With a market capitalisation of USD 200 billion, crypto assets – tokens and crypto currencies issued on distributed ledgers – are on a trajectory to establish a new asset class. Momentum in building beyond Initial Coin Offerings (ICOs), with a variety of tokens, i.a. providing an alternative to start-ups and small and medium-sized enterprises financing. Intricate eco-systems are emerging as crypto assets continue to expand.
As crypto markets grow, ensuring investor rights protection, safety and robustness, as well as overall efficiency is increasingly presenting its challenges. To enable further growth, crypto markets are increasingly looking for Financial Market Infrastructure (FMI) like roles and pieces of infrastructure to create the safe and efficient environment that issuers, investors and financial institutions look for.
Given our proximity to the safe and efficient functioning of today’s capital markets, a global group of Central Securities Depositories (CSDs)/Financial Market Infrastructures (FMIs), under the auspices of the International Securities Service Association (ISSA), developed a thought paper on the matter of infrastructure in the crypto and distributed ledger environment.
We believe FMIs hold a unique position to consider supporting crypto markets, offering investor protection, preventing market fragmentation, and making it possible for financial institutions to connect and service the crypto world. Accordingly, some of future’s FMI- roles and infrastructure will fall within our natural remit of bringing safety and efficiency.
The Distributed Ledger Technology (DLT) environment in which crypto assets are typically issued, has the potential to service crypto and traditional financial instruments in a different and more efficient way. We have a particular position to accompany financial institutions in this transition, leveraging our experience in business and technical standards, as well as in communication. As such, we can enable interoperability and avoid market fragmentation to the benefit of capital market functioning.
Involving FMIs in a variety of governance and operational roles can contribute to increasing trust of investors, raising quality of the ecosystem infrastructure which underpins the new asset class. By that means, FMIs will help crypto-asset markets to grow more quickly.