S11:E07 1 Plug, 2 Worlds: Introducing the new integrated digital and traditional CSD

In this special feature episode, our hosts Andrew Keith Walker and Nicholas Bruce are joined by Marco Kessler, Head of Product and Business Development for Digital Assets at SIX. This show is packed with new tech innovations and in-depth discussions about our new FINMA-regulated crypto custody services and digital innovations for SIX clients, providing legal certainty and operational resilience for market participants requiring post-trade and custody services for digital assets and crypto.

Transcript

Welcome And The Crypto Agenda

SPEAKER_03 0:05

And welcome back to the Registr Roundup. Yes, we are back again here in the sunny month of June. Well, it's wet here if you're in the UK, but it's sunny everywhere else since Brexit. Sadly, it's always raining here in the UK. Don't come. That's my advice. Uh, and sorry, Nick will tell you. And welcome back to the show. We are delighted today as well to be hitting on one of my very favorite topics. Yes, we are back in the world of uh blockchain, cryptocurrency, digital payment rails, micar regulated, stable coins, the Clarity Act. Yes, we are fully digital. And joining us for this show, we have our very, very special guest, someone who knows pretty much as much as there is to know about the topic, having worked in the industry pretty much since it kicked off. And that is, of course, Marco Kessler, who is the head of digital assets at six. You probably already know Marco, uh, who'll be coming on the show in just a sec. Uh, but first of all, of course, uh, we have to say hello to my most regular co-host, the most excellent Mr. Nicholas Bruce, the voice of Reason himself, head of new business at uh Register. Nick, welcome. Finally, we got our crypto show.

SPEAKER_01 1:15

I know, I'm excited about it, and um, yeah, it's good to be back as well.

SPEAKER_03 1:18

Okay, and also huge thank you to Marco for joining us. Marco Kessler, welcome to the show.

SPEAKER_00 1:24

Thank you. Hello, hello, Andrew, hello, Nick. Thanks, thanks for having me. It's always a pleasure.

SPEAKER_03 1:29

It's a pleasure to have you. Now, uh, I am going to embarrass you now by uh giving everyone a quick insight into your brilliant CV. I say embarrass you, I think actually it's it's embarrass me because your CV is so much better than mine. But Marco uh is uniquely qualified, really, to be working in this role at 6 SIS because he had 10 years as a management and technology consultant at Accenture, who, let's face it, are one of those firms that all the major infrastructure players rely on to keep them uh up to date and up to the minute with high-tech new developments and changing tech environments. And then Marco moved on to be the head of business design at uh six in the product development, research, and uh RD department. There, he moved on then to be the business head of digital securities and then to be the business head of digital assets, and now moving uh to be the head of digital assets at uh six, and of course, focusing very much on SIS, which is a merger between the digital CSD operations at six and the six digital exchange. Now, this, of course, is a really big deal because uh it's basically uh working off the back that FINMA has decided that uh it's time to bring crypto inside the traditional regulated uh bankruptcy insured uh world of regulated banks

What FINMA Approved And Why

SPEAKER_03 2:55

and infrastructure. And to tell us all about this and the opportunities it provides, we have Marco. So, Marco, I'm gonna stop talking now because I don't know nearly as much about it as you do, and I'm gonna ask you what's the big picture here? There's two distinct approvals. There's the corporate merger of uh SDX into six SIS, and there's the authorization to offer crypto custody through the CSD. What does that mean in total? What is possible now at six? And presumably this makes you something of a leader within our sort of suite of European market players.

