the risks associated with this are crucial.Its not just about speed but about risk reduction,security,resilience and reliability,said Berman.If you look at the amount of capital tied up in banks and o

90、ther institutions to support the possibility for failures,its enormous.The goal is atomic settlement where transfer of legal title and payment happens simultaneously,removing many of the key risks of the existing system.Finding the right balance But while the goal might be instant settlement or T+0,

91、is it achievable and the most desirable cycle?Only 16%of survey respondents indicated a preference for T+0 and T+1.The most popular response was T+2 or a variable settlement period/settlement on demand with both receiving 24%of the responses.The reason for a preference for other settlement cycles ov

92、er T+0 and T+1 is partly due to the lack of automation in documentation processes and the legacy infrastructure and technology currently in place in bond markets.But there are other issues too.While I do think we will see shorter settlement periods,I think its a mistake to assume it would be benefic

93、ial to push it all the way down to T+0 or even T+1,said Palaniappan.You have to consider the investor on the other side of the transaction.Most investors do not have cash readily available to settle a big primary market transaction immediately when a bond is priced.Investors will typically make port

94、folio adjustments in the secondary market to raise cash to put into the primary transaction and these processes take a few days.Offshore investors buying dollar bonds will find it particularly difficult to find hedges for their foreign exchange exposure on such compressed timelines.This might result

95、 in them having to pre-fund the deal,making it a more costly transaction from a liquidity perspective.With T+0 you exclude a number of investors that dont have liquidity ready on the same day a bond is priced said Malitsky.For primary markets,you must look at the minimum of T+1 or T+2 to allow all k

96、inds of investors to participate and find the perfect way in between.There are also other risks to consider with a same-day or one-day settlement period.These include higher operational risks,more pressures on back-office functions and issues with investors in multiple time zones for globally distri

97、buted deals.The key then is perhaps being flexible and opting for settlement on demand rather than a fixed period.The move to T+1 in the US capital markets is for secondary trades and this works because secondary transactions take less time to settle than primary,allowing investors to rebalance thei

98、r portfolios.A number of government bond markets also settle in one or two days for auctions as well as domestic issuances by Canadian sub-sovereigns,but these are different types of transactions to syndicated deals that are sold to a global investor base.Source:Digital assets and market infrastruct

99、ure survey 20241.3.Respondents divided over which settlement cycle is most desirableWhat is the most desirable settlement cycle for syndicated issuances?Share of respondents,%The use of technology allows us to shorten settlement cycles,but we need even more mature and fully developed infrastructure,

100、which could make settlement even quicker.Tim Meirer,senior manager,capital market innovation,KfW T+3 20%T+2 24%T+1 16%T+0 16%Variable.Settlement on demand 24%14OMFIF DIGITAL ASSETS 2024However,not everyone is in favour of quicker settlement.We are seeing shorter settlement cycles being pushed in the

101、 US,said Achim Linsenmaier,vice chairman of global public sector at Deutsche Bank.The question is whats the big added value for primary bond markets in Europe?Does it add much value for liquidity management or is there a significantly greater risk between T+5 and T+2?Alex Caridia,head of public sect

102、or markets at RBC Capital Markets,was also sceptical.Settlement risk is a consideration of course but currently its not an obstacle to business at all and generally more of an issue when facing investors versus sovereign,supranational and agency or public sector entities,he said.These are valid comm

103、ents but,nevertheless,the surveys results point to a clear preference for faster settlement albeit without a clear preference for what the new settlement period should be.Respondents identified a faster settlement cycle as the second-biggest improvement to post-trade processes,just after standardisi

104、ng investor identification and classification(Figure 1.4).Development of digital bondsBlockchain is at the forefront of technology that may be implemented to speed up settlement processes.It is being widely tested by issuers such as KfW,which has been one of the leaders in the development of digital

105、 and blockchain bonds.This summer,KfW achieved significant milestones with the first syndicated blockchain-based digital bond in Germany as well as the biggest digital bond with a separate 4bn transaction.The benchmark bond was the first high-volume digital bond and was issued on Deutsche Borses dig

106、ital D7 platform.Meanwhile,the 100m syndicated pilot transaction was sold through a consortium of bookrunners with Union Investment as the anchor investor.For KfWs first blockchain-based digital bond,we were able to shorten the settlement cycle from T+5 to T+2,so we have made progress but its not th

107、e end of the road,said Tim Meirer,senior manager,capital market innovation at KfW.The use of technology allows us to shorten settlement cycles,but we need even more mature and fully developed infrastructure,which could make settlement even quicker.The development of the digital and blockchain bond m

108、arket still has a way to go.Mainstream adoption is probably not going to happen quickly,said Michael Chapman,head of tokenisation at Deutsche Bank,one of the bookrunners on KfWs syndicated blockchain bond.Potentially,we will see growth in the next three to five years,he said.The big challenge with a

109、doption with new technology is always a level of hesitancy but the market is clearly moving in this direction.Increasing investor participation and confidence in these types of bonds is perhaps the biggest obstacle and that can only really happen with the creation of a secondary market.The big chall

110、enge for investors at the moment is that if they buy these bonds,they probably cant sell it,said Chapman.Besides the need for DLT-based central bank money,secondary market liquidity is clearly one of the most important points in the scalability of blockchain-based digital bonds,said Meirer.We need a

111、 number of different aspects to increase and strengthen the secondary market,he added.For example,trading venues are not yet fully ready to handle blockchain-based digital bonds crypto securities and we need crypto custodians to be involved,too.Nevertheless,progress is clearly being made and investo

112、rs,custodians and other market participants are increasingly being more involved in these transactions.Source:Digital assets and market infrastructure survey 20241.4.Standardisation and faster settlement would most improve post-trade processesWhich of the following would most improve efficiencies in

113、 post-trade processes?Share of respondents,%The question is whats the big added value for primary bond markets in Europe?Does it add much value for liquidity management or is there a significantly greater risk between T+5 and T+2?Achim Linsenmaier,vice chairman of global public sector at Deutsche Ba

114、nk Standardise investor ID and classification 32%Faster settlement cycle 28%Harmonisation of market conventions 16%Instant price discovery 8%Corporate actions rulebook 0%Other 16%OMFIF.ORG11BECOME A MEMBERGet in touch to join our exceptional network and shape the future of money and capital markets.

115、Folusho OlutosinCommercial Director,Digital Monetary Institute Folusho.olutosinomfif.org OMFIF.ORG/DMI15 OMFIF.ORG11BECOME A MEMBERGet in touch to join our exceptional network and shape the future of money and capital markets.Folusho OlutosinCommercial Director,Digital Monetary Institute Folusho.olu

116、tosinomfif.org16OMFIF DIGITAL ASSETS 2024PIONEERING NEW FORMS OF ISSUANCEOPINIONKfW,the German development bank,has become a pioneer in new forms of bond issuance,emboldened by Germanys Electronic Securities Act 2021.The agency one of the largest bond issuers in the world gave the market two example

117、s of its innovative approach to primary issuance earlier this year.On 25 June,KfW sold a three-year bond,raising 4bn with a 2.75%coupon.The bond was KfWs first benchmark to be processed via Deutsche Brses digital securities platform,D7.The agency completed a 20m two-year pilot transaction in Decembe

118、r 2022.Although the bond was fully digital unlike the majority of KfWs bonds it was still a central register security and the settlement process was similar to the traditional process.That was not the case for KfWs first blockchain-based bond.The bond was priced on 2 July and raised 100m.The bond ma

119、tures in December 2025 and carries a 3.125%coupon.Lewis McLellan,OMFIFs Digital Monetary Institute editor,spoke to Tim Meirer,senior manager,capital market innovation,and Normen Gnther,senior manager,capital markets at KfW,to find out more.Lewis McLellan:This was a busy and innovative period for you

