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Heat. Heat. [music] Heat. Heat. Heat. Heat. [music] >> [music] [music] [music] >> Good morning, distinguished guests, ladies and gentlemen. Welcome to this fantastic panel on tokenization. I'm Karen Cho, anchor of Squawkbox Europe on CNBC.
Now, just to remind you how we arrived at today, it was a few years back. I was at a property conference in the city of London. I left the conference convinced that just about every physical asset would be tokenized at some point. Would be buying a piece of the Shard, the Empire State Building, pretty much any piece of real estate was up for some sort of fractional ownership.
But talk went quiet, superseded by AI fever. But it's readily apparent in 2026 that there's been a ton of work happening in the backdrop. We've got banks, we've got asset managers, crypto players, other innovators have been quietly working on the innovation. And of course, the Trump family, not so quietly storming to the space, promising to bring real estate assets onto the blockchain and to tokenize Trump properties this year.
Now, is tokenization on the cusp of a breakout year in 2026? Is it the future of global finance? We have a terrific panel and just a reminder, you can get involved on socials #202026. So on the panel today we have joining us Francois Veroy Daloo, who's the Governor of the Central Bank of France, also ECB Governing Council member. Bill Winters, Group Chief Executive, Standard Chartered Bank, also International Business Council. Valerie Oane, Chief Executive Officer, Euroclear Belgium. Brian Armstrong, Co-founder and Chief Executive Officer, Coinbase. And Brad Garlinghouse, who is the Chief Executive Officer of Ripple. Thank you so much for joining us today.
Well, Governor, I want to kick off the conversation exploring why we are here today talking about tokenization. France has the G7 presidency this year. You've put innovative finance on the agenda already, talking about tokenization. Why?
>> Uh, good morning, Karen. Good morning to you all. Let me first stress that tokenization and stable coins might be the name of the game really this year. If we had been in Davos one year ago, remember nobody spoke about stable coins and now it's very fashionable. I hope it will be still more important this year than Greenland, but we'll see. Uh, and let me stress that tokenization is for the better. I really believe it will bring progress in global finance, delivery versus payments, uh, diminish of cost of financial transactions, etc. By the way, we don't know yet how far the use cases will go. If, if you look at the forecast for the volume of stable coins, including on the US market, the bracket is very wide. And it's interesting because at present, the use cases are concentrated on the crypto exchanges and a bit cross-border. I think it will come to domestic financial transactions, very significant. Could it come to domestic, quote unquote, economic transaction, including retail? The jury is still out, but anyway, it will develop and I think develop for the better.
Z said there are threats and as I am a central banker, let me insist a bit on at least I gave a speech two weeks ago with a triangle of threats and a triangle of answer, but let me sum up. The first threat is privatization of money, uh, and loss of sovereignty for for many jurisdictions. And we know this is a real fear, especially in emerging countries. But, uh, if we have only a currency in the future which is private and let this be honest, which is issued by American, uh, issuers, private companies, then we will have a question on sovereignty. Here's the answer is CBDC. And let me be very brief on what we do in the European field because we are pioneers there. Everybody is focused on the retail side and the so-called digital euro, but I will insist more on the wholesale side because as I said, the most important use cases will be wholesale on the financial. Here we develop a wholesale CBDC. And let me stress that the URI is completely pioneer. We will have this year, thanks to the so-called Pontest project, a pilot wholesale CBDC, first worldwide. And then we will have a so-called APIA project, more comprehensive with a European ledger or European network.
But let me insist and I will stop there, Karen. I don't want to be too long, that we still need a two-tier monetary system with public central bank money, which is the anchor, but which also private tokenized currency in euros and not only in dollars. And this is a question of stable coins in euros and or tokenized deposits. The jury is still out. It's up to European banks to to to develop and to choose. Uh, we could have both of them, stable coins in euro and tokenized deposits in euro bank deposit. But if we have known of them, I would be a bit worried about sovereignty. And what I say for the euro area is still more important, as I stressed, for many large emerging economies.
Governor, a terrific scene set and we'll circle back to some of those topics, but let's hear from Valerie next up because you're a clear part of the infrastructure in Europe. You've been looking at pilots, tokenizing euro bonds, UK guilds, gold with partners. What is tokenization promise to achieve and how transformative do you think it will be?
