In May 2022, digital assets were not only dominating the agenda but their usage was growing at record pace. With 400% year-on-year growth in the number of live projects, DLT and digital assets were becoming a core investment priority for firms across the industry – focused on a new generation of asset classes that were showing early signs of commercial maturity.
One year on, how different do things look today? After the “crypto-winter” of 2022, challenges in major FMI-led transitions and a new focus on cost-efficiency across the industry, what role do DLT and digital assets play today – and how can we characterise the evolution of our usage today?
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DLT in the Real World 2023 Handbook At-A-Glance
DLT and digital assets are 12% more important to the industry than last year
- Sell-side houses have continued to see DLT as increasingly core to their strategies.
- Fund managers and wealth managers are also increasingly convinced of the long-term benefits of DLT in 2023.
- Insurers, pension funds and sovereigns see DLT as 52% less relevant this year than last – in a sign of major disengagement at the end of the investment cycle.
Usage of DLT and digital assets has grown by 7% – but growth is slowing.
- We have seen a 7% increase in the number of firms who are “live” with DLT and digital assets over the last 12 months – compared with 24% jump from 2021 to 2022.
- DLT applications are increasingly “off-the-shelf” and need less discovery as they mature.
DLT in 2023 is about enabling cost efficiencies – not new revenues
- We have seen a 26% increase in the number of DLT and digital asset initiatives that have delivered against expectations in the last year.
75% of our projects are now delivering as expected – and not just in reducing costs
- In the case of driving cost savings, over 90% of projects in 2023 have met or exceeded expectations – validating our growing confidence in this core area.
DLT is ready to scale – in 5 key asset classes
- Our increasing maturity in planning and execution is most clear in five asset classes (or activities): OTC derivatives, structured products, securities financing, securitized assets and private equity.
DLT is too fractionalized for 24% of firms – making business cases harder
- For those who have taken their DLT platforms live, the limited cross-platform liquidity of tokens is the single biggest issue that they face. Yet only 4% of firms are currently working on integration across multiple blockchain protocols.
DLT is taking time: and our expectations are increasingly long-term
- In 2022, 19% of firms expected to derive returns from their DLT investments within the same year. Largely in the crypto-currency space, firms were rushing to offer and monetize new client capabilities.
- In 2023, much has changed. Urgent client demand for crypto-currency servicing has dissipated. High profile projects have underlined the importance of regulatory oversight (in the case of FTX) and the intricate complexities of ecosystem building at scale. And we have spent another 12.
Moving away from crypto custody? Not everywhere
- In the context of live deployments, the last year has also seen a marked shift in the balance of our digital asset (and crypto-currency) projects – versus DLT.
- Across North America, Asia-Pacific and Europe, DLT is now considered to be more important to firms of all profiles than digital assets – as regulatory cooling in the US and diminished market sentiment take effect. Across much of the world the platform is more important than the product.
DLT – still learning about cash
- With over 27% of projects run in this space with the objective of learning and development, cash and payments are the most experimental areas today.
DLT and Securities Finance – an excellent match
- One area where the value of DLT is extremely clear is in securities finance – where 63% of firms believe that DLT can have a major impact on existing workflows.
Inside our DLT projects
- A clear DLT journey: 67% of DLT effort is now concentrating on 8 asset classes
- We’re starting to see scale: 26% of projects are now real ecosystems
- 45% want to leverage public blockchains – but not straight away
- Digital cash: 49% expect live CBDCs by 2026
- The case for DLT still isn’t clear for 30% of us
- DLT as a liquidity driver: 63% see a major liquidity benefit of DLT
- Only 4% of today’s projects include finance or treasury
- Risk, Compliance and Legal: the last to know?
- DLT isn’t the right technology for 20% of sell-side projects
- Growing the ecosystem: “How can DLT and digital assets reduce bid-offer spreads?”