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:
- Notes from Dubai on the Web3 Summit
- Swarm @ Cambridge University
- Is the Ethereum ETF destined for success?
Dubai’s Web3 summit
The Web3 Summit held in Dubai on 16 and 17 April was a fantastic chance to catch up with industry peers, experts and leaders. Although an unexpected weather event created some drama, it was nonetheless a thought-provoking gathering for the industry.
In discussions Swarm was involved with, key topics included the rise to prominence of real world assets (RWAs) and stablecoins, and how their changing roles were impacting upon both TradFi and crypto spaces. This is crucial to increase market liquidity and efficiency in the Web3 environment, which faces infrastructure, pool management and cross-chain interoperability challenges.
Stablecoins now hold a position as a crucial tool for increased market stability. In the Web3 environment today there’s a range of methods to manage stablecoin value, including fully and under-collateralized, centralized and decentralized custody, on-chain issuance and issuance by centralized institutions, permissioned and permissionless, as well as algorithmic stablecoins.
The discussion considered how stablecoins in the Web3 environment can achieve value stability while ensuring their value aligns with real assets or economic activities.
Algorithmics, which have garnered much negative attention, form a small part of the stablecoin ecosystem while others which have grounding in RWAs are moving toward greater regulatory oversight through frameworks such as MiCAR, eMoney and other methods.
However, the pace of change is such in the sector that traditional frameworks routinely fail to keep pace with market developments and innovation. That being said, there was general agreement that regulation, managed proactively, is not the barrier to innovation it was once considered by the crypto community.
It is very much upon the industry itself to work within the guide rails given to them by governments, abstract the complexities and find a way forward.
Swarm talks to Cambridge University
We were invited to Cambridge University alongside other TradFi and DeFi industry experts to talk at the Queens’ College Cambridge Seminar in Ethics & Financial Innovation, Growth and Stability.
Among a host of interesting presentations to Cambridge students, from the likes of Mark Makepeace, the founder of FTSE, and Dr Robert Barnes the former CEO of the London Stock Exchange Group, we spoke about the adoption and regulatory compliance of tokenized assets and what the current state of play looks like.
We know that tokenization is very much a DeFi product today. Whilst other presentations outlined the potential of this technology and its impact on trading, lending and borrowing, and clearing and settlement for traditional financial institutions, it is the DeFi community that is taking advantage of tokenized assets and new economics on chain today.
Crypto is a story of the tail wagging the dog and the adoption of tokenized assets is no different. But large financial institutions need to understand how to make money from this technology first, before they will embrace it meaningfully. Efficiency alone will not prompt incumbent firms to redesign their entire trading infrastructure and market practices that have supported their business models for so long.
We also covered the regulatory landscape for issuing and trading tokenized assets. The makeup of regulation is varying and at times unclear for DeFi, with some states more hostile than others – which is likely to end in a variation of outcomes for the sector in the medium term. The variety of approaches from different regulators and the pace at which they move results in companies and entrepreneurs arbing between different jurisdictions of where best to establish their businesses and launch their product or service.
Will the Ethereum ETF make waves like bitcoin?
In the wake of the bitcoin ETF wave, Ethereum ETFs are the latest product in the spotlight, connecting TradFi and crypto. This comes on the back of the news that major institutional player Franklin Templeton has quietly listed an Ethereum ETF on DTCC.
Looking at the progress of bitcoin as an indicator can be instructive here, but the two cryptoassets are different from one another. Critical however to the approval in the US, ultimately, was the involvement of major institutional players in management of the ETF for a mainstream financial market.
This has led to a series of copycat moves by other regions looking to have a slice of the action, with Hong Kong set to begin trading imminently, and Australia now looking to take part. In the EU, tradeable bitcoin ETPs have been available for a while too, to less fanfare. The UK stands almost alone as a major financial center (although Singapore is missing too) with no retail investor access to bitcoin ETFs.
Ethereum is likely to face more opposition as it has a somewhat different use case and history to bitcoin. Franklin Templeton’s toe in the water is notable and we look forward to Ethereum joining the club of “legitimised” crypto currencies supported by TradFi incumbents.
