The securities have not been and will not be registered under the U.S. Securities Act of 1933, as amended or with any other regulatory authority of any State or other jurisdiction of the United States or Canada and (i) may not be offered, sold or delivered within the United States or Canada, or to, or for the account or benefit of any U.S. Person or Canadian, and (ii) may be offered, sold or otherwise delivered at any time only to transferees that are Non-United States Persons and Non-Canadians.

August 1, 2023

Binance report; SEC demands for Coinbase; Ripple

Welcome to Swarm Markets’ media memo. This weekly update provides comments from Swarm Markets’ co-founders, Philipp Pieper and Timo Lehes, on key industry news that has caught our eye, plus our own developments. 

Comments available on the following news items:

 

  • Tokenized treasuries $16 trillion dollar market potential
  • Blockchain offers more than just money-saving for TradFi
  • SEC Coinbase demands illustrates regulatory vacuum

 

Tokenized treasury market could hit $16 trillion says Binance report

 

A report from major crypto exchange Binance estimates the potential market for tokenized treasuries could hit an astonishing $16 trillion by 2030. Swarm was pleased to have been included in the report which looks at the tokenized real world asset (RWA) market. 

 

It found the current size of tokenized government treasuries is still comparatively small, around $600 million, but growing fast as demand for our own offering of the digital real world assets (RWAs) proves. 

 

What is revolutionary about tokenized RWAs isn’t that it is the creation of wholly new assets for investors to engage with, as mainstream crypto is, but rather the implementation of key technological innovations to bring long standing investable products into the digital ecosystem.

 

The first phase is to bring these products on chain to those who cannot access them using traditional rails. The second phase is composability. As more assets move on chain we will see pools of different asset classes emerge that align with different investment theses, creating unique and novel products.  

 

As the Binance report suggests, the potential market for this is enormous. Tokenized RWAs will totally change the way in which TradFi interacts with, manages and custodies assets that move through portfolios across the world at any given moment. 

 

The prevailing infrastructure as it exists now has changed little in 50 years of modern finance. But it is this very financial infrastructure that is ripe for innovation. The use of blockchains for securely recording ownership and transactions is going to completely change the makeup of the sector. 

 

SEC Coinbase demands show why regulatory vacuum is such a problem

 

Revelations on Monday that Coinbase was ordered by the US SEC to remove all crypto assets bar bitcoin from its platform has sent waves through the crypto community. It’s another week, another story of heavy handedness of the US regulator in regards to crypto. 

 

We’ve become accustomed to seeing assertive action from the SEC on the sector, to mixed results as the XRP ruling suggests. But this assertiveness is ultimately a product of the vacuum that exists in crypto regulation in the US.

 

Legislators continue to wrangle over the details of regulations, and in that the SEC sees itself as the defacto arbiter. But it is merely interpreting its responsibility here by declaring these tokens as securities, something that has been tested in court and doesn’t seem clear cut. 

 

This vacuum is hugely toxic for the market in the US, but in Europe we’re definitely seeing some positive outcomes as businesses look to base themselves somewhere where the rules are clear. This is a sugar rush for the market here but ultimately the global business needs a US which is clearer on the legal standing of crypto and presentation of a practical framework for innovators to follow. 

 

TradFi set to save $10 billion through blockchain innovation

 

A report from Ripple has found that TradFi institutions are set to save some $10 billion in costs thanks to blockchain innovations. In terms of an overall figure this is a conservative estimate, particularly as it just relates to cross-border payments. 

 

The reality is that blockchain, once adopted, will completely change the face of the global financial system. The introduction of transparency, self custody and security benefits that blockchain offers will totally remake the demand and availability of instruments, assets and products available to the market.

 

The inefficiencies of TradFi financial plumbing cannot be understated here as the sector has layered years of complexity upon its own systems and combined digital technologies into frankly old school methods. 

 

Ripple’s report has an important caveat however that businesses have got an eye on regulatory clarity and see the lack of it as a significant barrier to accessing the technology. While in the EU and UK this is becoming less evident, the US still makes this a big issue in the overall market, particularly thanks to the scale of both US capital investment and demand for services.

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