120、.Can you tell us how that came about?Normen Gnther:KfW is a frequent issuer,so weve been carefully watching market developments.When the German Electronic Securities Act arrived in 2021,that was an important development.In effect,it is a dematerialisation law.Before that,all securities in Germany ha

121、d to be paper-based,which is quite outdated.That law has two aspects,and we wanted to test both of them.First the central register security which,unlike in the classic format with a traditional global note,gives the issuer the option to replace the physical certificate with an entry in the D7 Clears

122、tream database.Alternatively,it gives issuers the option to make use of novel technologies and print a blockchain-based note.LM:Lets start with the first option then.This was KfWs second deal in that format.What was new this time?NG:Yes,in December 2022 we printed a small pilot transaction.For this

123、deal,a full benchmark was the next logical step for us.The process is much more efficient than the paper-based system.Going forward,we want to make this the standard way of issuing our bonds.LM:Does it require significant changes to your systems to move over to a dematerialised workflow?NG:Its essen

124、tially a data management project for us.Clearstream has built the infrastructure for issuing digital bonds,which requires the transfer of data from our system to D7.Hence,we needed to get that requirement from them and make sure we understand it correctly to match the data in our system to their dat

125、a model so that we could ultimately create a digital security.LM:Lets talk about the other deal then.This is a true blockchain instrument.What are the major differences between that instrument and the central register security?Tim Meirer:The central register security makes KfW has issued two digital

126、 new bonds this year,demonstrating its innovative approach to primary issuance.KFWS FIRST DIGITAL BOND OFFERINGSFIRST DIGITAL BENCHMARKFIRST BLOCKCHAIN-BASED DIGITAL BONDISSUERKfWKfWSIZE4bn100mPRICING DATE25 June 20242 July 2024MATURITYThree years18 monthsCOUPON2.75%3.125%PLATFORMD7BOOKRUNNERSBNP Pa

127、ribas,Bank of America,Crdit Agricole,LBBWDZ BANK,Deutsche Bank,LBBW,Bankhaus Metzler OMFIF.ORG/DMI17the issuance process generating the bond more efficient and automatic than conventional bonds,but it doesnt affect the settlement process.For KfWs first blockchain-based digital bond,we were able to s

128、horten the settlement cycle from T+5 to T+2 so we have made progress but its not the end of the road.The use of technology allows us to shorten settlement cycles,but we need even more mature and fully developed infrastructure,which could make settlement even quicker.LM:What infrastructure components

129、 are still missing or need more development?TM:Its a whole ecosystem.There is a large number of parts on the investor side that need to come into place to facilitate especially the secondary market.The investors need to be internally capable of buying and managing the securities.At present,secondary

130、 market liquidity for these instruments is not comparable to the liquidity for traditional instruments,so both buy and sell sides need to learn together from deals like this one.LM:What about the cash side of the transaction?TM:At this point,theres no standardised,scalable distributed ledger technol

131、ogy-based central bank money,so all the payment flows for this deal are processed off-chain.However,the European Central Bank is currently doing exploratory work for wholesale settlement and well be an active participant in the second wave of that.We expect our next blockchain-based digital bond to

132、be issued using the Bundesbank trigger solution.That will allow us to achieve delivery-versus-payment settlement.This is an important component.We believe that blockchain-based digital bonds are not going to become viable unless there is a cash solution that is capable of communicating and exchangin

133、g information with the DLT the asset is on.The ECBs exploratory work is very important for this.LM:Tell us more about the technology you used?TM:The bond was issued on polygon,which is a layer 2 solution on Ethereum.Its a public and permissionless blockchain.That wasnt an active choice for us.Its si

134、mply the blockchain protocol that our cryptosecurities registrar is running the register on.Another major deal under German law a siemens 60m bond was also issued on Polygon.A market standard regarding the different types of blockchains has not yet emerged.Trying different protocols and testing the

135、benefits of each will be part of the learning process.LM:How did you select your registrar and your banks?TM:Given the German Electronic Securities Act(eWpG)came into place in June 2021 and thus is still very young,there arent many licenced registrars yet.We looked at comparable transactions and,bas

136、ed on the Siemens deal,Cashlink seemed like the market leader.We worked with four bookrunners.The rationale behind the composition of the syndicate was to have representatives from all German banking sectors:co-operative,savings,large universal banks and private banks.LM:What other improvements are

137、necessary for this asset class to take off?TM:Besides the need for DLT-based central bank money,secondary market liquidity is clearly one of the most important points in the scalability of blockchain-based digital bonds.The bond we issued is over-the-counter tradable with market-making capabilities

138、from the bookrunners who quote on Bloomberg.However,we need a number of different aspects to increase and strengthen the secondary market,such as ECB eligibility.Moreover,trading venues are not yet fully ready to handle blockchain-based digital bonds and we need crypto custodians to be involved,too.

139、For our deal,investors dont have to interact with the blockchain directly.They have custody relationships with the bookrunners and DZ BANK will keep hold of the tokens throughout the lifecycle.The use of technology allows us to shorten settlement cycles,but we need even more mature and fully develop

140、ed infrastructure,which could make settlement even quicker.Tim Meirer,senior manager,capital market innovation,KfWThe process is much more efficient than the paper-based system.Going forward,we want to make this the standard way of issuing our bonds.Normen Gnther,senior manager,capital markets,KfW18

141、OMFIF DIGITAL ASSETS 202418OMFIF DIGITAL ASSETS 2024OMFIF:Why did Slovenia decide to do this experiment?What were the main reasons and motivation behind this transaction?Marjan Divjak:In the management of public debt,Slovenia is committed to transparency and efficiency and follows innovative approac

142、hes to achieving these goals.The Treasury received the Government Risk Manager of the Year 2017 award for its innovative approach to public debt risk management.The pioneering use of new technologies in sovereign debt management fits well with our debt management strategy.OMFIF:Who were the key part

143、ners and institutions that you worked with in this transaction and what role did they play?MD:This important step for Slovenia was part of the European Central Banks money settlement experimentation programme,and BNP Paribas played an important role in this.BNP Paribas and the Banque de Frances solu

144、tions contributed to the success of this historic transaction.Banque de Frances tokenised cash solution is the only solution in the ECB trial that is completely on-chain and thus fully interoperable with the use of smart contracts for trading and/or settlement without T2 intermediation.While it is t

145、rue that such setup adds another layer of complexity,we believe it should be considered as a possible development of distributed ledger technology platforms for securities trading.In addition to that BNP Paribas is at the top of the ranking list of banks market-makers for Slovenian bonds.OMFIF:How f

146、ar are we from digital bonds becoming a reality and part of issuance programmes?MD:I think there is still some way to go.However,I believe that it will soon be possible to offer the reference bond of Slovenia to investors in both traditional and digital forms of settlement.OMFIF:What are the main be

147、nefits of issuing digital bonds,particularly for a debt management office?MD:Issuing bonds based on DLT has in the long run the strategic benefit of expanding the investment base for Slovenias bonds.These types of issuance attract the international attention of technologically advanced investors and

148、 younger generations.Investors,on the other hand,can invest in settlement systems of their choice.DLT-based solutions have the potential to offer greater market efficiency and transparency.They could also be cheaper for both issuers and investors.Without diminishing the importance of traditional sec

149、urities settlement and custody systems,the development of new systems,in our view,is important from the point of view of efficiency and security in bond settlement.We will continue with this approach.Expanding the investor baseIssuing bonds based on DLT has in the long run the strategic benefit of e

