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Interoperability in Focus: Key Insights from the BIS Point Zero Forum

At the Point Zero Forum in Zurich, organized in conjunction with the Bank of International Settlements (BIS) from July 1-3, a panel provided an insightful examination into the impact of digital assets on financial services. Industry leaders from JP Morgan, the Monetary Authority of Singapore, Temasek, DTCC, and SIX Digital Exchange participated in the discussion.

The discussion centered on the multifaceted nature of integrating digital assets into the financial services sector. It explored the critical interplay between regulatory progress, investor sentiment, and technological commercialization. The conversation touched on JP Morgan’s ONYX project, the future of stablecoins, and the role of blockchains. The potential for a global, interoperable network that ensures accountability and regulatory compliance to operate seamlessly across borders and jurisdictions, maintaining security and stability, was also highlighted.

The consensus among the panelists was that while there has been significant educational progress, tangible outcomes remain slower than anticipated. This has led to frustration among investors. Sopnendu Mohanty, Chief FinTech Officer, Monetary Authority of Singapore , moderated the panel and opened by emphasizing the successes regulators have had in launching wholesale Central Bank Digital Currencies (CBDCs).

Pradyumna Agrawal, Managing Director, Investment (Blockchain) at Temasek, highlighted the slow pace of realizing the technology’s full potential despite these regulatory advances. “The frustration is that as banks and regulators get more interested, we start seeing more research and more POCs. The investor’s frustration is that real capital needs to deliver results. Can there be faster progress to realize the potential of all these use cases and technology?”

Commercialization Challenges

Umar Farooq, Co-Head of Global Payment Sales, J.P. Morgan & CEO of Onyx by J.P. Morgan, outlined the bank’s journey from early experiments with blockchain technology. This was driven by the need to create technology that addresses real-world problems with practical, commercially viable solutions. “We started Onyx five years ago. The thought process was that we can do things with this infrastructure that cannot be done in standard financial infrastructure. We really stumbled around for the first few years. We did five or six dozen experiments that told us that, in many cases, the tech was just not fit for purpose, for various reasons.”

Farooq added: “Over the last four to five years, since we created the ONYX business unit and brand, we’ve focused on building real-world, fully productionized infrastructure that actually makes money. So, the key here is it’s actually commercialized. If you cannot commercialize a technology, then you really have to question whether the technology is of any use or is just sort of for fun and for press releases.”

JP Morgan currently has two big efforts. One is on the money side, which started with JPMcoin and has now expanded into things like programmability and synchronized payments with other blockchains. These are live and being used by corporates and financial institutions across the world. On the digital asset side, it is operating probably the biggest regulated money as well as digital assets on a single platform. Here, it can conduct intraday repo and collateralized money market funds for collateral for trading. Recently, it has also done some debt issuances.

Interoperability Between Traditional and Blockchain Systems

David Newns, Head of SIX Digital Exchange, stressed the necessity of enabling interoperability between traditional financial market infrastructure and blockchain systems. This integration is crucial for driving adoption and scaling digital asset issuances. “In the short term, having to be able to interoperate with the existing financial market infrastructure is the initial scaling challenge you have when it comes to encouraging issuances onto the platform. For a long time to come, that interoperability between the traditional financial system and blockchain-based systems is going to be absolutely critical to achieve adoption of the blockchain infrastructure.”

Dr. Johnna Powell, Managing Director, Head of Technology Research and Innovation, Depository Trust and Clearing Corporation (DTCC), shared her perspective. “We absolutely see a future vision where it’s going to be multi-network. There’s not going to be just one network that rules them all. There’s not going to be a network for every single bank. It’s going to be somewhere, probably in the middle. Interoperability is going to be a huge challenge. However, there are so many other challenges, aside from just interoperability. Bridges are highly insecure and vulnerable and a number of other things such as integrating into financial legacy systems.”

Geographic and Jurisdictional Challenges

Few regions enjoy favorable conditions with regulatory frameworks in place comparable to the Swiss ecosystem, which can be seen as a leader where other jurisdictions struggle. David Newns held forward Switzerland’s financial market infrastructure as a competitive advantage, being owned by banks and characterized by a culture of consensus-building that creates a conducive environment for digital asset innovation.

“Of all the developed economies in the world, it’s only in Switzerland that we have production infrastructure transactions being carried out for settlement of securities in wholesale CBDC. So, Switzerland, as a result of all of that heritage around digital assets, has enabled it to get to this point of being at the very forefront of innovation.”

In summary, the panel shared the view that there is a pressing need to establish a global framework that balances accountability with innovation. This framework should provide the necessary governance to support commercial networks while allowing technological advancements to flourish. In parallel, gaining broader acceptance and trust in digital assets requires interoperability across public and private chains. Staying ahead of regulatory and technological developments will be key to harnessing the full potential of digital assets.

Oscar Wendel

Oscar Wendel has been based in Dubai since 2008. Wendel's career includes being Senior Content Manager at the Financial Times in London, Senior Manager of Content & Conferences at Dubai World Trade Centre, and a Director reporting to the CEO of MCH Group in Basel, a publicly listed company most famous for Art Basel. He is a writer and columnist for business journals covering technology, innovation, geopolitics, and culture and has reported from Libya, Afghanistan, and Iraq. In 2023 he announced the Intraplanetary National Anthem at COP28 and co-founded ASTROCOOL with David Chaum, a research project exploring space technologies to shield Earth from the sun.

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