Institutional Crypto Three Years Away
Wall Street broad acceptance of token-based assets as collateral is approximately three years away, according to Don Wilson, founder and CEO of DRW Trading.
“I’ve talked with people who run clearinghouses about this very question,” he said during a fireside chat at the Synchronize 2019 conference.
In the meantime, there is a lot that needs to be accomplished between now and then.
The most significant gating factor for institutional adoption is the dearth of the necessary tools asset managers need to manage and execute token-based transactions. Once firms have access to the new tools, it should whet their appetite, according to Wilson.
“The opportunity for entrepreneurs is to think about how we go from where we are now to where we can imagine and what needs to be built to accomplish it,” he said. “There is all sort of opportunities in terms of plumbing that fits these things together.”
One example, he cited was the recent decision by Digital Asset, which Wilson co-founded, to open source its DAML smart contract language.
“The work that Digital Asset is doing to put DAML on top of not just private blockchains but also public blockchains is a great example of the direction that companies in this space should be thinking about going to enable the wider spread adoption to these tools,” said Wilson.
Once institutional investors have access to the new toolkits, they will be able to use token-based assets to diversify client holdings, as a representation of real-world assets like real estate, and improve their efficiency via smart contracts.
“I believe all of them will happen, but it is going to take a long time,” he said.
Wilson expects that companies that already have extensive customer usage will be critical for widespread adoption of token-based assets.
“They will roll out wallets and crypto-tokens to their client base, which would simulate a lot of use,” he said. “And I think that will take place in the next year.”
Clients will have accesss to the firm's Zero Hash settlement service for digital and fiat trade.
One in five asset managers already have exposure to the new asset class.
It is time to pivot industry efforts further up the blockchain stack.
Meanwhile, digital futures prep for further market fragmentation.
It won't be the same, but it will rhyme.