150、xpanding the investment base for Slovenias bonds.Marjan Divjak,director general of the Treasury directorate at Slovenias Ministry of FinanceSLOVENIA BREAKS GROUND WITH FIRST EUROPEAN SOVEREIGN DIGITAL BONDOMFIF spoke to Marjan Divjak,director general of the Treasury directorate at Slovenias Ministry

151、 of Finance,and Amlie Frmy,innovation chief operating officer for global markets at BNP Paribas,about the first sovereign digital bond issuance in Europe and the banks role in helping Slovenia structure the deal.OPINION OMFIF.ORG/DMI19 OMFIF.ORG/DMI19OMFIF:Could you summarise the key aspects of the

152、placement and how it was structured?Amlie Frmy:This transaction was issued off the European Central Banks wholesale central bank money settlement experimentation programme.From our side,we did a few transactions for the bank last year as well as one in June.The Slovenia digital bond and the transact

153、ions for BNP Paribas were connected to the Banque de France platform,which provided the experimental cash tokens.For us,this was the opportunity to do a transaction with on-chain settlement,as well as a great opportunity to access the digital euro.The ECBs Central Bank Money(CeBM)trial started in Ma

154、y and will run until November where market participants can access the digital euro through three different settlement solutions in Banque de France,Bundesbank and Banca dItalia.We will be testing all three solutions as part of the programme,and BNP Paribas Global Markets is planning another transac

155、tion with the Bundesbank solution.OMFIF:Why was Slovenia keen to do this transaction?Could digital bonds bring about significant cost-savings for issuers?AF:Slovenia was very motivated to demonstrate how innovative it is by opening up this space in Europe from a sovereign standpoint.We were contacte

156、d in late 2023 to work with Slovenia to proceed with a digital bond as part of the ECBs CeBM with access to a cash central bank digital currency and settlement with a traditional currency.Digital assets are at an early stage so there is no cost reduction at this time but we can see how in the future

157、 it could provide real benefits from an operational perspective.These experiments enable sovereigns to test the set-up and market.OMFIF:How did investors engage in this transaction?AF:We had a few types of investors who relied on custodians;others will prefer to directly settle through Neobonds,BNP

158、Paribas Global Markets private tokenisation platform,and the Banque de France platform.OMFIF:Do you have a preference between private and public blockchain?AF:At this stage,private technology allows financial institutions to meet current regulatory requirements but there are also opportunities with

159、public blockchain.We want to be in a position to get familiar with both technologies.Neobonds is a private blockchain,canton-based and as secure as any other service or platform used within the bank.It is therefore fully permissioned.OMFIF:What were the lessons learned from this experiment?Do you ex

160、pect other sovereigns and issuers to follow Slovenia?AF:The real positive from these transactions is the speed of settlement and the capacity to settle immediately.We have also identified that it is probably achievable to have fewer intermediaries with the use of smart contracts and being able to au

161、tomate coupon payments.This will bring significant improvements to the current bond issuance process.We hope others will follow.We have received a lot of questions since the beginning of the ECBs CeBM about accessing the digital euro and the benefits for not just sovereign,supranational and agency b

162、orrowers but other issuers,as well as investors.They all want to be educated in this.We have been talking about digital assets for a while but the pace of development has been quite slow until now.With the ECBs CeBM,we see an acceleration by all market players who want to learn more about these prod

163、ucts and more questions being asked.It is quite encouraging to see this traction.We are open to the possibility of making use of the European Union blockchain pilot regime,but at present there are no registered or licenced trading or settlement systems.Until those licences are granted,we cant experi

164、ment in that area,but its something were interested in exploring.The real positive from these transactions is the speed of settlement and the capacity to settle immediately.Amlie Frmy,innovation chief operating officer for global markets at BNP ParibasBreaking ground20OMFIF DIGITAL ASSETS 20242.CASH

165、 SETTLEMENTRealising the value of tokenised cash will require an overhaul of the cash settlement infrastructure.KEY FINDINGS1.Market participants would prefer wholesale central bank digital currencies for settling most securities transactions over private tokenised money solutions,with 59%of survey

166、respondents selecting this option.2.Other forms of tokenised cash,such as stablecoins and tokenised money funds,will have their own use cases and applications,but they are not yet ready for financial markets.3.The adoption of tokenised cash will depend on a clear and robust regulatory framework.Cred

167、it ratings could also help to boost investor confidence and ensure widespread adoption.SOLVING FOR CASH IN A DIGITAL WORLD OMFIF.ORG/DMI21TOKENISED cash,or digital representations of traditional fiat currencies,is not merely a convenient alternative form of money but a fundamental building block for

168、 the digital asset ecosystem.Respondents to OMFIFs survey of market participants generally expect blockchain to become an important component of financial markets,with 42%agreeing it will be the dominant form of financial market infrastructure(Figure 2.1).As the development of tokenised securities a

169、nd blockchain-based financial instruments accelerates,one thing is becoming clear:realising the value of this kind of infrastructure requires an overhaul of the cash settlement infrastructure.Allowing cash and security tokens to exist within the same platform mitigates settlement risk.It enables cas

170、h and assets to be exchanged on a delivery-versus-payment basis.Atomic settlement where settlement of one leg of a transaction cannot take place without settlement of the other mitigates risk,freeing up liquidity that must otherwise be posted as collateral against the risk of trade failure.This also

171、 raises the question of whether instant settlement is desirable.For transactions to settle instantly(rather than on a net basis at end of day,for example)requires them to be pre-funded,which may prove even more costly on a liquidity basis than the present settlement model.However,while instant settl

172、ement may not be appropriate for some asset classes,tokenised cash can settle versus tokenised assets on demand,allowing the parties more flexibility in managing liquidity and giving them time for due diligence and regulatory compliance.Furthermore,tokenised cash offers the opportunity to streamline

173、 the process of managing payments throughout a given transactions entire life cycle,reducing friction in the digital asset marketplace by lowering costs.Delivering a solution for the settlement of cash is a core part of the development of a digital asset ecosystem.Tim Meirer,senior manager,capital m

174、arket innovation at KfW,said We believe that blockchain-based digital bonds are not going to become viable unless there is a cash solution that is capable of communicating and exchanging information with the distributed ledger technology where the asset is.Stablecoins:promising but not yet ready The

175、re are several different categories of tokenised cash solutions already present in the digital asset ecosystem.The first category is probably the most well-known:stablecoins.These come in multiple forms but,at root,they are cryptocurrencies designed to maximise price stability.Often,this is accompli

176、shed by pegging a given stablecoins ONLY 23%OF MARKET PARTICIPANTS FAVOUR STABLECOINS FOR CASH SETTLEMENT OF SECURITIES TRANSACTIONS.Source:Digital assets and market infrastructure survey 2024Figure 2.1.Market participants expecting blockchain takeoverDo you agree that blockchain will become the dom

177、inant form of infrastructure for financial markets?Share of respondents,%Agree Disagree Net-20-100102030405022OMFIF DIGITAL ASSETS 2024value to a stable asset.Tether,the worlds largest stablecoin provider,issues one stablecoin that is pegged to the value of the US dollar and one that is pegged to th

178、e price of gold.MakerDAOs Dai stablecoin is a crypto-collateralised stablecoin,pegged to the dollar but backed by Ethereum and other cryptocurrencies worth about 155%of the value of Dai in circulation.Algorithmic stablecoins are not necessarily tied to any reserve asset;their value is kept stable th

179、rough algorithmically controlled supply,not unlike a central bank.However,they do not have central banks key advantages of established monetary policy and credibility as recognised issuers of legal tender and are unlikely to prove suitable for institutional adoption.Stablecoins have come under close

