Syed Musheer Ahmed’s Post

Maha Al-Saadi's summary of the Bank for International Settlements – BIS paper highlights the increasing relevance of Real World Asset (RWA) tokenization in today's financial landscape. Liquid Tokens' recent engagement in two international RWA tokenization projects—one in real estate and another involving bonds—reflects this trend. Current Trends in RWA Tokenization Growing Demand: The demand for RWA tokenization is primarily driven by institutional investors, private entities, and family offices. However, there is a noticeable shift as more on-chain professionals seek to diversify their portfolios by incorporating hard, on-chain assets into their investment strategies. This diversification is particularly appealing as it allows them to mitigate risks associated with traditional cryptocurrencies. Investor Behavior: There is a distinct difference in how investors perceive various RWA classes. For instance, real estate tokens are viewed differently compared to bonds or securities. This differentiation influences investment decisions and strategies within the RWA market. We are also seeing differences in the perceived value of RWA Tokenisation in emerging & developing markets vs more mature, traditional markets. Future Outlook The landscape of RWA tokenization is expected to expand significantly as more traditional assets transition into digital formats. This shift not only creates new investment opportunities but also enhances the integration of traditional financial systems with blockchain technology. As investor interest continues to grow, particularly from those looking to diversify into tangible assets, the future of RWA tokenization appears promising and dynamic. Thank You Maha Al-Saadi. #RWA #Tokenisation #capitalraise

Central Bank Digital Currencies (CBDCs) offer several potential benefits and advantages: 1. **Increased Efficiency**: CBDCs can streamline payment systems, reducing settlement times and transaction costs. This can make transactions faster and more convenient¹². 2. **Enhanced Financial Inclusion**: CBDCs can provide greater access to financial services for individuals and businesses who are currently underserved by traditional banks. Anyone with a digital wallet can use them, regardless of their location or access to conventional banking services¹². 3. **Reduced Transaction Costs**: By eliminating intermediaries like commercial banks or payment processors, CBDCs can lower the costs associated with transactions, especially for cross-border payments²⁵. 4. **Improved Payment Security**: CBDCs can offer a secure and efficient way for individuals to make transactions without the need for intermediaries, reducing the risk of fraud and enhancing the overall security of the payment system⁵. 5. **Support for Monetary Policy**: CBDCs can provide central banks with new tools to implement monetary policy more effectively, potentially improving economic stability and control over the money supply³. 6. **Transparency and Traceability**: CBDCs can enhance the transparency and traceability of transactions, helping to combat money laundering and other illicit activities⁴. These advantages make CBDCs a promising development in the financial world, potentially transforming how we conduct transactions and manage financial systems. Is there a specific aspect of CBDCs you're particularly interested in?

PART 2 3. Interest Rate Parity and Monetary Transmission Mechanism Adaptation for Tokenized Asset Markets: Dornbusch-Fischer's principle of interest rate parity highlights how differences in interest rates drive currency movements. With CBDC, central banks can influence the returns on tokenized assets through targeted interest rate policies. These policies act as a mechanism for aligning the yield on tokenized assets with traditional financial instruments. Mechanism for Implementation: Dual interest rate regime: Apply a base interest rate for CBDC holdings and a higher rate for investments in tokenized assets, encouraging optimal asset allocation. Monetary policy corridor: Use an upper and lower bound to manage the returns on tokenized assets relative to traditional financial instruments, ensuring capital flows remain balanced. 4. Managing Inflation Expectations with Time-Consistent Policies Policy Mechanism: Dornbusch and Fischer emphasize the importance of time-consistent policies to anchor inflation expectations. With CBDC and tokenized assets, central banks need predictable policies to maintain trust in digital currencies and avoid inflationary spirals triggered by speculative trading. Policy Tools: Implement rules-based adjustments for CBDC supply, tied to market indicators such as the volume of tokenized asset transactions or economic growth metrics. Introduce forward guidance specific to digital asset markets, communicating expected policy actions to stabilize inflation expectations. 5. Central Bank as a Lender of Last Resort in Tokenized Markets Adapted Mechanism for Tokenized Ecosystem: In cases of financial stress, central banks traditionally provide liquidity as a lender of last resort. With tokenized markets and CBDCs, the role of the central bank must extend to supporting liquidity in digital ecosystems. Implementation Mechanism: Create liquidity pools backed by CBDC to provide instant liquidity for tokenized asset markets during periods of stress. Establish a swap window for tokenized assets and CBDC, where participants can convert illiquid tokenized assets into CBDC during crises. Use smart liquidity provisioning algorithms to deploy CBDC reserves automatically in response to market triggers. PART 2

