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 10, 2024

Bitcoin ETF; DeFi TVL; tokenized securities in 2024

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:

  • Bitcoin ETF approval poised to set 2024 off to a big start
  • Banks will only invest in blockchain when they make money from it 
  • DeFi TVL surges
  • Tokenized securities to have banner year in 2024


Imminent Bitcoin ETF approval is a pivotal moment for regulators and markets


The approval of major institutional bitcoin ETFs is imminent, likely in the coming days, as S-1 amendments have been filed to the SEC. This could be a pivotal moment for the digital assets industry, regulators and markets alike.


The shift for digital assets into regulated realms, and the steps taken by major household-name institutional finance into the space is nothing short of a ‘big bang’ moment. Although bitcoin will likely see significant turbulence, and has much of the news in its price already, we have to think here of the wider implications.


The approval of such ETFs in the US will be a huge change in attitude from the regulator, and for the market will underpin what it wants to see – well respected and fully compliant institutions engaging in the trade of digital assets. 


Making these financial instruments legal is also a signal to the market that institutions who look to comply fully can unlock new opportunities, particularly in the digital real world asset (RWA) space – where new technology is remaking opportunities underpinned by tangible assets. 


Banks will only invest in blockchain when they make money from it 


Blockchain is a back office revolution and the approval of a bitcoin ETF is the gateway drug for major financial institutions adoption. 


Blockchain’s killer use case is for the more efficient trading of traditional assets and real-time settlement will change the risk profile of capital markets globally. 


Today, if a bank or asset manager wants to trade a commodity, stock, bond, they have to go to a designated venue. Tokenization brings all assets onto one trading infrastructure and has been advocated for by the likes of BlackRock’s Larry Fink and Coinbase’s Brian Armstrong.


Money goes where it’s most efficiently put to use. By bringing all assets, like stocks and bonds, on to one tradeable infrastructure the market can also benefit from cross margining across different asset classes and building real-time risk profiles.


Until large financial institutions earn revenue from a space or asset class, they won’t invest in it, which is why making money from the Bitcoin ETF is the first step on that adoption curve for blockchain technology at large. The Bitcoin ETF is just the start.


DeFi TVL surges above $55bn 


2023 was a turning point for DeFi with significant TVL gains as participants came back to the market after a torrid 2022. The lion’s share of TVL is still on the Ethereum blockchain, according to CoinGecko data, but Solana had a very strong finish to the year. 


Although certainly underpinned by ebullience returning to crypto markets, this year looks set to be a pivotal year for DeFi as the sector grows its offerings – particularly with regard to crossover with TradFi. The biggest growth in the market will be for regulated digitized tokens, backed by real world assets (RWAs). 


In the year ahead we foresee more growth in DeFi value particularly through the onboarding of more TradFi products on chain. With renewed confidence in markets thanks to a more sophisticated regulatory environment driving demand, it is likely more institutions will look to DeFi for regulated solutions. 


The potential of this demand cannot be understated, with enormous pools of assets looking to adopt on-chain solutions to ownership, transaction and record keeping. Blockchain infrastructure looks set to finally deliver on the promise that many in the sector have seen for some time. 


Tokenized securities will take center stage in 2024 


The right ingredients are now in place for the tokenized securities market to really propel forward the movement toward market growth. 


Such growth is not necessarily driven by sheer market momentum either. We’re talking about a sea change in the way global financial institutions treat assets and financial instruments. Major banks, from UBS to HSBC, JPMorgan and many others are all openly looking at such propositions, nothing short of a revolution in the way the global financial market operates. 


There are however some clear hurdles to overcome in the year ahead, particularly in the realm of regulatory oversight. Key frameworks such as MiCAR, which could cause bottlenecks particularly in the registration process. But important clarifications are being made that will help firms to overcome these.


With more clarity in the US about the regulatory standing of tokenized financial assets hopefully to come, this will further propel the market in the coming months. However, with major institutions already laying the groundwork for their own tokenized offerings, what is clear is that the momentum is already in favor of tokenization being one of the biggest themes of 2024.