180、 scrutiny from regulators and policy-makers.The US Senate has introduced a bill to create a regulatory framework for stablecoins:the Lummis-Gillibrand Payment Stablecoin Act would prohibit stablecoins being issued by anyone other than a registered non-depository trust or an authorised depository ins

181、titution.The European Union has already gone further.Its 2023 Markets in Crypto-Assets Regulation essentially banned algorithmic stablecoins,required other stablecoins assets to be held by a third party and established strict liquidity regulations,requiring reserves to be liquid and held in a 1:1 ra

182、tio to stablecoins.Regulatory suspicion may impede the wider adoption of stablecoins for institutional use.There are also a number of unresolved,fundamental questions regarding stablecoins.It is unclear whether a stablecoin ultimately represents a claim on the reserves of assets held by the issuer o

183、r a claim on the credit of the issuer.In the first case,the ability to redeem a stablecoin is independent from the fortunes of the issuer.In the second case,the stablecoin becomes much closer to a traditional bank deposit and,if the issuer goes bankrupt,holders may find themselves unable to redeem t

184、heir holdings for fiat.This is a risk in traditional banking,but users are protected by state deposit guarantee schemes.In either case,the robustness of the instrument depends on transparently audited reserves.This can bring its own risks.The collapse of Silicon Valley Bank,which held a substantial

185、portion of the reserves backing Circles USDC instrument resulted in its peg breaking(in the secondary market.No USDC were redeemed at the issuer for under$1).Nevertheless,this is a vulnerability that may hurt stablecoin adoption,particularly among institutions.Institutions confidence in stablecoins

186、might be bolstered if they can obtain credit ratings.Transparent,robust ratings from well-known institutions might improve trust in the instrument as a means of settlement.It should be noted that even the fact that they need a credit rating differentiates them from central bank digital currencies,wh

187、ich offer a means of settlement entirely free of credit risk.However,it is possible that not every jurisdictions central bank will choose to issue a CBDC suitable for broad institutional use.Scaling stablecoins may also prove challenging depending on the composition of their reserves.To preserve the

188、 level of stability necessary for institutional confidence,stablecoins will need to be backed by combinations of cash and high-quality liquid assets particularly short-term government bonds.The scale of these assets required to back a stablecoin large enough to be valuable for use in capital markets

189、 use would demand a substantial proportion of these assets.Were a long way from the systemic adoption of stablecoins,said Natalie Lewis,partner,Travis Smith.Tokenised bank money popular for corporate use The second category of tokenised cash solutions is tokenised commercial bank money.These tokens

190、are digital representations of commercial bank deposits,which have the advantage of being a form of money many are already familiar with and can offer a flexible and scalable solution for tokenised cash.TBM adoption would prevent a scenario in which non-bank digital cash solutions proliferate,potent

191、ially fragmenting the money supply with non-fungible cash tokens.They would also most likely be regulated under existing electronic money rules and would not require specific regulation to deliver a new form factor of an existing type of money.Many banks are presently exploring this solution notably

192、 a consortium comprising DZ BANK,Deutsche Bank,Commerzbank,Unicredit and Helaba.But there are significant challenges.For most institutional capital markets,market participants generally prefer to transact in risk-free central bank money,rather than a form of money that represents a claim on another

193、financial institution.This requires holders to price risk for each TBM and to hold collateral against counterparty default.This may make TBM more suitable for corporate payments,rather than for use in financial markets.The UKs Digital Securities Sandbox enables the use SYNTHETIC CBDCsOne potential s

194、olution that addresses some of the challenges stablecoins face is the creation of synthetic central digital bank currencies.Each stablecoin would be backed by reserves of fiat currency held at a central bank at a ratio of 1:1.In effect,a synthetic CBDC would leverage private sector issuance of digit

195、al currencies but with full backing by central bank reserves.This model would ensure that the stablecoin maintains a steady value,as it is fully backed by central bank reserves and would potentially reduce the risks associated with the issuers creditworthiness,providing confidence to users and regul

196、ators.One firm attempting to solve some of the issues associated with stablecoins is Fnality International,a company developing peer-to-peer digital payments based on blockchain technology.Fnality has launched a sterling payments system,which allows participants to settle the cash leg of securities

197、transactions in tokens backed by reserves held in a Bank of England omnibus account.To preserve the level of stability necessary for institutional confidence,stablecoins will need to be backed by combinations of cash and high-quality liquid assets particularly short-term government bonds.OMFIF.ORG/D

198、MI23of TBM(and stablecoins)for cash settlement of DLT-based securities transactions,which may make the solution acceptable for market participants.Central bank money for a new eraCentral bank money is the most stable and secure form of cash.Figure 2.2 shows that,at present,59%of survey respondents p

199、refer it over any other private tokenised cash alternative.While this might develop as regulations and technology gradually change attitudes,it is clear that central bank money is regarded as having a unique importance in financial markets.Delivering it in a form suitable for widespread adoption in

200、capital markets is a challenge central banks are rising to.Multiple pilot programmes for wholesale CBDCs are already in development,including a token deployed by the Swiss National Bank to settle digital currency transactions,and a forthcoming pilot by the Monetary Authority of Singapore aimed at fa

201、cilitating domestic interbank payments.The Swiss pilot programme has been extended for a further two years,with a goal of including more financial institutions and a wider range of transactions.The project,now named Helvetia III,relies on tokenised municipal bonds from Basel-Stadt,Zurich,Lugano and

202、St Gallen,settled in wholesale digital Swiss francs.The European Central Bank is conducting a series of experiments in delivering a means of settling wholesale financial transactions in central bank money using DLT platforms.The programme will run until November 2024.Amlie Frmy,innovation chief oper

203、ating officer for global markets at BNP Paribas said:We will be testing all three of the ECBs central bank money solutions during the programme.There are three different experiments taking place.First,the Bundesbank is experimenting with the Trigger solution:a DLT infrastructure provides a technical

204、 bridge between DLT platforms and T2,the euro areas real-time gross settlement system.KfW announced that it intends to issue a bond using this system in August 2024.Second,Banca dItalias Target Instant Payment System Hash-Link system can interoperate with market DLT platforms via an application prog

205、ramming interface gateway.Third,the Banque de France is trialling DL3S a system in which central bank money is held in a DLT-based account held on a DLT platform a wholesale CBDC.Slovenias blockchain bond,issued in July 2024,made PROJECT AGORAmong the BISs most important projects is Agor,which aims

206、to unite tokenised bank money and tokenised central bank money on a single platform.The concept draws heavily on the idea of the Regulated Liability Network,which proposes using DLT to enable the recording,transfer and settlement of regulated liabilities central bank,commercial bank and e-money deno

207、minated in national currencies.It aims to combine the purported benefits of DLT,such as programmability and operational efficiencies,with the existing legal and regulatory frameworks governing traditional financial instruments.RLN proposes a world in which regulated entities tokenise the liabilities

208、 on their balance sheets.Inter-bank transfer would involve messaging between institutions and the extinguishing of tokens at the senders institution and the minting of tokens at the recipients institution,with final settlement handled at the FMI level.By tokenising regulated liabilities and recordin

209、g them on a shared ledger,RLN could potentially streamline cross-border payments,enhance liquidity management and foster innovation in financial services.The proposed network would adhere to established regulatory principles and standards,ensuring compliance with KYC and AML and sanctions regulation

210、s.Source:Digital assets and market infrastructure survey 2024Figure 2.2.Market participants prefer CBDCs for cash settlement of securities transactionsWhat do you favour as a solution for cash settlement in financial market transactions involving tokenised assets?Share of respondents,%59%of responde

