Toh Wee Kee

The worlds of DeFi and TradFi are converging, and there is no better example than payments on blockchains, with stablecoin issuers pursuing bank charters, and banks embracing blockchain and tokenization. This confluence presents an opportunity to implement best practices from both, yet carries a risk of importing complexities from each.

This roundtable convenes experts from DeFi and TradFi to share learnings and discuss key topics that can lead to stronger alignment and collaboration as we work towards common objectives:

1. Standards and Interoperability: Connectivity is critical to unlocking the ecosystem benefits of blockchain, and standards is key to enabling connectivity. What is the right approach for standards with payment tokens? Is the approach of broad standards developed with industry-level consensus (like with ISO20022) viable in a decentralized world? How can we collaborate and drive convergence on token standards?
2. Detecting and Responding to Financial Crimes: Payment tokens on blockchain introduces greater transparency, real-time traceability, and enhanced enforcement capabilities, which could enable regulators and financial institutions to detect, monitor, and act on illicit activity more efficiently than ever before. What is the current state of play? What are the existing tools available, how well do they perform and what are the limitations?
3. Payment Controls: TradFi and DeFi take different approach towards payment controls, which has often been framed as efficiency versus safety. Is this still an appropriate characterization? Can we enable efficiency without compromising safety? How are payment controls applied currently by TradFi and DeFi players? How could regulations further evolve to account for these new techniques?

Distributed ledger technology (DLT) is frequently highlighted as a game-changer for financial market infrastructure (FMI). Yet, despite numerous pilots, proofs of concept, and even some production deployments, it has (yet) neither replaced nor fundamentally transformed today’s financial markets. Rather, DLT has remained limited to niche applications.

Which key elements are still missing, or are insufficiently mature, to enable DLT to truly reshape FMI? Is the main hurdle the current regulatory framework, or do challenges around standardization, interoperability with legacy systems, scalability, governance, and proven use cases with sufficient value bear the greatest responsibility?