Distributed ledger technology (DLT) application in the real world is accelerating, said panellists at this year’s SIBOS conference.
The affirmation was made at a panel entitled ‘Meet the Experts: DLT in the Real World – Making Digital Assets an Operational Reality’, run by Broadridge, in which participants discussed the recent findings of ISSA’s industry-wide ‘DLT in the Real World’ survey.
Colin Parry, CEO of ISSA, outlined some of the survey’s key findings, including considerable year-on-year growth for live DLT usage and the maintained popularity of crypto and bonds assets. He also emphasised the fact that “the value [of DLT] is there,” but that it may be seen differently depending on where firms are in the ecosystem.
While the use of DLT is up, other panellists warned that the industry may not be using it to their full advantage. Xiaonan Zou, head of innovation and digital assets at UBS Group Treasury, stressed that regulation must be considered as companies push for everything to move faster. Operational risk needs to be minimised, she said, and regulation needs time to catch up.
Yuval Rooz, CEO of Digital Asset, disagreed. He stated that regulation does not need to change when considering the digital asset world, and argued that regulation for other asset classes and the wider market can be applicable. Instead, he suggested that a major problem the sector is facing is an overabundance of experimentation — and a lack of actual problem solving.
Answering the question of why investors should show an interest in DLT, Horacio Barakat, head of digital innovation for capital markets at Broadridge, affirmed that they already are. He said that the buy-side is seeing the benefits of DLT, but that the technology is of no use to them without the presence of a user network that they can engage in. As this network develops, uptake will increase. Although the buy side has been slower in the adoption of DLT, there was little incentive for them to join, he added.
Rooz instead suggested that the buy-side is not behind the curve — they had no reason to be ahead of it, as innovation in this area does not directly serve them. He stated that the buy-side is more interested in solutions to problems than product technicalities, and that once these are publicised there will be further interest in DLT.
Barakat concurred, stressing that networks are hard to build based only on product potential. He suggested that specific use cases for individual companies should be introduced before moving to a multi-party system, allowing for firms to adapt to new technology and realise its benefits.
Zou considered the rapid development of interest in DLT and digital assets over the past years, noting that support for her digital assets team has increased steadily. Similarly to Rooz, Zou mentioned the importance of using DLT to produce concrete use cases and create tangible benefits.
The importance of having clear strategies and objectives was highlighted by the panellists, with Zou stating that “planning and funding is very much front and centre in this journey,” and Rooz adding that technology migration requires clear project objectives, with all parties involved agreeing on intended outcomes and measures of success.
As the ecosystem is becoming more visible, investment in DLT is increasing, according to Parry. He said that firms are becoming more and more willing to partner with fintechs and other external service providers, rather than trying to develop everything in-house, and that the process is full-firm oriented, rather than a separate entity.
Returning to the question of regulation and best practice, Parry brought up ISSA’s long-term research into DLT, with a digital asset working group and several published papers. However, he admitted that there are not yet best practices available as the industry does not yet know what these should be.
Rooz stated that “a standard is a standard if people use it,” suggesting that these will emerge as DLT becomes more widespread.
Concluding the panel, each speaker offered a different perspective on the challenges that DLT faces. Parry cited regulation, while Barakat mentioned the industry’s aversion to change and the risk associated with it. Zou stated that there is a “long journey” ahead for digital assets, and that companies need to make sure that they are taking a price-minimising, benefit-maximising approach. Finally, Rooz reiterated that the focus should be on solving industry problems, and added that digital assets should stop being considered as disparate from mainstream assets.
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