Deutsche Telekom will mine Bitcoin, EU is gathering market feedback on tokenization | Week 24 European Crypto Headlines

Better late than never! It has been a rather slow week in terms of headline news for crypto in the EU - I guess everyone's busy attending industry events, which have really been ramping up recently.

The headlines

Fidelity International tokenizes money market fund on JP Morgan blockchain

Fidelity International (London) selected J.P. Morgan's "Onyx" blockchain to tokenize on of their own money market funds. The plan is to expand across other asset classes in the future. For now though, money market funds dominate the tokenization PoCs across institutions in Europe and the US.

Deutsche Telekom (T-Mobile) plans to start mining Bitcoin

Deutsche Telekom's head of web3 announced (on stage at BTC-Prague) that the company has plans to begin mining Bitcoin soon. He called it "digital money photosynthesis". A sub-entity of Deutsche Telekom, T-Systems MMS, has been running validator nodes for Polygon, Chainlink, Ethereum and others for some years now, and started running Bitcoin and Lightning nodes in 2023.

European Commission holds workshop on asset tokenization

On June 11, the European Commission invited key industry stakeholders to Brussels to discuss the state of asset tokenization in the EU. This come after ESMA criticized the EU's DLT Pilot Regimem under which not a single DLT MTF has been approved to date. Workshop topics included fund tokenization, secondary markets, and interoperability and standardization.

The down low

On Fidelity International:

There are a couple of interesting things here. First, it's becoming abundantly clear that money market funds are everyone's favorite fund to tokenize first. Blackrock also chose a money market fund, and so did Fidelity (U.S.), Franklin Templeton and WisdomTree. The reason for this is probably that its easiest to start with. The underlying isn't complex and is highly liquid, making it easier to marry instant settlement on the blockchain with settlement of the underlying assets.

Second, I think it's important to note that Fidelity International is using a bank-led blockchain. There is an ongoing battle for the preferred architecture for the financial industry: permissioned or permissionless, closed or open, centralized or decentralized. It seems to me that permissionless blockchains are ahead at the moment (Ethereum, Stellar and Polygon in particular), but this could still change. It's definitely something to keep your eyes on and start counting along.

On Deutsche Telekom doing "Digital Money Photosynthesis"

I can't help but wonder why Dirk R?der chose this exact wording. To me, the most obvious answer is that he may be hinting at mining Bitcoin using exclusively renewable energy (maybe even exclusively solar). It's no secret that while Telekom MMS is very active in the space, Bitcoin in particular has a bad rep among many German corporates. The typical (and often disproved) energy consumption argument really grew roots around here. It doesn't seem far fetched to me that the only way Mr. R?der could get his higher-ups to sign off on Bitcoin mining is by packaging it nicely with green energy. Studies have shown that combining Bitcoin-mining with wind or solar farms is one of the better things to do.

Time will tell what Telekom understands under "Digital Money Photosynthesis". I'm betting on the above, but however they do it, it's definitely bullish.

On the EU Commission Workshop:

Finally, it looks like the EU is trying to improve the DLT Pilot Regime. Touted as the fix to low liquidity (and all other growing pains) of tokenized assets when it first launched, the DLT Pilot Regime hasn't lived up to the hype yet. While there are some applications flying around, none have been approved yet - and the total number of applicants isn't that impressive either. ESMA published a letter in April detailing current issues with the regime that they thought led to a lack of applicants. This workshop seems to be the commissions reaction and it looks like they are listening and planning to fix things. Some of the (better) questions they asked participants where:

• Does the DLT Pilot allow for the organisation of secondary markets in tokenised financial instruments? If not, what is missing?
• What challenges does the industry face when tokenising funds and underlying assets?
• What are the essential pre-conditions for tokenisation in the EU funds markets?
• What role should policy makers and supervisors play in mitigating the risks and enabling market participants in seizing the opportunities of asset tokenisation?

So far so good. I have high hopes that something good will come out of this.