Institutional Digital Assets Handbook 2024

Despite the setback of the FTX collapse, institutional interest in digital assets has grown markedly in the past 12 months, with firms of all sizes now acknowledging participation in some form.

While as recently as a year ago, institutional trading firms were taking a cautious stance toward their use, the acceptance of tokenisation, stablecoins, and decentralised finance (DeFi) as viable mechanisms for achieving real-word financial objectives has attracted market utilities, asset managers, banks and funds, propelling digital assets closer to mainstream acceptance.

At the same time, blockchain technology – previously relegated to the status of ‘solution looking for a problem to solve’ – has been embraced by players across the spectrum of the capital markets landscape. Regulators, too, are taking a more proactive role in assessing how distributed ledger technology (DLT) can help address market structure issues and how digital assets can help market participants manage risk and boost liquidity.

Institutions are recognising that digital assets can play a role in their own capital adequacy compliance activities, and help provide much-needed collateral, by allowing asset owners to unlock the value held in previously difficult-to-value assets. Meanwhile, regulatory developments are quietly building a framework for oversight and an infrastructure that helps financial institutions to meet their fiduciary requirements with less friction in terms of technology and administration.

This A-Team Handbook describes the current state of play for institutional digital assets. It explores the emerging regulatory environment and explains how it will impact firms’ approaches as they seek to add digital assets to their portfolios and service offerings. Finally, it examines the technology and data requirements for firms seeking to participate in the digital assets segment.

Topics covered include:

• What are digital assets?
• The role of blockchain / DLT technology
• Benefits and risks of digital assets
• Drivers of institutional interest
• State-of-play for institutional participation in digital assets
• Emergence of tokenization
• Collateral management
• Need for regulatory clarity
• Infrastructure/market structure challenges
• Public vs private blockchains
• Interoperability between chains
• Governance
• Exchanges and connectivity
• Order and execution management systems
• Price formation, market data and liquidity
• Reference data, symbologies, taxonomy and standardisation
• Automating post-trade workflow
• What’s needed to accelerate institutional adoption of digital assets
• What’s next for the digital assets segment