What is your view on the impact that DLT and Blockchain is having in reshaping asset and wealth management? What is the current state of the space and how do you foresee it moving forward?
The advent of Bitcoin and its underlying Blockchain technology has already led to a paradigm shift across the financial spectrum – and we believe there is much more to come. Having highlighted the inefficiencies within centralized legacy institutions, it has challenged traditional finance with its radically innovative, trustless and programmable nature. Whereas Bitcoin has established itself as a monetary good whose scarcity presents a valid thesis for its long-term store of value, its adoption has led to the emergence of an entirely novel asset class. This advent of crypto assets, combined with the accelerated development and application of decentralized finance, has undoubtedly led to the rethinking of the financial services landscape, from capital markets onwards.
We’re at a critical inflection point as the evolution of Blockchain technology advances f rom exploration to commercialization. This has been facilitated by several factors. Market developments, such as growing retail and institutional demand for crypto assets, have transformed traditional hedging strategies whilst presenting new opportunities for portfolio diversification, particularly during times of global economic and geopolitical uncertainty. Policy changes including increased regulatory clarity have contributed towards an overall reduction in uncertainty, with market inf rastructure developments and increased interoperability of Blockchain offerings supporting its dissemination and utility.
Wealth management has been ripe for disruption, the tail end of an industry that was already late to the digital game. Covid-19 was undoubtedly a driving force in helping to kick-start the change, as was the increasing need for cost efficiencies and the push for self-service capabilities and digital-first experiences from the younger generations who will be on the receiving end of a massive transfer of wealth over the coming decades. These shifting needs, expectations and preferences of future generations - from how they source information around investments to where they choose to put their money – lends itself to digital-first platforms and providers.
Trusted advisory has always been at the heart of wealth management and will remain so. The key will be blending the digital with the human to create enhanced services, capabilities and experiences. These emerging technologies will play a much-needed role in streamlining inefficiencies in wealth management and align with the changing needs and expectations of clients. For wealth managers, there are two aspects to consider with regards to the changes that these new technologies bring to the space – and I would encourage them, as I encourage everyone, to view these with curiosity and optimism, because technology is ultimately a tool and it’s up to us to shape it to build the future we want to see.
First, there are the new asset classes that Blockchain technology underpins and has enabled. This includes crypto assets, NFTs, metaverse assets such as real estate and others that have yet to emerge. In today’s market environment, with low to negative interest rates and current social and economic change, we expect more investors to look for ways to diversify their assets into emerging and alternative asset classes. Given the early stage of the development of the native interfaces for these assets and the technical comfort level and know- how currently required, this is where products such as our Valour Exchange Traded Products provide a secure and accessible path for investors, bridging the gap between the financial systems of the future and today’s inf rastructure.
Second, this technology has unleashed a major financial and technological movement, one that is powering the creation of the infrastructure for an entirely new financial system. DeFi, this emerging ecosystem of financial applications and protocols built on Blockchain technology with programmable capabilities, is f ree f rom the constraints of the legacy architecture weighing down the existing financial landscape and is powered by real-time innovation which is inherently global and 24/7. This not only opens up the possibility for the development of new and novel types of platforms, products and services, but also for existing organizations that are willing to engage outside of their comfort zone, the opportunity for exciting new partnerships and integrations.
Overall, Blockchain technology presents an immense opportunity for wealth management. While we’re still in the early stages, we’re seeing a surge of interest from traditional players and investors as Digital Assets and DeFi become better understood. At DeFi Technologies, we predict that the future of financial services will be built by disruptive technology, with Digital Assets and decentralized protocols at the heart of this. Ultimately, we have the opportunity to move from siloed, opaque, and, for many, inaccessible models and systems to the possibility for new paradigms enabling financial services which are more efficient, transparent and inclusive. What could be more exciting!
What solutions does your company offer that asset and wealth management firms should consider?
DeFi Technologies bridges the gap between traditional finance and the digital economy, offering simplified access to decentralized finance, which we believe are core to the future of the financial services industry globally. One of the primary ways we do this is through Valour, a wholly-owned subsidiary of DeFi Technologies, which creates the most accessible way to gain exposure to innovations such as Digital Assets and DeFi, via mainstream investment channels.
