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.

January 17, 2023

Binance; ABN Amro; UAE

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:

  • Binance to allow institutional self custody
  • ABN Amro launches digital bonds
  • UAE approves virtual assets regulation


Binance to permit institutions to self custody digital assets


Major global crypto exchange Binance is moving to allow institutional investors to self custody digital assets, according to a report from Bloomberg detailed by CoinDesk.


Self custody is one of the major emerging trends of the crises in 2022. While it has been a feature of blockchain infrastructure since the technology’s inception, the majority of crypto users opt for CeFi exchanges out of sheer ease of use, compared to self custody solutions, which we as consumers are not used to. 


As we’ve learned in recent months, this had disastrous, if predictable, consequences, as soon as margins at these (badly managed) exchanges came under anything like serious market pressure. The acknowledgement by Binance here that self custody is a solution for institutional participants is very revealing.


Self custody at a stroke eliminates some of the major risks that caused the downfall of big platforms. Self custody exchanges acknowledge that the assets in question are to be protected and ring fenced from use where no permission is expressly given otherwise. As an exchange you are there to facilitate the exchange of those assets and help to ensure collateral confidence of your customer. 


The job now for the sector is to look at how to make self custody as secure and seamless as possible for the user. That institutions are demanding it is good news in this respect, as they are the participants that will drive change and adoption that will filter through to even a consumer level in the ecosystem. 


ABN Amro launches digital blockchain bonds


Dutch bank ABN Amro has become one of the first banks in Europe to register digital bonds on a blockchain. The news adds to a growing list of examples we can point to, which demonstrates the potential and acceleration of digitising Real World Assets (RWAs). 


ABN Amro’s bond issue is fully digital. Preparation, placement and documentation of the bond was all digitised and recorded via blockchain, with ownership also recorded in the form of tokens, after investors had purchased the asset. This is just one example of enabling digital RWA ownership, but has major potential implications for the future of the global financial system.


Just a few days ago none other than BlackRock boss Larry Fink told CNBC he was excited at the prospects for the tokenization of RWAs. In short – this is no longer just the dream of DeFi innovators, but the ambition of the leaders of some of the biggest TradFi asset managers in the world.


What does a digital RWA ecosystem look like? Everything from bonds to equities, and essentially any type of financial asset could soon exist on, and be exchanged via, digital blockchains that provide completely secure records of ownership. 


Property rights form the very fundamental basis of the global economy and digitising RWAs is the logical step to fully modernise this. ABN Amro’s €450,000 digital bond issue was small by most institutional standards. But the implications for the future of this technology are much, much bigger. 


UAE gets ahead of the pack on virtual assets


An regulatory arms race is underway as global financial hubs look to lay the groundwork for accommodative regulatory frameworks. The latest development in this race comes from the UAE which has just approved its own virtual assets framework. 


The UAE might not be the first choice regulatory destination for firms looking to operate within European or US jurisdictions, but the creation of defined rules for virtual asset firms is a clear signal from the country that it wants a piece of the emerging sector. 


A regulatory race is now palpably underway to attract innovators to base themselves in the most forward-thinking regulatory regions. Regulation, far from stymying the development of the digital asset sector, is creating a level playing field for projects, with clear and definable protections for users – be they private or institutional.


Those users are clamouring for clear protections at the moment, especially in light of some of the events of last year. The industry has much to do to bring confidence back through measures that ensure collateral confidence, risk management and transparency. Regulatory oversight, as a critical protective measure to financial market infrastructure built using blockchain, is fast approaching too. 


Those businesses that adopt a regulatory-first approach will see their innovation gain traction and become embedded in a way that the ‘Old West’ of crypto was never able to attain.