Most traditional asset managers favouring centralised stablecoins

Editorial

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In an interview with FinextraTV, Fabian Dori, chief investment officer, Sygnum Bank explained what this means for the future of wealth and the financial ecosystem as a whole:

“That regulatory framework is really accelerating institutional adoption, enabling traditional asset managers to integrate with stablecoins much more easily. […] I think for most crypto native asset managers, stablecoins are already central to their daily operations and for traditional asset managers, the groundwork is now really being laid for stablecoins to become much more significant in the near future.”

Stablecoins, much like cryptocurrency, initially suffered from a level of apprehension and distrust, but as more structures and regulations have been put in place, this has begun to abate. This change in sentiment and gradual acceptance of the importance of stablecoins within the crypto asset ecosystem has led to this current growth, yet within more traditional finance, there does appear to be more of a focus on centralised versions.

“Regulated stablecoins nowadays can offer a value proposition that appeals to institutional investors as well because the frameworks define the requirements that are needed to set the stablecoin up. The license that is required, the allowed collateralisation reporting obligations, independent assurance reports etc. So I think the framework for regulated stablecoins which typically then are centralised stablecoins is ever more in place to really make them – from a traditional finance point of view – a safe tool for payment settlement and the like”

Going further, Dori explains the importance of differentiating between centralised and decentralised stablecoins, particularly when it comes to risk management. Centralised stablecoins present, in some ways, a simpler risk:

“It’s really concentrated on one issue […] it might be concentrated on the custody side, on the management side etc. So the key risk here is really all about concentration.”

However, as decentralised stablecoins exist as more of an autonomous asset, their risk is slightly different:

“they introduce less – so to say – of a concentration risk but here the risk is more around the value of the underlying collateral basket in case it is hedged as within there might be an imperfect hedge. There are also regulatory questions – how to treat such a token: is it a security or not? So there then the risks are more with respect to the value of the collateral basket, potential hedging questions and obviously regulatory topics that need to be addressed.”

Despite each version having its own implicit risks to handle, Dori believes their stability is becoming more manageable and their trajectory more predictable. As a result, when asked about the future of stablecoins, Dori remained passionately optimistic:

“I still believe in the vision that all assets will be tokenised and that the programmable value chain will need stablecoins; tokenised money market funds and elements as such to really allow the full value of the blockchain technology, automated processes etc to be exploited. So yes both mid and long-term, I’m a strong believer in stablecoins.”