14 November 2023

European financial markets are being tokenised (as is the traditional environment)

El Confidencial

Photo: 6th Edition of the Blockchain & Digital Assets Forum.

The MiCA Regulation will be a reality in our country in 2025, but the financial sector is already conducting tests with Blockchain and undertaking specific measures across Europe

One of the topics that took centre stage at the 6th edition of the Blockchain & Digital Assets Forum, organised by El Confidencial together with Allfunds, Grant Thornton, LaLiga, Metrovacesa and Mastercard, was how regulation affects financial markets. Following the announcement by Montserrat Martínez, Deputy Chairwoman of the Spanish National Securities Market Commission (CNMV), that the application of the European Regulation on the crypto-assets market (MiCA) will be brought forward by six months, so that it can be implemented in Spain in December 2025, it was time to listen to the analysis of the sector's experts and professionals.

The first to share their thoughts with the audience were Javier González, Chief Business Officer at Allfunds Blockchain, and Carol Lago, Director of Innovation at the Blockchain & Crypto Lab of Grant Thornton. Thus, for the CBO of Allfunds, "this technology is no longer something to be discovered and, in fact, the industry has already surpassed that stage. We are at a point where use cases must prevail and technology must remain underneath". Meanwhile, Carol Lago pointed out that "we have come a long way in recent months and years in terms of tokenisation in the financial environment, however, the two big challenges that still need to be addressed are scalability and interoperability".

In her keynote speech at the forum, the Deputy Chairwoman of the CNMV also highlighted the fact that a new feature of the new Securities Markets and Investment Services Act is the introduction of the possibility of representing financial instruments by means of distributed ledger technology (DLT). This was precisely the issue at the centre of the intervention of Joaquim Matinero, a banking-finance lawyer specialised in blockchain: "Where are we heading at the European level? France has already positioned itself on DLT and is considering authorisations for when MiCA enters into force; in Germany there are three projects based on this format; and in Ireland, large US companies have already entered the market, attracted by European regulation, as it is the most harmonised and innovative", he explained. In Spain, the lawyer confirmed that there are six DLT projects underway.

Traditional institutions are moving into 'blockchain'

Banks also had a voice at the forum. One of its representatives, Alfonso Gómez, CEO of BBVA Switzerland, focused his analysis on "the three key concepts" that, in his opinion, traditional banking brings to the world of digital assets: "Service, because we have a responsibility to our customers; strength, acting as a point of trust and confidence with investments; and security, as $3,800 million worth of crypto-assets were hacked in 2022 alone.

Aurora Cuadros, Corporate Director of Securities Services at Cecabank, agreed, pointing out that "the entire area related to security is growing at a very high rate" among traditional institutions. On the role of banks, she assured that the functions of the depositary will not change, even if they are tokenised, and we will continue to perform oversight and supervisory tasks, as well as provide liquidity". On the other hand, she did acknowledge the need to change the operational model: "We need to encourage new training and skills. This is the aspect we are focusing on at the moment, always hand in hand with the regulator to give confidence to investors", she emphasised.

On the degree of penetration, Sergio Fernández-Pacheco, CFO and COO of Azvalor Asset Management, said that "this technology will develop as long as companies, customers and investors see it as something positive", and provided an insight: "Some 44% of the top companies we have analysed are already implementing Blockchain processes". Along the same lines, Carlos Salinas, Head of Digital Assets at Morabanc, specified that "the impact of this technology is horizontal in all our business verticals", although he qualified that "in private banking there is a captive demand from traditional customers who are watching this transition from the sidelines and, therefore, there is a huge business niche to be explored".

Tests in Europe and how to guarantee digital identity

On the future of the European fund industry, we heard from Carole Michel, BNP Paribas Luxembourg - Fund Distribution Senior Global Product Manager; Romain Devai, Allfunds France - Blockchain Business Development; and Mariano Giralt, MD at BNY Mellon European Bank (Madrid Branch).

Carole Michel described the tests that the entity she represents is currently conducting and assured that "this is a first step in which we can already see that blockchain is a new communication channel between the investor and the fund". However, she also stressed the importance of the "legacy system" and the fact that "native tokens are not yet being tested, but rather digital representations of conventional shares".

Romain Devai's analysis was similar, although the expert took the opportunity to praise the European Pilot Scheme because "thanks to this mechanism we have the ability to tokenise a fund in any EU country. It is a unique opportunity to have a level playing field and to be able to issue a native digital token, as well as having a secondary market that can be a new way of distributing funds in Europe", he said.

Mariano Giralt focused on the taxation aspect and considered it "one of the key challenges facing all custodians". "Currently", he continued, "when a Spanish fund invests in France, Italy, the United Kingdom or Germany, the withholding tax procedures are very different and there are different deadlines and formalities. However, in our view, we believe this will all change with blockchain technology, as it can provide a fantastic experience with greater traceability and transparency".

Finally, those attending the forum, some four hundred people, as well as all those who followed the event via streaming, were able to listen to the plans concerning digital identity and its relationship with the investment sector, presented by Nacho Alamillo, advisor at the Logalty Group, and Raúl López, Director of the Blockchain & Crypto Lab at Grant Thornton.

For the Nacho Alamillo, "current technology already guarantees trust. There are examples of fully operational certificates. However, blockchain will facilitate management operations and reduce the workload, while at the same time providing more security". In his opinion, "the rules of power will change the market, but technology must be regulated", he claimed. In line with this, Raúl López admitted that "implementing a digital identity system in a company is not difficult, what is complicated is knowing what it will be used for and how it can be scaled", he said.

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