Digital Assets Summit - Key highlights

Global round-up panel

Representatives of the UK, Ireland, France, Germany, Belgium, Italy, Ireland, the U.S., Singapore and Hong Kong, provided a comprehensive, global view of adoption across financial services.

The overriding consensus was that robust, clear, and effective regulation and collaboration between regulators and industry players are essential for establishing trust in the industry and ensuring the success of the digital assets market.

Partners Sharon Lewis and John Salmon, noted the speed with which regulatory issues around digital assets has moved on in recent years:
 
“2023 has been a defining year for digital assets and blockchain, with a number of jurisdictions publishing new regulatory frameworks, cementing the importance of digital assets and blockchain into legislation.” Sharon Lewis, partner, Hogan Lovells, Global Head of the Financial Institutions Sector. 

“The world is very different from when we first did this conference five years ago. Then, regulation of digital assets seemed very far away. But the conversation has moved on quickly and lots of jurisdictions are now considering regulatory frameworks around digital assets. This sector has the power to change the face of financial services but trust has been an inhibitor of adoption and this is absolutely crucial to the industry moving forward.  Regulators need to trust businesses,  businesses need to trust that they are being fairly treated by the regulators and customers need to trust that the sector has robust safeguards in place.” John Salmon, partner, Hogan Lovells, Head of the Digital Assets and Blockchain practice.

Key Takeaways 

• Fragmented markets and a lack of maturity in the digital assets space has created a number of challenges. 
• Bryony Widdup, partner, Hogan Lovells, London stated “Policymakers should focus on building skills capacity. We need a well-skilled workforce in this industry.”
• Eimear O’Brien, partner, Hogan Lovells, Dublin, summarised the reasoning behind the impetus on purposeful regulatory action by stating “This is essential because the industry is so fast moving.” It was also noted that in Ireland, a strict regulatory regime was needed to bring trust and credibility to the digital assets market both for institutional and retail customers.
• Interestingly, when looking at how regulators view digital assets innovation, Belgium noted that regulators and policymakers need to be open to new projects and innovation and that regulators are not always receptive to the latter. In contrast, regulators in France are seen to do a good job of addressing and welcoming innovation. It was highlighted that in Italy, an open dialogue with regulators is seen as essential for building trust.
• Singapore noted a lack of education in the market around digital assets. Hong Kong shared these views, highlighting that greater institutional involvement will not only build trust but accelerate regulator knowledge and skills relating to this industry.

Global regulation and policy developments panel

The panel provided an overview of the agency-led initiatives seeking to build trust in digital assets across financial markets infrastructure, from sandboxes to pilot regimes; and the importance of global harmony in these developments. It was noted that digital trust is imperative if we are to realize the potential of tokenization.

Panellists agreed that effective regulation demanded global cooperation, engagement and openness. 

Key Takeaways 

• Panellists were complementary of the importance of the IOSCO recommendations, noting its importance in bringing global consistency in what is by nature a cross border technology.
• When it comes to the core issues such as conflicts of interest, vertical integration, market abuse and DeFi, panellists were all aligned. This last year, the topic of vertical integration was particularly important and jurisdictions have sought to put in place firm rules around this. 
• Global cooperation is imperative, underscored Lavan Thasarathakumar, Senior Adviser, Hogan Lovells, “for a jurisdiction to act in isolation will be a futile endeavour, global technologies and global businesses need global approaches and it will be vital for regulators to work with their global counterparts to: share information, their understanding and lessons learned, so we have safe, well-functioning markets.”   
• Global approaches do not mean that everyone has the same approach, each jurisdiction sought to achieve these outcomes in slightly different ways, still having unique characteristics to distinguish themselves. 
• Learning is key, trust is developed when the regulators were able to better understand how the industry operates and sandboxes are a great way of achieving this. That being said, whilst it works for some and is seen as a great way to build public-private relations, others said that the market was too small and there are easier, quicker and more cost effective ways of generating this intel, understanding and trust. 
• The call for regulation is being answered, whilst some have already put frameworks in place, others are just around the corner from implementation.

For more information, please visit the Hogan Lovells Digital Assets and Blockchain Hub, where you can also read the firm’s newly released Digital Trust White Paper. 

For a full round up of the summit and panels, please read here.