The Investment Industry and an Evolving Digital Landscape

Is 2022 the Breakthrough Year for Digital Assets?

Will 2022 turn out to be a breakthrough year for digital assets? Certainly, central banks are seriously studying the potential of central bank digital currencies, or CBDCs. Also showing keener interest of late are regulators, whom many commentators view as not having kept up with the rapid pace of developments in the space.

Papers in this selection explore a wide range of topics on the evolving digital landscape, with several exploring how digital innovation may impact the business of asset management via digital custody, regulation, and tokenisation of assets. Other commentators look at the ongoing evolution of blockchain, what might happen to the U.S. dollar in an age of CBDCs, and how regulatory changes might impact the acceptance of digital assets as portfolio constituents.

Digital Digest (State Street, Jan 2022)

State Street’s first Digital Digest is a collection of their recent insights into the digital ecosystem and how it is impacting financial services. It features articles on tokenisation, digital custody, what the regulatory pathway for digital assets might look like, and cryptocurrencies as assets.  

Tokenisation of Alternatives (BNP Paribas AM/Liquefy/CAIA Association, 2021)

Jointly authored, this seminal piece outlines how tokenisation via blockchain could potentially revolutionise alternative asset investing, offering advantages to both investors in, and managers of, alternative assets.   

Blockchain and Beyond: What’s driving FinTech in 2022? (Lombard Odier IM)

Lombard Odier’s article reviews developments in the fintech space in 2021, while also offering insights into the key trends of 2022, focusing on the broader adoption of blockchain technology and additional regulatory insight. 

Investors’ Exposure to Crypto and Blockchain Tech (Bridgewater Associates, 2022)

Bridgewater Associates takes a deep dive into ways in which institutional investors are gaining exposure to cryptocurrencies, how institutional holders make money from such investments, and what future developments are on the horizon. 

Proof-of-Stake: A crypto path to lower energy consumption? (FTSE Russell, 2022)

FTSE Russell’s paper compares Proof-of-Work with Proof-of-Stake in digital asset adoption, noting the former results in vast quantities of electricity being used for 'mining'. They argue that the alternative process, Proof-of-Stake, potentially offers yield advantages while also being a much greener solution. 

The Future of Digital Assets 2022 (EmergentX)

In this encyclopaedic paper from EmergentX, they argue that 2022 will be a pivotal year for the adoption of digital assets. The alignment of several interested parties (investors, owners, regulators) is likely to see a step change in attitudes towards crypto, DeFi and tokenisation, amongst others.

U.S. Dollar in the Age of Digital Transformation (U.S. Federal Reserve, 2022)

This U.S. Fed paper offers insights into the emergence of digital assets in recent years, but focuses on central bank digital currencies, or CBDCs, how they might be used, their potential risks and other considerations, and what policy measures might be needed to see their adoption. 

CBDCs to become reality in 2022? (OMFIF)

The Digital Monetary Institute Annual Report considers whether 2022 will be the year when central bank digital currencies become a reality, noting that considerations have moved from the technical to societal and political considerations. Practical issues, such as how to integrate CBDCs into existing payments systems, remain a key challenge.  

Beyond Blockchain: Promise of digital trust networks (BCG, 2021)

Boston Consulting Group investigates digital trust networks (DTNs), arguing that many conflate DTNs with blockchain, when in fact it is just one part of the DTN architecture. DTNs address the reciprocal distrust that exists between many counterparties. 

Webinar: Digitisation's impact on the asset management industry (AIMA, 2021)

This ICMA Asset Management and Investors Council (AMIC) virtual event considers how digitisation is impacting the asset management industry. In a wide-ranging discussion, event participants cover a wide range of topics, including asset tokenisation and the use of artificial intelligence. A presentation by the European Commission sets out its vision for an EU digital finance strategy.