The line between traditional finance and digital assets is becoming increasingly blurred, wrote journalist Wesley Bray. In a recently published article on The Trade, he likened the traditional and the new in finance as “parallel lanes”. Gathering insights from a number of industry insiders, he explored what it might take for the two to converge.

With many exchanges now offering digital assets, and banking giants dedicating specialised units to the burgeoning digital sector, Wesley Bray observed that the convergence of the two parallel lanes might already happening.

Christoph Hock, head of tokenisation and digital assets at Union Investment agreed. He described blockchain as an enabler that allows the sector to “create accessibility, especially for retail investors, to additional products which are not tradable or fungible today”.


Play by the rules

For blockchain to play well with traditional finance, David Newns believes that regulation is crucial. The head of SIX Digital Exchange (SDX) says, “When it comes to crypto assets, the notion that you have regulated institutions which are transparent and compliant with regulations will mean you trust them as a counterparty to provide services,.”

Christoph Hock claimed that when issues occur, the fault lies not in blockchain itself, but in regulation errors. Citing FTX and Bankman-Fried as examples, he argued that these cases were not due to malfunction in blockchain,  “but human misbehaviour, in combination with a lack of regulation”.

Embracing change

“Market infrastructure is being reshaped by digital assets through the introduction of new methodologies for ownership, transferability and transparency,” wrote Wesley Bray. However, Duncan Trenholme, global co-head of digital assets at financial services firm TP ICAP warned against getting too excitied about what blockchain could do for traditonal finance – in Wesley Bray’s words, “don’t fix what isn’t broken”.

David Newns echoed the same sentiment. “Traditional banking has so much efficiency already in it, despite what you might sometimes hear,” he says. Nevertheless, he acknowledged that “there are areas that we can certainly bring significant benefits through blockchain technology”.

Drawing a parallel between the shift from T+2 to T+1 in traditional finance and “the premise of moving collateral within minutes or hours”, Duncan Trenholme added that “crypto challenges the way that traditional markets operate and have grown to operate over the years”.