Central Bank Money: Anchoring the Future Monetary System As technology reshapes finance, one certainty endures: Central bank money must remain the rock anchoring the entire monetary system. In a recent speech, Thomas Jordan (Chairman of the Governing Board of the Swiss National Bank) outlined how the Swiss National Bank is charting this future via pioneering initiatives: 👉 Helvetia III: The World's First Pilot Issuance of Central Bank Digital Currency on a Regulated Platform for Settling Tokenized Assets Like Bonds Jordan's insights? Wholesale CBDC showed: • Central bank money retains all benefits in tokenized form   • Efficient, secure settlements possible on 3rd-party platforms • Mechanisms to maintain SNB control over issuance Yet key considerations require further study:   • Timing to enter asset tokenization settlements   • Comparing solutions like platform integration  • Optimal wholesale CBDC design and access setup • Governance ensuring central bank stamp of authority On the retail front, the new SIC system delivers:  • Enabling instant, 24/7 payments between individuals   • A foundation for innovative, programmable payments While no current plans for a retail central bank digital currency in Switzerland exist. The risks presently outweigh potential benefits. In Jordan's vision, the future monetary system will see central bank money - in innovative new forms - fulfilling its indispensable anchor role regardless of technology.  P.S. What future role should central bank money play as finance evolves? Share your perspective. "Central bank money must maintain its essential function irrespective of the technology used."   - Thomas Jordan, powering the monetary anchor Don’t be left behind! Visit FinFormed and start growing!

👏 👏 Central bank of the year: Central Bank of Brazil 👏 👏 👏 Brazil's strides in embracing cutting-edge technology have positioned it as a global leader in innovation, particularly within the financial sector. With the Central Bank of Brazil spearheading initiatives such as the introduction of Pix https://lnkd.in/eZzgMSR3), a revolutionary instant payment system, and the development of a digital real (DREX), Brazil showcases its commitment to digital transformation. These initiatives have not only enhanced financial inclusion but have also set a precedent for other countries looking to modernize their financial infrastructure Since joining Act Digital, a company deeply rooted in Brazil's technology landscape, I've witnessed firsthand the transformative power of these advancements. Our experience servicing the finance sector in Brazil underscores our capability to navigate and leverage the dynamic technological landscape of emerging markets. With over 100 customers benefiting from our solutions and our extensive global presence, including offices in the United States, Act Digital stands as a reliable partner for the finance industry. In a rapidly evolving world, maintaining a competitive edge necessitates exploring diverse technological partnerships. Embracing opportunities overseas can be very rewarding, as it opens doors to a wealth of innovation. Act Digital stands ready to serve as a strategic ally for companies seeking to harness the advancements of new technologies, leveraging our expertise and global presence to drive success. https://lnkd.in/empm_fD4 act digital Brazil-Florida Business Council, Inc.

🌐💱 The Emergence of Central Bank Digital Currencies (CBDCs): Shaping the Future of Money 🌐💱 Central Bank Digital Currencies (CBDCs) are revolutionizing the financial landscape, offering new ways to create, circulate, and control money. Our latest blog explores the profound impacts of CBDCs on monetary policy, financial systems, and regulatory frameworks. Discover how CBDCs can enhance payment efficiency, foster financial inclusion, and transform traditional banking dynamics. Dive into the opportunities and challenges of this groundbreaking innovation. 🔗 [Read More](https://lnkd.in/euj6UpEk) Looking to advance your career in accounting and finance? Explore opportunities on our website.

