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Global rules are needed to stimulate asset trading via blockchain, says report
By Medha Singh
(Reuters) – Large-scale stock and bond trading on blockchain will remain a dream unless a global standard for cross-border activity is established that allows assets to move seamlessly between blockchains, according to a report published on Thursday.
So-called tokenized assets – which represent the underlying assets – are traded on distributed ledger technology (DLT) also used for cryptocurrencies. Banks hope tokenized asset trading will take off as a way to make trading faster, cheaper and more transparent.
However, the lack of consistent global regulation prevents assets from moving smoothly between different blockchains. Industry executives at an event in Amsterdam this week said progress on asset tokenization is moving slowly and that adoption is limited so far.
Customer and compliance requirements vary too widely around the world for a single fixed solution to meet everyone’s needs, said Georgios Vlachos, co-founder of blockchain interoperability firm Axelar, who co-authored the report.
“As things stand now, different regulatory jurisdictions are progressing at different rates and have different areas of focus,” Vlachos said.
The report on blockchain-based trading was written by the Axelar Foundation and digital asset risk assessment firm Metrika, with contributions from Citi, Deutsche Bank, Mastercard and Northern Trust.
Deutsche Bank said in the report that it is essential to have industry-accepted approaches to the risk assessments needed to facilitate adoption.
However, “standards developed too prematurely can deprive the industry of better developed solutions or become irrelevant,” said Boon Hiong Chan, Deutsche Bank’s head of Securities & Technology Advocacy for Asia Pacific.
Northern Trust predicts that by 2030 the size of its digital asset market will grow between 5% and 10% of the $13 trillion in assets it holds in custody.
Currently, according to data from the 21.co dashboard on Dune Analytics, assets worth approximately $85.12 billion are tokenized, including government bonds, fiat-back stablecoins and commodities.
(Reporting by Medha Singh in Bangalore; Editing by Susan Fenton)