Sibos 25: a quantum leap for DAs

Increasing global regulatory acceptance of digital assets is a “quantum leap” for the technology and how it will change the payments space, according to David Buckthought, Head of Tech — Payment Services and Digital Assets at ANZ.

The United States GENIUS Act, passed in July, installed a broad regulatory framework around stablecoins in the US, in a bid to foster and protect the $US238 billion global market. The rules make clear where tokens and stablecoins sit in the broader financial sphere.

Other regions are taking notice — as well as the banking sector. In August, a group of financial industry bodies called on the Basel Committee on Banking Supervision to rethink their rules around banks and stablecoins.

Speaking on podcast to On Air with ANZ Institutional, Buckthought said the industry was “very buoyant” about the GENIUS Act and the momentum it had created.

“What we've seen over the last six months has probably been that quantum leap in the regulatory bodies moving forward,” he said. “And driven out of the US.”

The story is a little different on the homefront, he admitted — but still positive.

“Australia is not quite there yet,” Buckthought said. “We're still working with a lot of our regulatory bodies around, well, how do we take some of these learnings out of the US, and how does that apply to the Australia region? And when can we start seeing some of the similar kind of pieces?”

Buckthought made the comments in conversation with Carl Garrett, ANZ’s Head of Global Cross-border Payments, ahead of the Sibos financial services conference in September. You can listen to the podcast — the first part in a two-part conversation — below.

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Garrett said as technologies like stablecoin continue to develop, regulatory and compliance overlays were “obviously incredibly important” — particularly when it comes to cross-border payments.

“Things like financial crime, whether it be sanctions or money laundering, are absolutely front of mind for us in the way that payments work today,” he said.

Buckthought said the regulatory bodies ANZ had worked with had been “very engaged this whole process”.

“They understand that this is coming and we need to make sure we’ve got the right kind of rules in place,” he said.

Standards

The next big step for tokenisation is interoperability — ensuring chains with different standards can interact efficiently with each other. Buckthought is confident the sector getting there.

“As an organisation, we have a belief that not one chain will rule them all,” he said. “And we do think interoperability is going to be the key for this.”

As part of the Hong Kong Monetary Authority (HKMA)’s Phase 2 e-HKD Pilot Programme, ANZ has spent time working with Chainlink to allow the facilitation of ANZ’s stablecoin, A$DC, across both public and private networks.

“Why this is important goes back to: where are the customers?” Buckthought said. “Different use cases, when it comes to tokenisation, will be better suited to different types of chains, whether it be private or public.

“What we're saying is we don't want to make a bet on just a single model. We want to be able to be where the customers are. And with that interoperability becomes fundamental to this.”

Solve

Garrett said the benefits for banks when it comes to stablecoin were clear, but there were still some issues to solve.

“The big benefit that we see is the ability to harmonise what we'd usually think of as the message flow and the funds flow,” he said. “When you're using tokenised forms of money to exchange between counterparties, the implications that you'd usually have to face into, around sourcing of liquidity and funding of an account in an offshore market, those are far more simplified. Because you transfer value with the message.

“You also have the benefit of instantly reconciled and being able to bring that liquidity control into your own domain. That then, by extension, eliminates some of the potential complexity from a markets and treasury perspective.

“It also means when it comes to things like currency cutoffs and funding windows, which occasionally can be challenging today, those challenges are eliminated.”

But none of these benefits can be realised unless the underlying consumer or commercial flow is settled on the beneficiary’s end, Garrett pointed out. That’s the near-term challenge for the tech.

“Unless the ultimate institution that's going apply the funds to the beneficiary is 24/7 enabled, and has their own modernised payments infrastructure [that can process and convert tokens], it's unlikely to translate to meaningful retail or commercial customer benefits in the near term,” he said.

The conversation also touched on how stablecoin standards address ISO 20022, and what bank customers really care about when it comes to stablecoins. Listen to the podcast above to find out more.

Shane White is Editor at ANZ Institutional Insights