Opinion | Financial services sector needs rewiring as digital assets gain greater institutional acceptance
- With clearer regulation coming soon, large financial institutions such as banks and asset managers will have the approval needed to participate in the market
There is a tidal wave of adoption of digital assets under way around the world, and this has set the stage to ‘rewire’ the financial services industry and its value chains.
The growth potential is massive. Hong Kong’s digital assets institutional market alone could top US$100 billion in the next three to five years, according to information in recent reports from Hong Kong Private Wealth Management and KPMG.
Asian markets are driving this shift. Japan was the first to regulate digital assets and now has licensed exchanges.
In September, the People’s Bank of China announced plans to launch a digital version of the yuan to replace physical cash for consumer payments, while regulatory bodies in Hong Kong, Australia and Singapore have created sandboxes that encourage innovation and participation in the fintech space.
Regulation has proven a boon to growth. When Japan introduced government guidance around digital assets in 2017, trading volume grew by 450 per cent in a year, compared with 18 per cent globally during the same period.
Digital assets will only continue to grow. With clearer regulation coming in the near future, large financial institutions such as banks and asset managers will have the official ‘stamp of approval’ needed to participate in the market, driving tokenisation of existing asset classes and substantial capital inflows to the sector.