Virtual Round Table Discussion – Token markets need liquidity. Where will they get it from?

What is the event about?

This virtual round table is a Thought Leadership discussion focused on how to solve the biggest single obstacle to progress in the tokenisation of securities and funds: the lack of liquidity.

Liquidity is touted routinely as a benefit of tokenising securities and funds. But liquidity is not just a consequence of tokenisation at scale. It is also a cause of large and active markets in security and fund tokens.

So what is this cause-and-effect thing that we call liquidity? Where does it come from? And how can we attract more of it to the token markets?

Liquidity is the ability to turn an asset into money. Money is manufactured by banks, when they lend more than they borrow, and distributed throughout the markets by the loans that banks make to their clients.

The capacity of a bank to borrow, and so to lend, and therefore to manufacture money, is governed by their ability to use capital, cash and collateral efficiently within the constraints set by national and international capital and liquidity regulations.

That tokenisation enables banks to use capital, cash and collateral more efficiently is evident already. It enables them to:

• Mobilise collateral trapped in infrastructural silos

• Maintain smaller buffers of cash and collateral in markets where they are active

• Borrow intra-day as well as overnight and at term

• Pay and get paid, within and across borders, more quickly than before

• Programme money to make payments and meet margin calls

• Turn any and every asset or liability on a bank or corporate balance sheet into a financial contract exchangeable for cash or useable as collateral

  
  

The use of tokenisation by banks to fund themselves and their clients promises to kick-start a virtuous circle. It is one in which banks can manufacture more money, and more assets are exchangeable for money.

If we define liquidity as the ability to turn an asset into money, tokenisation is a powerful tool for generating liquidity. This is not because it can turn any asset into a token – as is often pointed out, tokenisation does not in and of itself make an asset liquid – but because it makes any asset a financeable financial contract that is more easily exchangeable for money.

In this sense (of turning assets into financial contracts) tokenisation is a financialisation technique. It provides a clear path to large scale, liquid token markets because it is based on an understanding of what liquidity is and where it comes from.

What are the topics of discussion?

• What is liquidity?

• Who generates liquidity?

• Who sustains liquidity?

• What is the impact of tokenisation on liquidity?

• What are the benefits of tokenisation for bank funding?

• How does tokenisation make corporate balance sheets more liquid?

• How will tokenisation impact sell-side intermediaries (i.e., prime brokers, brokers, inter-dealer brokers, market-makers, tri-party agents)?

• How will tokenisation impact buy-side intermediaries (i.e., asset managers, wealth managers, fund distributors)?

• How will tokenisation change the role of financial market infrastructures (i.e., exchanges, ACHs, RTGSs, CSDs, CCPs)

• What are the benefits of tokenisation for end-investors (institutional and retail)?

• How should regulators steer market developments?

Why attend?

Tokenisation is poised to transform the financial markets. As banks adopt the technique, that transformation will begin, because liquidity will become available.

The effects will reverberate throughout the financial system, impacting banks, brokers, prime brokers, market-makers, asset managers, exchanges and payments and financial market infrastructures, but also corporate issuers and treasurers and end-investors.

Bank and corporates will finance more of their balance sheets and at lower cost

Brokers, prime brokers and market makers will transact more business

Asset managers will have access to a wider range of asset classes and investors

Distributors will have more asset management products to sell

Regulators will have to redesign the tools they use to maintain financial stability

Exchanges will list a wider range of assets including money

Payments market infrastructures must accept multiple forms of money

Securities market infrastructures must adapt how they settle transactions in central bank money

Who should attend?

Bank treasurers; Corporate treasurers; Central banks; Brokers; Prime brokers; Inter-dealer brokers; Market makers; Asset managers; Fund distributors (wealth managers, private banks); Tri-party agents; Payments market infrastructures (RTGSs, ACHs); Central counterparty clearing houses; Exchanges; Regulators

When is it happening?

Thursday 13th of February at 2pm UK time.

Panellists:

Lidia Kurt – CEO at BX Digital – https://www.linkedin.com/in/lidiakurt/

Michael J. Cyrus – Head of Short Term Products, Equity Finance & FX bei DekaBank Deutsche Girozentrale – https://www.linkedin.com/in/michael-j-cyrus-635a0036/

Mike Reed – Head of Partnership Development for Digital Assets at Franklin Templeton https://www.linkedin.com/in/mike-reed-81a387/

Jasmine Burgess, Chief Risk Officer at Coinbase Asset Management https://www.linkedin.com/in/jasmine-burgess-a3924412/

Lloyd Wahed, Founder and CEO at Members Capital Management https://www.linkedin.com/in/lloydwahed/

Moderated by Dominic Hobson Co-Founder at Future of Finance – https://www.linkedin.com/in/dominic-hobson-49b8222/