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What can we expect from blockchain? Lionel Messi-style central banks?
Article published in Allnews on 19 August 2021
Will your employer pay you in their own crypto-assets one day? That's what has just happened to Lionel Messi. On 12 August, Paris Saint Germain announced that he will receive some of his salary in the cryptocurrency $PSG fan tokens1.
This anecdote illustrates the exponential development of blockchain technology, on which cryptocurrencies and crypto-assets, such as tokens, are based.
The current exploratory phase is crucial for the future of finance and its digitalisation, as blockchain is one of the most promising options.
Read more about cryptocurrencies and the underlying blockchain technology here: Cryptocurrencies move from pizza to regulatory scrutiny
The time of the first steps of bitcoin, which is also based on this technology, seems light years away. Major financial players are now getting in on the act. In July, the European Central Bank announced the launch of a digital currency project based on blockchain, following closely on the heels of its Russian and Chinese counterparts2. In spring, the European Investment Bank launched its first digital bond, worth EUR 100 million, again with the help of blockchain technology3.
Blockchain is transforming the value chain in the capital markets, as well as the way in which different players trade and deposit securities. At the same time, the digitalisation of assets will make access to financing easier by simplifying procedures and cutting costs.
Discover more about blockchain here: Demystifying blockchain
When people talk about blockchain, you need to imagine a decentralised network of players who each have the history of all the transactions performed between them. This network may be public, private or hybrid. Each group of transactions makes up a block, and the blocks are assembled chronologically to form a chain. This chain is one of the benefits of the technology, since it is searchable, unchangeable and decentralised. This means that it is possible to access a transaction history to check that a new transaction can actually take place, but it is impossible to alter past transactions. Blockchain thus offers banks and financial institutions a more secure identification method, which enables them to guard against fraud and accelerate processes.
At Lombard Odier, we have a long tradition of innovation. As a banking group that develops its own technological platforms, we have explored the possibilities offered by blockchain, for example by carrying out its first bond transaction via this technology in 2018.
Today, we firmly believe that partnerships and collaboration are essential. That is why we are investing in the fintech and start-up sectors to work with them to create innovative solutions for external asset managers.
For example, we are working with the Geneva-based platform Wecan Comply, which facilitates interaction between banks and external asset managers. Several banks have joined the initiative as the challenge is considerable: it involves streamlining processes, reducing the burden of compliance work, and sharing information in real time, thanks to blockchain technology.
Our strategic approach also includes investing in Taurus, one of the Swiss leaders in fintech, which develops innovative digital asset and blockchain solutions4. In April, Taurus received a licence from FINMA to launch a novel crypto-asset trading platform.
1 https://en.psg.fr/teams/club/content/paris-saint-germain-concludes-first-player-signing-featuring-fan-tokens
2 https://fr.euronews.com/2021/07/14/la-banque-centrale-europeenne-lance-son-projet-d-euro-numerique-alternative-aux-cryptomonn
3 https://www.eib.org/en/press/all/2021-141-european-investment-bank-eib-issues-its-first-ever-digital-bond-on-a-public-blockchain
4 https://www.ictjournal.ch/news/2021-04-20/la-premiere-bourse-en-crypto-actifs-reglementee-au-monde-est-genevoise
Important information
This document is issued by Bank Lombard Odier & Co Ltd or an entity of the Group (hereinafter “Lombard Odier”). It is not intended for distribution, publication, or use in any jurisdiction where such distribution, publication, or use would be unlawful, nor is it aimed at any person or entity to whom it would be unlawful to address such a document. This document was not prepared by the Financial Research Department of Lombard Odier.
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