interview with Anthony Woolley
“Everybody's talking about tokenising”
Maurice
Hello everybody and welcome back to another edition of C&F Talks. Today I'm going to be speaking to Anthony Woolley who's Head of Business Development and Marketing at Ownera and their Co-Founder and CEO Ami Ben-David will be speaking at the Tokenisation Summit which is going to be held in London on the 21st of November. Anthony, welcome.
Anthony
Yes, thank you, absolute pleasure to talk to you today.
Maurice
Great to have you with us.
Scope of real-world assets that can be tokenised
Let's start perhaps by providing a little bit of background on tokenisation of real-world assets as they are widely described. How do you really define this? What are the limits of the types of real-world assets that can be tokenised? Is there a limit?
Anthony
In principle, no. And when you talk about the potential for tokenisation and the potential size of the market the numbers can almost become meaningless. The way we think about it is tokenisation we now see being applied in a few key areas and all of these are massive markets. We're seeing tokenisation in the world of capital markets now has really taken off in terms of liquidity and collateralisation and optimisation of collateral.
So, you could take that one topic and say well if you're talking about the repo markets, they're doing, I don't know what it is today nine trillion dollars a day maybe, so you end up with very big numbers. Or you could talk about the potential to distribute tokenised funds again a massive market.
But then again, when you then talk about tokenisation of broader assets so you talk about now you're getting into private markets and alts so you're talking about real estate, private equity, private debt, again multi-trillion dollar markets and the technology itself can be taken all the way down to more esoteric topics things like oil paintings, racehorses etc. Everybody's talking about tokenising, so it's actually it's enormous.
Maurice
Yes, I heard about the tokenisation of a cruise liner or maybe no, I think it was a cargo ship not long ago, so it really does seem to have spread as a technique. And I suppose the benefit of fractionalisation of ownership is a key driver in many of these things and the permanence of the record on the blockchain.
Ownera’s role in the market
But tell us please a little bit about what Ownera does in this regard what's your role within the market?
Anthony
Yes, yeah we play a very specific role that we focus on in the world of tokenisation which is that of connecting market participants. So what you've seen is that in the last few years everybody's been talking about tokenisation for a while, and then institutions went away and built tokenisation solutions and we now see those come to market, and we see a lot of supply of high quality assets that now large institutions are starting to issue in tokenised form.
One of the issues and limitations though is, has been lack of distribution. So once you've tokenised an asset how do you get it to market participants across the globe? That's what Ownera focuses on. We're a technology company that gives regulated institutions software we call routers, which basically enable institutions to talk to each other peer-to-peer, to distribute tokenised assets for investor buy side institutions to consume those assets for digital custodians to do what they do, and we just focus on that.
So we don't actually do the tokenisation right we've got lots of these big institutions digital exchanges etc tokenising we play the role of connecting market participants and we think that's been the key missing piece to really unlock this space and enable tokenisation to have a market-wide impact.
Maurice
So you're essentially the infrastructure that enables the markets to communicate and trade and distribute.
Anthony
Indeed, yeah that's a good way of summarising it.
Maurice
Yeah, but it's that clearly that's a key area to be and I guess you know if you're well established and you do that that there's something of a first mover advantage to being in the situation you are today.
Key benefits of tokenising assets generally
So, let's just go back to the tokenised assets a little bit further you know we touched on some of the benefits but what would you list as the key benefits of tokenising assets generally?
Anthony
Yeah there's a few. I think it's important to understand that you mentioned some of the attributes of this technology and enabling you to have, you know, call it a mutable very reliable record of ownership of these assets. But really what's key is being able to establish then a digital chain from that tokenised asset all the way through to the ultimate beneficial owner and this is something we don't really have in capital markets today, there are breaks along the way whether that's in the primary markets or complexities in the secondary markets.