Well, I think tokenization is, uh, we, we see that as an evolution of the financial market of the, the financial securities trans market in the sense that, um, with tokenization, you will certainly be able to reach out to a bigger range of investors. You will give access to finance to many more people. So when we talk about inclusion, financial inclusion, syn tokenization definitely, uh, is is part of the game. But I think it's also important for issuers because if indeed you start reducing the time to market, you start reducing the cost of issuing, I mean that also, it's a, it's a benefit for for the for for the for the issuer side. Having said that, um, as you, as governor was saying, um, the use cases, um, start coming. So I think we start seeing emergence of, uh, uh, interest and and, um, and, uh, interest and volumes into into the the digital assets, especially on the on on the security side. I think, um, we have started an initiative with Bongo France to tokenize the commercial paper in France. I think for me, it is a very interesting initiative because it is the first time that we are really trying to move a full market, a full ecosystem on tokenization because today what is very difficult is that you have issuers, for example, we are willing to, uh, issue digital assets, but then the investors are not really coming on very fast, you know? So with this, um, uh, project on the commercial paper, it's, it's 300 billion of euro, so it's not small, but it is small enough to make sure that we can all learn their lessons and see how we can transpose this initiative, uh, in a broader sense.
>> Bill, let me come to you. You're on the record as saying most transactions will be tokenized by 2028. Are we really two years out from sweeping moves towards tokenization for transactions or was that too optimistic?
I'm not sure I said 2028. I I definitely said that the the the end state is one where most things will settle in in digital form, uh, and you including real assets. Uh, but not everything, of course. Uh, but, uh, we're, I think at a major inflection point right now. I'm not sure no one was talking about stable coins a year ago, but but clearly it's, it's gathering momentum. Uh, it's gathering momentum because we've made the the leap in many many fronts between the the the crypto world where stable coins are absolutely embedded and the trady or or traditional finance or or fiat world, uh, where stable coins and and related tokenized instruments are finding their way into the mainstream. Uh, I would say so far it's in pilot form in many sandboxes. It's initiatives like the the wholesale euro CBDC. Uh, you know, there have been other earlier stages with with ECNY, uh, but not really using commercial transactions, uh, the Chinese currency in the same way. Uh, but this is, this is the year when this is happening in scale and, uh, I, I have no doubt, no less conviction than I did a year ago that eventually all things will will settle in digital digitized form. Uh, how we get there, I don't know. Uh, I, we as a bank, we're operating in in 60 countries on the ground, another 60 that we that we, you know, deal in very actively. And that means we've got 60 plus regulators with 60 different regulatory regimes. So how we get from point A to point B is will be heavily influenced by regulation, uh, but it doesn't change the direction of travel.
>> We can pick up on the regulation point in a moment. In the meantime, Brian, you are one of the the biggest advocates for tokenization in the room. You've talked talked a lot on CNBC about the institutional demand that is coming into the mix. What real world problem does tokenization solve and how does it promise to improve the future of finance?
>> Yeah, well, tokenization solves a lot of problems. I mean, there's an efficiency aspect to it. You can have real-time settlement, lower fees. But maybe the most powerful part of it is just democratization of access to investment in high-quality products. You know, a lot of people have heard about the unbanked. There's actually an unbrokered segment of the world as well. There's about 4 billion adults who don't have access or any ability to invest in high-quality assets like the US stock market or, you know, real estate or whatever. So what tokenization can do is it's just like, uh, you know, you have an underlying unit of that asset, you now have a token that's one to one representative of that. The the first version of this was stable coins, that's another version of tokenizations tok. So stable coins have have been growing enormously. We're now seeing that happen with, uh, US equities, real estate. It'll happen with corporate paper, um, you know, commodities, like all all kinds of things will come on chain. And this is just going to allow the people of the world to participate in this engine of wealth creation, which most of them don't have access to if they're only dependent on their labor, uh, for some source of income. So it'll be a great bo for capitalism. Uh, it'll create more demand. When we, when we speak with funds like at BlackRock and Apollo, they've said, you know, they want to tokenize every single fund that they have and they just know that it'll increase demand for their products. So Coinbase launched a product called Coinbase Tokenize, which is helping, uh, institutions do this, and we're incredibly bullish on it.
