Thriving in the era of digital assets

Distributed ledger technologies (DLT) - the best known is blockchain - and digital assets are becoming increasingly important. This is already shown by the market capitalization of the top 100 cryptocurrencies, which is now more than 2.2 trillion euros (as of the end of November 2021).

Despite the high volatility, investor demand for cryptocurrencies and digital assets continues to increase. This group of people also wants new trading and custody services, which most banks and asset management companies have only offered to a limited extent so far.

The main reason for this lies above all in a regulatory framework for digital assets or cryptocurrencies that is insufficient from the point of view of financial companies and therefore a lack of legal security. This shows our opinion among companies in the financial industry from six European countries. The results paint a comprehensive picture of the current industry view of DLT and digital assets.

Based on the answers, we have formulated four core theses:

• With the recent regulatory developments in the area of ​​digital assets and the application of DLT, a new dynamic is emerging in the market as a key entry barrier for financial market participants is removed.
• Due to the transparency and anti-counterfeiting of data, DLT has the potential to completely redesign existing processes and thus significantly improve the operational efficiency of the sector.
• The demand for digital assets from private customers to family offices is booming and is forcing established market participants to expand their offerings and address new groups of investors or customers.
• If European banks and asset managers do not accelerate their investments in digital asset products and services in the near future, they risk falling behind highly specialized service providers and FinTechs.

In our paper "Thriving in the era of crypto and blockchain" we provide an overview of the current market and regulatory developments with regard to digital assets, cryptocurrencies and DLT solutions. We present the results comprehensively and analyze them with a view to the four hypotheses described. Recommendations for action for banks and asset managers can be derived from this.