During today’s CityWeek conference, the major UK asset manager abrdn shared its views on tokenization. Russell Barlow, Global Head of Alternatives, said the key benefits for a fund manager are access to assets that it might not otherwise be able to own or to invest in the same assets but in a cheaper or more liquid form.
Last year abrdn joined the governing council of the Hedera public distributed ledger (DLT). Barlow observed that it uses the “Hashgraph consensus technology to validate. And we’re using that for our operations to allow us to generate internal efficiencies.”
He separately mentioned that one of the general areas being explored is the right way to connect DLT to the current operating infrastructure.
Barlow continued, “We would look to use them (Hedera) as the tokenization provider for the tokenized offerings that we’re putting out. That would be seen as regulated security, so that comes under our current permissions.” He was referring to regulatory permissions. Update: Abrdn has launched a token on Hedera.
Abrdn is also the largest outside investor in the regulated digital asset exchange Archax.
Crypto versus digital securities
The asset manager emphasized the primary interest is in digital securities. These have all of the crypto benefits of on-chain rails, (atomic) settlement and the trading window. However, Barlow quipped that he wasn’t sure asset managers were keen on a 24/7 work environment.
“Where we really see the opportunity is in the broader adoption of digital securities as the next evolution of the market infrastructure,” said Barlow.
An earlier question had asked whether abrdn would consider investing in crypto. He said the asset manager could consider it but would need to have an FCA crypto license. And that only Bitcoin and Ethereum were currently sufficiently liquid. He also added that there was no major demand from clients asking for crypto products nor many requests from clients asking for exposure within the portfolios.
The abrdn executive compared crypto to gold because both are viewed as stores of value. Despite gold being traded for a long time, it’s not in everyone’s portfolio.
But he also emphasized that because demand isn’t there today, it doesn’t mean it won’t come. And he thinks abrdn is likely at some point trade crypto.
Public DLT as a preference
The asset manager pondered the public versus private DLT options. “Personally, a lot of what we’ve seen has been on permissioned blockchains on private networks. That doesn’t feel as though it’s the future. That doesn’t feel like why all of us are here and why we’re interested. It’s really the idea of a much more open source and a broader access,” said Barlow.