If I can make one other point, um, just to build on what the central bank governor here said earlier, um, you know, I do think that, um, stable coins are going to play a major role. I think, uh, central bank digital currencies can also play a complimentary role. And, you know, people think about our current financial system as kind of sacrosanct and it's the only way to do it. But, you know, if you study the history of money, really, it's got created in like 1971 when Nixon went off the gold standard in the US. And we currently have the system where most central banks don't have any link to a hard commodity underneath. Um, I think fiat currencies are going to continue to exist for a long time. Uh, but we're also seeing the birth of a new monetary system that I would call the Bitcoin standard, instead of the gold standard. And in the crypto space, that is a return to, um, you know, sound money and, uh, something that is inflation resistant because democracies around the world, once we came off the gold standard, are struggling to balance their budget. They're all running deficits and it's caused inflation in fiat currencies. And so there is a real segment of the population that is looking for a new system based on hard money.
>> Brad, on that note, there are lots of sound bites there, lots to respond to. You've already seen the momentum. First up, tokenized assets on Ripple's XRP ledger surged over 2,200% last year. Just weigh in from your perspective.
Well, I think I agree with a lot of what was said here. You know, I do think the the first poster child of tokenization is really stable coins. You saw as Brian observed, you know, massive growth last year. I think, you know, uh, went from in 2024, $19 trillion of transactions on stable coins last year and 2025 is 33 trillion, so about 75% growth. I think many in our industry would say that's going to continue. I I think to the extent there's space between, uh, what Brian was just talking about and how I think about the the Bitcoin idea, at Bitcoin standard, I look at that and I I think it's much more of the marriage. You know, sovereignty of fiat currencies, I believe, is for many countries sacrosanct. Uh, Ben Bernanke spoke at a Ripple event many years ago and he made the point that governments will roll tanks into the street before giving up monetary supply, giving up the control of monetary supply, which stuck with me as, yeah, that makes sense. And so at Ripple, we very much focused on building the bridges between traditional finance, as Bill was describing, you know, what we now call tradi and decentralized finance. And that has meant working with a lot of the banks around the world to kind of build those bridges. [snorts]
>> Governor, you have to address this. Is the euro in danger from a Bitcoin standard?
No, I am a bit skeptical, Brian. Sorry to say it, about this idea of the Bitcoin standard. We left the gold standard. Uh, but the gold was only a technical mean. What is important is what you say B, that monetary policy and money is part of sovereignty and we live in democracies and I think the public role is key. And if we lose that, really, you lose a key function of democracy. That said, I always keep repeating that money, as long as it exists for centuries, has been a public-private partnership. You need a public anchor, whatever its form is. Remember, in silver and gold were sovereign assets. So it was on the public side, and then you had bank notes and you will have CBDC. But anyway, the most important part of payments is in the private sphere, and this is the development of tokenized private money. But this tokenized private money must be regulated to inspire trust, confidence. And this is another danger. We should treat that tokenization could develop, uh, if not safe enough, financial risk with the multiplication [clears throat] of stable coins, which are very different, very different, which, uh, are fragmented. This is the issue Bill you mentioned. And so we must have safe enough regulation. This is MiCA in the EU area. This is now Genesis in the US, which is welcome. Uh, because if stable coins are not enough, we could have the risk of a somewhat Gresham's law. You know, this famous one that the bad currency is more used for transaction and the good currency, which would be CBDC, would be kept for store of value. So I think we are on the right track to to regulate. We could improve MiCA still more, improve Genesis perhaps. And the question of compatibility you raised, we discuss it in the BIS. I happen to chair, uh, the BIS. There is a so-called Agura project, and we will discuss it in the G7 in the French presidency. But regulation is not the enemy of innovation, once more, it's a guarantee of trust.
>> It's fascinating that you say that. Brian, you mentioned a complimentary role that you could play. Is there a complimentary role in Europe when there's so much regulation and it is about the digital euro?
>> Yeah, I actually think these these are very positive some. So crypto, just broadly, is a technology to update financial services. So it's going to help with stable coins and, you know, tokenized equities and crypto assets and trading. And by the way, borrowing and lending is also getting updated. So I think that, uh, crypto is very good for fiat currencies. Um, it's very good. Bitcoin is a good as a check and balance on deficit spending because when there is a lack of trust or people, you know, from like in a US context, if people are worried about inflation, or maybe in places like Argentina or Turkey or Nigeria, um, they are going to flee to the thing that they believe is going to store value more. So, um, I think in general, it's going to be very complimentary. And like you said, I think it comes down to trust. And so if, if, uh, fiat currencies can maintain trust and not have, you know, the money printer, uh, kind of debasing everybody, um, then they'll survive. But if they, countries that, you know, have bad behavior on that dimension, um, Bitcoin doesn't have a money printer. The the supply is fixed and people will go to it in times of uncertainty, kind of like they did with gold. The the guarantee for trust is independence on central bank side and we have a common mandate and we are accountable to that. But sorry to say that I trust more independent central banks with a democratic mandate than private issuers of Bitcoin.
