Reflections from SIBOS
Jason Lau, September 2023
After a six-year hiatus, Toronto welcomed 9,000 Sibos community members back to the Metro Toronto Conference Centre. Over four engaging days, attendees delved into the theme “collaborative finance in a fragmented world,” attending over 250 conference sessions and myriad of client meetings.
The SIBOS agenda prominently featured discussions on cross-border payments, artificial intelligence (AI), cloud-based banking, embedded finance, and environmental, social, and corporate governance (ESG). DLT and tokenization also remained significant topics. Notably, the conversation around DLT and tokenization has evolved since the last Toronto SIBOS. While AI has surged in prominence, DLT remains relevant; however, the buzzword has transitioned from specific blockchain types to “interoperability”—the quest for synergy between varied ledger standards.
Despite blockchain’s slower-than-expected adoption in finance, the industry’s move toward it is undeniable. The benefits are evident, with many at the conference highlighting instantaneous settlement as a prime advantage, whether for tokenized money or other assets. Thus, the push for using this technology to streamline internal settlement and address trade settlement challenges grows stronger.
David Lynne, Head of Corporate Bank at Deutsche Bank, captured this sentiment, stating, “We’ve substantially invested in digital asset custody. Rapid changes in the fixed income and currencies business, especially in settlement around repo and clearing, underscore this technology’s value. As we expand our institutional cash management and treasury services, the tokenization of money becomes imperative in the transaction process.”
Yet, a universal blockchain ledger or a single DLT standard remains elusive, perhaps even unnecessary. Institutions have varied priorities and expectations for DLT; therefore, the overarching challenge becomes the integration of these diverse blockchain systems. Essentially, the current scenario we have today —with many institutions initiating isolated DLT networks—should be considered typical for the innovation stage of blockchain. But as we transition from experimentation to application, addressing interoperability between different blockchains, and even between blockchain and traditional ledgers, becomes paramount.
Several initiatives, such as the Regulatory Liability Network (RLN), Ownera’s FINP2P, Digital Asset’s Canton Network, and Chainlink’s Cross-Chain Interoperability Protocol (CCIP), are on the frontline to address this issue, which will harness blockchain’s true potential: efficiency.
Pilots for the RLN have already advanced in both the US and UK, and Swift recently revealed the outcomes of their CCIP blockchain interoperability trial during SIBOS. Yet, transitioning these pioneering steps to the next level necessitates a more defined regulatory framework and a solidified consortium of financial institutions eager to operationalize this technology.
In conclusion, SIBOS echoed a collective sentiment: the path to blockchain integration may be long-winded, but the industry is already gearing up for the next stages of DLT implementation. It’s evident that institutions are keenly exploring the optimal routes to market, all the while seeking direction from regulatory bodies. The present beckons financial institutions to transition from mere innovative experimentation to proactive strategizing for their place in the impending financial landscape.
Jason Lau is a business strategy consultant at Colendi and SETL, as well as managing partner at Core Strategy. In his spare time, he teaches social media management for web, video, and design.