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Four acquisitions for the love of Tokenisation

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by Efi Pylarinou Advisory
| 08/11/2023 09:00:00

The world is a crazy place, and I do not think anyone needs any evidence for that. Pick any topic, and there is ample evidence out there.

Let’s look at the Tokenisation topic, which is inextricably connected to digital assets and more closely to stablecoins.

Emotional swings
 from the news (did you wonder if it was fake news?) that the SEC dropped its case against Garlinghouse and Larsen of Ripple. This Christmas, it would be three years since the Ripple/SEC saga started. Did Ripple Labs hold an illegal IPO when raising funds by selling XRP, because it was an unregistered security offering?

Upset from looking back at the economic cost of this saga and questioning its purpose since regulatory clarity still has not passed US Immigration. As Sandra Ro, CEO of GBBC, put it this week in a LinkedIn post: “Can someone please calculate the taxpayer money and lawyer fees spent during the multiple years on the Ripple/SEC case?”

Disgust with the revelations during the SBF/FTX trial and the latest NY lawsuit for fraud against Gemini, DCG and Genesis (losses of c. US$1 billion from the Gemini Earn product).

Excitement with the announcement of a milestone acquisition this week: DTCC is acquiring Securrency.

Let’s take a look at this deal. Let me know if you can feel the excitement too.

DTCC is US-based with global subsidiaries and acts as a centralised clearing and settlement company for different asset classes. In 2022, it processed US$2.5 quadrillion in securities settlements.

As you can imagine, compliance and interoperability are paramount for DTCC. Even if 10% of the TAM projections of tokenised Real World Assets (RWA) floating around, materialise, the DTCC wants to be part of it.

BCG and ADDX estimated the TAM around US$16 trillion (May 2022).'s latest report estimates the market value for tokenised assets will be between US$3.5 trillion in a bear-case scenario and US$10 trillion in a bull-case scenario by 2030.

More importantly, the FINK (US$10 Trillion AUM) has spoken and said at the New York Times’ 2022 Dealbook Summit.

In the first WealthTech views report in Spring 2021, “How DLT and Blockchain are shaping the future of asset and wealth management”.

Securrency was profiled, and Dan Doney (CEO at the time and now CTO) said: “Programmable digital assets are the future of finance. Compliance and interoperability lie at the heart of digital assets”.

I personally remember an early demo of the Securrency dashboard with an early version of their Digital Asset Composer, which was a plain-language interface enabling users to leverage object-based tools. This dashboard can be used by Issuers of digital assets, financial services providers, lawyers, and any other professionals to intuitively create any type of financial instrument.

This Digital Asset Composer is connected to the Policy Engine efficiently enabling users to define the regulatory and transactional parameters applicable to that asset, but also to update tokens if these rules change.

Securrency has also integrated a data oracle, the Attestation Registry, and the Digital Asset Registry, which handles reporting, proxy voting, and other shareholder-related items.

My excitement also comes from another similar deal that was announced in August. DLTfunds was acquired by Deutsche Börse.

In both the 1st and the 2nd 'WealthTech views report DLT and Blockchain — 2022', we profiled FundsDLT.

A Luxembourg-based FinTech focused on the entire lifecycle of fund administration on new rails. FundsDLT was launched and owned by Clearstream, Credit Suisse Asset Management, the Luxembourg Stock Exchange and Natixis Investment Managers. The regulatory progress in Europe from MICA and DORA, but most importantly, the German and Swiss government’s legislations around DLT, have been significant enablers for these innovations to come to market.

FundsDLT provides a shared platform for asset managers, banks and financial advisers, built on distributed ledger technology that generates efficiencies, transparency and better client experience all along the investment fund distribution chain.

These two acquisitions may not be huge in deal size, but they are important as they will be enabling significant changes behind the scenes through major incumbent players.

At the same time, there have been more acquisitions over the past couple of months targeting a piece of the Tokenization of RWAs pie.

In May, Ripple acquired Metaco, and this acquisition is more than just about custody of digital assets. METACO’s main product, called Harmonize, is an orchestration system for Digital Assets to tokenise, manage staking and smart contracts, and connect to Defi.

Ripple is already serving several incumbent banks and financial providers globally.

In August, Securitize acquired OnrampInvest. Securitize is a leading FinTech in the digital asset securities space. I remember Carlos Domingo and their first tokenisation of SpiceVC (tokenising a VC fund) and then spinning it off to what is today Securitize.

Despite the messy crypto regulatory environment in the US, Securitize has been building, launching and growing. In 2019, it became the first SEC Registered Transfer Agent operating on the Blockchain. In 2021, it started issuing tokenised funds and launched Securitize Markets to enable the trading of digital asset securities. It has established several collaborations with incumbents to tokenise private funds (e.g., Hamilton Lane and KKR). I think of them as the US analogue of ADDX in Singapore (Is ADDX the Betterment of the Private Markets?). Their acquisition of Onramp opens a distribution channel for tokenized assets to empower RIAs. It follows a partnership with Onramp providing access to private equity feeder funds from investment giants KKR and Hamilton Lane. Fractionalisation and diversification of portfolio holdings through tokenisation.

Changing rails does not happen overnight.

Dematerialisation of company shares (i.e. not maintaining them in physical form) was completed fairly recently. It started in the late 1960s, and by 2010 at least in the US and Europe, it was 99% complete.

Remember the issue of the lost Stock Certificate in both the original 1964 Mary Poppins movie and the 2019 Disney production “Mary Poppins Returns” in which the missing share certificate is used to repair a kite.

Now we are roughly six months away from the T+1 settlement becoming effective for US and Canadian securities, on the old rails. Will they break? Will this pressure help the transition to the new rails, and how can that work in such a fragmented market?

I guess this will work its way through the usual scattered innovation approach that then gets bundled, acquired, and integrated.

Watch the partnerships and the acquisitions for the love of Tokenisation because it has a huge impact on the bottom line (albeit behind the scenes mostly).

Read the original article here.