Our Research Approach

The Digital Finance Ecosystem

Research stream 1: Dynamic registers for instant exchange

New technologies aimed at ‘activating’ the legacy ownership registers and registries into real-time exchange facilitators.
The first major step required to transform financial markets is the digitisation of the registry. The registry is traditionally a bookkeeping and communication function, tracking who owns shares in companies and communicates with shareholders.

In the Digital Finance world, this changes entirely. When truly digital assets are created, issued, traded and settled in real-time, the registry becomes the centrepiece of all transactions. It becomes the most critical and strategically important piece of all trading infrastructure. It is required for all marketplace activity, and may even become the marketplace itself.

The registry in this context is not necessarily a separate commercial entity, although it could be operated as such. It could also be operated by producers and manufacturers as the securities issuers themselves, or in different scenarios by any of the aforementioned parties.

This research stream will:

Research stream 2: Advanced securitisation – turning more things digital

Turning more things into instantly tradable digitised assets. Combining legal research with technology research, including smart contracts and smart titles to address this core challenge.
The second key tenant of the Digital Finance transformation is the conversion of ever more assets into digital securities, and the increased liquidity of these assets. This includes, for example, the creation and fractionalisation of digital ownership titles to physical assets. It also includes an increase in the creation and ubiquity of purely digital assets and ‘meta-assets’ like pooled investments and managed funds. Key here will be the assets and enterprises of SME’s that as a result of the cost of traditional exchanges have not had access to the key benefits of a marketplace, namely, transparency, fairness and efficiency.

This research stream will:

Research stream 3: Distributed trading – commoditisation of marketplaces

Monitoring and analysing the distributed marketplace. Building next generation technology and finance analytics to service distributed, customised marketplaces for individual tokenised assets.
With true digital or digitised assets, the principal function of a marketplace becomes very simple – it is to facilitate the real-time exchange of one set of digital assets for another. Such marketplaces obviate the need for conventional lines of credit, and the burdensome protocols required to establish trust between a marketplace and its participants. Clearing and settlement becomes an instantaneous part of the digital asset exchange.

In turn, by reducing the barriers to set up a marketplace or exchange, this leads to potential for individual exchanges to become commoditised. A counterpoint to this commoditisation trend is the evident need for regulation, supervision, and operational certainty in new financial markets. This is not just a requirement from a government perspective, it is in fact ensured by existential self-interest of market participants. History shows that a completely unregulated market will lead to many levels of irregularities and to the ultimate detriment of an honest participant.

From the perspective of an issuer as well as an investor, the financial ‘marketplace’ will ever increase to become a distributed marketplace of many individual venues, to source or distribute digital assets.

This research stream is a combination of empirical observations, active development and trialling of technologies, processes, and suggestions for operational improvements of the distributed marketplace.

This research stream will:

Research stream 4: RegTech with algorithmic real-time enforcement

Combining legal, regulatory and technology for algorithmically enforceable rules and regulation, and the technology to monitor and enforce in real-time.
The instant transfers of assets require rules and regulations that can be enforced as part of the transfer itself. This requires a different approach to regulation. Compliance needs to be verified at the time of processing the transaction; if the necessary regulatory requirements are not met the transaction is rejected. This is the only efficient way a regulated real-time exchange of assets can work because rolling back transactions will be either impossible or technically difficult, and operationally expensive.

The current governance-based approach, which states intentional rules and relies on case law for enforcement, is neither appropriate nor adequate for the new real-time environment.

Algorithmic real-time enforcement provides a solution to this challenge. In the ‘Active Registry’ paradigm from Research Stream 1 the centre-point of such enforcement moves from the exchange to the registry. This enables proactive compliance with rules and regulation as a precondition to any digitised asset transfer. With enforced integrity, proactive compliance with rules enforced by the registry can automatically apply even if the targeted asset exchange transaction is initiated in a different geographic legislation.

This research stream will: