Inhalt

Why Asset and Wealth Managers Must Embrace Digital Assets and Web3 technology 

The world of finance is undergoing a transformation unlike any seen before. As digital assets and Web3 technologies challenge traditional financial systems, asset and wealth managers find themselves at a crossroads. To remain competitive and relevant in this evolving landscape, professionals in this field must adapt and stay ahead of the curve. In this article, we will explore why asset and wealth managers should closely monitor the developments in this often-controversial space and how a multidisciplinary view on these technology developments can help find the right answers.

 

By Arno Pernthaler
Vorstandspräsident, DEC Institute                                                                   
Marcel Harmann
Vorstandsmitglied, Crypto Valley Association                                                 

 

The Digital Asset Revolution

Digital assets, which are the representation of real-world assets (financial or non-financial) in form of a token on a decentralized ledger, have gained significant attention and investment in 2023. Other assets like cryptocurrencies, non-fungible tokens (NFTs), decentralized finance (DeFi) platforms and stablecoins have increasingly captured the imagination of investors and financial professionals alike. This variety of assets provides new opportunities and challenges for asset and wealth managers.  

  1. Diversification and Investment Opportunities: The world of digital assets offers a range of diversification opportunities for portfolios. Cryptocurrencies, for instance, provide a low correlation with traditional assets like stocks and bonds, making them a valuable addition for risk management and portfolio optimization. If cryptocurrencies are not an option, a variety of additional asset classes are being issued and traded over distributed ledgers, such as digital bonds or traditional equity of early-stage ventures normally accessible only by an elite group of investors. 
     
  2. Volatility and Risk Management: While crypto assets offer exciting investment potential, they are also known for their high volatility. Asset managers need a deep understanding of these assets to manage risk effectively, both for individual clients and institutional portfolios. According to a recent Coinbase report, Bitcoin moved more than 4.3 standard deviations higher in the last weeks (relative to the last three months), compared to a 2.5 to 3.0 standard deviation move lower for US stocks.  
     
  3. Regulatory Challenges: Different jurisdictions have varying approaches to digital asset regulation and staying compliant is crucial. The Securities Exchange Commission (SEC) deals daily with crucial issues in terms of financial stability and investor protection. Apart from guiding and hedging the market, with the statement of the SEC to consider more than +65 cryptos to be securities (ADA, XRP, MATIC...), regulation still struggles with deceptive behaviors such as scams and other irregular market moves, such as when in October a fake Bitcoin-ETF from Blackrock was seemingly approved by the SEC. This led to a nearly 10% surge in the price of BTC, followed by a subsequent drop once the approval was publicly denied as an 'accident’.
     
  4. New Asset Classes: non-conventional and differentiating products are nothing new to the investment management industry, that needs to evolve in alignment with a new buyer preference. Tokenized music rights with monthly streaming-earnings of global popstars like Snoop Dog, collectible fashion tokens from brands like Dior or Hublot, and security tokens of SME equity are just three examples that have expanded the traditional concept of financial and investable assets, bringing on board a new set of characteristics and implications for asset managers.  

 

The DLT vs Web3 Ecosystem

DLT developments refer to a more conservative and institutional approach in the adoption of distributed ledger technology, mostly oriented towards existing products and services, whereas Web3 represents a vision of a decentralized and user-centric internet including complete ownership of financial assets, where blockchain and other distributed technologies play a central role. This new paradigm opens up numerous possibilities and challenges for asset and wealth managers.   
 

  1. Capital markets and payments: The use of smart contracts and tokenization in capital markets is proliferating, not to mention the increased use of stablecoins across famous Web2 applications such as PayPal, allowing real-time payment-vs-delivery. Asset managers must grasp how these technologies can impact traditional financial instruments and services. Banks such as Deutsche Bank, Citi Bank and JP Morgan, just to name a few, are betting big on digital assets. JP Morgan for example is setting a historic milestone by processing more than $1 billion in daily payment transaction volumes for wholesale clients.  
     
  2. Decentralized Finance (DeFi): DeFi platforms allow users to lend, borrow, and trade digital assets without traditional intermediaries. Asset managers need to understand how these platforms work and how to incorporate them into client strategies. According to the European Securities and Markets Authority (ESMA), DeFi is recognized as the most innovative development in the asset management space but remains an unmeaningful risk to the financial stability, giving its relatively small value locked of currently about 41 billion globally according to DefiLlama.   

 

Signify expertise, earn a professional designation 

Professionals who adopt this change and seek professional certification in this field make a step further to navigate in the complexity and harness the opportunities presented by this evolving technology trend. With the knowledge, expertise, and multidisciplinary approach offered by the professional designation programs of the DEC Institute, asset managers can not only stay current but also thrive in the digital age of finance. As the world moves toward Web3, asset and wealth managers should evolve with it, ensuring the best outcomes for their clients and the development of their careers.  

Register for the 12-hour CDAA® 1 Preparatory course of DEC Instituteon edX.org, accredited by the SAM continuing education platform 12 credit points. REGISTER HERE

 

 

Biography

Arno is a Corporate Venturing expert in the space of Distributed Ledger Technologies, Digital Assets and Web3. Arno has co-founded the DEC Institute, a premier global certification body and professional society, together with leading academic and industry institutions. From 2019-2022 Arno was heading the corporate development of Atomyze, a USD 30 mio. industry-backed digital marketplace for tokenization and trading of commodities on blockchain technology. Before that, he worked as a corporate development manager for Swisscom Blockchain AG. Arno started his career in Digital Strategy & Consulting at Monitor Deloitte and was professionalizing his blockchain know-how working for the Deloitte EMEA Blockchain Lab in Dublin in 2017. He holds a Bachelor of Science in Business Administration from the Università degli Studi di Firenze and a Master of Science in Management & Strategy from the Católica Lisbon School of Business & Economics.

Marcel is the founder and CEO of DeFi Suisse AG & THORWallet. He is a seasoned entrepreneur with a background in Banking and Finance from the University of Zurich. He also started a Ph.D. in Information Technology at the University of Applied Sciences Lucerne & University of Fribourg. Marcel is also the course director at the University of Applied Sciences Lucerne for the CAS Crypto Finance and Cryptocurrencies and CAS Blockchain course. He is one of the co-founder of the DEC Institute, and board member of the Crypto Valley Association in Switzerland. Before that, he acted in award-winning tech startups in various roles from founder, early management member or angel investor.