Sibos Wrap-Up: What We Learned about Digital Assets
1 November 2021
Sibos was a powerhouse of discussions on critical topics facing transaction bankers. Monica Summerville and I had the honor of leading one of the Big Issue Debates: Think Tank on the Rise of the Internet of Value: Role and Opportunities of Cryptocurrencies, Stablecoins, and CBDCs in Financial Services. I participated in the Sibos Wrap-up Session and shared my three key takeaways from that discussion, summarized below, along with what surprised me and my thoughts regarding what should we think about as we look ahead. You can access my 10' wrap-up here. I encourage you to listen to the whole segment but if you'd like to jump ahead to mine, it begins at 11'40".
For detailed analysis on this topic, please see my Celent reports, Mapping the Crypto Galaxy Part 1: Transaction Banking and Payments and Mapping the Crypto Galaxy Part 2: Trends in Cryptocurrencies, Stablecoins/CBDCs, and DeFi.
1. Increasingly FIs recognize that banking and payment systems have not kept up with the pace of advancements in the digital economy and trading.
- E-com operates 24/7, XB, relatively inexpensively
- The trading front office runs on modern tech, highly automated, low latency
- Banks operate typically with batch processing, store and fwd messaging
- Payments messaging, clearing, settlement are decoupled, can take days
- This dichotomy is unsustainable.
- In response, a growing number of FIs and FI-back consortiums are harnessing blockchain, smart contracts, and digital assets to align the performance of banking/payments systems with those of the digital economy.
2. The Internet of Value is beginning to crystallize
- Today, there are use cases that are progressing towards economic viability, having proven value and feasibility.
- Use cases supported by select cryptocurrencies, XRP and Stellar Lumens, and stablecoins like USDC
- The introduction of CBDCs will accelerate the mainstreaming of digital assets.
3. Cryptocurrencies are gaining legitimacy as a new asset class
- When the Bitcoin paper came out, all the buzz was regarding how BTC provides the missing link, the Internet of Value, i.e., acts as a medium of exchange.
- When Bitcoin failed to gain traction as a medium of exchange for legal activities, the pivot was blockchain will be the great disrupter.
- Now Bitcoin is leading as a new asset class, initially driven by retail investors, followed by institutional investors.
- Institutional investors translate into more sophisticated demand which in turn, accelerates DeFi growth.