>> Which have a very useful role, but >> Bitcoin is a decentralized protocol. There's actually no issuer of it. So that's, that's in the sense that central banks have independence, Bitcoin is even more independent. There's no country or company or individual who controls it in the world. And so anyway, I, I think it's a healthy competition because, um, uh, because if people can decide which one they trust more, and I think it's actually the greatest accountability mechanism on deficit spending.
>> Bill, come in.
>> Yeah, I'd like to come back on the trust comic. We're talking about the trust in the instrument itself, which is key. And, uh, obviously, trust and sovereignty are two conflicting objectives. And the the Bernanke tank point is is very real. It's very real. And I'm, I'm sure he's right. I'm sure he's right today as well. But there's also trust in the infrastructure. So, to for a monetary system to be effective, you have to have the instruments that work and you have to have the pipes that work. And the people who are custodians of the pipes and the people who are the custodians or the market that's a custodian of the instrument need to be trusted by the sovereign entities. Unless sovereigns are prepared to give up power and go to a completely decentralized world. But that's not the way it seems to be happening. And I think we'll probably hear about that later today as well, in in a very different context. So, uh, you know, power matters when it comes to money. So, the trusted entities in the financial system today are many. But I'll put banks at the center of that, mostly because we've been regulated to the point of extinction in some cases. But, you know, we've been, we've been regulated aggressively, uh, on the back of of misdeeds. So there is an, there is an embedded trust in the banking system, which is why Standard Chartered has has been, I say, at the forefront of a few of these initiatives because we want to parlay the the trust that we can bring, we collectively as banks can bring to the system, and lever these fantastically powerful new instruments in a complimentary way.
>> There's an element of trust, but there's also an element of momentum. We're seeing it in terms of the swing away to gold, which is now just a momentum trade as trust has eroded. Brad, do you want to come in on this, in the element of trust?
Well, I certainly think momentum is a big part of this. And I, I think, you know, frankly, I personally think the crypto environment and stable coins included, even tokenization, momentum is so much on our side of of that direction. And that's partly because you're seeing the US, the largest economy in the world, has been pretty openly hostile towards facets of crypto and blockchain technologies. And that has shifted dramatically, you know, starting with the White House, but certainly, you know, the work that the industry based in the US has come together and helped elect a much more pro-crypto, pro-innovation, uh, Congress. And you're seeing that play out. So, I think momentum is a big part of this. And, uh, you know, continuing to make sure that we're playing into that in a nice way, but also demonstrating real results. Because look, if this is just hype, you know, I think part of the tokenization topic, the main topic today, part of that is like, we shouldn't tokenize everything just to tokenize something. There has to be a positive outcome of efficiency or transparency or, you know, some of the root benefits of being tokenized. Otherwise, it's just like, okay, it's nice science experiment.
>> I'm surprised no one's throwing democratization of the market to me. And that's typically the argument when when we have some sort of innovative approach to an asset class. You want to come in on this and the perspective that you have because today, as we talk about real world assets, there is a huge switch towards alternatives. And you're looking at what that means in terms of access to some of those products.
And and absolutely. And frankly, coming back on the point on trust, we just wanted also to to bounce back on that. Um, I think also as the the market mature, I mean, people are looking also for, you know, um, trusted, uh, parties who can really, um, continue to bring, um, safety for for for the market. But they're also looking for, uh, institutions which are bridging, um, different, uh, zones, you know, different, uh, um, pools of of liquidity. And this is where a financial market infrastructure starts playing a role because indeed, we need to first see how the market is emerging. But then when we are starting to reach a certain level of maturity, then indeed, uh, having a financial market infrastructure which can allow interoperability between different pools of liquidity, but also with traditional finance, has a lot of value. And to come back on your point about alternatives, it is indeed, uh, correct that the market is in search of, um, investment products which are meeting more their needs. Maybe sometimes traditional finance has not evolved sufficiently fast to really attract those investors. And and I do see as well tokenization, but also alternative to be a way to increase the, um, attractiveness of the European capital markets. Uh, typically, we know that we have lots of European savers, but not investors. And having instruments which are really addressing their questions in terms of, uh, um, risk profile, but also in terms of access, ease, and ease of access will certainly be good as well for the European capital market. Alternative tokenization, you know, um, as you were saying, complementarity between the Bitcoin and the traditional finance. I think all of that, I think, is is good for the growth of the financial markets.
