Capital markets News

ISSA survey shows rising strategic importance of DLT adoption

DLT strategic importance

Today the International Securities Services Association (ISSA) published its latest DLT in the Real World survey. It shows that institutions rate DLT as increasingly important from a strategic perspective, particularly exchanges, CSDs, wealth management firms and custodians. Asset managers were the group that considered it least important.

The quantity of projects in progress is roughly the same as last year across all stages, ranging from proofs of concepts to production. Only 8% of live projects generated more than $500 million in annual turnover, with 68% having $10 million or less. Digital bonds are the most active segment, followed by payments, crypto and securities financing/collateral.

Cost savings are increasingly the top motivation for DLT projects, followed by new revenues, although this declined as a motivation compared to last year. There’s an increasing appetite in DLT for treasury liquidity, which makes sense in a high interest rate environment.

Private blockchain usage increases

There were a few unexpected findings. For example, beyond the survey, asset managers have a significant appetite to increase their use of public blockchains to expand distribution. However, the proportion of survey respondents using private blockchains increased from 55% to 65%, with most of them shifting from public blockchains using permissioned applications. That said, asset managers only made up 13% of the people surveyed. Regulators still strongly favor private blockchains, and since last year, the Basel Committee has been more outspoken on the topic.

Another unexpected finding was the anticipated timelines for the release of central bank digital currencies (CBDCs) in various jurisdictions. Around 9% of respondents foresee CBDC issuance this year in several major jurisdictions such as the US, Europe, UK and Switzerland. A Chinese CBDC was given one of the longer lead times until launch.

The reality is the opposite. The digital RMB is showing signs of launching this year or next. The likelihood of a US CBDC issuance in the next three years is close to zero, whereas 40% of respondents put it as likely. There’s a strong likelihood of a retail digital euro, but 2027 is the earliest launch date, with 2028/29 being more probable. Yet 45% of survey respondents expect a digital euro before 2027. However, a wholesale CBDC issuance before then is not impossible given current wholesale DLT settlement trials in Europe.

Another oddity is that the survey found that 9% of live platforms were using the DLT Pilot Regime. Except, so far there are no approved DLT Pilot Regime projects.

Meanwhile, the Bank of America also published a survey highlighting investment appetites amongst the wealthy with major shifts afoot. Wealthy individuals aged under 44 are less keen on listed stocks and more interested in alternatives and digital assets.

Image Copyright: ISSA, The Value Exchange