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Business Standard
20-05-2025
- Business
- Business Standard
What role will central banks play when tokenised finance goes mainstream?
With mainstream investment products increasingly finding a second home on the blockchain, it's a good time to ask what role central banks would play if everything they have learned while policing double-entry bookkeeping over the last 350 years becomes irrelevant. The techno-anarchist vision behind cryptocurrencies like Bitcoin was to free the financial wellbeing of individuals from the clutches of large custodial institutions — and the monetary mandarins supervising them. That utopia never materialized, but the embrace of the underlying technology by traditional banks and asset managers has taken off. There's plenty of appetite for it. Now that apps like Robinhood have made investing super easy, Millennials and Gen Z refuse to accept that private banks will hawk unlisted unicorns to their wealthy parents, but not to the actual users of the products and services of these new-age startups. Why should lumpiness of private equity or private credit get in the way of mass access? Democratising finance by fractionalising it was a lofty aspiration even a few years ago; it's becoming a reality now. Just last week, Franklin Templeton launched Singapore's first retail tokenised fund. The product is basically a mirror of an existing money-market instrument. But it will exist in the crypto space, allowing individuals to access it for as little as $20. Alternative assets now have their tokenised versions, too. KKR & Co.'s Health Care Strategic Growth Fund debuted on blockchain three years ago. Money has gone the same way as assets. Tether Holdings Ltd.'s market-leading coin USDT is well known to those who use the 1:1 representation of the dollar to buy crypto. Banks, meanwhile, are jumping into the $200 billion-plus stablecoin market to explore other use cases: Standard Chartered Plc plans to offer a Hong Kong dollar digital clone. Rival HSBC Holdings Plc has tokenised gold. Bank deposits may be up next. This is a new terrain for central banks. Historically, money and securities have been tied to accounts, their movement and ownership recorded according to Italian mathematician Luca Pacioli's 1494 treatise on double-entry bookkeeping. Central banking, which emerged in Sweden 350 years ago, put the monetary authority's ledger at the top of the system, helping to stabilize it. Paper accounts eventually gave way to electronic entries, but the basics of traditional finance remained broadly intact — until now. Unlike central banking, distributed ledgers are a decentralizing force. Using the technology, it's possible to create digital tokens that represent legal claims just like money and securities, but they aren't tied to accounts; they belong to whoever has the cryptographic key. The coins can be programmed using self-executing software code, or 'smart contracts,' removing the need for multiple layers of intermediaries. Want to move some pension savings into a new fund? The back-and-forth of faxes and emails — between asset managers, distributors, fund administrators, trustees, and registrars — gets compressed when all the data needed by the software is on the blockchain. What used to take a week can be done in two days. Selling one currency to buy another in cross-border commerce is instantaneous. But what happens if tokens end up replacing all money and securities? Will central banks still be able to run monetary policy? When manias, panics and crashes hit, can they restore calm by their usual practices — paying interest on bank reserves; temporarily creating or absorbing liquidity; or permanently loosening and tightening financial conditions through outright purchases and sales of securities? The Bank for International Settlements and the New York Federal Reserve's innovation center joined hands to explore just those questions. Theirs was no thought experiment. The researchers put together the central-banking toolkit on the blockchain. The good news is that the prototype works — in both routine situations and periods of stress. That isn't all. Project Pine also took a first stab at exploring if smart contracts could make implementation of monetary policy more nimble, efficient, and effective. They perhaps can, but not if central banks are just another participant in the money market. 'They might also require privileged access to institutional data and higher standards of privacy and security,' the researchers noted in their report last week. In fact, when the central bank performs the functions of an 'oracle,' an outside source whose data is trusted by everyone else in a decentralized network, resources don't have to be wasted on seeking consensus from participants. (For instance, it's just more practical for intermediaries to let the central bank be the sole timekeeper in interest calculations.) Project Pine assumes a scenario where all of today's money and assets have been tokenised. The transition to that stage, if it does ever occur, may be long and messy. In the interim, as the use of tokens increases, demand for bank reserves could become volatile and hard to predict. It will be interesting to see how monetary authorities handle the coexistence of money and tokens.
Bloomberg
08-05-2025
- Business
- Bloomberg
Milken Attendees Show Calm Over Economy in Public, Worry in Private
Attendees of this week's Milken Institute Global Conference heard a lot of upbeat chatter from the stages of the Beverly Hilton hotel, where billionaires and executives frequently took a sanguine tone about the state of markets and the global economy. Treasury Secretary Scott Bessent touted the US as the premier destination for global capital. KKR & Co. co-founder George Roberts told the audience to 'stay calm and carry on.' Ares Management Corp. Chief Executive Officer Mike Arougheti spoke of the 'golden opportunity' of private credit.