SPEAKER_00 3:29

Thank you. Thank you for it. It's a it's a good question, and indeed it is a two-step process. So, and and I realize it's it's maybe it needs a bit of uh deciphering uh uh to really understand. And so I'm happy to explain this here. So let me start from before this approval. So prior to this approval, uh in Switzerland, we had two financial market infrastructures. We had the, let's say, established one, which is, as you mentioned earlier, uh SIS, uh, which is where the full Swiss financial place, but also foreign institutions are connected to since decades and uh and use it as the the the the place of custody and basically uh tap into any post-rate services. And then you had uh SDX, which was a separate infrastructure where uh which which based on uh uh uh blockchain, uh where we uh well we where we pioneered uh regulated digital assets basically in terms of securities, digital securities, or corporate bonds or or or similar assets, uh equities. And you know, so those used to be separate, meaning uh also legally, the different legal entities with different licenses. So that meant for a for a for a financial institution wanting to join uh or to use this digital services, they had to effectuate a separate onboarding, separate contracts, separate, uh separate uh uh processes, basically all uh distinct. Which just worked quite well, to be honest, because we reached a total of about 20 uh financial institutions onboarding on this parallel infrastructure. What we have realized though is that, well, this is not exactly scalable. It's not really uh easy to adopt. I mean, we are uh there are some barriers to enter, you know, for adoption because of the reason of having duplicate uh contracts and duplicate uh onboarding and all of that. And so we realized, hey, why why not, you know, the technology has reached a level of maturity. Uh the experience, we have we have achieved enough experience, collect enough experience to be well beyond what used to be maybe experiments of pilots years ago. We're well beyond that. So now we we came to the point where we can integrate the digital uh asset services and capabilities into the main playground, if you like, and the main FMI, which is SIS, effectively uh giving access, providing access to all customers of SAS, which is in the hundreds, uh uh to access these services seamlessly without needing to do to set up a new uh uh full you know contractual framework or business relationship without needing to do a completely separate onboarding and all of that. So we want to ease the access. Now comes crypto into play because crypto, uh again, back to the previous state, used to be offered from a completely different entity which was not licensed, which was uh self-regulated. It's a concept in Switzerland, which is uh self-regulation, as I said, but it's not a proper license. And we realize soon enough that this is this is not sufficient for institutional grade investment. It just doesn't fly. It's not enough. And therefore, we'll be working, as you mentioned, with Finma together, uh, also as part of this integrative efforts I mentioned just earlier, to at the same time include crypto custody uh as an ancillary service, if you want as an additional ancillary service of the of the main post-trade value chain, basically. And and as we are doing anyway, it is integrative effort to to bring it on board, basically, to uh to then uh uh pack everything under one entity. So the the story about providing the access uh or simplified access to the market, to the existing financial place, uh, we figured uh it would be useful to do this also for crypto customers. And yeah, it is a major milestone. Yes.

Crypto Demand Versus Digital Issuance

SPEAKER_03 7:20

We know that the conversations online, if you read the journalism and you look at Securities Finance Times and all these different publications, everyone is focused on, it seems, digital issuance and digital assets one day, and then the next day everyone's focused on crypto. And, you know, they're not obvious, they're they're adjacent fields, but they're they're very uh different uh sets of applications and strategically they're different from market participants. So which one would you say is receiving the hottest demand? Is it people looking for the digital issuance side of things so they can get CSD-issued digital collateral out there into uh their uh value chain? Or do you think there are an increasing number of market participants who want a safer, more regulated space for their crypto?

SPEAKER_00 8:06

If I take a snapshot of today, I would have to say I'm in the opinion of the latter. So really the the crypto and and in part stable coins also nowadays being being uh at the forefront of adoption right now. Mainly because I think the the the the other topic you mentioned, so basically uh optimizing uh existing pipes or existing assets, if you like. Uh and we come to that, I'm sure, later, about collateral mobility or similar. I think it's still partially in the works, uh, and and probably also because it takes it takes a larger ecosystem to mobilize to support that. So if I had to take a snapshot, I would say still uh more adoption in terms of crypto and and and respect to the stablecoin as well. But I think we are at a shifting point because obviously, I mean, I don't know, I don't have the stats right here, but what you have capitalization of cryptocurrencies around uh four trillions or something like this, I guess. I don't know if that don't don't take it that hard.

SPEAKER_03 9:04

Something like that, isn't it? It's it's I think three three trillion of it was Bitcoin yesterday. Today that's only one and a half or something.

SPEAKER_00 9:11

Exactly. That's important when this goes is published, this podcast. But Lo, um it it's it doesn't matter the actual number. It's clearly uh uh uh several orders of magnitude smaller than when you combine the likes of uh DTC in the US, the European FMIs, six as well, uh, with our presence in Switzerland and Spain. I mean, they're completely different, different numbers, so therefore the capital you can move, the capital you can uh uh uh adopt basically, or you can leverage to adopt digital models, is completely different. So as I said, I would say rather crypto, but I think we are at a shifting uh in a in a shifting uh phase, so to speak.

SPEAKER_01 9:49

Yeah, I've got to admit. I uh for me, um I guess it's exactly that. I mean, the way I look at this, and I'm not uh I'm definitely not an expert on this, so this is Marco's show, it's definitely not gonna be my show. But I think this is is all around um seeing that evolution of the future. You're seeing, you know, becoming the here and now, and what you need on that journey, so that you what you're seeing is maybe the way I look at it, it's just a new asset class that's coming in. You know, I always remember when the days when we talked about alternative asset classes, uh, they're not really that alternative anymore, they're just not equities and fixed income. And I think this is just, you know, the next step in that kind of that evolution as technology takes us to new places and the way we invest changes.

