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This week…

This week is action-packed. I was at the Digital Euro conference, and consultancies are releasing more institution survey results, which show that the direction of finance moving on-chain has already begun.

1. Digital Euro Conference Rundown

2. EY Blockchain Report: Facts and Stats Galore

3. Research Paper: Public Blockchains: Not Just for Crypto Anymore
   

   The wildest finding to me is that enterprises that want to engage with DeFi is set to triple over the next 2 years, from 24% to 75%

Digital Euro Conference

It was a conference featuring zero crypto bros, and I only saw one hoodie the whole day - a very different conference for me, I am am happy about that.

I've distilled the key takeaways that will shape Europe and the wider financial landscape. 

Banks like Rabobank, ABN Amro, and ING are joining forces to launch a platform directly on Ethereum Mainnet.

Although Layer 2 solutions were initially considered, the group eventually prioritized sticking with Ethereum's robust Layer 1, although it could, in the future, move to layer 2.

Meanwhile, Deutsche Bundesbank is pushing ahead with a wholesale Central Bank Digital Currency (wCBDC) project within a permissioned environment, reflecting a cautious yet strategic approach to digital currencies - and a need to remain competitive against the USD.

Interestingly, discussions at the conference highlighted an emerging gap: despite Europe's efforts, there's significantly more global demand for USD-based digital assets than Euro equivalents.

This challenge, alongside ongoing regulatory dynamics like MiCA v2.0 and Basel regulatory updates, is poised to shape the competitive landscape for digital assets in Europe.

Privacy, composability, and compliance—particularly around OFAC and KYC requirements—emerged as key themes.

Institutions increasingly seek compliant yet flexible blockchain solutions, which positions Ethereum as a prime candidate due to its robust ecosystem and compatibility with evolving regulatory standards.

Lastly, the International Capital Markets Association works with major financial organizations to bring standards together.

EY Blockchain Report: Facts and Stats Galore

EY’s latest blockchain report reveals fascinating insights that underscore blockchain’s accelerating journey into mainstream finance. Adoption statistics clearly illustrate a growing enthusiasm for digital assets among enterprises worldwide, signaling a paradigm shift in how financial institutions perceive blockchain technology.

• 86% of institutional investors plan to allocate to digital assets in 2025.

• 85% increased their digital asset allocations in 2024.

• 59% plan to allocate over 5% of their AUM to cryptocurrencies in 2025.

• 73% of institutions hold altcoins beyond BTC and ETH.

• 60% prefer to gain crypto exposure through registered vehicles like ETFs/ETPs.

• 44% categorize crypto as a distinct asset class.

One striking statistic from EY indicates that private-sector stablecoins, predominantly USD-backed, have become crucial in cross-border payments, surpassing $5 trillion in transaction volumes in 2024 alone.

The report also emphasizes the critical importance of regulatory alignment. With new Basel regulations effective since early 2022 and upcoming MiCA regulatory frameworks, enterprises must stay proactive.

EY predicts that companies leveraging blockchain strategically now will reap substantial competitive advantages in terms of efficiency, compliance, and innovation.

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Public Blockchains: Not Just for Crypto Anymore

A recent academic paper explores how public blockchains, particularly Ethereum, can serve as financial market infrastructures, redefining the efficiency and capabilities of existing systems. This research underscores blockchain’s potential in streamlining payments, securities settlement, and asset management.

One of the standout capabilities discussed is blockchain’s "omni-asset" infrastructure, enabling diverse asset types—from stablecoins and traditional currencies to securities and derivatives—to settle atomically on the same blockchain.

The paper also delves into the programmable nature of smart contracts, highlighting innovations like flash loans—uncollateralized, instantaneous loans repaid within a single transaction. Such innovative financial products, impossible within traditional infrastructure, showcase blockchain’s transformative potential.

Moreover, the research tackles the question of disintermediation head-on. While traditional settlement systems rely heavily on intermediaries and delayed net settlements to manage credit and risk, blockchain’s real-time, peer-to-peer capabilities promise reduced risk, lower transaction costs, and greater transparency.

However, the paper acknowledges blockchain’s risks, such as legal uncertainties, governance complexities, technological vulnerabilities, and compliance challenges. Effective risk mitigation strategies, like formal verification of smart contracts and robust regulatory frameworks, are crucial to widespread institutional adoption.

The inherent flexibility of blockchain solutions allows for extensive experimentation, which could spur significant innovation across financial services.

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