GMEX Prepares For ’Tokenomics’06.21.2018
Hirander Misra, chairman and chief executive of GMEX Group, said institutional investors will be trading tokens, or digital assets, more quickly than anyone can imagine and the technology provider will launch related businesses in the first quarter of next year.
GMEX Group is a set of companies that include creating and operating cost-effective electronic exchanges and post trade infrastructure in multiple asset classes, including cryptocurrencies, in both developing and developed markets. The firm’s GMEX Fusion offering combines the technology currently being used by exchanges and post-trade venues with blockchain technology.
Misra told Markets Media that he had not seen anything like the move to digital assets during his 23 years in finance but that tokenomics will run in parallel with, rather than replace, the current real world economy.
“Tokenisation will go institutional quicker than anyone can imagine,” he said. “In the first quarter of next year we will have launched genuine operations after beginning testing in September.”
Tokenomics was defined in three ways by Dr Paul Ennis, an ICO advisor and lecturer in the College of Business, University College Dublin; James Waugh, an ICO adviser and director at Blueblock consultancy and William Weaver, committee member of the Blockchain Association of Ireland in an article on Coindesk. The first definition was a self-funding mechanism for projects within the crypto economy; the second definition was deployment of a token within the ecosystem of an initial coin offering; and the third was the set of all economic activity generated through the creation of tokens.
They wrote: “This final definition makes the assumption that we are currently in the earliest phase of this type of economic activity and that we expect to see innovation occurring at the typical pace of the crypto-economy, namely at breakneck speed.”
GMEX has made announced three projects related to the token economy since the end of May.
Misra said: “GMEX is propagating the network effect in the crypto environment and we will be making more announcements. A lot of firms think about acquisitions or building something themselves and we take a totally different view in believing that the future will be very collaborative.”
The first announcement was a partnership between GMEX and the Digital Asset Group, which is is separate from New York-headquartered Digital Asset, the distributed ledger software firm led by Blythe Masters, the former JP Morgan executive.
Stephanie Ramezan, partner at Digital Asset Group and co-founder of Quince Capital, told Markets Media this month: “We are trying to achieve something revolutionary in marrying traditional financial services with the digital world and launching the world’s first fully-regulated B2B crypto and blockchain bank.
The collaboration includes the delivery of exchange initiatives and post-trade services including digital registry; a blockchain clearing house; decentralised depository and custody; digital and crypto banking; crypto fund management and emerging technology incubation.
The second partnership was with cryptocurrency firm ThinkCoin, a specialist subsidiary of brokerage ThinkMarkets. GMEX Fusion’s capabilities will be combined with the TradeConnect multi-asset trading network using ThinkCoin, the digital trading token unit of exchange. A blockchain-based exchange will allow trading of multiple asset classes including cryptocurrencies, equities, foreign exchange and commodities. Traders will be connected with each other by an artificial intelligence-powered scoring and matching model.
The third partnership was with Ingot Coin, which links the crypto universe and the current traditional financial industry including trading and broking, exchange execution, clearing, settlement, custody and digital banking through a combination of blockchain and centralized solutions and services.
“ThinkCoin is a subsidiary of an existing brokerage with retail investors,” Misra added. “Digital Asset Group is developing an ICO fund linked to the operation of a digital bank. Blockchain Board of Derivatives is developing real-time clearing on blockchain for futures and Ingot Coin will allow the world of securities to be tokenised with secure digital custody so that the current securities market structure co-exists with the new.”
He continued that GMEX does not intend to duplicate partnerships across asset classes or jurisdictions. The group will be involved in a number of sectors that provide value and synergies and will initially operate across six distinct verticals.
Next year GMEX will be looking at prime brokerage and providing the ability to monitor accounts across a number of crypto exchanges, and also a product for real estate. In addition, he added that GMEX’s custody offering allows assets to move in and out in real-time, rather than T+3, and so reduces risk to zero. “Custodians need to reinvent themselves or they will become extinct,” said Misra.
He described GMEX as taking a venture capital-like approach.
“We are making strategic bets and helping incubate firms which are likely to be successful in our domain“ said Misra. “A GMEX token giving exposure to tokenomics would be valued by investors.”
Misra admitted there is a lot of hype around digital assets and blockchain but argued that GMEX has a record of 100% delivery. “The tokenisation of assets and securities is happening very quickly and many large companies are not agile enough to keep up,” he said.
Consultancy Greenwich Associates said in recent report, Blockchain Adoption in Capital Markets—2018, that the level of disruption caused by distributed ledger technology its first three years is below expectations but interest still remains high, with 88% of respondents saying their firm is focused on the technology.
— Greenwich Associates (@GreenwichAssoc) June 12, 2018
“Indeed, 14% now claim to have successfully deployed a production blockchain solution,” said the report. “These successes notwithstanding, blockchain technology has yet to achieve those lofty expectations.”
Greenwich interviewed 213 global market participants working on blockchain technology during February and March this year.
Richard Johnson, vice president in the market structure and technology practice at Greenwich Associates with a focus on equities and financial technology, wrote the report. He said in the study that the top three uses for DLT in the survey were payments, trade finance and syndicated loans. For capital markets applications today, DLT is more often being used as a post-trade solution only.
“The assets – stocks, bonds or other instruments – are traded in a separate, pre-existing market, and DLT is integrated after the trade to aid in the reconciliation and settlement process,” Johnson added. “So while securities settlement could certainly stand to benefit from a technology upgrade, a move to T+0 is not seen as the right catalyst for DLT implementation here.”
The key technological challenge has been achieving interoperability between legacy systems and DLT solutions.
“Implementing enterprise technology designed to replace decades of legacy market infrastructure is no simple task, and most blockchain executives have told us it has been harder than expected,” said Johnson. “Nevertheless, engagement remains high, budgets and teams are increasing, and most firms expect to deploy a blockchain solution within two years. But there is a difference between releasing production technology and transforming an industry. It is likely we are still many years away from that lofty goal.”
The Bank for International Settlements said in its latest annual report that cryptocurrencies promise to replace trusted institutions but that, looking beyond the hype, it is hard to identify a specific economic problem which they currently solve.
“Transactions are slow and costly, prone to congestion, and cannot scale with demand,” said the BIS. “The decentralised consensus behind the technology is also fragile and consumes vast amounts of energy. Still, distributed ledger technology could have promise in other applications. Policy responses need to prevent abuses while allowing further experimentation.”
— Bank for Intl Settl. (@BIS_org) June 17, 2018
… but the underlying distributed ledger technology just might be applied in finance, for instance in trade finance #DLT #Blockchain #TradeFinance 4/4 https://t.co/Z9f5mBLrhK pic.twitter.com/fi9RrhRn1j
— Bank for Intl Settl. (@BIS_org) June 17, 2018
R3's Mike Wilkins outlines three practical, tangible ways digital assets and blockchain are driving change.
Mike Wilkins of R3 discusses blockchain and the importance of interoperability for digital assets.
This is a major step toward making private market strategies accessible to individual investors.
Growth comes as the crypto winter is prompting capital to focus on more viable blockchain use cases.
Can crypto help the industry better understand the future of traditional markets?