211、nts prefer CBDCs over any other private tokenised cash option.CBDC 59%Bank-issued stablecoin 23%Tokenised fund unit 14%Non-bank issued stablecoin 0%Other 4%24OMFIF DIGITAL ASSETS 2024use of the Banque de France solution(see page 32).There are many factors to consider in responsibly implementing wCDB

212、Cs.Security risks are paramount,as the digital infrastructure that enables them is potentially vulnerable to malicious actors engaging in cyberattacks and fraud.Similarly,operational risks like electrical outages,natural disasters and loss of network communication could threaten the stability of the

213、 system.However,the potential advantages of wCBDCs are significant.By offering relatively frictionless exchanges,wCBDCs could revolutionise wholesale payments and settlements between banks.For example,Project Cedar,a wCBDC prototype developed by the Federal Reserve Bank of New York,found that its bl

214、ockchain-enabled payments system was able to settle foreign exchange transactions in under 15 seconds and improve the safety of these transactions by using separate,homogenous ledger networks including both private and central sector banks.Faster and safer payments will reduce costs for users,and br

215、inging multiple currencies into a single system would vastly improve the transparency of the financial system by allowing direct transactions between participants.Many of these benefits apply to other forms of tokenised money,but what makes the use case of CBDCs valuable is their status as the ultim

216、ate settlement asset:there are no credit risks attached to a transaction in central bank currency,as well as no liquidity constraints.According to the Principles for Financial Market Infrastructures set by the Committee on Payments and Market Infrastructures and the International Organization of Sec

217、urities Commissions,settlement should take place in central bank money whenever possible.Recent updates have begun to take the possibilities of wCBDCs into account.Tokenised funds:familiar but riskyThe final category of tokenised cash is tokenised fund units,digital shares of money market funds.Thei

218、r main advantage over other digital assets is that money markets are already a very familiar and clearly regulated investment vehicle,potentially providing a stable and versatile form of tokenised cash for institutional investors.Pensions or sovereign funds that seek reliable supplies of short-term

219、liquidity could tokenise their assets into TFUs,rather than rely on deposits of fiat currency.The UK Treasury has suggested that TFUs would be particularly useful as collateral,due to the much faster settlement times compared to traditional fund units,the fact that TFU transactions are recorded on a

220、 distributed ledger,providing an immutable record,and their interoperability with many different platforms and systems.There are two main considerations holding up the wider adoption of TFUs.The first,which is a consideration common to all tokenised cash alternatives,is a relatively uncertain regula

221、tory landscape,which may evolve differently across jurisdictions.The second is the risk of redemption runs,where large numbers of investors simultaneously attempt to redeem their TFUs for cash.These can lead to liquidity crises within a given money market,with delays or even the inability to offer r

222、edemptions.Runs can also lead to asset prices being forced downward,causing losses for investors and depressing confidence in the market.While the risk of redemption runs is hardly unique to TFUs,the advantages offered by tokenised cash alternatives the reduction of friction in transactions and easi

223、er cross-institutional and cross-border transactions exacerbate the potential of a run occurring.The path to global coherenceThe future of tokenised cash lies in achieving global standards and interoperability.This will require extensive collaboration between central banks,commercial banks,fintech f

224、irms and regulators on a number of different fronts.First,common standards must be established that ensure the fungibility and interchangeability of different tokenised cash formats,which includes meeting the challenges of technological and operation implementation.Potential solutions each come with

225、 challenges.Blockchain bridges,which allow tokens from one blockchain to be used on another,are vulnerable to hacking as well as being complex and resource intensive.Locking tokens on one platform and creating representations of them on another chain pose the challenge of ensuring the validity of re

226、presentations and maintaining liquidity on the original platform.It is unclear how robust either method is,due to the issues mentioned above,regulatory questions and the fact that neither has yet demonstrated the ability to scale seamlessly.Second,regulatory challenges must be met head-on to prevent

227、 markets from splintering or jurisdictions from engaging in race to the bottom regulatory arbitrage.This is more of a concern for retail markets rather than institutional ones,but the legal and logistical issues posed by a patchwork landscape of regulation will still create risks for institutional m

228、arkets.Finally,these standards and regulatory frameworks must permit experimentation with and exploration of new technologies and use cases for what is still a novel technology.These challenges are beginning to be met.Swift has conducted a series of experiments in collaboration with several financia

229、l institutions that test how Swifts existing infrastructure could be adapted to the tokenised asset market.The experiments found that Swifts systems could be adopted to serve as a single access point that links tokenisation platforms,cash leg payment types and participants interacting with tokenised

230、 assets.In the past year,many jurisdictions have moved to publish and implement guidelines for digital assets,including the European Union,the UK,Japan,Hong Kong,Singapore and the United Arab Emirates.Established banks and financial services companies are also adding digital asset capabilities,as to

231、kenised cash is increasingly in circulation and high interest rates have boosted the importance of high capital efficiency.While there is much work still to be done,the tokenised cash future is nearly here what will matter is implementation.BY OFFERING RELATIVELY FRICTIONLESS EXCHANGES,WCBDCs COULD

232、REVOLUTIONISE WHOLESALE PAYMENTS AND SETTLEMENTS BETWEEN BANKS.FUTURE OF PAYMENTSA new generation of payments takes shapeOMFIF is excited to present our latest Future of payments report,featuring an extensive survey of central banks uncovering their beliefs about cross-border payments and the variou

233、s solutions being proposed.REGISTER HERE Digital MonetaryInstitute26 November 202426OMFIF DIGITAL ASSETS 202426OMFIF DIGITAL ASSETS 2024ExchangesNo.of dealsVolume$m1Luxembourg Stock Exchange81383.103152SDX81331.400853Hong Kong Stock Exchange4751.2234ExchangesNo.of dealsVolume$m1Clifford Chance51070.

234、85222Lenz&Staehelin1375.03753Linklaters6338.3414Ashurst6318.8615Allen&Overy7196.3921IN the debt capital markets,many of the worlds leading banks,technology companies,advisers,consultants,law firms and platforms are devoting significant resources to the development of digital bonds and the creation o

235、f a market that brings speed and efficiency for issuers and investors.To date,that investment has resulted in a growing,but still limited,number of digital bond deals,many of which have been important pilots and learning processes for those involved.Even as the technology and infrastructure of distr

236、ibuted ledger technology-based and other forms of digital bonds develop and a tipping point for widespread adoption fast approaches,its not easy to assess which firms are leading the way in this future world of finance.Traditionally in bond markets,league tables have provided an invaluable insight i

237、nto which banks do the most business,and they are used as the accepted form of EXCHANGESLEGAL ADVISORS Top by deal number Top by deal number3.BLOCKCHAIN BONDS RANKINGSA global ranking of digital bond deals since 2022LEADING THE FUTURE OF FINANCE OMFIF.ORG/DMI27 OMFIF.ORG/DMI27ExchangesNo.of dealsVol

238、ume$m1EIB31104.54452HKSAR Government5853.1493UBS2539.27254World Bank2328.9565Lugano city2220.7686Union Bank of the Philippines1209.28717Societe Generale5178.101958KfW2129.07029Canton of Basel City1120.0223510Canton of Zurich1114.307ExchangesNo.of dealsVolume$m1Crdit Agricole6620.27232SEB1469.5873Com

239、merzbank1223.0564Basler Kantonalbank3195.80101675UBS6191.20956676HSBC6171.33087Goldman Sachs6163.079428Zurcher Kantonalbank3152.0949ICBC4125.203910Bank of China5112.5281667ExchangesNo.of dealsVolume$m1so|bond1939.1742HSBC Orion5813.15993SDX5684.721354STACS1209.28715GS DAP by Goldman Sachs2205.35966S

