The digital assets space has been the subject of great excitement for years. Do you think we are approaching an inflection point where these technologies will transform financial markets, or is this still a sideshow?
It is a fascinating time for the industry. While the initial hype around digital assets has cooled, we are definitely seeing a shift towards more pragmatic, real-world applications. Distributed ledger technology (DLT) is starting to mature, with a focus on projects that offer tangible benefits rather than the ambitious ‘big bang’ transformations we once heard about.
The progress made in tokenisation and central bank digital currencies (CBDCs), for example, suggests that we are indeed approaching an important turning point. However, it is not about replacing the entire financial system overnight — it is more about incremental change and integration.
Last year was difficult for the industry, especially with the regulatory challenges and high-profile collapses in the cryptocurrency space. How did this impact the broader adoption of DLT?
2023 certainly brought some sobering lessons for the market. The collapse of FTX and lawsuits against platforms like Binance and Coinbase highlighted the risks of operating in an unregulated or loosely regulated environment. However, these incidents have also increased regulatory scrutiny, which is actually a positive development in the long run. We are seeing jurisdictions around the world, including Europe, the UK, and Asia, move forward with clearer regulatory frameworks. This is crucial because market participants are now looking for greater certainty before they commit to large-scale DLT projects. The implementation of the Markets in Crypto-Assets Regulation (MiCA) in Europe, for instance, is a key milestone.
The EU’s DLT Pilot Regime entered into force in 2023, what role do you see it playing in advancing security tokenisation?
The DLT Pilot Regime is a significant step forward. It allows market participants to experiment with listed security tokens within a regulated framework, which is essential for testing these new technologies at scale. We have already seen some progress with unlisted instruments, but the pilot regime opens up new possibilities for tokenising traditional assets like equities and bonds.
By providing exemptions from certain regulations, the regime fosters innovation while still maintaining regulatory oversight. I expect that in the coming years, we will see a growing number of market infrastructures experimenting with DLT trading and settlement systems (DLT TSS). This could help the development of a secondary market for tokenised assets, which is something the market needs to drive liquidity.
Tokenisation has been a key theme for some time, particularly for boosting liquidity and transparency. Are there any notable use cases you’ve observed recently?
Absolutely. One notable example is the European Investment Bank’s issuance of digital bonds. They have been at the forefront of experimenting with both public and private blockchains to issue tokenised securities.
We have also seen alternative investment firms like Hamilton Lane offering tokenised feeder funds, allowing individual investors to participate in private equity markets with much lower minimum investment thresholds. These use cases demonstrate the potential of tokenisation to expand market access, which is a powerful proposition for both issuers and investors.
Central bank digital currencies seem to be gaining significant traction. How do you see the role of CBDCs evolving, particularly in cross-border transactions?
CBDCs are indeed gaining momentum. Nearly 130 countries are exploring them, and many are in advanced stages of development. Central banks are realising that CBDCs could offer more efficient cross-border payment solutions.
We have seen initiatives like the BIS’s Project Mariana, which tested cross-border CBDC settlement between multiple currencies, making great strides in proving the viability of these solutions. BNP Paribas is also involved in the ECB’s wholesale Central Bank Money (CeBM) programme, where we are testing the three settlement solutions proposed.
The move towards cross-border CBDC collaboration is essential for harmonising today’s fragmented digital asset landscape. If we can achieve that interoperability, it could significantly enhance the efficiency of global capital markets.
With this increased focus on collaboration and interoperability, do you think we are moving towards a more integrated ecosystem for digital assets?
Collaboration is certainly becoming more critical. Past initiatives were often siloed, focusing on individual organisations testing DLT for internal purposes. Now, we are seeing a shift towards larger industry-wide projects. For example, Swift’s experiments using its infrastructure to connect multiple blockchains is a promising development. The Canton Network is another example, allowing previously isolated systems to connect and synchronise assets across different platforms. Interoperability is key to unlocking the full potential of tokenised assets. It is not just about linking blockchains — it is about creating an ecosystem where both traditional and digital assets can coexist and thrive together.
Looking forward to 2024 and beyond, what are the key areas that you believe will drive progress in the digital asset space?
I see a few key drivers. First, the regulatory environment will continue to play a crucial role in shaping how digital assets evolve. As regulatory frameworks become clearer, market participants will feel more confident about committing to larger projects. Second, I expect to see more cross-industry collaboration. The days of isolated DLT initiatives are numbered — multi-party consortiums and ecosystems will drive more significant experimentation. One notable example will be project Agorá from the Bank of International Settlements (BIS), set to gather 40+ private firms and seven central banks. Finally, the focus will be on platform interoperability and standardisation. Resolving the fragmentation in today’s digital asset landscape is essential for scaling these solutions globally. At BNP Paribas, we are fully engaged with these initiatives, both internally and externally, and we are excited to see how the market evolves.
How is BNP Paribas positioning itself in this evolving landscape of more mature digital assets?
BNP Paribas is deeply involved in shaping the future of digital assets. We are actively participating in initiatives like the ECB’s Central Bank Money programme and exploring tokenisation projects across the value chain. Our goal is to seamlessly integrate digital assets with traditional ones, ensuring minimal disruption to our clients’ operating models. Collaboration is also central to our strategy.
We are working closely with market participants, industry bodies, and regulators to help shape a more integrated and efficient ecosystem. This is an exciting time, and we are committed to playing a leading role in this transformation.
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Stephen Everard
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