Hello everybody and welcome to the latest edition of C&F Talks. Today it's my pleasure to have with me, Jürgen Hofbauer, who's the Global Head of Strategic Partnerships at Taurus. Jürgen is going to be speaking at our Tokenisation Summit which is being held in London on the 21st of November. Welcome, Jürgen.

Hi, thank you very much for having me.

Great to have you with us.

There's been a lot of excitement about the whole concept of tokenisation and in particular perhaps, to the types of asset classes to which it may apply. So perhaps you can tell us a little bit about what is the scope of real-world assets that can be tokenised and are there limits on the types of assets that might be included in this definition?

Yeah, absolutely. I think there's a lot of, I think RWA has become a real buzzword when it comes to tokenisation and tokenisation itself has very much picked up again as a theme.

When you look back some years obviously with what you have digital assets you have some of the cycles but now really I think the past year we have seen a lot of companies actually going into this. A lot of companies working on not only POCs but actually coming into production with it as well and that's what we see as well with the clients we work with.

When it comes to the opportunities, sometimes you feel the opportunities are limitless, right? You feel if you read some articles that anything can be tokenised and everything can be put on the blockchain but really if you deep dive a little bit into it at the end and at least what we focus on as well is working with regulated financial institutions and when it comes to that industry segment you do face certain constraints because obviously it's a heavy regulated industry.

With heavy regulated industry comes obviously a burden on companies to comply with it which means you can just go ahead and tokenise any instruments and then think, okay, once you put it on a blockchain then you have done the job. There's just a lot to it.

Now, there's regulatory constraints that are with it so you have to stick with certain rules and to be honest rules and regulatory requirements that have been out there, been out there for a good reason because financial industry, the traditional finance industry so to speak, has been around for many, many years, for decades, right? And it's working and it's working the way it's going because it has rules and regulation on it.

So that's one part when I say like, okay, from technology perspective you might think it's limitless. Regulatory side you have to obviously be mindful of what can and can't be done and technology side I would just mention that it's obviously very important to ensure security around it, security privacy. It's like what data can be shared.

You're talking a lot about on-chain data, who has access to the status, what can be shared and also around the scalability because what you really want to do is a project to scale and not just kind of like create within your islands.

So in essence, from a technology point of view, no particular limits but with the regulatory and the legal side that there are constraints particularly if we're talking about the financial community.

That's correct, yes.

Maurice

So, in terms of your company's role within all of this, what does Taurus do? What's your business model within tokenisation in particular?

Yeah, so we're first and foremost, we're a technology company. A technology company focused on custody, so digital asset custody but also very much on tokenisation where we have a fully integrated tokenisation platform. When it comes to our engagements with the traditional financial industry, we're working with banks, so regulated financial institutions.

We're working there with about 30 plus banks that are in production. Within that client base, tokenisation as I said before, is obviously one of the major use cases. Whether it comes to tokenisation, money market funds, whether it comes to tokenisation of fixed income instruments and so on or even stable coins, tokenised deposits and so on.

Some of the themes and the use cases that have seen really much popping up in the past, I would say 6-12 months or even more. So our work there is twofold. Number one, we provide the technology and number two, we work with the wider ecosystem to see what's really out there, what else is needed for financial institutions to do that because at the end, we feel that tokenisation should be as simple as just clicking the button so that banks and regular financial institutions can focus on what they do best, which is what is the actual instrument they want to tokenise, whether it's equity, whether it's that, but don't really have to think about what technology do I need, which blockchain do I need to create it, what are kind of like smart contract functionalities for each of those instruments I want to tokenise. We want to make it as simple as possible.

Yeah, yeah.

So I mean, you mentioned a few use cases there in money market funds and so on, but so far, what are the most popular use cases for this, for tokenisation?

Yeah, and a little bit here, I think it's an evolution as well.

I think initially what we have seen is clients thinking about maybe number one, tokenisation of equity or that instrument, but then the thinking was like, okay, it's actually a very efficient market to a certain extent already when you think about equities in a traditional sense. Then we have seen a move towards, well, maybe we need to go into private markets because private markets is not as efficient. There's a lot of manual work involved already. Can that be where tokenisation can add value? And also the other thing was, can tokenisation add liquidity?

Now, the one thing to say is not always just by tokenising an instrument makes it liquid because number one, you need to create the market, primary issues, but what is the secondary market? Can you bring market makers to the table as well that actually coordinate so you can actually create some more liquidity and deeper liquidity? And that's still, I would say, tricky when it comes to private markets to actually go into that direction.

So as a last shift, and that's really, I think the last, I would say probably last 12 months or so, was really going into a bit of a shift of thinking, okay, tokenisation, can it add number one, obviously a new business case to create new revenue streams, but then also where banks, financial institutions, and players in traditional finance market were thinking about what is actually the cost saving aspect around it? So can tokenisation be used to streamline processes in back office, middle office that hasn't really been taken into consideration beforehand?

And that's where we have really seen an uptick into the tokenisation of money market funds, the tokenisation of maybe mutual funds and fixed income instruments as a means of using something that is, I would say, fairly simple when it comes to certain functionalities that need to be in there. And the whole thing about asset management, lifecycle management plays in there. It's not so much just about the mint and burn. And what is it that banks daily use and can be made more efficient in that regard?

Maurice

So quite aside from some of the intrinsic properties of tokenisation, like sort of fractionalised ownership and so on, there are an awful lot of operational benefits to be had.
I can see that, are the regulators keeping up? Is the global regulatory framework, broadly speaking, suitable and appropriate for the developments of tokenisation?

I mean, I'm in a lucky position to actually have a view globally as to what is happening.

And obviously, there's a lot. So I'm also not the expert in each and every single country. But those countries that we have been looking at, maybe sticking closer to home, which is within Europe, we have Micra that came out.

That's very helpful to actually provide a unified framework for tokenisation as well across the EU. And that will enhance adoption, because clarity amongst the financial community to be able to tokenise something and have the regulatory framework obviously helps to scale the businesses as well. Then we have seen, and probably as a Swiss company, we have benefited from the DLT Act here in Switzerland, that allows the secure issuance and the trading of tokenised securities as well.

We have been at the forefront to work with the CMTA, it's the Capital Markets Technology Association, which initially started off as an association to bring players together. And that's not meaning just banks or asset managers. Also, technology companies bring together law firms as well to work on a framework for specific instruments.

So, we have been focusing on, for instance, tokenisation of securities, because our true belief is that only if you have a framework or a certain scheme, the banks and others that want to tokenise cannot hurt you and can pick up too. That's when, which will allow you to scale basically.

And on a global outlook, there's obviously still countries that start the adoption. Certain countries have more regulators that are engaged with. I mean, you look at Singapore, MAS is, I think, a very good example.

I was just at the conference a long ago where it was highlighted as to what they have done. Now, you can't expect each and every single country and the regulators of each single country to come to the table and bring the parties together. But I think that's where industry participants need to kind of build this community as well and see what's best for each jurisdiction.

Yeah, fantastic. Certainly a very dynamic and interesting time for the industry. It was a reworking, if you like, of some of the infrastructure of the industry. Jürgen, thank you. Thank you so much for that.

For our viewers, I very much hope if you want to hear more about these issues and related issues, you can attend the event of the Tokenisation Summit in London on the 21st of November. More information available at our website, www.cityandfinancial.com. Jürgen, I look forward to seeing you on the 21st at the conference.

Super. Thank you very much for having me and looking forward as well to participating. Thanks so much.

Thank you.