Whoever dominates crypto ETFs could very well dominate tokenized structured products, believes the president of Wecan Group, Vincent Pignon.
Demand for structured products is growing in virtually all markets. It could grow even more without obsolete technology. Disruptive and independent players are then created, like Taurus, for example. Thanks to which, since December 2022, banks such as Pictet or Vontobel can launch tokenized structured products on the Ethereum blockchain.
Could we therefore see, from 2025, an acceleration in acquisitions of fintech companies specializing in market infrastructures based on blockchain? And who will be the buyers? The big systemic banks? Remember that, according to the firm Oliver Wyman, a consulting specialist for the banking industry, banks made less than 1% of all fintech acquisitions between 2013 and 2023. And only 13% of the 94 transactions exceeded $300 million. . For Vincent Pignon, executive president of Wecan Group, there is however an intense rivalry between traditional and disruptive infrastructures.
But what could be the role of technological pure players offering services to issuers, structurers, banks or distributors of structured products?
We can imagine independent, innovative and disruptive players like the American Coinbase, which Meta tried to buy. Such companies could replace traditional stock exchanges if the latter fail to achieve their technological transformation. Coinbase precisely aims to be able to list all tokenized values, that is to say reflected on a DLT on a global scale. If, tomorrow, Coinbase manages to normally list tokenized structured products, then we could ask ourselves the question of what use traditional exchange platforms could possibly be.
Around 90% of all crypto ETFs are listed on Coinbase. Even large ETF issuers like BlackRock use Coinbase for custodianship of their products. There is a real issue of continuity here and it remains to be seen who will be the dominant player in a few years, knowing that a DLT stock exchange will be supranational, open 24 hours a day and with a listing cost lower than that of traditional stock exchanges.
Note also that most disruptive pure players could simply be bought by large traditional and, above all, regulated players. These pure players will compete with each other and, after a few years, it will be possible to identify the most successful and efficient companies which will serve as a reference or standard for the entire value chain. . Companies which will probably be subject to a consolidation movement.
“The reality is that blockchain is not going to remove the need to validate certain steps.”
-Concerning financial flows, what limits do current technologies present?
For example, we see independent asset managers approaching a seller of structured products and a custodian bank. The manager gives the purchase order to the bank, but the issuer of the structured product must first obtain validation in terms of compliance from the two other parties. As a result, payment is not released until these elements are met. Which could take days in a very optimistic scenario. In reality, it usually takes much longer. If everything was prepared in advance, as DLT technology aims to do, everything would be done instantly, from placing the order to actual payment.
Will DLTs really eliminate certain intermediaries or will they instead lead them to change the way they operate?
My personal intuition is that, on the contrary, these technological changes will strengthen them. The reality is that blockchain will not eliminate the need to validate certain steps, such as, for example, structuring a product or using legal services. If all these intermediaries manage to appropriate blockchain or artificial intelligence, their jobs will be improved and not eliminated, in particular thanks to a radical optimization of their processes. These intermediaries will be able to work much more effectively on the fundamentals of their respective professions.
Does this mean that all players in the value chain, even those furthest from the financial profession, will necessarily have to go through a digital transformation?
Ultimately, I have no doubt about it. This transformation will not take place simultaneously and will depend on the nature of the profession. The largest players in the financial industry, such as banks or stock exchanges, should be the first to carry out this transformation. Let us remember that the stock exchanges were the first companies to invest in this change. SIX Group, Deutsche Börse, Euronext, NYSE, all now have infrastructures linked to those of distributed registers.
