On May 28th, we decided to host a webinar with prestigious experts addressing the practical application of asset tokenization for financial institutions. The online event had the aim to help provide a practical insight from 3 different perspectives: Investor, Issuer and Bank.
Introduction to the topic by Radoslav Albrecht (CEO Bitbond):
Panel discussion “Issuing Real Securities on Chain: Practical Insights of Tokenization“
Hosted by Michael Pinkus (CFO Bitbond) with three panelist perspectives:
- Investor: Paul Mehta, Global Head of Loans at Aberdeen Standard
- Issuer: Rose Carmichael, Chief Strategy Officer of iQ International
- Bank: Philipp Doppelhammer, Managing Director at Bankhaus von der Heydt
Open Q&A session with event guests
What is asset tokenization?
Asset tokenization is the process of issuing a digital representation of a real tradeable asset on blockchain or DLT, in other words it consists of issuing a tokenized security (aka security token). Asset tokenization market has been growing significantly and is proving to be a way more efficient process of securitization. The daily trading volume in digital assets 2 years ago was around 30 billion euros per day. Today, this trading volume reached 150 billion euros. Nearly all of, it is from crypto assets being traded and the role of regulated funds is minimal. We believe this will change in the coming 5 to 10 years, where most conventional asset classes will be tokenized and will exist in some way on a blockchain or DLT. This shift in markets is the most exciting time in FinTech, hence we at Bitbond decided to focus on asset tokenization and the sector in general. Regulatory environment changed remarkably in the last 1 to 2 years, in Germany a blockchain strategy was released last September and is currently in implementation. It consists of making electronic securities possible, most securities will be able to get tokenized. Additionally, the provision of custody services for 3rd parties is financially regulated and became part of the german banking act.
Meet our panelists:
- Bank perspective: Philipp Doppelhammer, Managing Director at Bankhaus von der Heydt, one of the oldest banks founded in Germany, since 1754. It is a privately owned bank that comes from a traditional wealth management private banking background. In 2017, they decided to switch and move into institutional business, focusing on institutional as a servicing, therefore maintaining their Luxembourg based management company, in charge of setting up and administering investment funds. Another core of their business is also based in Luxembourg: white-labe securitization platform. It consists of setting up real bankable assets, hence they started looking into asset tokenization, as it is a very good way to enhance their securitization process and gain digital traction. Von der Heydt has partnered with Bitbond in order to acquire our bank-grade solutions in asset tokenization and digital asset custody.
- Issuer perspective: Rose Carmichael, Chief Strategy Officer of IQ international: her background is mainly in corporate finance and M&A. She worked for Siemens and now at IQ International, a multinational sustainable technology company headquartered in Switzerland.IQ International is a company that has a portfolio of 66 international patents and 31 patent pending technology designated to change the traditional industry in batteries and power storage, both for automotive and industrial. Interested in the asset tokenization vehicle as a way to raise money for expansion, they aim to switch from licensing to other battery manufacturers to becoming their own producers, therefore they aim to raise funds through asset tokenization.
- Investor perspective: Paul Mehta, Global Head of Loans at Aberdeen Standards: his background is in credit markets focused around loans, high yield bonds, leverage finance… Aberdeen standards is an investment house with around 500 billion assets under management, of that 100 billion are in fixed income, and 5 million in private credit. Through asset tokenization solutions, they are looking to improve the process of handling that amount of assets.
How is asset tokenization the tool to solve your pain points?
Philipp Doppelhammer: “2018 was the first time we got in touch with that topic, we set up a vehicle for a customer that asked us to issue a simple crypto tracker certificate. We weren’t really able to pursue public sales as there was no regulatory framework in Germany and Luxembourg yet.We kept following that technology mainly because we are a small bank and our pain points are that we are dependent on intermediaries such as clearing houses. This slows down the process. Usually, we aim to have a standard security rate to invest within 4 weeks, however, in practice it can take double or triple that time. This costs us a lot of money and even our clients on some occasions. We always looked for new ways to replace such intermediaries, in order to act as one stop shop issuance and do everything ourselves.This is not done by other banks in the traditional world. Consequently, we desire to substitute our securitization as a service product, with a tokenization as a service product. Therefore, we partnered with Bitbond to set up a tokenization module. We then saw a lot of demand for other services, and decided to rebuild the bank to become a full service provider in custody solutions, tokenization solutions, payment and settlement solutions. As a 4th pillar, there will be a token sales platform that we plan to launch at the end of this year.”
Paul Mehta: “One of the main pain points is settlement of trades, it is an unnecessary pain when it comes to trading loans. Asset tokenization could definitely help improve that side of the business. Loans are not a security, they don’t trade through an exchange as an OTC product. In our case for example, a billion size euro loan could go to 300/400 institutions. Now the process is very manual: it can start with a voice trade, then transferred to an agency that would check the transfer (almost like stamping and sending it off). The lack of identifier (ISIN) contributes to that manual process. The process has a very elongated settlement time, in Europe it is t+10 and in the US t+7, ordinary cash settlements are delayed and KYC check usually delays it even more. If I sell a european leveraged loan today, I will probably not get cash before t+22, it is a significant drag on the ability to deploy cash and there definitely is a counterparty risk alongside a market risk. People in charge looked to improve that process in the past, but maybe the wrong way, as they want the traditional set up to speed up. I believe it needs innovative solutions like the ones offered by Bitbond or DLT in general. When you look at the identifier, you can quickly reference it and proceed. With asset tokenization and the solutions provided by Bitbond, it could be a great way to standardize to respond to these pain points and drastically improve the process.”
Rose Carmichael: “A lot of corporate issuers try to go to market and deals aren’t pulling through. A “Roadshow” is a process corporations go through, where they are represented by an investment bank, then visit a lot of institutional investors, have meetings in large conference rooms, present the strategy, the financials and the reason for raising money. It is more or less the same across different markets, that’s what corporations have to go through when publicly traded, they have to inform the market about what they do and plan to do. It is very challenging and a lot of rules to follow, in terms of info to share. Our roadshow got cancelled due to corona and having a new norm for roadshows would be interesting. Will there be a need for roadshows? Is it going to be bridged with digitalization, however, can we replace that element of trust knowing it brings us greater speed to market? The core concept might remain, but it will definitely adapt. With solutions like Bitbond’s asset tokenization platform, such pain points can be addressed and taken care of to provide a better speed to market.”
Asset tokenization – the future of financial instruments.
Asset tokenization has the potential to contribute a lot in efficiency to capital markets. It eliminates many manual processes and provides faster speed to market when it comes to investment and securitization. Through this webinar, we learned from 3 different perspectives how asset tokenization helps these businesses achieve their goal in a way more cost effective and fast process. In a world where digitization is becoming more indispensable, a need for trusted technology to handle our financial infrastructure is on the rise. Therefore, with solutions such as the asset tokenization technology provided by Bitbond, you can ensure easier, more secure, cheaper and faster transfer of funds. Just like sending an email.
Are you interested in asset tokenization? Learn more about Bitbond and the technology we provide, or register for a demo on our website.