So the core tokenisation technology is one thing, but when you combine that with the digital chain connecting the asset through to the ultimate beneficial owner and you have those digital rails you get all sorts of optimisations some intermediaries will come out others will be enhanced in terms of the role that they play, and it's really making this environment efficient and it's also doing it in a way where you can instantly update records of ownership.
So, what does this mean? It means that unlike today in capital markets where you agree an order for a transaction and then it has to go through clearing and settlement etc you know you have the ability and we have the capability with our routers to orchestrate these transactions instantly so you can update record of ownership of an asset from seller to buyer and orchestrate that at the same time you're moving the money from the buyer to the seller and orchestrate that instantly and that's also really powerful opportunities in different markets.
Maurice
Yeah, I mean that's huge isn't it? There's so much talk at the moment about in the securities market in the Trad Fi securities market and moving from you know T3 to T2 to T1. And all of this seems like from a bygone era in the sense that you're talking about instant settlement.
Anthony
Yeah, when you want it basically sometimes instant settlement can be incredibly valuable. So for example, we're working on some major projects to help in the intraday repo market to facilitate the instant exchange of collateral and cash in intraday. Fantastic use case where you can have large institutions in the repo markets now actually just lend and borrow for a few hours and just pay interest for a few hours. Fantastic application of the power of instant exchange of collateral and cash which is a broader theme that we're seeing now.
Maurice
Yeah, astonishing isn't it.
The global legal framework supporting tokenisation
And what about the legal framework has that caught up with what is a very novel technology?
Anthony
Yeah, so when you've got innovation a lot of people talk and stress about what's going on with regulation, is it moving fast enough to keep up, and these sorts of things. I think what we found is that there's always at any moment in time a regulatory environment in which you can and should operate, right, regulation is a good thing.
What we found is that we're working on projects that are going to production now under existing regulation and legal structures under existing securities regulation and laws etc and we can do that today. What's happening is the regulation is continuing to move forward and as it does, it will enable us to move progressively to completely native digital solutions. There are a few barriers to doing that straight away but we don't see it as a binary thing where the regulation isn't right today and it will be tomorrow.
Actually, you can operate within the regulation and take these systems to production and over time the regulation will evolve a bit and enhance and enable us to do it in a more seamless way.
Key trends in tokenisation
Maurice
So finally, what are the key trends or things that you expect in the future the next milestone, if you like, in tokenisation?
Anthony
Yeah, we're at a really interesting moment in time. So the reality is that people have known about tokenisation for a few years now right, and when any new innovation comes along there's a lot of noise everybody gets excited about the potential everybody intellectualises its ability to transform financial services.
The reality of actually doing it is something else and so what we saw in the last few years is everybody got excited then everybody disappeared into their labs for want of a better word to work out what a technology really meant and everything went quiet, right.
What we're seeing now is all of that stuff all of that innovation is coming out of the labs and going into production so you've seen in the last year large asset managers such as BlackRock and abdrn and Franklin Templeton start to distribute tokenised money market funds which have given investors a way to get yield in more of a liquid way, in a way that you can more easily redeem those money market funds. So that's one theme.
And this is really by the starting gun and has really driven now this wave of all of these tokenization projects now coming into production, whether it's around money market funds leading into more broad tokenization of funds, whether it's in work we're doing on the intraday repo markets which is now leading to broader transformation of securities finance, and ultimately those much bigger markets out there of real estate and private equity shares in pre-IPO companies things like that is coming following that.
So, I think we're at a point in time and the conference is well timed because that transition we're going through from 2024 into 2025 is now next year scaling these tokenization solutions into the market and our role of connecting the market to help realize that. So, it's an important moment in time a realization of an innovation and a technology people have been talking about for a few years now is when it's actually happening.
Maurice
Yeah, exciting times as you say, the challenge of scaling up.
So for our viewers if you'd like to hear more about these and related issues, do come along to the Tokenisation Summit 2024 in London on the 21st of November. More information available on the website: www.cityandfinancial.com. Anthony, thanks very much for sharing this with us today.