>> The attractiveness of the asset also in some parts comes down to yield. And it's funny, you know, gold's been so attractive, but doesn't pay a yield. There's a fight brewing state side around regulation. And I know, Brian, you've had issues with the Clarity Act, and now it's stalled thanks to some of your opposition. You've been talking about whether there should be a reward paid for some of these tokenized assets almost like a dividend. Just explain that notion to us because the Chinese are pushing ahead with a revamped yuan that pays some sort of a dividend. Why is it necessary in your view? Is it just pushing the agenda for Coinbase or is it good for consumers?
>> Yeah, so the legislation in the US has been making good progress on market structure and I wouldn't say it's stalled. I'd say there's a good round of negotiation happening. Um, and so I think that that's positive. What we shared publicly was that we want to make sure any crypto legislation in the US does not, um, ban competition, uh, for traditional financial services, banks or traditional, uh, securities brokerages. And in our reading of the draft, that's what it did. It actually unfairly penalized, uh, crypto companies. We think they should be able to compete on a level playing field. And when there's competition, that's how, uh, you know, the consumer benefits. And I think there's very forward-thinking bank CEOs like Bill Winters and and others that have just really been leaning into this as an opportunity. They recognize change is, you can think of it as a threat or you can think of it as an opportunity. So the the smartest bank CEOs are leaning into this. Some of their lobbying organizations in DC are trying to put their thumb on the scale and and ban their competition, which I have zero tolerance for. So we're going to speak up if we ever see that happening. Um, but yeah, I think there's two main reasons why, um, in this case, the main debate is around stable coins paying rewards. First, um, it just puts more money in consumers' pockets, right? So I'm, I think people should be able to earn money, more money on their money, right? That's that's the high level. It's also about global competitiveness though, like you said. Uh, China did just come out recently and say that their central bank digital currency is going to pay interest. Okay. And then there are offshore stable coins, um, that are actually larger than the US regulated ones right now. And they would love it if US stable coins could were banned from paying rewards because it allows them to flourish offshore. So we need, from a US legislator point of view, they should be ensuring US regulated stable coins are competitive. Same thing from a European stable, stable coin point of view. I hope, you know, Eurocoin and etc. continues to grow and, um, we're in a global competition. And we need to make sure that consumers benefit and these each country puts their interest first.
>> Governor, to that point, does the digital euro need to pay some sort of an interest?
Oh, the answer is no. In our case, >> why? >> And no, no, let let me explain perhaps with a somewhat philosophical remark on this apparent opposition between innovation and regulation. Because I'm a bit fed up with this opposition. Let me explain. There is this idea that Europe would be only on the regulation side and innovation only in the US. Uh, there is an apparent contradiction. I agree. But there is a common purpose in the long run, which is trust, and we mentioned it. Regulation without innovation, I am not interested. I I say to the central bankers, it would be status quo statism. I'm not interested. Uh, but, uh, innovation without regulation, it could create serious trust issues. Financial crisis exist, and they are born sometimes of misled or dangerous financial innovations, and financial crisis have a very high cost. This is why we need regulation. So, uh, I think it's common interest to to find the right balance on this question of remuneration of stable coins and or CBDC. We have to look at the effect on financial stability, on the banking system. I don't want to enter the US debate. We see where where the interests are. They are also private interests. They are legitimate. But the public purpose should be also to preserve the stability of the financial system. In our case, CBDC, and especially the digital euro, is not intended to attack the the banking system and its deposits. So we should be cautious on the transfers. I strongly believe in complementarity on public-private, and this has been the monetary system for centuries. It's a change of technology today, but it's not a change of principle.
>> Brad, come in on this because you're the innovator in the room, but you also believe in regulation.
>> Yeah, I, I think what's going on in the US right now, uh, is a classic dynamic of when you create new law, uh, it's never going to be perfect. And, you know, I think what's, you know, the dynamic within the industry and working with, uh, Congress has been kind of, I subscribe to the idea that perfection is the enemy of good. And you can't get to perfection. And so, uh, I think Brian's exactly right. We are, we we're as close as we've ever been in providing that clarity. As some in the room probably know, uh, Ripple lived through a five-year battle with the US government being sued because of the lack of clarity. Uh, so we are very much an advocate of clarity is better than chaos. Uh, so I, again, I think Brian's right, we are very close. Uh, I don't know if we reward side, rewards, dividends, interest. Is it necessary on stable coins?