SPEAKER_03 10:40

And does that mean that for you it's just going to be another day at the office, you're just gonna have to incorporate some new regimes, some new schemas, some new fields, but the role of the TR remains the same, or do you see that this could bring in more complex products as market participants find new and interesting ways to leverage their uh digital assets at the CSD?

SPEAKER_01 11:04

Um, yeah, I think from a TR perspective, I don't actually think it's gonna be a fundamental change. I really don't. I think what you'll see is you'll see the industry adoption means that this just gets assimilated into the standards process. That's from the TR perspective. It doesn't mean that the stuff uh you see Marco doing isn't you know trailblazing, and it absolutely is. You know, the stuff that's actually happening when you look at the FMI side is what normalizes it so that people like the TRs, we can just get on and incorporate everything as BAU. And I think I think you know, downstream we're just benefiting from all of this great work that's actually happening or has happened. Because I think for us it's not a news story because we were there right at the beginning.

SPEAKER_00 11:51

I may add, Nick, fully agree. And actually, the one way I define success personally is if the likes of uh uh register, you or or or other users in general, other banks, don't even notice. You know, they can focus on what they get for it on the actual benefit instead of knowing about the piping and uh and that thing. And I think that's very important.

SPEAKER_03 12:11

One of the big things here, and you know, I'm gonna refer specifically actually to the uh six press release, which is talking about

Legal Certainty Through The CSD Model

SPEAKER_03 12:20

providing legal certainty and operational resilience. And that's obviously the thing that everyone wants when it comes to crypto. I mean, we can joke about the volatility and you know the longevity of coins and the the governance of the companies providing them, but from a uh a sort of regulatory and a safety point of view, this is a big step, isn't it? But but where does that legal certainty and operational resilience come from here? Is it in bringing everything within the CSD? Do you have a different kind of model uh and protections built into it that sort of give it that uh safety edge?

SPEAKER_00 12:55

That's a very good question. And I think it's important and and and sometimes maybe it's not known out there because I think, I mean, CSDs and and other like similar intermediaries have been around for for decades that you know it all goes so well that people forget what they're actually doing, which is a good thing and also a bad thing when you when then you need to explain what is it that you're doing, you know. So it's a fun fun fact. But uh I would say all of all of that, and I would say in particular I mean an important disclaimer. I mentioned before, we used to, prior to the integration, we used to offer crypto from a separate entity which is not licensed, but was not was not licensed, but but it was self-regulated. But because we offered it in the umbrella of Cisgroup, I mean you can ensure that you can be sure that that that operating model was very rock solid already before the integration. But okay, let me close that disclaimer. Once we we we bring or once that we have brought now crypto custody under the CSD license, that means automatically that all the controls, all the processes, all the compliance uh um uh requirements, but also all the the legal uh conditions and terms that apply to services offered by a CSD now also apply, I mean, per se, of course, then it are sometimes specificities depending on on services or or asset class, but they also apply to crypto customers. And I think uh from an investment point of view, you you look at an asset not just not just uh in terms of uh uh uh upside potential, uh yield or similar, but you also look in terms of risk, risk classification, understand, okay, uh if I collaborate or or use a certain provider uh or platform, um what are the risks associated in different classes of risk, and that can very well make an investment viable or non-viable. Uh so or selecting an asset uh uh to be a good choice for for investing in or or or not a good choice. And so I would say it's really it's in our DNA, uh uh since well before the digital uh the digital time, so to say, to provide uh completely rock solid uh um and supervised, more importantly, services. So I will I won't bother you or you leave or the listeners about all the all the processes regular recurring, we have to uh uh maintain and perform uh uh to satisfy the requirements both of our customers. They also have obviously strict expectations that we need to demonstrate every time, obviously of the regulator or regulators, actually, in the case of Switzerland and Spain. So all of this is our daily business. And uh it's something which is quite heavy intensive, so that enhance in the essence of what we do, because it's it's also what sets us apart in a way.

SPEAKER_03 15:55

I don't want to be a party pooper here, but I am going to uh just you know turn the lights on to Brighton, say turn the music down, everyone, for a minute, and bring up the the risk side of things here because this is an important year, isn't it?

