At the start of this new year, we asked some of our clients and colleagues for their predictions for 2023. This is what they said.
Not surprisingly, given TRG’s specialised financial and digital assets focus, there is a degree of consensus and consistency in our collective forecasts for the new year, particularly around continuing (and increasing) convergence of traditional, decentralised and centralised finance services and solutions.
Digital asset convergence and the adoption of Distributed Ledger Technology (DLT) within TradFi weren’t the only common themes; continued cloud adoption, ESG and sustainability, technology innovation and GRC (governance, risk, compliance) in financial markets and services were also common threads and themes for 2023. Read on for the individual responses.
Drew Forman, Head of Cowen Digital and Eric Rose, Head of Execution, Cowen Digital
- In response to recent market developments, in 2023 we are likely to see greater separation of duties between digital asset trading venues and custody functions. Institutional investors will be more cautious in choosing partners and will gravitate to firms with trusted, familiar brands. Despite the current bear market, building out of digital asset and blockchain infrastructure at buy side firms is not likely to slow down.
- Tokenization will accelerate, particularly for real-world assets, unlocking tremendous amounts of value that are currently locked in illiquid structures. Bringing real estate and infrastructure assets on-chain will create significant efficiencies in pricing and liquidity.
- GameFi will continue to grow and we are likely to see breakthroughs in blockchain based gaming in the next few years, with the greatest potential gains for platforms that can offer seamless switching between in-game rewards and tradable assets.
Sean Kiernan – CEO, Greengage
- Creative destruction: Crypto is never boring, and some big industry names are at risk. The Web3 story, including metaverse opportunities and NFTs, will lead to many promising new companies entering the fold of larger market participants, as others fall away.
- CBDCs: In 2023 we should expect to see the launch of more concrete proposals to bring forward CBDCs (particularly wholesale digital currencies).
- Consolidation: Firms in operation today will be focused on revenue generation and building out solutions towards profitability (wherever possible).
Hirander Misra, Chairman and CEO, GMEX Group
- Given recent events, more so than ever there will be a flight to quality for institutional digital assets activity enabled by credible regulations. This will lay strong foundations for the sector with increasing decoupling of activities such as market making, which do not belong within an exchange.
- Increasing interoperability between off-chain traditional finance (TradFi), centralized finance (CeFi) and on-chain decentralized finance (DeFi). This will enable more seamless activity between these different constructs with a ‘network of networks’ collaborative approach.
Mark Baker, Chief Marketing Officer, Infront
- Digital transformation is the red line for financial services in 2023. We’re living in fast-moving and turbulent economic times; leveraging digital technology will be key across all financial markets. Increasingly, firms must deliver more customised customer experiences, and stay compliant.There will be a greater digital focus across Europe, including measures to ensure adequate and diversified access to critical raw materials needed for this continent’s digital and economic resilience.
- With respect to sustainability/ESG, companies will be subject to ever-steeper reporting and transparency requirements that will only be met by big data analysis with digital tools (e.g. AI and ML). Asset and wealth managers will use these same technologies increasingly to create bespoke automated investment strategies for their clients while feeding data into chatbots and virtual assistants.
- Cryptocurrencies will remain one of the most debated products of our time. 2022’s market turmoil will result in the rolling out of tougher regulation for all market participants in 2023, which will go a long way to restore trust in the industry. However, despite the rockiness of the current crypto space, its underlying blockchain technology works, is stable, and will support the development of smart contract capabilities that will play an essential role in the future of Europe’s financial services.
Bob Santella, Chief Executive Officer, IPC Systems
- As we emerge from a 12-month period of volatility across asset classes and markets, it is difficult to make predictions. Broadly speaking, however, the increasingly accelerated pace of digitization will continue to lead innovation and contribute towards the industry’s requirement to stay flexible and agile.
- Financial markets and services industries will continue their relationship with cloud technologies with increasing and ongoing cloud adoption acting as a gateway to “revolution technologies” like big data, enhanced automation techniques, distributed ledger technology, and AI / ML –and the corresponding benefits in terms of digital transformation.
In addition, here are some of our insights for 2023:
- A number of headline grabbing technologies and trends will gain real traction within the trading lifecycle, coming together to realise real benefits for trading firms in terms of TCO efficiencies, new client acquisition and innovation.
- Exchanges will continue to drive deployment of more cloud edge services; the cost of supporting legacy systems will drive more rapid cloud adoption; low and no-code offerings and ‘buy to build’ strategies will drive digital transformation and AI/ML will be prevalent in more real world applications and use cases.
- ESG will continue to be a key priority for financial firms as they respond to the plethora of global regulations and directives, at the same time ensuring they can attract and retain employees, customers and investors with a focus on climate impact and diversity. There will be continuing focus on energy markets, given the wider macro environment, and the need for closer scrutiny of pricing and utilisation.
- While the future of the cryptoasset market is notoriously hard to predict, well-rehearsed problems in centralised finance (CeFi) mean that the pace of traditional finance (TradFi) and decentralised finance (DeFi) convergence will accelerate in 2023 and beyond. Key to this will be a heavy focus on RegTech, and potential alignment of TradFi standards, regulations and consumer protections developed over many years with the innovation and efficiencies offered by distributed ledger and tokenization technologies.
- In the wider blockchain ecosystem, Web3 will continue to grow apace, alongside greater embedding of finance into everyday activity, whether embedded crypto payments via social media or metaverse banking. Investment in Web3 companies and solutions will increase, particularly in the arenas of data management and privacy-enhancing technologies.
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