You know, I mean, Ripple doesn't have as much of a dog in that fight as others in the industry. Uh, and so we, you know, there's others that have stronger opinions. It doesn't directly affect Ripple's business as much. I, I agree in some ways that like, look, competition is good, and I agree very much the idea of a level playing field. Now, I also think a level playing field goes two ways, and that crypto companies should be held to standards that banks are, and banks should be held to standards that crypto companies are in order to compete. So, I don't think that's a one-way street that somehow team crypto gets to have, you know, a certain pass in some way.
>> Bill, let's hear from the banker in the room. There's pragmatism. You know, money goes where there are returns and where there's the best option. Your bank also operating big corridors across Asia, as we talk about digital yuan as well as in Europe. So how do you see this playing out? Do do any of these tokens need to have some sort of an interest-bearing element?
>> I, I think [clears throat] if I can be very simplistic about it, I think tokens are going to be used for two things. They'll be used as a medium of exchange. No particular need to to bear interest for a medium of exchange because they'll be instantly transmitted. Uh, and they'll be used as a store of value. And as a store of value, they're much less interesting if they don't, if they don't carry a yield. But there will be tokens, uh, that are called stable coins. There will be tokens that are called tokenized bank deposits, which will probably bear yield. And there will be tokens that are called tokenized money market funds, which will definitely bear yield. That's the whole point. Uh, right now, stable coins are big and liquid, super. Uh, the CBDCs don't exist yet in in in a commercial scale. Maybe they will. I hope they will in in in the right form. And tokenized money market funds, of which we've issued in currencies like Hong Kong dollars, uh, or eventually will be, it'll be, uh, CNH Chinese currency, uh, will exist and they will be useful as a store of value. And like, I mean, our research estimates, everybody's got their own numbers, and maybe we'll get to $3 trillion of outstanding stock of stable coins in the next three or four years. The bulk of that is going to be in developing economies where there's lack of confidence in the local currency. And stable coins of whatever form, could be Bitcoin, will be used as a store of value. Bitcoin is quite volatile, that everybody knows that. The US dollar is the US dollar. You like it, you don't like it, but you know what it is. So that money is going into stable coins today. It may go into tokenized money market funds in the future if they're available and if they're bearing yield. Frankly, we don't care as a bank. We don't care. We want our customers to get the best thing for them. So if it's, if it's the medium of exchange, we want to provide them with the entry point and the exit point. And we do that today. They like us for it, and we'll keep on doing that. When it comes to store of value, especially in emerging markets, got to be compliant, right? I mean, there's probably a black market transaction someplace that gets that local currency out of the local currency into US dollars. Sometimes it's legit, sometimes it's not. That's always been an issue. And as a bank, we're a policeman. That that's our job is to is to try to prevent that. Unfortunately, banks don't prevent most financial crime. But.
>> Valerie, come in on this because we've spent all week talking about European competitiveness and if we are talking about different regulation, different approaches here. Is Europe going to be left behind?
>> I'm an optimistic person and I'm a European. So I, I well, I don't think that Europe will will be left aside, but Europe has to to accelerate. I think it's, and I think 25 has been a year where everybody realized that there is a need indeed for fair competition, for a level playing field, but also for acceleration in in innovation. And, uh, I think there is a willingness in Europe to do so. And, uh, again, in my field, which is securities business, um, well, Euroclear has as a global footprint. We have been pioneering on the issuance of digital assets about four years ago. Um, we start also seeing the value of tokenization for probably collateral management because one of the, um, I think the thing that we are really adding to the financial markets is liquidity. And if you can start, you know, increasing the liquidity, the the movement of the collateral management different through different, um, pools of liquidity, that will also again benefit, uh, the, I mean, the whole capital markets. So to to your point, no, I think Europe has to indeed innovate faster, but at the same time, I think there are a number of banks, there are a number of financial market infrastructure, there are a number of players who are definitely willing to be part of that game, and we will be at the wrong.
>> Quick one, Brian, before we open up to the audience. Is there a geopolitical element here? We've got so many stable coins backed by US dollars. You've got the yuan moving at pace as well. The reality of the future if there's more transactions in both of these currencies bypassing other elements. Does that have consequences for the relevance of say the euro and other currencies?