240、G Forge5178.101957SWIAT4109.1228Cashlink1107.9169R3s Corda1107.40710Euroclear D-FMI DLT platform1105.9ISSUERSBOOKRUNNERSPLATFORM PROVIDERSaccreditation.The universe of digital bonds has now reached sufficient scale to create league tables in this important market.OMFIFs Digital Monetary Institute ha

241、s thoroughly researched and analysed all digital bond deals launched in the past two years.From this research,we have created league tables based on accepted models(such as equal apportionment)that rank by volume and number of deals for the period of 1 January 2022 to 25 July 2024.These league table

242、s are not just for bookrunners and issuers,but also for law firms,platform providers and exchanges that have participated in the deals to date.Each table is interesting in its own way.Issuers have to take a leap into the unknown,entering a new medium without compromising the integrity of their debt

243、franchise.Platform providers do a great deal of the technical heavy lifting of creating the new format,while legal advisers work to ensure the new instruments are compliant with existing regulation.Although the job of a bookrunner changes little with the new format,their participation in digital dea

244、ls might indicate a desire to learn more and develop experience.Finally,we have exchanges,which play a pivotal role in creating the infrastructure for a liquid secondary market for digital bonds.Institutions from Switzerland and Hong Kong are well-represented in the results,thanks in no small part t

245、o the hand that their monetary authorities are taking in the digitalisation of the markets.As monetary authorities around the world follow suit,we will see their markets burst into life.This market is likely to rapidly mature over the coming years.We expect the number of participants to grow,but tho

246、se who have taken early leads may have acquired early advantages of experience and comfort with the operational challenges of a new medium.In one area in particular,a few institutions have taken an early lead:some legal advisers have carved out a reputation for their digital bond services.Perhaps ot

247、her categories will follow suit in years to come.Many market participants are just dipping their toes in the water.For some,that means only one or two deals,with a great deal of preparation time.Others have participated in many more deals but of smaller sizes.Which strategy will prove more fruitful

248、in building up the experience and expertise required to excel in this market will become clear over the coming years.Top by deal number Top by deal number Top by deal number28OMFIF DIGITAL ASSETS 2024HONG KONG AS A DIGITAL ASSETS HUBOPINIONOMFIF:What do you see as the key advantages to adopting DLT

249、infrastructure in financial markets?Georgina Lok:What motivated the HKMAs work in bond tokenisation was the value of embracing innovation to further develop the financial market.We assisted the Hong Kong Special Administrative Region government in issuing the worlds first tokenised government green

250、bond in 2023,followed by a second issuance in February 2024.This was the worlds first multi-currency(Hong Kong dollar,renminbi,US dollar and euro)digital bond.To share our experience,we published a report setting out the considerations of our first issuance,as well as the potential benefits offered

251、by DLT in bond markets.In our view,a key advantage of DLT in financial markets is to bring different parties(in the context of a bond issuance:the issuer,underwriting banks,custodians and agents)onto a single platform,providing an immutable,single source of truth that eliminates the need for synchro

252、nising information across different parties.DLT and smart contracts also hold the potential to automate workflows(in the context of a bond life cycle,this could include issuance and settlement,principal repayment and coupon calculations),resulting in efficiency gains,lower costs and enhanced transpa

253、rency.For instance,our digital bond issuances achieved shortened settlement cycles from the typical five business days(T+5)to one business day(T+1).OMFIF:In many jurisdictions,we are seeing individual platforms springing up.Are you concerned about fragmentation?What do you see as the HKMAs role in e

254、stablishing market standards?GL:It is encouraging to see the market actively exploring and adopting technology innovation.To fully reap the benefits of tokenisation and enhance liquidity for a robust market,interoperability will be key.Generally speaking,there are two angles to interoperability:the

255、interoperability of digital platforms with existing market processes and systems,and interoperability across digital platforms.In our tokenised issuances,we attempted to address both angles.For instance,our second issuance featured a groundbreaking investor access model.This allowed investors to acc

256、ess the bond via traditional market infrastructure based on largely business-as-usual processes through Hong Kongs central securities depository for debt securities,the Central Moneymarket Unit,and its existing linkages with Euroclear and Clearstream.This lowered the technological and operational ba

257、rriers for investors,making it more accessible to a wider range of investors.Our second issuance also adopted the International Capital Market Associations Bond Data Taxonomy.This is a set of standardised and machine-readable language for a bonds key economic terms,dates and relevant information,whi

258、ch could facilitate more efficient information exchange between parties,systems and platforms when adopted more broadly.Throughout our tokenisation journey,we have been collaborating with a diverse range of industry partners to facilitate knowledge exchange.We believe this is crucial for establishin

259、g common ground and enhancing our ecosystem,thereby supporting collaborative development.OMFIF:DLT infrastructure comes in many varieties(private,permissioned,public)Georgina Lok,head of market development at the Hong Kong Monetary Authority,spoke with OMFIF about the benefits of distributed ledger

260、technology and the HKMAs experience of issuing tokenised bonds.TO FULLY REAP THE BENEFITS OF TOKENISATION AND ENHANCE LIQUIDITY FOR A ROBUST MARKET,INTEROPERABILITY WILL BE KEY.Georgina Lok,head of market development at the Hong Kong Monetary Authority OMFIF.ORG/DMI29and each has its own advantages

261、and disadvantages.Can you discuss the HKMAs thoughts on the different protocols?GL:Both public and private blockchains have their advantages,depending on the use case and objective.For instance,public blockchains generally offer greater transparency and scalability,while private blockchains generall

262、y provide a higher degree of data confidentiality.Conventional bonds are typically traded over the counter,which means that trading information,such as price,volume and frequency,as well as holding information,remains private.It is not uncommon for digital bonds to be issued on private,permissioned

263、blockchains.At the same time,there are also middle-ground models that strive to increase transparency while preserving privacy,like registering digital bonds on a private blockchain with a mirrored record on a public blockchain on an anonymised basis.OMFIF:Our survey indicates a strong preference fo

264、r wholesale central bank digital currencies as a means of settling the cash leg of tokenised securities trades.What is your thinking on this topic?GL:There are various forms of payment tokens that can be used to settle tokenised securities trades.These include CBDCs issued by a central bank,stableco

265、ins or tokenised deposits issued by commercial banks.Each has its own merits and implications.For example,commercial tokens can provide more flexibility in allowing customisation but may also be subject to higher counterparty,credit,operational,volatility and liquidity risks.In our first tokenised g

266、reen bond issuance,Hong Kong dollar cash tokens were used to settle the tokenised bond on the digital platform.The Hong Kong dollar cash tokens were minted by the HKMA in exchange for fiat cash provided by banks.We will continue to explore potential synergies across different areas of technology inn

267、ovation,including between bond tokenisation and the use of CBDCs.OMFIF:What are your strategic aims for the advancement of capital markets infrastructure going forward?GL:We have come a long way since the beginning of our tokenisation journey in 2021 where we concept-tested tokenised green bonds in

268、Hong Kong with Project Genesis in collaboration with the Bank for International Settlements Innovation Hub Hong Kong Centre.We have since moved beyond the proof-of-concept stage with real-money transactions,showcasing Hong Kongs flexible and conducive environment for innovative issuance formats with

269、 our first issuance,and achieving wider market participation and scalability with our second,the size of which was comparable to benchmark issuances in traditional format.However,we are not stopping here.Moving forward,we aim to continue soliciting feedback and ideas from the industry.We want to col

270、laborate with stakeholders to enhance our ecosystem and explore further use cases to promote the adoption of this technology,with a view to strengthening Hong Kongs position as a global digital assets hub.We want to collaborate with stakeholders to enhance our ecosystem and explore further use cases

