Blockchain Finance Grows up in Davos

In 2022 the main financial blockchain story involved corrupt crypto-billionaires going bankrupt, leaving a swath of investor destruction behind them.

In 2023, the main theme on display at a Copper-organized Davos panel “The use of DLT in financial market infrastructure” was how blockchain can improve financial market efficiencies and operations.

Indeed, the grownups in the room had little interest in the crypto crash and instead chose to focus on DLT Blockchain innovations, and how they can improve their businesses. Topics included:

• Digital asset tokenization for asset issuance, distribution, sales, and life cycle management.

Goldman Sachs is leading the pack here with syndicate partners such as European Investment Bank and Santandere, in issuing and managing a $100 million USD bond, using its new Digital Asset Tokenization Platform built on top of Digital Asset’s Daml smart contract language and Canton blockchain. This follows a separate $100M bond issuance on the public Ethereum blockchain.

• The role of CBDCS and stablecoins in timely settlement and clearance of trades on blockchains, and in serving cross-border payment transactions.

The Hong Kong Stock Exchange is proving this value.  HKEX  is rolling out a new platform to better serve international investors as the conduit into the Shanghai and Shenzhen Stock Exchanges, via its Northbound Stock Connect program during a tight daily four-hour settlement window. HKEX is working with Daml smart contracts and integrating with DTCC’s Institutional Trade Processing services to further automate and expedite the time bound process.

• Digital Identity and blockchain intelligence innovations that are critical for regulatory compliance, safety, security and business opportunities.

Transparent immutable logs are an auditor’s dream but they must be tied to off-chain vetted identities. Similarly, hard-to-understand address-based transactions must to turned into blockchain intelligence with easy user-interfaces and strong analytical underpinnings.

• Managing Counterparty Risk: Certainly, counterparty risk remains front and center, and is more pronounced in unregulated environments. But problems inevitably give rise to solutions. Copper’s Clearloop solution is one such remedy to counterparty risk by enabling institutional clients to trade and settle digital assets on exchanges connected to ClearLoop, directly from Copper’s multi-party computation (MPC) custody. The process mitigates counterparty risk and increases capital efficiency.

We expect more of these types of self-controlled (via an MPC share) custody trading solutions to emerge over time, eliminating counterparty risk arising from asset custody services.  Conio supports a similar three-key wallet solution where the end-user owns one of the three keys.

Key Takeaway: The Davos panel clearly demonstrated what we see at Gartner every day:

Mainstream users continue to explore Web3 innovations to improve business outcomes and opportunities – while corrupt crypto actors get indicted, go broke and get left out..