>> I do think that, uh, they're in global competition, absolutely. China, US, Europe, going down the list, Japan. I mean, in some ways, Europe is ahead of the US because they passed MiCA legislation. So they have comprehensive crypto legislation, while the US only has about half of it right done right now with the stable coin act. Um, and we're now working on market structure. So, Europe is ahead, but the vast majority of stable coins are actually US dollar-backed still. And so, uh, you know, when I meet with leaders in the in the Europe, I, I basically encourage them to move faster, allow some of these things like, uh, rewards on stable coins, which is different than interest and yield. Um, that would allow them to be globally competitive. So, I do think Europe, uh, I'd like to see them move faster on European stable coins.
>> Governor,
>> No, I think on this question of sovereignty and geopolitical balance, first, we are all from advanced economies. And this is perhaps missing in the panel because this development of tokenization, you mentioned it, Bill, is probably an increasing challenge for some developing countries or emerging economies because it could mean a full dollarization. Let let me put it this way. On the other side, it will bring serious economies, cost savings on the cross-border business, and this is a huge benefit, I hope, for the developing world. But here, obviously, the worry about tokenization is bigger in the South, to put it up. And we had discussion in the G20 by some very important emerging countries, emerging powers saying we should forbid cryptos, which I think it's not, it's not a good solution. We would lose innovation. But be be aware, there is there is this issue. If I may add, uh, two other points, uh, on your point, Brian, I agree that tokenization is probably an accelerator of the diversification of the monetary system and diversification of currencies. At present, most stable coins are in dollar for a very simple reason. It's linked to the main use case, which is crypto exchanges. But if we come to financial transactions and still more to economic transaction, your prediction, Bill, I would be ready to to bet for for 28 for financial transaction, not less for for economic, but we'll see. But if we move to these other use cases, we will have this diversification. And here infrastructures will matter much. I agree with Valerie. This APIA project I mentioned is ready to ID to build an integrated infrastructure in the European market. It will accelerate Capital Market Union.
>> Now I'm going to take some questions from the floor. So if you do have a question, just put your hand up and we're going to bring a microphone down to. Just in the meantime, to our online audience, remember you can get involved #WF26. Uh, I think we've got a microphone here in the front. If you want to pitch a question directly to anyone on the panel, please feel free. Yes. Oh, stand up. Okay. So, hello. Thank you very much. Fantastic panel. My name is Fernando, the chief economist of a big Brazilian bank. So, my point is, uh, what do you think would happen with credit leverage, with, um, duration transformation and monetary policy in a world where stable coins win the game? Let's say this way. Just would love to hear your views. Thank you.
>> Governor.
>> Very simple question. You come from a Brazilian bank. You said Brazil is a very interesting example where, as you are aware, at present, the Brazilian Central Bank developed a fast payment system which is probably the most efficient worldwide with Pix. And there is now the idea of extending this infrastructure also to a kind of CBDC with Drex. So if stables only win the game, this would mean it's an extreme case that money would be completely privatized. I wouldn't be completely reassured, to use a euphemism. We had in the past, again, technology only doesn't change the philosophy. Uh, we had example in the past where money was completely private without a serious central bank take. What existed in the US in the 19th century, under your control, and there was no real Fed or, uh, or, uh, central bank, and there were many crises of confidence. So I don't say at all that central bank currency will be dominant, will have a significant market share, but it's an anchor of confidence. And it's why I insist so much on complementarity. I think it's the interest of stable coins to be fully equivalent at par, one to one, without fees, to a central bank currency.
>> Brian, coming quickly so we can take another question too.
>> Yeah, I would just say in a world where stable coins grow to that extent, um, you know, I wouldn't say that they're entirely private money. I mean, in the US, at least under the Genesis Act, um, all the stable coin reserves have to be held in short-term US treasuries. So, they're really backed by US treasuries, u but the privately issued, the token. And then I think what will happen is you, you, you mentioned like the transformation or maturation comment. I think that, um, in that world, you're going to have companies that are just have a 100% reserve of people's money held in US treasuries. There's not going to be a concept of fractional reserve if they don't want to get licensed as a bank, right? And so what does that mean? It means people can earn rewards on those stable coin balances, but if they want to earn a higher return, the customer can opt in to lending out their money. Um, and the lend, you know, that'll have to pay a higher rate than what they could get in short-term US treasuries. So it, it actually flips the banking model a little bit on its head.
>> Right, another question here.
>> Yeah. Uh, I'm Eric. I, uh, I'm the founder of, uh, the largest payments company in Latin America that's not non-bank. Uh, I see a lot of countries in the global south that don't have, uh, don't control their own currency. Um, why haven't they been on chain already? Like, and what do you think needs to happen to move their whole payment infrastructure, uh, to the blockchain and perhaps to have stable coin, uh, replace like the dollars they use locally?
