Tokenisation: 2020 is execution year

James Devlin 3 min read

Last week Eight Roads Fintech Strategic Investments (FSI) hosted its second thematic dinner in London focusing on 'The future of Tokenisation'. (see previous event here)

For those of you who are less familiar with the FSI team our mandate is to make Series A-B investments into Fintech businesses that have a long-term strategic angle on Fidelity International. We have been operating for around 18 months and currently manage a growing portfolio of seven companies.

We focus on businesses and themes with adjacencies to wealth / asset management and capital markets and therefore tokenisation and blockchain are important topics where we have been engaging and building investment theses. We have put our money where our mouth is on this front at the beginning of 2019 we backed Clear, who build blockchain-based settlement and clearing networks for global industries.

For this dinner, we gathered a group of experts across the field of tokenisation including Fintech founders, investors and industry experts to share ideas and thoughts on pioneering applications.

We kicked off the evening with thoughts from Tom Jessop President, Fidelity Digital Assets, William Lovell Head of Future Technology from the Bank of England and Professor William Knottenbelt from Imperial College London's Faculty of Engineering, Department of Computing.

Over the course of the dinner, we reviewed the path of cryptocurrency over the last decade and how this has led to the use cases for blockchain that people are using and exploring today. Below are some takeaways:

  • The crypto-winter has thinned the herd: The BTC slump in 2018/9 proved a headwind to blockchain project sentiment over 2019. Founders and academic institutions saw funding fall for experiments and projects over this period. However, the pause has allowed for a re-calibration of the market to focus its efforts on viable projects with real business cases.

  • Enterprise Networks are now live: To improve internal and external efficiencies in areas where immutability and mistrust are rife, private networks are coming online. Teams who are focusing on a narrow use case and are funded by consortia of like-minded large corporates are making the most headway to bring their vision to reality. The utility of the use case vs. incumbent systems is as-ever the lead factor in adoption.

  • 2020 will be the year for the tokenisation of alternative asset class exposures: Firms and funds are making real progress tokenising funds and underlying assets across Real Estate, Private Equity, Private Debt, Infrastructure and Forestry. The underlying technology to do this is largely commoditised, but the legal understanding of the teams around these projects and the workflows and end user experiences are still the secret sauce of differentiation. We expect household names in this space to launch credible projects in this space this year.

  • Tokenisation is a buzzword that can be a call to action: Blockchain and tokenisation are not silver bullets to inherently difficult problems, however, as buzzwords in large organisations they can get people into a room to discuss and unpick processes they have been taken for granted for years. In a strange way tokenisation can be an organisations' catalyst for change without implementation.

After years of conversation and limited projects of real note there was wide consensus at the dinner that tokenisation was on the cusp of becoming a mainstream activity within certain aspects of the financial services industry. Like all things this won't happen overnight. Leadership and innovation will come from brave and determined firms and founders.

We'd like to thank all our participants for coming and we are looking forward to our next event. Our inboxes are open for future event ideas or to founders looking to raise in line with our mandate!