271、 to promote the adoption of this technology,with a view to strengthening Hong Kongs position as a global digital assets hub.30OMFIF DIGITAL ASSETS 2024CENTRAL BANKS AND THE FUTURE OF MONEY OPINIONOMFIF:Our survey indicates a strong preference from market participants to be able to settle tokenised s

272、ecurities transactions in central bank money.Can you expand on the SNBs work in this area?Antoine Martin:Financial institutions prefer to settle virtually all large-value transactions in central bank money.This is true for both traditional and tokenised financial transactions.From a financial stabil

273、ity perspective,this preference is welcome as private-sector actors can hardly create and maintain a stable and efficient monetary system on their own.Only a central bank can provide risk-free money.Just like traditional financial instruments,tokenised financial instruments require a means of paymen

274、t that is widely accepted and has a stable value.To understand risks and benefits,the SNB has worked with market participants and field experts to explore the suitability of three models for settling tokenised assets with central bank money.Through experiments,pilots and analysis,we investigated who

275、lesale central bank digital currency,a real-time gross settlement link and bankruptcy-remote private money.Wholesale CBDC,a tokenised form of central bank money issued by the SNB,is integrated directly into the DLT infrastructure that also settles the tokenised securities.The tight integration allow

276、s for secure and efficient atomic settlement.The RTGS-link synchronises the RTGS system and the distributed ledger technology platform that settles tokenised securities using the delivery-versus-payment mechanism.We learned that while it is possible to exchange money and goods simultaneously on a Dv

277、P basis in distinct infrastructures,the challenge remains how to coordinate processes across sometimes disparate systems.The bankruptcy-remote private money enables integrated settlement,like wholesale CBDC.In contrast to wholesale CBDC,this form of money is private-sector Swiss franc token money,bu

278、t privileged under bankruptcy law.It is structured legally in such a way that,in the event of bankruptcy of the token issuer,it would have a risk profile comparable to that of central bank money.All three models raise operational,legal and policy questions.These policy questions concern,for example,

279、the requirements for third-party platforms,the risks of liquidity fragmentation arising from the issuance of wholesale CBDC or bankruptcy-remote money,and the governance arrangements needed around these settlement arrangements.OMFIF:Can you give your thoughts on the future role of central securities

280、 depositories in the market?AM:Today,financial market infrastructures are typically tailored to a specific type of asset and a specific use case,including payments systems,securities settlement systems and currency settlement systems.In the case of CSDs,their four core economic functions have remain

281、ed largely unchanged over the years,despite significant technological advancements,such as the dematerialisation of securities.These functions comprise issuance,central safekeeping of securities,Antoine Martin,member of the governing board at Swiss National Bank,spoke with OMFIF about how tokenised

282、assets are still in a niche,but their growth relies on the private sector finding valuable use cases that drive adoption.Decisions made by central banks regarding the cost of settlement in central bank money on token platforms will influence the spread of tokenisation in the financial system.Antoine

283、 Martin,member of the governing board at Swiss National Bank OMFIF.ORG/DMI31their mobilisation and processing of securities events.With tokenisation,this might change.Tokenisation may enable the consolidation of various types of assets on a single platform in the future and their settlement includin

284、g money itself as a settlement asset.Furthermore,tokenisation bears the chance of efficiency gains.Standardised representation in digital form can simplify the process of issuing,transferring and storing securities.The automation of business processes through smart contracts could lead to further ef

285、ficiency gains.Finally,a uniform,tamper-proof database could simplify the recording of asset values across FMIs and internal systems of financial institutions.OMFIF:What do you think the journey to DLT becoming a widespread market utility looks like?AM:Currently,tokenised assets on DLT platforms are

286、 still in a niche.The few existing regulated DLT platforms,such as the SDX in Switzerland,have little economic significance at this stage.Like every financial market,tokenised asset markets are driven by network effects.Novel platforms can only generate the necessary gravity if they can demonstrate

287、their innovation potential against exiting arrangements.This is why the SNB has decided to support private sector innovation through the issuance of wholesale CBDC in the above-mentioned experiments.The adoption of tokenised asset markets within the regulated financial system will be driven by a mul

288、titude of factors.The promoting factors include,in particular,expected efficiency gains,new business opportunities,better risk mitigation and robust legal and regulatory frameworks.On the other hand,hindering factors include significant up-front investment expenditures,non-trivial coordination probl

289、ems among market participants and the prevailing lack of harmonisation of legal and regulatory frameworks on an international level.Also,decisions made by central banks regarding the cost of settlement in central bank money on token platforms will influence the spread of tokenisation in the financia

290、l system.OMFIF:What is your perspective on the different blockchain architectures(private,permissioned,public)?AM:The design of DLT platforms may or may not impose access restrictions,and it may provide users with varying degrees of participation in the consensus process for transaction and data val

291、idation.Hence,all DLT architectures and individual projects must be carefully analysed by the central bank to ensure that they meet a central banks requirements for the issuance and use of central bank money as a settlement asset,including central bank legal,operational and governance requirements.F

292、or public,permissionless DLTs,it must be ensured that the required controls by the central bank can be implemented,for example,on access to central bank money for the settlement of transactions between involved parties.Technical solutions may be possible,as demonstrated by Project Mariana,however,mo

293、re work will be needed.OMFIF:What do you feel the central banks role should be in shaping the trajectory of capital markets development?AM:As long as tokenised asset markets are economically of little significance,settlement in central bank money is not strictly required.However,central banks may su

294、pport innovation by providing a safe and efficient settlement asset.The success of tokenised markets depends crucially on the drive and innovation of private sector and whether the potential benefits materialise.The private sector needs to find the interesting and valuable use cases that will drive

295、adoption.Ideally,central banks may support the innovation efforts of the private sector by enabling settlement in wholesale CBDC,like the SNB is doing with the Helvetia pilot.The pilot enables the wholesale CBDC settlement of tokenised asset transactions on the SDX platform until at least June 2026.

296、This provides planning certainty for the private sector,while maintaining options for the SNB to exit the platform if the desired success of the platform does not materialise.ONLY A CENTRAL BANK CAN PROVIDE RISK-FREE MONEY.32OMFIF DIGITAL ASSETS 2024central securities depositories.As yet,it remains

297、untested.Can you give your thoughts on this experiment and the role of CSDs in the market?EA:To be precise,the European blockchain pilot regime does not give the market the opportunity to replace the role of CSDs.It will not abruptly replace the current infrastructures including traditional CSDs whi

298、ch have been meticulously developed and already provide state-of-the-art services for most use cases in payments and securities settlement.CSDs remain essential to the functioning of market infrastructures and to financial stability.They ensure the security and efficiency of securities transactions

299、and by centralising the custody of securities,CSDs provide a safer and more reliable system.They streamline the settlement process by automating the transfer of securities and payments and enhance market liquidity and transparency by facilitating quick and efficient transfers between participants an

300、d centralising information on securities ownership.However,we need to plan ahead and ensure that our infrastructures are not only up to date but futureproof.The pilot regime extends the pioneering experimental approach taken by the Banque de France since 2020 on wholesale central bank digital curren

301、cy.Its aim is to enable innovations made possible by tokenisation within a simplified regulatory framework and to take advantage of the benefits of tokenised finance while controlling its risks.It authorises the issuance,registration,transfer and storage of tokenised instruments,and guarantees finan

302、cial stability.FUTUREPROOFING FINANCIAL MARKET INFRASTRUCTURE OPINIONOMFIF:Our survey indicates a strong preference from market participants to be able to settle tokenised securities transactions in central bank money.Can you expand on the Banque de Frances position on this topic?Emmanuelle Assouan:

303、Since the 2008 financial crisis,central bank money has proven to be a powerful and necessary asset to secure the settlement of financial assets,and thus mitigate liquidity and counterparty risks.Therefore,market participants have a strong preference for having the possibility to settle tokenised sec