🚀 Exciting developments at the European Central Bank! 🌐 Yesterday marked the start of Phase I of the ECB's exploratory journey into the tokenisation of financial instruments and the settlement of central bank money. This initiative aims to improve market efficiency, foster innovation and pave the way for new opportunities in the field of #DLT. Phase I will work with selected stakeholders to simulate cash and asset settlement scenarios in test environments. But the journey doesn't stop there! Phase II, which begins in July, will open the doors for additional financial firms and business cases to join the exploration. Undoubtedly, this endeavour is a testament to the ECB's commitment to maintaining central bank money #stability while at the same time enhancing the #efficiency of European markets. The next few months will be interesting as the ECB will explore the potential of tokenisation and draw conclusions on the future of financial infrastructure. 💱💼 #ECB #Fintech #Tokenisation #Innovation Read more here ➡️ https://bit.ly/3K0EN5t

The European Central Bank (Eurosystem) has initiated the first of a series of trials to explore the use of distributed ledger technology (DLT) for settling wholesale transactions in central bank money. This ambitious project brings together 16 private companies (comprising 10 market participants and six market DLT operators) alongside five central banks for live trials and experiments in simulated environments. The first experiment, led by Oesterreichische Nationalbank, focused on the tokenization and simulated delivery-versus-payment (DvP) settlement of government bonds in a secondary market transaction against central bank money. This marks a significant step in understanding the practical applications and benefits of DLT in financial markets. Preparations are underway for further trials covering various use cases, including DvP transactions in both primary and secondary markets, securities lifecycle management, automated wholesale payments, and payment-versus-payment transactions. These trials are set to continue over the next six months, offering valuable insights into how the Target settlement system and DLT platforms can interact and the potential advantages of leveraging new technologies in wholesale financial markets. This initiative highlights the Eurosystem's commitment to innovation and modernization in financial infrastructures, potentially paving the way for more efficient and secure transactions in the future. Stay tuned for updates as these trials progress and we uncover the transformative potential of DLT in wholesale central bank money settlements.

Central Bank Digital Currencies (CBDCs) are increasingly being seen as a significant part of the future financial landscape. Here are some key points to consider when evaluating the potential of CBDCs: Potential Benefits of CBDCs: 1. Financial Inclusion: CBDCs can provide access to financial services for unbanked and underbanked populations, offering a secure and efficient alternative to traditional banking. 2. Efficiency and Speed: Transactions can be processed faster and more efficiently, both domestically and internationally, reducing the reliance on intermediaries. 3. Reduced Costs: Lower transaction costs compared to traditional banking and payment systems can benefit consumers and businesses alike. 4. Monetary Policy Implementation: Central banks can have more direct control over the money supply and interest rates, potentially enhancing the effectiveness of monetary policy. 5. Security and Fraud Prevention: Advanced digital infrastructure can reduce the risks of fraud, counterfeiting, and money laundering. Challenges and Concerns: 1. Privacy Issues: There are concerns about the level of surveillance and data privacy implications, as CBDCs could allow central banks to track individual transactions. 2. Cybersecurity Risks: The digital nature of CBDCs makes them susceptible to cyber attacks, requiring robust security measures. 3. Impact on Banking Sector: Widespread adoption of CBDCs could disrupt traditional banks, potentially leading to disintermediation and affecting their business models. 4. Technological Infrastructure: Developing and maintaining the necessary technological infrastructure can be challenging and costly, particularly for developing countries. 5. Regulatory and Legal Challenges: Establishing a regulatory framework that ensures the safe and effective use of CBDCs while preventing misuse is a complex task. Current Developments: • Many central banks around the world are actively researching and experimenting with CBDCs. Countries like China have already piloted their digital yuan, while others like the European Central Bank and the Federal Reserve are in various stages of exploration and development. • Collaboration with private sector technology companies is also a common approach to leverage their expertise in developing secure and scalable solutions. Conclusion: While CBDCs hold significant promise for the future of digital finance, their success will depend on addressing the associated challenges effectively. As central banks continue to explore and develop these digital currencies, the future of CBDCs will likely be shaped by technological advancements, regulatory developments, and public acceptance. In summary, CBDCs are poised to play a crucial role in the future of the financial system, but their adoption and implementation will require careful consideration of various economic, technological, and social factors.

Central bank settlement systems are the unseen yet vital components of the respective payment system. They ensure the completion of all electronic payments within a nation. If these systems fail, financial activities halt or revert to older payment methods. A well known feature of these systems is their reliance on SWIFTNet, a secure financial messaging network used by banks. This reliance was highlighted by the European Central Bank's recent upgrade from Target2 to T2, which introduced SIAnet alongside SWIFTNet, breaking SWIFT's monopoly. While SWIFTNet, owned by the cooperative SWIFT, is crucial for both cross-border and domestic payments, this dependence can create a massive single point of failure (SPOF) and pose risks such as foreign control and system outages. To learn more, take a look at this very interesting blog entry.