Maurice:

Welcome back to C&F Talks. Today, I have with me Rowan Varrall, who's the Regulatory Affairs Director at the Digital Token Identifier Foundation, the DTIF. Rowan's going to be speaking at the Digital Asset Innovation Summit, which is being held as part of City Week on the 2nd of July at the Royal Garden Hotel in London. Rowan, welcome.

Thank you, great to be here.

Great to have you with us.

My first question, I guess, is really to ask you to tell us a little bit more about the Digital Token Identifier Foundation. Why was it set up? What's its purpose? How does the market benefit?

Sure. Essentially, we are the registration authority for this new ISO standard, ISO Digital Token Identifier. What this really means is we're mandated by ISO to run the implementation of this token identifier standard and wanting to make sure that it aligns with industry and regulatory demands. The DTI itself is just a code used to identify tokens itself. Those of you who are familiar with ISINs know that the security identifier contains reference data on the security. The DTI contains reference data on the token and the ledger details itself.

How this all came about was the industry got together, and they realised very quickly when looking at cryptocurrencies that a currency code ISO standard wasn't going to be fit for purpose to start talking about Bitcoin, Ethereum, and all the other dozens, hundreds, thousands of cryptocurrencies out there.

But then we started to realise quite quickly that this DTI standard was actually very useful for looking at the tokenisation of financial instruments, looking at the wider spectrum of real-world asset tokenisations, as well as looking at the stable coins in the wider cryptocurrency universe. So really, at the end of the day, this standard just provides an unambiguous way of talking about these tokens that everyone's talking about now.

Yeah, so I guess it gives a transparency and enables, probably underpins trust in the market far more. So clearly a very, very useful purpose.

So, looking at the tokenisation market from your perspective, what do you think that the use cases that are practical momentum today are?

Yes, I guess practicality is subject to the eye of the beholder, but I think all sectors, transformation of capital markets, the real-world assets, and what's going on in the financial infrastructure space, these have all seen pretty significant momentum over the last few years. I think for the capital market space, I think most of us know digital bond issuances have grown, I think, over 260% year on year, mainly thanks to the ECB trials that were going on. Then we've seen a lot of positive momentum for tokenised intraday repos and tokenised money market funds here and across the pond as well.

I think as well for those looking for exposure to the world of cryptocurrencies, the funds and derivatives activities, that has really ramped up over the last 12 to 18 months as well with strong growth. And I think a lot of financial infrastructure as well are building their capacity to work with both the traditional and the digital assets, either offering custodian services or offering other services on top of what they've traditionally provided to their clients.

Maurice:

So, what role do you think regulatory frameworks and data standards play in enabling secure and compliant tokenised asset trading, especially from the institutional viewpoint and their adoption?

Yeah, I'd say regulatory frameworks, I think, and standards as well, they're probably the greatest enablers of growth for institutional adoption anyway, for any DLT-based activities. And I think you could argue as well that regulatory frameworks are just another standard at the end of the day. So, I think in terms of regulatory frameworks, institutions obviously need regulatory and legal certainty for them to operate. Without a framework, it's just a non-starter to invest.

I think in terms of data standards, every market goes through growing pains. Sometimes it takes a long time for markets to agree on how something should be done. But thankfully, I think it's just natural to come to a conclusion that it just makes a lot of sense to use the same templates or to use the same data taxonomies for what they're doing so they can communicate effectively. Regulators understand what's going on transparently. It's just it builds that investor confidence, and it builds marketing integrity as well.

So, I think hopefully with tokenisation, we're trying not to repeat the issues that we saw in the traditional financial markets, how it may have taken more and more decades for standards and protocols to actually come together. So, I think thankfully, I think we do see a lot of collaboration in this space, and I think it's really the only way forward in sharpening the tools that we need for this space of DLT-based activities.

And probably accelerates the market development, as you say.

With growing interest in tokenising everything from bonds to carbon credits, how can global standards like DTIs help prevent market fragmentation and support innovation?

Yeah, so to no one's surprise, I'm a big supporter of global standards. I think they're really the foundational elements of a well-functioning market. So, I think if we want to reduce the possibility of market fragmentation, the industry really needs to decide on how assets can flow across systems and infrastructure.

I think in essence, we need interoperability and that's been discussed a lot ever since this really started taking hold. I think the DTI provides one of those foundational elements for the industry just to talk about the same token unambiguously, whether it's a DLT bond issued across multiple ledgers or if it's digital shares doing the same thing, or whether it's a stablecoin that may represent one asset, but it can be distributed across dozens of different ledgers. Being able to talk about these different token implementations with specificity and certainty, that's what the DTI provides essentially.

I think as well, if everyone starts to compete on naming conventions, we're going to end up with a lot of wasted time and energy because these conversations really don't need to happen. Thankfully, ISO standards are generally there for everyone to just lean on, have a look at, and actually just embed because they're open stance at the end of the day. I think what you want in a global standard as well is not to be bulked down with its scope being relevant to a certain number of markets or just a handful of jurisdictions.

And I think, thankfully, the DTI was developed. This is a global standard, and it provides that common link for any tokenised markets across any jurisdictions.

So, the DTI should provide quite a lot of support for interoperability, as you say, which increasingly I think that's going to be the challenge.

But turning to the challenges, when you look ahead, what do you think those are in terms of tokenisation and the opportunities as well? What is DTI prioritising to support the growth and the transition of the market?

Yes. I think transition, I think like any major infrastructure tech stack, wider institutional adoption, it takes time. I think it needs to go from an organisation, to go from a wait and see approach, to experimenting, to knowledge building and producing their own business cases for further adoption.

Thankfully, I think a lot of organisations are getting more active in this space and also sharing their knowledge and collaborating in joint projects. I think there are quite a few challenges still. This is probably being quoted a lot, but secondary market liquidity, collateral eligibility, just the upfront costs of a new type of tech stack.

Then also some issues with how are you going to settle this? What are the on-chain cash options? Again, I think one of the biggest questions on how this ecosystem will develop is how everyone will address interoperability across the DLT and the traditional networks.

I think we will operate in traditional and digital rails for some time, and we need technology agnostic standards to build these bridges. I think in terms of our main priorities, this is why we've been working with ANNA, the Association of National Numbering Agencies, as a key priority really from the start since the DTI was in development. This new standard DTI, it's complementary in nature to ISINs, LEIs, CFIs. It's all linked.

We're bringing essentially a new tool into the toolbox for those involved in the digital asset markets. Everyone that is very familiar with the ISIN asset identification will be able to easily pick up this new DTI on the same rails to be able to go into that second layer of token identification.

I think, yeah, it's really interesting times to be involved in digital assets. I think our biggest priority is collaboration, making sure that the DTI is fit for purpose with the industry and really with the regulators as well as they grapple with what they want their frameworks to look like here.

Yeah, interesting times, as you say, with huge opportunity.

For our viewers, if you'd like to join us at the Digital Asset Innovation Summit, again, that's being held as part of City Week on the 2nd of July at the Royal Garden Hotel in London. We'd love to see you there.

Further information on how to book, those details are available at www.cityweekuk.com. So do visit the website and have a look at what's on offer. We very much hope you'll be able to join us in person. There are also virtual tickets available.

Rowan, thank you very much for sharing those thoughts. We look forward to seeing you at the event.

Thank you. See you then.