304、urities transactions in central bank money.This power to provide security is an integral part of central banks monetary sovereignty function,regardless of technological developments.The emerging trend of tokenisation of finance once again raises questions about the assets used to settle transactions

305、 in tokenised assets.If central bank money is not available on distributed ledger technologies,private assets would be used to settle such transactions and this potentiality poses a risk of market fragmentation.Given market participants needs and the risks for financial stability,the Banque de Franc

306、e since 2020 along with the Eurosystem,the Bank for International Settlements and other central banks,are currently exploring ways to settle tokenised asset transactions in central bank money as a means of safeguarding its central role in financial markets.OMFIF:The blockchain pilot regime gives the

307、 market the opportunity to test whether DLT market infrastructure can replace traditional Emmanuelle Assouan,director general,financial stability and operations at Banque de France,spoke with OMFIF about the banks involvement in the European blockchain pilot regime as well as the experimental approa

308、ches needed to prepare for the digital transition.WE NEED TO PLAN AHEAD AND ENSURE THAT OUR INFRASTRUCTURES ARE NOT ONLY UP TO DATE BUT FUTUREPROOF.Emmanuelle Assouan,director general,financial stability and operations at Banque de France OMFIF.ORG/DMI33OMFIF:Many institutions are setting up their o

309、wn DLT platforms for the use of their clients.What do you think the journey to DLT becoming a widespread market utility looks like?EA:This momentum reflects the potential of DLT.The technology can improve transparency,ease data reconciliation and reduce costs and inefficiencies thanks to smart contr

310、acts ability to optimise processing and function on a 24/7/365 basis.This could significantly shorten transaction time specifically for cross-border transactions over different time zones.In the case of DLT becoming a widespread market utility where many institutions would create their own,uncoordin

311、ated DLT platforms,the main risk would be that of market fragmentation that entails a risk for financial stability.Regarding the settlement asset,safeguarding the anchoring role of central bank money on financial markets is crucial for financial stability.In this context,the BIS Innovation Hub and c

312、entral banks,starting with the Banque de France,have launched experimentation programmes that explore the possibilities offered by the settlement of tokenised financial assets in central bank money.OMFIF:What is your perspective on the different blockchain architectures(private,permissioned,public.)

313、?EA:Regarding the adoption of a specific technology,it is currently not feasible to make a definitive recommendation.Experiments conducted by the Banque de France have involved testing various types of DLTs,including private or public,permissioned or permissionless blockchain.However,further researc

314、h is required to conduct a comprehensive comparative analysis,particularly in terms of security,which is a crucial criterion for public policy decisions,and heavily dependent on the technology employed.Other criteria play significant roles in assessing the models effectiveness and efficiency,such as

315、 contribution to,and effectiveness in,preserving the two tier monetary system as well as considerations related to other settlement assets,scalability,programmability,fragmentation and cross-currency capability.OMFIF:What do you feel the central banks role should be in shaping the trajectory of capi

316、tal markets development?EA:As public authorities,we have a regulatory role,but we are also an active participant in this innovative ecosystem.The BIS Innovation Hub and central banks have a growing interest in the concept of unified ledgers,a new kind of financial market infrastructure,which could c

317、ombine tokenised central bank money,tokenised commercial bank money and also potential tokenised financial assets on a common seamless programmable platform.This is Project Agors aim,a public-private partnership coordinated by the BIS Innovation Hub(which focus is on the first two).Our participation

318、 in this project as the representative of the Eurosystem is of particular interest for the enhancement and development of the Capital Markets Union with the potential creation of a European unified ledger.It would be an infrastructure operated by European governance standards,on which tokenised fina

319、ncial instruments and tokenised settlement assets including CBDC,currently being explored by the Eurosystem,would coexist.A European unified ledger could contribute to deepening the CMU and have a catalyst effect of improving the efficiency of post-trade in Europe through increased interoperability

320、for market participants.It has the potential to encourage the development of products issued directly on DLT,such as securities for innovative companies and green bonds,thus facilitating the allocation of European household savings to finance the green and digital transitions.AS PUBLIC AUTHORITIES,W

321、E HAVE A REGULATORY ROLE,BUT WE ARE ALSO AN ACTIVE PARTICIPANT IN THIS INNOVATIVE ECOSYSTEM.4.TOKENISATIONWhile challenges are being overcome and infrastructure is starting to emerge,we are some way off a fully tokenised financial system.KEY FINDINGS1.Tokenisation is coming but not yet,and it will a

322、rrive for different asset classes at different times,depending on market forces.Most survey respondents expect it to arrive over the next 5-10 years.2.Demand is a more important determiner than supply.Tokenising a new asset class might be feasible,but unless there is a community wanting to trade in

323、that format,it will not succeed.3.Infrastructure for tokenised ecosystems is emerging,and technical challenges are being overcome,but regulators need to set standards for mass adoption of distributed ledger technology for systemically important asset classes.TURNING TO TOKENS34OMFIF DIGITAL ASSETS 2

324、024 OMFIF.ORG/DMI35A GREAT deal of work has already been done on the tokenisation of the bond market,but bonds are by no means the only asset class where tokenisation is contemplated.Agustn Carstens,general manager of the Bank for International Settlements,and Nandan Nilekani,co-founder and chairman

325、 of the board at Infosys,articulated a vision of financial markets powered by a network of shared ledgers,where multiple financial assets including fiat currencies are tokenised and brought together in a single venue.Such a system would vastly reduce the need for lengthy messaging and clearing proce

326、sses,thereby delivering more efficient and reliable services for users,they said in Finternet:the financial system for the future.OMFIFs digital assets and market infrastructure survey found that the overwhelming majority of market participants do expect tokenisation to happen,but that it is not yet

327、 imminent.Its arrival was predicted to come in the next 3-5 years and 5-10 years by 40%and 52%of survey respondents,respectively(Figure 4.1).Delivering on this vision will be a task of enormous complexity.Tokenisation offers a technical means of representing ownership of any asset on a shared ledger

328、.In relatively small scales,this is already happening.An institution need simply take custody of an asset or security,then immobilise it and issue tokens representing its ownership.In August 2024,Ripple partnered with Archax to launch an exchange and matching engine,enabling 24/7 trading of tokens r

329、epresenting a mix of funds,securities and other assets.With scale and a broader range of assets and participants,the task of harmonising the overlapping legal frameworks and developing a robust model for governance to bring a broad array of assets together in a single platform is daunting.Even leavi

330、ng aside the technical challenge of ensuring that a venue of such systemic importance would be operationally resilient and secure from cyber-attack,the challenge is immense.Market participants agree that we are not on the road to a single Finternet infrastructure with one master blockchain.The compl

331、exities and the concentration of risks would be too severe.But the efficiency savings of token infrastructure are broadly appreciated and can be realised via incremental progress.Each asset class will implement token-based systems separately,when market forces determine that it is appropriate,and on

332、ly when each infrastructural component that the market requires has been deployed and given regulatory approval.Where will tokenisation provide value?The Bank for International Settlements has created what it calls the tokenisation continuum,mapping what makes an asset class suitable for being 92%OF

333、 SURVEY RESPONDENTS THINK TOKENISATION IS STILL MORE THAN TWO YEARS AWAY.Source:Digital assets and market infrastructure survey 2024Figure 4.1.Tokenisation is coming,but it wont be here soonWhat timeframe will financial markets experience a substantial degree of tokenisation within?Share of respondents,%6-10 years 52%3-5 year 40%1-2 years 0%Never 8%36OMFIF DIGITAL ASSETS 2024overhauled with token