Remy Blaire: The promise of blockchain in capital markets has spent nearly a decade in the pilot phase, and as the market for tokenized assets adjusts, the conversation is finally shifting from if to how.
Now, Global Digital Finance, FIX Trading Community and Deloitte released a landmark joint report titled "The Convergence Imperative."
After interviewing dozens of senior Wall Street executives, the verdict is clear: the future is not replacement, but rather a complex dual-stack environment where legacy and digital infrastructure must coexist.
Well, joining us live here at the New York Stock Exchange to discuss what this means for institutional adoption is Heather Goldman, an independent director in global asset management and a Company Board Member of Global Digital Finance.
Great to have you here. Thank you so much for joining me.
Heather Goldman: Thank you for having me.
Remy Blaire: This is probably a very dense report for us to go through in less than 10 minutes here. But first and foremost, what are the key takeaways from this report?
Heather Goldman: I think the key takeaways are that interoperability is going to be key to the adoption of tokenized digital asset instruments in the marketplace.
There's been a big debate about whether we're going to see decentralized financial infrastructures replace traditional financial systems. And where we've seen the solution come out is that we're, in fact, going to be integrating these tools.
Another key finding, and where we had a broad degree of consensus around all of the experts that we interviewed, was that the earliest adoption in the marketplace is coming from traditional financial instruments being tokenized themselves and finding new use cases for those digital assets.
So those are some of the most important findings that we're seeing. So tokenized financial instruments and digital assets are driving adoption. It's not a question of either-or in terms of the technology stack. It's going to be the integration.
Remy Blaire: Yeah. So I do want to expand on that and get your perspective on both the technology as well as the use cases.
So what is the reality when it comes to the technology, and what happens when you have the old and the new in terms of blockchain plumbing as well as infrastructure running side by side?
Heather Goldman: Well, what we're really talking about here is taking a traditional financial instrument, like a money market fund, which is already broadly adopted and integrated into the financial system, and tokenizing it.
Those have actually been around for quite some time. And they've been around for quite some time because a security is a security, whether you tokenize it or it's in a traditional security format. That's actually a very important aspect to market adoption.
Now, the difference with a tokenized money market fund is the ability to apply it into new use cases. And the earliest adoptions that we're seeing and the potential applications are really in collateral mobility.
So how can we take a financial instrument that's already been broadly adopted into the financial plumbing and in the toolkit of the financial system and find new and better uses for it, or additional uses for it in the financial system?
Now, we do think that there are other traditional assets which lend themselves to being tokenized: private credit assets, private equity markets, equities overall.
But where we're seeing the broadest adoption really is in that money market segment and the repo segment early on.
Remy Blaire: Yeah. So you have highlighted a lot of the use cases here, and there's a focus on the technology as well. But where are you seeing the opportunity?
Heather Goldman: Well, the opportunity, if you can unlock collateral and you can unlock the ability to trade and use these instruments from a collateral perspective, that's fundamentally a more efficient way to transact.
So businesses can both find new business opportunities in terms of the development of new types of products to service customers. They can find operational efficiencies with respect to using these instruments and potentially reduce operating risk in the internal plumbing of how we deploy these systems.
Remy Blaire: And I also do want to get your perspective on tokenization. So first and foremost, why is tokenization taking off in the safer, cash-like assets first? And what do you expect to see in the near term?
Heather Goldman: Well, they're taking off in these segments because there's already a lot of liquidity in these markets. And there are very deep liquidity pools.
In some of these more emerging markets, we're still developing those liquidity pools so that there are true efficiencies in terms of trading in these asset classes.
And there are industry challenges as well with respect to market adoption, particularly around the standardization and how we're describing and thinking and using these, and building these systems so that they're interoperable across financial firms and within different market players in the ecosystem, in both traditional finance and now, as we integrate more decentralized finance, financial market infrastructure companies.
Remy Blaire: And from your perspective, when we're looking at some of the fragmentation that is taking place here, what do you think is the solution moving forward?
Heather Goldman: Well, this was probably one of the greatest areas of consensus in findings in the paper, is that there really are two things that are required in order for market adoption to really take off.
One of which is really building out the cash leg in terms of trading. So if you're going to be trading in tokenized instruments, you need a cash settlement layer.
And that cash settlement layer can be in the form of stablecoins, can be in the form of tokenized bank deposits, and outside the U.S., CBDCs. We were focused more principally on the U.S. and U.S. market adoption.
But if there's not standardization in terms of how systems speak to one another, that will be a barrier.
So what is the solution, and what are we calling for as an industry?
So I want to call out our partners in this project. Global Digital Finance worked very closely with FIX and the FIX Trading Community, along with Deloitte.
And our two organizations, FIX and GDF, we're neutral conveners in the industry. We are member associations. We're global associations, and we can play a very important role in bringing together the market participants in order to establish these standardized sets.
So, for example, in a simplified way of thinking of this, if I am in the telecom industry, for example, I don't need to be concerned about who the telecom provider is for someone I might call on the other end of the phone.
So we really need to create that same kind of interoperability through standardization.
And we are making a call out to the industry and a call to action where FIX and GDF, along with the marketplace and other market participants, can convene the industry to help establish those standards.
The fundamental principle that we believe is important here is we don't believe the industry will compete on standards. The industry wants to compete based on the quality of its services and its products and serving customers.
So we'd like to take the technology decision out of that conversation and be part of that convening of the industry.
Remy Blaire: Yeah. And I understand that challenge when it comes to those shared standards.
So finally, before I let you go, as you look beyond, what are some of these stakeholders actually looking forward to?
Heather Goldman: Well, stakeholders, at the end of the day, they'd like the technology to disappear.
They would like to be able to deliver better products and services. They would like to run more efficient operations in their business. They would like to reduce the risk of operations and find risk mitigations and their solutions in blockchain and distributed ledger technologies that can deliver that.
Remy Blaire: Well, I appreciate your time. Thank you so much for joining us live here at the New York Stock Exchange today.
Heather Goldman: My pleasure.
