IFCs Can Support The Great Asian Digital Asset Revolution

• Published date: 31 January 2023
• Subject Matter: Finance and Banking, Technology, Financial Services, Fin Tech
• Law Firm: Jersey Finance Limited
• Author: Maria McDermott

It's clear that the emergence of 'the internet' some 30 years ago had a seismic impact on how we communicate. Back in the early 90s, the digitisation of information created significant opportunities in areas such as e-commerce, education, social media and entertainment.

Fast forward to today, and we are now in the midst of a new, second digital revolution; and this time, it is built on the digitisation of assets, where anything of value can be digitised and exchanged.

It's a concept that can be applied to a broad range of goods - from art and fine wine to real estate - and it has the potential to be transformative in how we conceptualise trade and investment, opening up new ways to access markets, or indeed create new markets that didn't exist before.

Champions of the digital assets revolution point to the significant benefits it can bring - enabling frictionless trade and commerce, cheaper capital movements, more robust technology-driven transactions and fewer restrictions on access to markets.

Leading the world

It's a revolution that is happening right now - and in few places it is happening faster than in China, with experts forecasting that the country is going to lead the world in terms of digital asset and currency adoption. Even today, the digital economy represents around 40% of Chinese GDP (Source: MIIT).

This acceleration of digital asset and currency adoption is being driven by the maturation of the underlying digital platforms and tools that are supporting digital change, as technology becomes more and more sophisticated.

The foundation for this is the distributed ledger concept built on blockchain technology. Now in its sixth generation, today blockchain is capable of enabling hundreds of thousands of transactions to be completed every second - compared to around 20 transactions per second when it when it first came into being 20 years ago.

And it can do this in a more secure way and with less cost and friction than traditional payments typically undertaken through banks and clearing houses and the SWIFT system.

It's a concept that central banks, regulators and policy makers are taking extremely seriously too, with the Hong Kong Monetary Authority as well as regulators such as the SEC, FinMa, MiCA and BaFin all creating clear frameworks for digital assets.

With those regulatory frameworks in place, access to digital currencies and assets is no longer reserved for institutional investors - the retail market has access now too.

To put that in...