Blockchain technology has highlighted the inefficiencies of legacy finance and its integration therein is being used to capitulate on its loss of market share to decentralized finance. Digital assets and decentralized technologies, more broadly, are a rapidly evolving space: most institutions are still getting comfortable with the overall concepts and are hesitant to invest in the infrastructure needed to offer them to clients. Accessing Digital Assets or DeFi directly can involve high barriers to entry for investors: technical know-how, counterparty risk, the use of unregulated platforms and wallets, and overall comfort in dealing with complexities around nascent, decentralized technologies. Moreover, while the integration of DLT and Blockchain technology in TradFi may support its sustained relevance, it does little to align the industry with the radically innovative DeFi offerings - and opportunities - that are putting the power back in the hands of users and investors.
As the first and only publicly-traded company of its kind, DeFi Technologies represents a diversified opportunity into the nascent and constantly evolving landscape of decentralized finance. Through our three areas of work – the issuance of digital asset exchange-traded products, venture investments, and participation in network inf rastructure, DeFi Technologies provides investors with trusted access to the emerging world of Digital Assets and Web3 whilst simultaneously contributing towards the overall growth of the ecosystem.
Through Valour, an issuer of digital asset ETPs on regulated stock exchanges, we facilitate retail and institutional access to a growing suite of Digital Assets and decentralized finance investment products. As recent headlines showcase, there is strong and increasing demand from investors to access Digital Assets, but limited options for retail investors to gain access to this emerging asset class. Wrapping them into ETPs is an ideal way to do that, offering an efficient and secure way to gain diversification in an investment portfolio by gaining exposure to a benchmark or asset class.
Valour’s flagship products, Bitcoin Zero and Ethereum Zero, tracking Bitcoin and Ether respectively, are the first ETPs of their kind globally to be offered with zero management fees. With listings across leading European stock exchanges including Euronext, Borse Frankfurt and Nordic Growth Market, Valour’s products are continuously pioneering the market with innovative, transparent and accessible offerings. We have a range of forthcoming unique products in the pipeline in the coming months that will enable investors to gain exposure to new areas of innovation that would previously have been complex or inaccessible.
We’re also thrilled to recently announce a joint venture with SEBA Bank for the creation of investment solutions in Digital Assets in Europe for both institutional and retail clients, starting with a suite of asset-backed ETPs to be launched later this year. Earlier this year, DeFi Technologies co-led SEBA’s successful and oversubscribed funding round and announced our preferred partnership agreement with SEBA Bank. As a fully integrated, FINMA licensed, Digital Assets banking platform providing a seamless, secure, and easy-to-use bridge between digital and traditional assets, we see SEBA as a natural partner for us as we look to pioneer further innovative solutions to enable investor access to emerging asset classes.
Through our early stage venture arm, DeFi Technologies is building a portfolio of high potential ventures that are accelerating the growth and development of DeFi, Web3, and the economic infrastructure of our increasingly digital lives. We back ambitious founders and innovative projects and networks building for the long-term, focusing on Pre-Seed to Series A ventures.
Our third area of work incorporates network inf rastructure participation, with contributions to- wards overall ecosystem improvements in areas of governance, security and transparency. As an active participant engaged in the provision and maintenance of decentralized node solutions, DeFi Technologies assists in establishing secure and reliable networks through its roles of validating, voting and staking, working in partnership with industry-leading service providers across the space. In addition to nodes, we actively seek opportunities to further contribute to DeFi networks and applications, one example of this being our role as a Data Publisher with the Pyth network, a decentralized financial market data distribution platform.
DeFi Technologies, as demonstrated through these three pillars, is committed to providing accessible, trusted and diversified propositions for investors, available via secure and compliant channels, into the burgeoning ecosystems of decentralized finance and Web3. Ultimately, we are dedicated to innovating and building access for investors to an emerging asset class, to forging partnerships and to investing into the future of the ecosystem to help realize the promise of a more efficient, transparent, diverse and inclusive financial system.
Figure 10: DeFi Technologies’ three pillars
This article is from The Wealth Mosaic's WealthTech Views Report: DLT & Blockchain 2022. Access the full report here
