Traditional Custody going Digital

TL;DR

A quick snap of October shows the evolving landscape of digital asset custodial services.?

In Europe, CACEIS, a leading French custody bank, has developed a state-of-the-art digital asset custody architecture, launching tokenized money market funds, including Spiko, which has received approval from the French Financial Markets Authority.?

In the US, Ripple Labs has bolstered its crypto custodial offerings with enhancements that include bank-grade security and compliance features, allowing clients to tokenize RWAs? and engage with a decentralised exchange. Ripple booked a 250% y-o-y increase in customer acquisitions.

Recent collaborations between digital asset marketplaces such as Archax and Assetera indicate a significant stride towards enhancing liquidity in the tokenized funds sector. With the leading UK asset manager abrdn spearheading these initiatives, one more instance of swift adoption of tokenization.

State Street Global Advisors expresses a positive outlook on the potential of tokenization to enhance market efficiency. While acknowledging some regulatory hurdles across various jurisdictions, it paints a vibrant picture of an industry on the brink of transformation.

In more details

Custodians in battle array

In Europe :

CACEIS, a prominent French custody bank, is now facilitating access to natively digital money market funds with Spiko’s MMF receiving approval from the French AMF in June to launch tokenized US and Euro Treasuries on the Ethereum and Polygon blockchains. It highlights CACEIS's newly established digital asset custody architecture. But this also demonstrates a growing expansion of such digital asset services ! In US : Ripple Labs has enhanced its crypto custodial services by introducing new features that incorporate bank-grade custody technology. The upgrades include hardware security module options, pre-configured operational settings, and advanced anti-money laundering monitoring to ensure regulatory compliance. The platform will also allow clients to tokenize real-world assets on the XRPL and access a decentralised exchange with low trading fees. Ripple's custody business has experienced a 250% year-over-year customer growth, serving major clients across key financial markets.

Buy, Sell,Trade, and assetera Digital asset marketplaces Archax and Assetera have partnered to enhance investor access to their listed digital assets. UK asset manager abrdn will enable its tokenized funds to reach EU investors through Assetera's platform. Archax operates under a Financial Conduct Authority licence as a multilateral trading facility, while Assetera holds a MiFID II licence from Austria's Financial Market Authority, facilitating primary and secondary market operations across the EU and EEA.

This collaboration aims to increase liquidity for tokenized funds, with abrdn funds being the first to list on Assetera, and highlight the fast adoption of such technologies in the ecosystem.

State Street ready to go to the front?

State Street Global Advisors is optimistic about tokenization, highlighting its potential to enhance market efficiency through increased speed, reduced costs, and improved transparency and accessibility. However, SSGA cautions that realising these benefits will necessitate developing a comprehensive ecosystem, and acknowledges specific challenges, particularly in harmonising regulations like AML and KYC across various jurisdictions. Access to high-risk asset classes, including private equity and credit funds, will remain limited for average investors.

It identifies bonds as the largest current tokenized asset class, poised for immediate gains, followed by commodities, with private equity and credit funds also on the horizon. It emphasises that many recent digital bond issuances were motivated by factors beyond lower costs and faster transactions, such as positioning by sovereign and financial institutions within a competitive market.

SSGA anticipates the tokenization of real estate funds will significantly develop in the medium term; however, it is expected to face competition from established real estate investment trusts, which diminish its relative advantages compared to other asset classes. Concurrently, SSGA’s digital assets division is preparing to focus on digital bonds and tokenising money market funds for leverage.

A pinch of regulation in the adoption framework The World Economic Forum has advocated for stricter licensing and clearer sandbox objectives to tackle challenges within the decentralised finance sector, as outlined in their October report, ‘Digital Assets Regulation: Insights from Jurisdictional Approaches’. The report points out the necessity for international collaboration and technology-enabled solutions for effective regulation. It reviews the regulatory frameworks of nine jurisdictions and recommends tailored approaches based on the diverse risks of DeFi applications. Furthermore, the WEF highlights the importance of consumer education on potential risks, advocates for unified oversight in digital asset regulations, and underscores the need for robust anti-money laundering measures.