In recent years, with the rapid development of technologies such as blockchain and distributed ledger, the scale of the digital asset market has been growing significantly. By November 2021, the total value of non-state-issued digital assets reached $3 trillion, far exceeding the $14 billion in November 2016. As a result, US President Joe Biden signed the Executive Order on Developing Digital Assets in March 2022, requiring government agencies to study the legality and economic impact of creating America’s Central Bank Digital Currency and to ensure the development of a responsible digital asset financial system.
According to a survey at the SIBOS 2022 conference, one of the greatest challenges faced by digital asset services providers is regulation. However, regulatory measures in different countries are like a double-edged sword; although they may limit the innovative development of digital assets, they also provide clear guidelines for the market to follow. In October 2022, the European Commission passed the Markets in Crypto Asset Act (MiCA), which explicitly states the regulated subjects include crypto assets, crypto asset issuers, and service providers. It is expected to provide legal certainty for crypto assets not covered by existing EU financial services legislation and replace the EU members’ existing national legal frameworks.
On the corporate side, the decentralization trend brought by distributed ledger technology (DLT) has not limited the development of traditional financial intermediaries. In 2020, the US bank J.P. Morgan launched the world’s first bank-led blockchain platform, collaborating with over 25 multinational banks and over 400 institutions in 38 countries and regions. The extensive network creates diverse scenarios and multi-currency cross-border payment systems; it can also integrate with the bank’s own trading, payment, collateral, and financing services.
In the securities industry, the Swiss Stock Exchange (SIX) established the Swiss Digital Exchange (SDX), and the Depository Trust & Clearing Corporation (DTCC) in the United States launched the Digital Securities Management Platform (DSM) through Project Whitney. Both of them provide a full range of services for security token offerings (STOs) from issuance to transfer. They also provide issuers and investors with compliant services for registration, record-keeping, and continuous management. Through smart contract technology, benefits such as automation, paperlessness, and standardization can be created.
Compared with emerging fintech companies, traditional financial intermediaries still have many advantages in the digital asset era, such as stable systems, interoperability of the interfaced assets, legal compliance capabilities, and long-term reliable partnerships. As the global digital asset scale continues expanding, the market demand for standardized, reliable, and regulated digital asset-related services from traditional financial intermediaries is also rising. This trend will keep driving financial intermediaries worldwide to explore more development possibilities.
