DeFi: Hope or Hype? Quite a bit for regulators to

Transcript:DeFi: Hope or Hype? Quite a bit for regulators to:
DeFi: Hope or Hype? Quite a bit for regulators to think about. Cryptocurrencies Institutional Interest Spot and Futures ETFs/ETPs Regulators have focused on trading venues, Market power in creating and processing the underlying is also relevant Regulations designed for Traditional Finance are not adapted to DeFi 11/15/24 The Future of Finance Stablecoins Backed by liquid assets off-chain or cryptocurrencies on-chain Sky or Tether Total: about $ 179 bn Largest is Tether: About 70% 11/15/24 The Future of Finance Blockchain data on daily “simple” transactions 11/15/24 The Future of Finance Soc Gen Forge “Coinvertible” A Euro denominated digital asset under French Law Economically like a MMF Issued on the Ethereum blockchain – only available to whitelisted addresses. 11/15/24 The Future of Finance Wyoming Stablecoin Anticipated launch in 2025 Backed by US Gov’t bills held in trust Anticipate US-wide use 11/15/24 The Future of Finance Regulatory Questions Cheaper payment rails may lead customers to eschew banks Changes in deposits and flows due to changes in the payment system can have real effects as they affect banks’ incentives to produce inside money/loans Changes in the type of deposits at banks can affect stability if they become more “sticky.” 11/15/24 The Future of Finance Optimal Regulatory Response Not obvious that a central planner wants the same institution to process payments and to make loans. Because of network effects, competition in payments is difficult. Stablecoins are a plausible substitute for card networks --> encourage competition? 11/15/24 The Future of Finance Tokenized Real World Assets BUIDL BlackRock USD Institutional Liquidity Fund Largest tokenized treasury offering Qualified Investors Short term cash/cash equivalents BNY is custodian Stable $1 value + payments to the wallets On Ethereum Blockchain Developments: Ustb Collateral 11/15/24 The Future of Finance Other Regulated FI Tokenization 1. Citi Token: Deposits are tokenized and can be used for cross-border payments 24/7 “Regulated Liabilities” Cash Management and Trade finance. 2. HQLA (by Goldman Sachs): Collateral management for Institutional Clients Delivery versus Delivery (no cash) Broadridge Intraday Repo Around 1 trillion USD a month 11/15/24 The Future of Finance Benefits of Tokenization Allows fractionalization. Increased participation May increase secondary market liquidity 11/15/24 The Future of Finance Tokenization and settlement Makes it easier to switch and use collateral Possible to do direct collateral swaps Less volume in markets and price discovery Precise settlement (less pre-funding) Align technological transfer with title transfer (no fails) 11/15/24 The Future of Finance Optimal