From investment banks to broker-dealers, asset managers, clearing houses, custodians and securities depositaries, almost every segment of traditional finance is now under threat from blockchain technology.
That’s the key message from Townsend Lansing, our guest in the latest New Money Review podcast, ‘the future of money in 30 minutes’.
In the podcast, Lansing, a lawyer and former investment banker, described how new tokenised fundraisings are gaining ever more interest.
“If you don’t think token offerings are disrupting traditional capital markets, you’re not paying attention,” Lansing tells New Money Review editor Paul Amery during the podcast.
Lansing cites the controversial recent sale by cryptocurrency exchange Bitfinex of $1bn in a new token called ‘LEO’ as a potential landmark for the new technology.
The sale was completed within ten days in May, according to Bitfinex, despite the exchange being the target of an April lawsuit, alleging fraud, from the New York Attorney General.
Lansing is the chief commercial officer at Token Market, which provides tools for blockchain-based businesses to grow.
The latest New Money Review podcast covers the evolution of distributed ledger technology – from the creation of bitcoin and ethereum to the more recent growth of digital finance in the form of tokenised assets.
In the podcast, Lansing also discusses:
- How the fraud-ridden 2017/18 bubble in initial coin offerings (ICOs) has prompted intense interest in the future regulation of token offerings;
- How security tokens offer companies to issue traditional equity and debt but to record that issuance in a new way—on a blockchain;
- How utility tokens potentially represent a revolutionary new way for technology companies to sell their services and products;
- Why millennials may prefer owning and trading tokens to holding a brokerage account and buying shares or funds;
- Why there’s a tension between the idea of financial market regulation based on a single state/region and the potential for a single global financial infrastructure;
- How initial exchange offerings (IEOs) are an unregulated evolution of initial coin offerings (ICOs).
- Why the recent Bitfinex fundraising is so significant.
Here are some key quotes from the interview:
[on Bitfinex]
“Ten years ago, if a company had been sued by a meaningful law enforcement agency like the New York Attorney General, then had gone to an investment bank to help raise a billion dollars, they would have been laughed out of the room.”
“Bitfinex was able to tap that amount in under ten days by creating a completely novel instrument that was a hybrid of a utility token, a debt instrument and a convertible into equity. They didn’t use an investment bank or a traditional intermediary. It’s a radical new development.”
[a new infrastructure is being created]
“Despite all the bubbles and fraud allegations, the industry is moving along and things are changing at a tremendous pace. It’s like the internet bubble of 1998-2000. There were lots of frauds, but the fibreoptic cables were being laid for the future of the internet.”
“Digital assets are disrupting the big banks. You’re going to see a lot of the investment banks working out how they can apply this technology to their own businesses. JPM Coin is an example.”
[incumbents face a loss of business]
“From transfer agents and administrators up to the clearing houses and the central securities depositaries, they either need to adopt the new technology or understand how it’s going to impact their business.”
“The capital formation business has traditionally generated lucrative fees for investment banks. But the Bitfinex case shows you can tap pools of liquidity without the need for anyone to support the capital-raising.”
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