I
was
hoping
I
could
get
through
the
week
without
mentioning
Davos,
since
the
conference
has
been
getting
increasingly
tedious
over
the
years,
not
to
mention
irrelevant.
But,
alas,
that
harsh
judgment
is
largely
unfair,
since
the
agenda
at
the
annual
meeting
of
the
world’s
elite
does
attempt
to
tackle
large
global
issues
by
inviting
the
ultimate
“influencers”
to
say
their
piece.
We
can
mock
the
private
jets
used
to
travel
to
a
venue
to
discuss
the
perils
of
climate
change,
scoff
at
privileged
financiers
dismissing
tools
for
financial
freedom,
and
laugh
at
the
hypocrisy
of
wanting
to
fight
misinformation
with
censorship.
Yet,
we
can
also
appreciate
the
showcasing,
parading
and
parties
for
the
networking
opportunities
they
are.
And
we
can
enjoy
the
glitz
of
the
media
coverage,
which
is
increasingly
what
Davos
is
about.
Intriguing
yet
overlooked
debates
sometimes
get
surfaced.
This
happened
yesterday,
on
the
Tokenization
Economy
panel,
which
I
actually
enjoyed.
It
featured
good
dialogue
and
smart
people,
including
Circle’s
Jeremy
Allaire,
Stellar’s
Denelle
Dixon,
Euroclear’s
Lieve
Mostrey
and
Skybridge’s
Anthony
Scaramucci.
Noelle
Acheson
is
the
former
head
of
research
at
CoinDesk
and
Genesis
Trading,
and
host
of
the
CoinDesk
Markets
Daily
podcast.
This
article
is
excerpted
from
her
Crypto
Is
Macro
Now
newsletter,
which
focuses
on
the
overlap
between
the
shifting
crypto
and
macro
landscapes.
These
opinions
are
hers,
and
nothing
she
writes
should
be
taken
as
investment
advice.
The
discussion
was
about
use
cases,
regulation,
jurisdictional
differences
–
the
usual
stuff
but
eloquently
said.
At
the
very
end,
however,
just
as
I
was
concluding
“nice,
but
nothing
new,”
an
audience-member
asked
for
the
panel’s
opinion
on
the
regulatory
approach
of
“same
activity,
same
risk,
same
regulation.”
A-ha!
Finally,
something
potentially
controversial.
Euroclear’s
Mostrey
chimed
in
first,
insisting
that
regulation
has
to
be
technology-agnostic
if
we
don’t
want
to
block
progress.
This
has
been
Euroclear’s
approach
so
far,
issuing
a
short-term
note
on
their
own
proprietary
blockchain
and
then
passing
it
over
to
traditional
rails,
fully
compliant
with
existing
laws.
Read
more:
Noelle
Acheson
–
Bitcoin
ETFs
and
Wall
Street:
A
Double
Milestone
I
get
this,
and
on
principle
I
agree
–
it’s
the
outcome
that
matters
when
it
comes
to
protection,
not
the
technology.
But
when
it
comes
to
blockchain
and
securities,
the
technology
does
matter
a
lot.
It
confers
not
just
new
advantages
but
also
new
functionalities
that
the
legacy
rails
can’t
contemplate.
True,
that’s
not
exactly
“same
activity.”
But
insisting
that
all
blockchain-based
securities
conform
to
current
rules
limits
the
potential
at
the
starting
gate.
We
will
only
ever
get
“more
of
the
same”
but
with
some
efficiency.
Surely
we
can
aim
higher.
Same
but
different
Even
if
we
accept
that
we
start
with
the
“same”
and
work
with
regulators
on
crafting
rules
for
the
“different,”
there
are
still
regulatory
issues
that
need
addressing.
To
start
with,
the
Euroclear
blockchain-based
note
needed
to
be
passed
to
legacy
rails
in
order
to
be
fully
compliant.
That
adds
steps,
layers
and
middlemen,
which
doesn’t
sound
so
efficient
to
me.
Why
can’t
the
blockchain-based
note
meet
the
regulatory
requirements?
Because
recognizing
securities
transactions
natively
on
a
blockchain
is
not
as
simple
as
it
sounds.
For
instance,
settlement
finality
is
a
key
part
of
securities
regulation
–
when
is
ownership
transferred?
In
traditional
securities,
it’s
when
the
seller
has
accepted
payment
from
the
buyer
for
the
asset.
