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.

July 19, 2023

Mattereum; XRP; Banque de France; RWA allocators report

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:

 

  • Swarm partners with Mattereum
  • XRP case is a win for crypto, but regulation still lacking in US
  • EU and UK battling to create digital asset frameworks
  • Allocators guide to tokenized treasuries

 

Swarm partners with Mattereum to securitise real world assets on chain 

 

Swarm has announced a partnership with Mattereum, a digital identity layer for real world assets on Ethereum, that will bring traditional assets on-chain for institutional investors to trade on its decentralized and regulated infrastructure.

 

Having coordinated the launch of the Ethereum Network, Vinay Gupta started Mattereum to create legal structures so that transfers of tokenized real world assets are reflected in real world ownership and are enforceable.

 

Solving for enforceability of ownership for assets both on and off chain is a crucial piece of the tokenization puzzle, which will enable more high-value collateral to move into DeFi with confidence. 

 

The partnership will facilitate the onboarding of high value traditional assets, like real estate, gold, fine art, commodities, and other tangible assets that have traditionally been illiquid or inaccessible to a broader audience, to the blockchain in order to benefit from greater liquidity, efficiency and self-custody.

 

XRP win is positive for crypto, but doesn’t answer the regulatory problem 

 

With the ongoing wrangling over how crypto is regulated in the US, the recent court victory might be seen as a sign that the tide is turning on enforcement. Indeed, markets reacted as if it was a victory.

 

But there’s a bigger picture problem that the market isn’t paying much attention to – crypto activity, be it lending, trading or otherwise, still needs some form of regulation, even if the SEC has failed to win its arguments in the US. Of course, the SEC will be back with more cases in order to try and confer security status on tokens, but the US system needs codified rules to enshrine and authorise the crypto market. 

 

Clearly we no longer exist in a world in which crypto can just carry on with no rules and responsibilities. There have been too many market failures for that. Regulation is there to protect both consumer and creator in the process, while protecting the market from bad actors. 

 

Many countries are well ahead now on the path to regulation and the US is at real risk of getting stuck behind. We’re already seeing the onshoring of capital and businesses looking for more progressive regulatory frameworks. Until the US has clarity the sector won’t have the confidence it needs to grow. 

 

EU and UK ramp up digital asset efforts 

 

Both the EU and UK are looking at creating digital-asset specific frameworks as the sector becomes increasingly important in the crypto ecosystem.

 

The approaches are taking different paths, but what is clear is it is at the front of minds of regulators in both regions. There are however some potential issues in the different approaches.

 

Banque de France governor Francois Villeroy de Galhau has proposed a pan-European blockchain infrastructure for tokenized settlements. While interoperability between chains is going to be a huge aspect for the sector to overcome, the potential creation of a centralized DLT is perhaps troubling, especially if it comes with its own inbuilt CBDC.

 

The key here is that the EU should not look to wipe out independent initiative. The proposal to allow interoperability between a variety of tokenized assets is potentially very powerful, but this convenience must not come at the cost of security, transparency and decentralization.

 

In the UK, the regulator is launching a sandbox to test tokenization. Again this shows that regulators have a clear eye on the technology as it expands rapidly. Ultimately regulators are looking to get ahead, or on time at least, with regulator innovations. As the sector expands it will become an increasingly important part of both DeFi and TradFi.

 

RWA Allocators Guide to Tokenized Treasuries 

 

Swarm is very pleased to have been included in the recent Allocator’s Guide to Tokenized Treasuries report. Tokenized treasuries have hit a recent landmark of $600 million in the market. The report makes for incisive reading on what is a fast-expanding sector of finance around the world. 

Tokenized treasuries are still relatively small compared to the size of government bond markets, but reaching $600 million is a positive indication of where the demand for tokenized treasuries is heading. In February this year, we launched tokenized real-world assets and have seen a huge uptake in these already, with several digital issuance sell outs.

The fact liquidity is building in the tokenized treasury market during a bear market, is a very encouraging indicator of investor sentiment for these products. While it’s not possible to predict the direction of markets, we would expect to see a major expansion into digital assets in the next bull run.

However, trading securities on chain requires key regulatory and governance measures. For those bringing tokenized treasuries on chain, it should be done with as much transparency as possible and built with investor protections by way of safeguards against platform insolvency. 

Tokenized securities must be traded on a regulated platform and adhere to the same robust regulation as the TradFi assets underlying these tokens. If done right, these assets can benefit from the safety and deep liquidity in traditional markets combined with 24/7 trading, self custody and transparency of decentralized finance (DeFi).

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