[ T H O U G H T L E A D E R S H I P | S W I F T ]
Developing the infrastructure of the future for digital assets
How do you see the current state of the digital asset ecosystem for financial institutions ? The digital asset ecosystem is constantly evolving and is undergoing rapid development . In the past 12 months , there have been even more promising developments in the space , and lots to cover , so I ' ll just highlight a couple of trends we see as important . The first is around institutional investment . Our working assumption is that the buy-side will continue to have an outsized role in shaping the market in the future as other market actors will look to serve them going forward . We ' ve seen various surveys across the past year noting the increasing level of interest that institutional investors have in allocating money to digital assets and securities , for a variety of reasons . You can see from the number of market announcements that more buy-side institutions are beginning to test the tokenisation of funds on-chain . The second concerns government interests . Global regulators are increasingly expressing a willingness to find ways to support the development of the ecosystem , albeit in a riskmanaged way . Clear guidelines are emerging across jurisdictions as well as industry sandboxes like the UK ' s Digital Securities Sandbox , the EU DLT Pilot Regime , and initiatives like Project Guardian out of Singapore that are promoting public-private sector collaboration for real use cases . These two trends together are driving an effort to build capabilities and competencies by institutions across the
An eventful 12 months have seen the industry make great strides in its efforts to create a regulated digital asset ecosystem for traditional market participants . Here , Jack Pouderoyen , who leads digital asset innovation for Swift , discusses the progress being made in scaling the tokenised securities market , and how Swift is working with its community to facilitate interoperability and turn these ambitions into reality .
value chain . Another aspect I would point out is that , to date , industry efforts have largely been focused on primary issuance , with less overall development and traction of secondary markets . Finally , there ’ s also a real demand for solutions that can be moved into production to commercialise and create real value for customers .
What are some of the barriers to adoption and what is holding back further scaling of the market today ? I think in the grand scheme it ’ s still quite early for the market , and so there are several hurdles that have stood in the way of more meaningful adoption . Probably the most often cited point is around clear legislation and regulation , which is well covered , and moving in the right direction now . In addition , the overall maturity of infrastructure is still relatively young . Many larger financial institutions have launched their own tokenisation platforms , but those use a range of different technologies and protocols , and they tend to focus on specific asset classes . This infrastructure piece also pertains to connecting the cash leg , whether we ' re talking about on-chain formats , like CBDCs and tokenised deposits , or more traditional fiat rails . In any case , the risk here is that a range of siloed systems , or ‘ digital islands ’ form , resulting in a negative impact on market fragmentation and liquidity . There also needs to be further development around common standards and market practices . This would cover both enhancing existing data standards , for example , ISO 15022 and ISO 20022 , but also newer areas like smart contract and token standards which today experience a high degree of diversity
18 Global Custodian Fall 2024