This
involves
many
steps,
involving
clearing
houses
such
as
Euroclear.
But
on
a
blockchain,
settlement
“finality”
is
both
atomic
(payment
and
transfer
in
one
step)
and
usually
consensus-based.
How
much
consensus
is
enough
for
finality?
This
is
made
even
more
complicated
by
the
variety
of
blockchains
being
used
for
tokenization:
there
are
public
chains,
permissioned
ones,
proprietary
networks,
and
sometimes
a
hybrid.
Different
blockchains
work
in
different
ways.
There
is
also
a
lack
of
clarity
for
now
as
to
what
reporting
is
needed
for
on-chain
transactions,
and
how
it
should
be
delivered.
Plus,
what
sort
of
identity
should
be
used?
And
when
a
security’s
whole
life
cycle
is
embedded
in
code,
who
is
responsible
if
something
goes
wrong?
Depending
on
the
chosen
platform,
blockchain
“fixes”
are
not
at
all
straightforward.
The
Euroclear
approach
can
work:
use
the
blockchain,
but
repeat
everything
on
legacy
rails
so
the
regulators
are
happy
and
traditional
investors
don’t
feel
excluded.
But
is
it
optimal?
Is
squeezing
this
new
type
of
asset
into
an
existing
structure
the
most
efficient
approach?
It
broadens
the
potential
reach
for
now
by
getting
it
past
the
gate-keepers
–
but,
ultimately,
it’s
no
more
than
a
very
short-term
fix.
Circle’s
Allaire’s
response
summed
it
up
succinctly:
“Same
activity,
same
rules
is
still
a
looking-backward
philosophy.”
Read
more:
Colin
Butler
–
2024
Will
Be
the
Year
Tokenization
Truly
(Finally)
Begins
He
used
the
early
days
of
the
Internet
as
an
example.
If
this
philosophy
had
been
applied
back
then,
he
said,
the
world
today
would
look
very
different.
All
websites
would
need
to
have
registered
with
the
Federal
Communications
Commission.
If
any
were
to
stream
audio,
they’d
need
to
get
a
radio
license.
For
peer-to-peer
communication,
a
platform
would
need
to
apply
to
become
a
telecom
operator.
With
this
maze
of
requirements,
the
Internet’s
main
use
would
probably
still
be
for
exchanging
research
papers.
Crypto
is
in
a
similar
situation.
I
totally
agree
that
regulation
should
care
about
outcomes,
not
the
technology.
But
ignoring
the
ability
of
the
technology
to
do
things
in
a
radically
different
way
is
cutting
off
the
potential
just
as
it
takes
its
first
steps.
It’s
a
difficult
problem
to
solve.
Financial
assets
have
a
totally
different
risk
profile
than
publications
or
audio
content.
The
layers
of
regulations
to
protect
investors
while
ring-fencing
economies
are
orders
of
magnitude
more
complex,
as
they
should
be.
And
waiting
for
new
rules
to
be
drafted,
that
take
into
account
the
new
characteristics
of
blockchain-based
asset
transfer,
could
end
up
delaying
progress
by
years.
A
compromise
So,
what’s
the
solution?
My
preference
is
for
“simple”
tokenized
securities
to
be
covered
by
existing
rules,
to
allow
crypto-native
and
legacy
market
participants
to
start
experimenting
with
processes
and
market
reactions.
Meanwhile,
sandboxes
should
allow
for
experimentation
with
the
regulators’
blessing.
The
sandboxes
need
to
recognize
that
markets
are
changing,
and
“out
there”
ideas
could
end
up
becoming
the
norm
of
a
more
efficient
tomorrow.
It’s
not
that
long
ago
in
the
arc
of
history
that
electronic
trading
was
regarded
as
a
radical
departure
from
common
sense.
Tokenization
is
a
similar
leap
forward
–
just
as
electronic
trading
unleashed
a
previously
unimaginable
range
of
new
types
of
product
and
trading
strategies,
so
will
blockchain-based
markets.
Just
as
electronic
trading
enabled
increasingly
sophisticated
dashboards
to
improve
both
intelligence
and
reporting,
blockchain
transparency
can
reduce
risk
while
enabling
new
market
functionalities.
The
potential
is
much
greater
than
doing
something
more
efficiently.
It’s
about
what
we’ll
be
able
to
do
that
we
couldn’t
before.
For
that,
new
rules
will
be
needed
–
but
we
can
work
within
the
existing
ones
meanwhile.