>> Who wants to take that one? [clears throat]
>> They haven't because of the sovereignty concern. And most developing economies are still not all, obviously, there's some examples of countries that have gone entirely digital and they've given up the sovereignty of their currency. Others have accepted dollarization and they've given up the sovereignty of the currency. Most are resisting that for for the reasons that that the governor mentioned at the outset. Uh, so then it just happens through the back door. Uh, and you end up with a de facto dollarized system. As Standard Chartered, we operate in many de facto dollarized economies. They work. It's not bad at all, actually. But the government has an extremely important lever of of power. Uh, these are not typically democracies, although they may be in some cases, but the government loses a lever of power to control the destiny of of their people, which typically isn't popular with the people. So, but, but if it doesn't happen through the front door, it happens through the back door. But the better outcome by far is to have a legitimate monetary regime in the first place that's managed by a legitimate central bank. And obviously, many countries in the world have achieved that, not least the European Central Bank. So let's be serious. I mean, like how many countries have hit their inflation target, uh, you know, consistently over a period of time? I mean, we're struggling with that right now. So anyway, but you guys are our experts and and you're dealing with.
>> Can I only add on a positive note? I completely agree with what Bill just said that many of these emerging, uh, countries and still more developing economies are very innovative and fast payment systems. So they are more on the infrastructure side than the currency side itself. But I am impressed by the fact that advanced economies are not the most innovative in fast payment systems.
>> And Pix is not the only example. Take UPI in India. Take South Africa. There are very interesting things happening on the payment systems.
>> Right. I want to push on to an issue that impacts Western markets, developed markets, emerging markets. If we have more fractional ownership, does that drive speculation? Because we've seen it in many areas where there's fractional ownership. You've seen it in the retail investor getting involved in many places. You actually have an escalation of that asset class. You think about single homes, and there was an announcement recently from the president trying to keep out institutional ownership. And if you put that together, was that a preemptive strike ahead of some of the changes that are coming in tokenization? Brad, do you want to touch on that? Does it does it provoke more speculation in asset classes? And where does it leave the average owner?
>> Well, you're you're choosing the word speculation. I, I subscribe to Brian Armstrong's comment earlier of like opening up investment access and investment versus speculation. I, I put it in kind of two different buckets. They both have a purpose. They both, uh, have active market participants. But I, I think the opportunity around tokenization for certain, uh, verticals is in fact the democratization of access to investment, less so on the speculation side. Uh, I, I don't know enough about, uh, you know, Trump's decision to, you know, make steps towards banning institutional investment and residential real estate to comment there. I do think if, if you want expo e economic exposure, investment exposure to a commercial building in Miami and you have, you know, $10,000 US, you can't do that today. And I think opening that up, and I know Brian's example is even better because it's the many billions of adults who don't have any access, uh, that, you know, my example is not perfect for that, but the point.
>> Look, I investments or speculation, two sides of the same coin versus transparency, right? So when you have in a fractionalized world, you'd have much more transparency. Transparency is typically good for systemic stability in the long run. Although it can lead to bubbles or or bouts of short selling that that induce volatility. On balance, I think where we've had nasty financial crisis, they've been when they've been problems that some in the market have seen but couldn't act on and couldn't normalize that. So I, I would always vote for transparency, fractionalization to lead to transparency.
>> Governor, 10 seconds.
>> No, just to say that yes, to increase access to investment, as you said, but it must go along with increased awareness of risk. And this is the question of advice by the financial industry to the customers and financial literacy. So it should go together. If not, it could be a catastrophe at the end.
>> Valerie,
>> I completely agree. I think it's two sides of the same coin. I think it's al according to the risk profile of the people, but access doesn't mean speculation necessarily. I'll take a different take, which is, um, I think the top 10 fiat currencies of the world will have enough trust to persist. And the next hundred should either get dollarized or replaced by Bitcoin.
>> And on that note, we are right at time. Thank you so much.
>> We are definitely missing a developing country.
>> Thank you so much to our terrific panelists. We do appreciate you weighing in. I think we've all learned a lot about tokenization. So we do appreciate it. Remember to get involved. #WF26. Although I'm not sure if we're still hashtagging anymore. Brad, are we still hashtagging?
>> We're still hashtagging.
>> Okay, we're still hashtagging. Thank you so much for joining us. [applause]