Simon Keefe: «TradFi Needs to React to Tokenization»
There is growing demand from digitally native users to gain access to traditional investments in tokenized form, including mutual funds. Calastone’s Simon Keefe spoke to finews.asia about developments in the space, including the the threat of traditional players being left behind.
There are increasing efforts in the tokenization of traditional real-world assets to realize the benefits of digitalization such as operational efficiency and cost savings. OCBC, for example, launched the sale of bespoke tokenized bonds to corporate accredited investors in January this year. In March 2024, HSBC introduced tokenized gold to its retail clients.
Similar developments are occurring in the tokenization of funds where an estimated $135 billion in annual costs could be saved by the asset management industry, according to a recent white paper by Calastone. Many fund houses are already making moves such as UBS Asset Management, which launched its first tokenized fund in November 2024, or China Asset Management which announced a money market fund on SC Venture’s tokenization platform, Libeara.
«Asset managers are always being squeezed on their profit margins so they have to look at every potential angle,» explained Simon Keefe, head of digital solutions at Calastone, in an interview with finews.asia.
Digital Investor Demand
According to Keefe, fund tokenization demand has historically been driven mainly by fund providers but there is increasing interest from the investor side, especially amongst digitally native users in decentralized finance (DeFi).
«If you look at the DeFi space, some of the parties buying into those assets are the likes of stablecoin providers […] who want to invest their balance sheet into reliable, safe assets that are liquid. There are corporate treasurers managing substantial on-chain cash balances for yield and efficiency. And you have the kind of digital retail investor that has perhaps traditionally held crypto but now wants to diversify their portfolio,» he observed.
«Across the industry, we can all see that kind of North Star that we're moving towards in the future of full integration with crypto assets.»
Tokenization in Traditional Finance
While traditional finance (TradFi) companies in fund distribution, such as banks, are also beginning to look into tokenization, O’Keefe believes that there is not yet a strong urgency to transition quickly. Firstly, there are existing tech stacks for fund products so it wouldn’t make sense to tokenize funds only to then un-tokenize them for processing. Secondly, digital assets are still relatively nascent to much of their current client base.
However, there is an imminent threat to any player that decides to rest on its laurels, most notably because of the emergence of next generation clients and an ongoing historic wealth transfer.
«TradFi needs to react to tokenization and a lot of players are starting to take notice but I don't think they can rely on having just an innovation team to look at this stuff,» Keefe warned. «They are already losing clients to the digital world and that will just grow exponentially moving forward if they don't have a solution.»
Distribution Solution
Calastone recently launched its own tokenized distribution solution that aims to bridge the gap between traditional investment funds and blockchain-native networks such as Ethereum, Polygon and Canton. This capability also leverages the firm’s global network spanning over 4,500 firms across 56 markets. Asset managers will be able to expand their investor base into blockchain-native investors with no operational changes.
«We're already seeing that uptrend in adoption enormously over the first four months of this year, particularly on money market funds,» Keefe added.