Mint
06-05-2025
- Business
- Mint
Milken Crowd Warms Up to Tariffs While Condemning All the Chaos
(Bloomberg) -- Scott Bessent walked on stage at the largest gathering in months of Wall Street's champions of global trade, aiming to explain why President Donald Trump is putting up hurdles to global trade. Fingertips steepled, his eyes panning, the Treasury secretary told a quiet crowd that tariffs, tax cuts and deregulation are 'interlocking parts of an engine' to boost America's clout — emphasizing it's all thoughtfully designed. He soon paused: 'I hope you can see the bigger picture now.' The verdict came swiftly: Investing titans and financial leaders at the Milken Institute Global Conference in Beverly Hills lined up to say they can live with tariffs and a reworking of trade — just get it settled soon. KKR & Co. co-founder Henry Kravis, Citigroup Inc. Chief Executive Officer Jane Fraser and Carlyle Group Inc.'s Harvey Schwartz were among the chorus warning that corporate leaders are rattled and in limbo while waiting to see how trade talks play out. That risks damaging the economy. 'What the administration wants to do is not wrong,' Apollo Global Management Inc. CEO Marc Rowan, once a top contender for Bessent's post atop the Treasury, said in a Bloomberg Television interview at the gathering on Monday, echoing others in nodding to Trump's intent. But the chaos of recent weeks is hurting the US reputation for 'stability, predictability, regularity,' Rowan said. 'I see us moving from what was hyper-exceptionalism to merely exceptional.' At times, the conference offered a split screen of confidence and concern. On one side, Bessent emphasized that the US is in a strong negotiating position, remains the 'premier destination' for international capital and will become an even more appealing environment for 'investors like you.' But many Wall Street leaders painted a vivid picture of C-suite uncertainty. Corporate clients are strengthening their balance sheets, pulling forward inventory and pausing spending or investments in their businesses, Citigroup's Fraser said. Executives are locked in intense talks with bankers and running through scenarios. She expects that to turn into action later this year. Along the way, the global economy may pay a price that 'is not trivial,' International Monetary Fund Managing Director Kristalina Georgieva said. After all, trade imbalances built up for years and are coming to a head in a manner that is difficult to anticipate. 'We are now going from a predictable trade regime to what is going to be a new equilibrium,' she said. 'The way from here to there, very uncertain.' Such uncertainty is creating the potential for a recession — but economic growth may end up stronger, Michael Goosay, chief investment officer for fixed income at Principal Asset Management, said in an interview at Milken. 'If we get through this without a lot of additional friction, we think we are in an environment where you can actually see a reacceleration of growth in the latter part of the year and into 2026,' he said. Several money managers emphasized that long-term capital would advance the government's goals of revitalizing America's industrial base and fund infrastructure to give the US an edge in a global AI arms race. It would also be helpful if the Trump administration, which has said it's deeply engaged in talks with a slew of major trading partners, would announce at least a few deals and give business leaders a sense of what the future holds, according to attendees. That would also make clear 'the US intends to play ball,' Franklin Templeton CEO Jenny Johnson said. 'Stay calm and carry on,' KKR co-founder George Roberts told another audience, borrowing a phrase from the British. Trade deals are going to get done, because they have to be, and the administration is already walking back some of the 'novel ideas' it came up with, he said. While fellow attendees called for a quick resolution, hedge fund manager Bill Ackman pitched a slightly different suggestion for Trump's camp. Last month, the billionaire investor got his way when the president announced a 90-day pause for most reciprocal tariffs to negotiate with countries around the world. 'The way he goes about things, as we've seen from the president, is a bit of shock and awe, which tends to scare people,' Ackman said. 'Ultimately he's a dealmaker. He likes to make deals.' But for the moment, Ackman said, Trump should put tariffs on China on hold for 180 days. --With assistance from Alexandre Rajbhandari, Janet Lorin, Enda Curran, Aaron Weinman, John Gittelsohn, Allison McNeely, Laura Benitez, Simone Foxman and Jason Kelly. More stories like this are available on First Published: 6 May 2025, 06:22 AM IST
Bloomberg
30-04-2025
- Business
- Bloomberg
UK Analytics Firm GlobalData Said to Attract Takeover Interest
GlobalData Plc, the UK research and analytics company controlled by billionaire entrepreneur Mike Danson, is attracting takeover interest from several international private equity firms, people with knowledge of the matter said. The London-listed company has received approaches from suitors including KKR & Co., the people said, asking not to be identified because the information is private.
Bloomberg
29-04-2025
- Business
- Bloomberg
KKR-Backed InCred Is Said to Be in Talks With Advisers on $470 Million IPO
Indian lending firm InCred Financial Services is in talks with potential advisers for an initial public offering to raise about 40 billion rupees ($470 million), people familiar with the matter said. The Mumbai-headquartered company, a partner of KKR & Co., is in discussions with firms including IIFL Securities, Kotak Mahindra Bank Ltd. and Nomura Holdings Inc. about working on an IPO, the people said, asking not to be identified because the information isn't public.
