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.

March 26, 2024

Ripple’s tokenization event; EU’s AMLR steback from the €1,000 limit; SWIFT and DLT

lcome 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 on the London Tokenization Policy Summit
  • EU backs down on €1K crypto payment limits
  • SWIFT wants everyone on the same ledger


London Tokenization Policy Summit 


The London Tokenization Policy Summit, hosted by Ripple, Imperial College Business School and the Centre for Financial Technology, was held recently and provided some valuable insight into the growing market for Tokenized assets. 


Some of the more notable predictions to come from the summit included BCG’s eye-opening estimate that the market for tokenized assets could reach $16 trillion by 2030. This is no small figure. To give it context, the current capitalization of the S&P 500 is around $40 trillion. Were BCG’s figure to come to fruition, we’re looking at an extraordinary transfer of TradFi wealth on chain. 


The benefits of real world asset tokenization cannot be understated – from better market efficiency and price discovery of less-liquid assets, to heightened ownership security and protection against loss – the financial system as it exists today will benefit massively from the growth of the technology. 


The summit did however recognize something Swarm is keenly aware of – we’re yet to see a really first-class simplified tokenization offering to market. There is an element here of the sector still being in its infancy. Much of the innovation is still at the fundamental level – looking at the infrastructure and core problems and working to create those core solutions. 


But user-friendly and clean UX are going to be a gamechanger in the near future that help the market to achieve that extraordinary scale. It’s akin to the iPhone moment of the late 2000s – smartphones had existed in one guise or another for some time. But the iPhone’s launch in 2007 was a game changer because it completely changed – and simplified – how people accessed services on that piece of technology. 


First mover advantage isn’t always the key. Creating something that everyone can adopt seamlessly is potentially far more powerful and central to that  $16 trillion growth potential. 


Step back from €1,000 EU crypto payment limit is positive


Updates from the EU in new Anti Money Laundering Regulation (AMLR) have come through the Parliament, confirming much of what was expected in the new rules, and avoiding one significant problem.


The new regulations largely enshrine processes and rules that were already in place for much of the crypto sector. These AMLR rules encompass a much wider set of businesses with payment and other money handling responsibilities so the codification of responsibilities is by no means specifically targeted at crypto.


It is a facile argument that attempts to complain about additional AML and other rules – those businesses operating in the space should have been largely compliant already. Those operating outside of these parameters were not doing so with regard to the regulations in the first place.


There is one area however where some positive progress has been achieved. There was a proposal in the new legislation to create €1,000 limits on crypto payments from self-hosted wallets. This would have been highly detrimental to the sector and would have created a punishingly small limit on transactions. 


Fortunately, this proposed rule has been ditched – a sign of common sense prevailing from legislators and a real win for the sector in the EU at a time of evolving rules and procedures creating a whole new playing field for the market. 


It remains to be seen what effect the wider pieces of regulation such as MiCA and other updates have on sectoral progress in the EU. But efforts to encourage legislators to not impose excessive limitations on the market appear to be paying off. 


SWIFT wants everyone on the same ledger 


SWIFT – short for the Society for Worldwide Interbank Financial Telecommunication – is perhaps the most critical TradFi rail for financial institutions in the world. 


The organisation has now given its view on where it seed distributed ledger technology (DLT) moving. In short, it sees a single “universal shared ledger” for financial institutions to operate upon in order to simplify and transform how the global financial system communicates, transacts and operates. 


This view confirms previous opinions given by organisations such as the Bank for International Settlements (BIS) and regulators such as the Monetary Authority of Singapore (MAS) and would appear to indicate a clear direction of travel for major financial institutions in regard to blockchain. But some significant questions persist with this idea, particularly when you consider the nature of the powerfulTradFi institutions proposing it. 


Firstly, it is hard to create a unified rail for the global financial system without some element of centralization – be that in terms of oversight or design. This is especially likely when you consider some major entities who would be users of such a system would inherently not be in favour of privacy, decentralization or indeed in some circumstances, transparency – key pillars of DLT. 


The market itself now has numerous solutions in play – stablecoins are private market-based initiatives that offer the solutions that SWIFT is now considering openly. But like the major concerns that CBDC tech presents, a single shared ledger would create considerable concerns about who gets to design, implement and oversee such a ledger. 


SWIFT says a unified ledger could provide a “big bang” moment for tokenization but this denies the fact that the ecosystem is already developing at pace without a singular system in place. SWIFT ultimately has its own interest at heart, and clearly would like to see itself placed at the centre of the technology that replaces the TradFi infrastructure it currently oversees.