Is a unified platform for multiple forms of digital money and assets a viable objective? Our Founder and CEO, Gilbert Verdian, was invited to answer this question alongside other industry leaders at the Future of Finance’s Digital Money event earlier this year.
In a session moderated by Dominic Hobson, Co-Founder of Future of Finance, the other speakers were Marco Kessler, Head of Digital Securities at SDX, Daniel Eidan, Advisor and Solutions Architect at the Bank of International Settlement, Lee McNabb, Head of Group Payment Strategy at Natwest and Monica Summerville, Head of Capital Markets Technology at Celent.
Gilbert first commented that given the regulatory environment institutions are operating in, we must understand what this means for firms: “Building mission critical systems on infrastructure that is not robust can present huge risk. Adopting DLT technology requires taking the same approach that current systems have – it must consider the necessary controls, SLAs and legal implications to ensure risk can be managed if something were to go wrong.”
Summerville emphasised that we won’t necessarily have one overarching platform that rules everything. She made comparisons to the adoption of the internet. “The internet wasn’t forced on people, initially we had dial-up internet before we transitioned to broadband, it was a gradual change.”
Kessler agreed and was keen to explain why. “Achieving a common platform isn’t feasible,” he said. “Why? Because there will always be different use cases and jurisdictions, in the US we have 16 exchanges to trade stocks.”
Building on this, Eidan believed that the main issue is tokenomics. He described the challenge of wanting to keep value to yourself, and how commercial incentives are forcing people to build walled gardens which make it difficult to achieve unification.
Eidan added that, “unified doesn’t equal universal. It acknowledges that only some things need to be unified.” He then used an analogy of Web2 vs. Web3, “Extending into the Web3 world means that Web2 is loosely sharing information, but Web3 adds the value layer – and this is where the challenge is because connecting value is hard.”
The conversation then shifted towards whether the public sector should facilitate a fair environment, which we’re seeing in some use cases already. Panelists collectively discussed the Project Agora unified ledger which is bringing data to assets in a unified environment. They concluded that this is a strong use case to test whether the industry can bring interoperability to the front of mind across both public and private sectors.
Coming back to the importance of use cases, McNabb who gave a unique consumer-side perspective asked the panelists, “where are the use cases that differentiate the experiences we have now? From a banks’ point of view, a unified ledger requires step change and a clear understanding of risk versus the benefit it will bring to customers.”
Hobson expanded on this and encouraged panelists to share examples of their work in this space, to which McNabb responded: “The private sector was invited to influence the UK retail CBDC, and this is an example of a project where collaboration was key.”
Gilbert pointed out that Quant built much of the technology for this in response to the Bank of England’s question: what is different about a CBDC that our current payment system can’t do? “Today we have electronic finance but a digital society that is built on legacy thinking and a push and pull payment system. By adding programmability to money, we were able to add complex logic through functionality like multi-party locks, triggers and automation that could unlock new types of products and payment lending,” Gilbert said. “The RLN will take this a step further by adding additional functionality to central bank money. We’re starting to see adoption of digital money, but it is vital that banks remember the business case.”
Hobson concluded the discussion by asking if we are heading towards a common platform and if this concept is evolving. “In some cases, the groundwork is there, the International Monetary Fund is currently supporting the XC platform for payments that will provide a centralised ledger for cross-border payments,” added Summerville.
“While public initiatives are giving space for pilot programmes, commercial use cases are what will really encourage adoption.”
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