These 5 Digital Asset Classes are Driving Institutional Interest
In the past years, digital assets are expanding rapidly. To create a secure and transparent environment, frameworks of the EU and further global regulators are coming into force. These milestones empower institutions considering more and more types of digital assets.
With digital assets expanding rapidly, the European Union and global regulators are developing frameworks like MiCAR to create a secure, transparent environment for the industry. These regulations aim to protect investors, ensure stability, and support a well-structured market for digital assets. [1] This empowers financial institutions considering more and more types of digital assets.
As a well-established provider of a tailored digital asset operating system, we observe growing demand in the following areas:
Cryptocurrencies
Cryptocurrencies represent digital or virtual currencies that leverage cryptographic methods to secure transactions and regulate the creation of new units. The first and most famous cryptocurrency is Bitcoin, while other prominent examples include Ethereum, Litecoin, and Ripple. These digital assets serve multiple purposes, such as online transactions, investment options, and as a store of value. [2]
Stablecoins
Stablecoins are a type of cryptocurrency whose value is pegged to the value of another asset. Typically, they are held as a class of crypto asset designed to minimise volatility. Most stablecoins are backed by fiat currencies, such as EURO, DOLLAR or highly liquid assets like money market funds or commercial paper. [3]
They were developed to avoid the high volatility of traditional cryptocurrencies and thus offer a more stable option for transactions and store of value. In addition to the most common "fiat-backed" stablecoins, there are also less common types like algorithmic and commodity-backed stablecoins. [4]
Security Tokens
Tokenization enables the representation of real assets, including all associated rights and obligations, using blockchain technology. This enables the digital representation of a range of financial instruments, including shares, bonds, and funds, as well as tangible assets such as real estate. The Electronic Securities Act (eWpG) defines security tokens as crypto securities. [5] A significant milestone was reached in 2023 with the issuance of crypto securities by Siemens, becoming one of the first German companies to do so on a public blockchain. [6]
In 2024, the company took the next step with the largest cryptocurrency issuance to date, valued at 300 million Euros. Thanks to technical innovations and collaboration with other financial institutions, the transaction was fully automated and completed within a few minutes. [7]
Non-Fungible Tokens (NFTs)
NFTs (Non-Fungible Tokens) enabling both physical and virtual items to be represented as unique through blockchain technology. They span various applications like art, videos, and memes, with high price tags in some cases. Legal considerations around NFTs include civil and copyright issues, especially regarding the rights they actually convey, such as ownership and usage rights. New business models have emerged to make NFTs more accessible, like trading, storage, and minting services. [8]
Under MiCAR, NFTs with unique and non-fungible characteristics, like digital art and collectibles, are generally unregulated, although there are some exceptions. As MiCAR typically focuses on crypto-assets with investment or payment applications, NFTs with fungible or exchangeable attributes, or those that are speculative or investment-oriented, are subject to regulatory oversight. [9]
Utility Tokens
Utility tokens are digital assets that provide digital access to applications, services and resources, and are accepted only by the issuer of those applications, services and resources. Under MiCAR, they are classified as 'other tokens' and are therefore subject to the relevant regulatory requirements. [10]
Summary
Market demand and forecasts indicate that digital assets have already achieved a significant level of market penetration and are continuing to gain momentum. Statistics show that the market volume of digital assets (security tokens and cryptocurrencies) in Europe, including Switzerland, could reach 5.6 trillion euros by 2030. [11]
The positive outlook on digital assets is prompting a growing number of financial institutions to explore offering these services. However, many who have initiated preparations face challenges, especially as legacy systems struggle to support digital asset integration.
Trever provides a tailored solution to overcome these limitations and enables financial institutions to manage, trade and monitor digital assets through one holistic operating system. It also connects them to all required venues through a single integration. Get in touch with our experts to get closer insights: https://trever.io/contact/
Sources:
[1] World Economic Forum. (2024). Digital Assets Regulation: Insights from Jurisdictional Approaches. https://www3.weforum.org/docs/WEF_Digital_Assets_Regulation_2024.pdf
[2] Digital Assets. (o. D.). KPMG. https://kpmg.com/de/de/home/themen/uebersicht/digital-assets.html#
[3] Stable (or not-so-stable) coins. (o. D.-b). KPMG. https://kpmg.com/xx/en/our-insights/regulatory-insights/stable-or-not-so-stable-coins.html
[4] Stablecoins: Fast so hart wie bare Münze. (o. D.). PwC Switzerland. https://www.pwc.ch/de/insights/disclose/34/stablecoins.html
[5] Tokenisierung erklärt: 4 Schritte der Tokenisierung. (o. D.). Cashlink Technologies GmbH. https://cashlink.de/de/tokenisierung/
[6] Siemens begibt erstes elektronisches Wertpapier auf der Blockchain. (2023, 14. Februar). Siemens Aktiengesellschaft. https://press.siemens.com/global/de/pressemitteilung/siemens-begibt-erstes-elektronisches-wertpapier-auf-der-blockchain
[7] 300 Millionen Euro: Größte SWIAT/Bundesbank-Triggerchain-Kryptowertpapieremission gemäß eWpG! (2024, 5. September). IT Finanzmagazin. https://www.it-finanzmagazin.de/siemens-dekabank-swiat-blockchain-mega-wertpapier-emission-215438/
[8], [15] Hanzl, M. (2022, 3. März). Digital Assets – rechtliche Einordnung und Nutzen für die Geschäftsmodelle der Finanzinstitute. EY - Österreich. https://www.ey.com/de_at/banking-capital-markets/digital-assets-rechtliche-einordnung-und-nutzen-fuer-die-geschaeftsmodelle-der-finanzinstitute
[9] NFTs under MiCAR – are they regulated or not? (2023, 16. November). CMS Law | Tax | Future. https://cms.law/en/int/publication/legal-experts-on-markets-in-crypto-assets-mica-regulation/nfts-under-micar-are-they-regulated-or-not
[10] Markets in Crypto-Assets Regulation. (2023). In KPMG AG. https://hub.kpmg.de/hubfs/LandingPages-PDF/kpmg-markets-in-crypto-assets-regulation.pdf
[11] Digitale Assets – Was ist das? (2023). zeb.rolfes.schierenbeck.associates Gmbh. https://bankinghub.de/themen/digitale-assets
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