In recent years, the financial industry has witnessed a transformative evolution marked by the rise of tokenization and digital money. The Oliver Wyman Forum's report, "Inside the Competition for Big Money," sheds light on the profound impact of these technological advancements on traditional financial institutions, ushering in a new era of competition and innovation.
The Rise of Tokenization and Digital Money:
Tokenization, the process of creating digital representations of assets on digital ledger technology ("DLT"), has emerged as a pivotal force in reshaping the financial landscape. It enables the programmable management and transfer of assets on a blockchain, eliminating the need for traditional intermediaries. The report emphasizes that this shift fosters trust in networks rather than intermediaries, streamlining processes and reducing the reliance on banks' balance sheets.
Implications for Global Banks:
The report predicts significant consequences for global banks, with cross-border payment revenue potentially at risk as demand for intermediary services declines. The efficiency gains of tokenization could lead to faster settlements, diminishing the need for counterparties to deposit cash as collateral, thereby impacting banks' net interest income. However, the benefits of reduced costs are expected to be shared across the securities industry, benefiting issuers, investors, and intermediaries.
The Role of Digital Money:
As assets undergo tokenization, the demand for digital money increases, offering new opportunities for market-based products leveraging blockchain. Money market funds, traditionally competing with bank deposits, can now be tokenized, exchanged directly as payment tokens, and contribute to the growing ecosystem of digital money.
Challenges and Necessities:
The report emphasizes the necessity of reliable and safe digital money for the scalability of tokenization. Key players, including corporate treasurers and asset managers, require trust in the stability of digital money and the assurance that the payments process involves minimal counterparty risk.
Value of Tokenization:
Tokenization enhances financial markets in terms of efficiency, innovation, always-on liquidity, liquidity optimization, and market integrity.
Programmability and smart contracts, central features of tokenization, offer significant efficiency gains and facilitate the development of new products and services.
The Regulatory Landscape:
Regulatory hesitancy, particularly in the United States, poses challenges for banks experimenting with public blockchains. However, experiments in private networks are ongoing, and the rise of digital disruptors in the crypto space suggests a shift in market dynamics.
Looking Ahead:
The report paints a picture of a financial industry at a crossroads, where traditional banks face existential questions amid the rise of digital money and tokenization. Digital intermediaries, poised to revolutionize finance, must navigate regulatory challenges, and collaborate with industry platforms to compete with banks at the core of their business model.
In conclusion, the competition for big money is undergoing a paradigm shift, driven by the transformative forces of tokenization and digital money. The future promises both challenges and opportunities as industry players adapt to this evolving financial landscape.
Related Articles:
Tokenization of Securities vs. Real-World Assets ("RWA"): Navigating the Howey Test and Embracing Regulatory Safeguards
Oliver Wyman Forum: Inside The Competition For Big Money
https://www.oliverwymanforum.com/future-of-money/2023/nov/inside-the-competition-for-big-money
Disclaimer
An offering statement regarding this offering has been filed with the SEC. The SEC has qualified that offering statement, which only means that the company may make sales of the securities described by the offering statement. It does not mean that the SEC has approved, passed upon the merits or passed upon the accuracy or completeness of the information in the offering statement. The offering circular that is part of that offering statement is at https://vdr.ohanae.com/projects/ohanae. You should read the offering circular before making any investment.
Ohanae Securities LLC is a subsidiary of Ohanae, Inc. and member of FINRA/SIPC. Additional information about Ohanae Securities LLC can be found on BrokerCheck. Ohanae Securities LLC is in discussions with FINRA about exploring the expansion of business lines for the broker/dealer. Any statements regarding abilities of Ohanae Securities LLC are subject to FINRA approval and there are no guarantees FINRA will approve the broker/dealer’s expansion.
Ohanae Securities is seeking approval to be a special purpose broker-dealer that is performing the full set of broker-dealer functions with respect to digital asset securities – including maintaining custody of these assets – in a manner that addresses the unique attributes of digital asset securities and minimizes risk to investors and other market participants. If approved, Ohanae Securities will limit its business to digital asset securities to isolate risk and having policies and procedures to, among other things, assess a given digital asset security’s distributed ledger technology and protect the private keys necessary to transfer the digital asset security.