Private Keys Segregation And Insolvency Risk

SPEAKER_03 16:08

12th of January 2026, uh FinMA issued guidance on the risks associated with the custody of crypto-based assets. And, you know, this is where we have to get in a little bit of the sort of technical nitty-gritty, and that's why I'm glad you're here uh because you've got the technical know-how. FINMA's guidance was very direct, wasn't it? It said that there are failure modes uh that can occur uh in the the world of uh crypto assets, and that's the private key and operational risk, which is everyone's worst nightmare. You you forget how to get your blockchain assets back. Uh the counterparty risk where uh the segregation isn't guaranteed in uh a counterparty uh and uh that can affect uh the insolvency situation uh for a custodian. And um also those issues are multiplied by the fact that crypto could be sitting in a very different jurisdiction uh somewhere around the world. And, you know, I suppose the question is to what extent is the CSD-based model going to address those issues? Or how are you uh addressing these issues of the private sort of operational risk, a counterparty risk, and also this sort of multi-jurisdictional aspect which seems baked into the world of crypto?

SPEAKER_00 17:26

I think it's it's it's a it's a really, as you said, very timely because it's really, really interesting. And let me start with saying that the CST model, the way I see it, is not a reaction to FIMMA's generic guidance because it it predates it, but it actually directly addresses exactly those failure models that FINMA highlighted. And so if you look at briefly, what what is it that they highlighted in that uh in the directive? It is, first of all, private key and operational risk concerns. So, you know, what happens in case of loss, theft, or mismanagement of keys, uh, or when you have non-standardized operational processes in to private keys and operational risks, or uh custody and insolvency risk, you know, if you have weak segregation, how do you resolve a case of insolvency? You know, who gets what? How do you account for it, and so on? Unclear ownership, legal ownership of the actual assets. Uh then the the last part, I think, important cross-border regulatory risk, you know, in case of assets held abroad, or having custodians which are outside of equivalent supervision, uh, not having clear uh ways to enforce legal uh legal rights uh in case of bankruptcy. I mean, these are these are understandably exactly the kind of things that uh a regulator like Fedma uh puts a finger on because that's really, really, really important, really key. Now interestingly, uh the CSD model is a model that exactly uh maps into those needs naturally, I would say, by nature. So so we are not in a way um uh uh we we we were not uh created uh uh um so so you know we we were not created uh uh following that directive, uh but because of that directive we have a very strong uh match basically with those requirements. So for example, in everything we do, as I said before, it's not just about crypto or just about other digital assets. We do have an institutionalized custody processes in place that now integrate also or extend to crypto as well, with you know, control, governance, and access, uh a clearly standardized operating model which has been established since since decades, as I said. Uh we we have of course the asset segregation rules, uh which is as I said embedded, embedded in the core business in a way. So in a way it's it's it's it it's it's as if uh the integration really uh helps uh um helps resolve all those uncertainties that may arise when when looking at uh you know if somebody reads that uh directive stuff we may start to think, wait a second, what am I getting into? If uh you know is it is it so risky and so problematic to to access this kind of asset classes? And you know, uh an entity such as an FMI, and we are not the only ones, of course, but for sure I can speak for six rupees, has been built to tackle exactly those aspects.

ECB Collateral Signals A Tipping Point

SPEAKER_03 20:32

The ECB uh obviously also released big news in January and said that they they would, for the first time, be accepting CSD-issue digital assets in uh post-trade as as collateral uh in um uh securities transactions. So I want to ask you, everything seems to be lining up a little bit here. Do you think that we're hitting a sort of tipping point in the digitalization of the securities world?

SPEAKER_00 21:00

I I think so in a way, and I think it's it's one fomenting the other in a way, because you have different different arenas, I would say. Or I don't know if that's the right uh analogy, but anyway, I'll use it. You have the one uh which is obviously uh geographical, geopolitical, between, you know, competitiveness, you know, of different financial places across the world. Uh and uh and you know, uh there it's uh it's like a it's like a five, no. I mean, once it starts, it spreads, you know. I mean it can spread in that sense. But you also have uh uh an interaction between different forms of assets, or for it you see that very well in different forms of monies, for example, you know, between stable coins, the tokenized deposits, uh central bank stock currency, and and even the rest, you know. Uh so so this I think it's uh it's a bit um uh uh self self uh uh uh igniting and and and you know self uh uh propelling. Forward in a way. And indeed, I would say you you I mean, I wouldn't say that there are direct dependencies and connections between all those uh developments, definitely not. Uh, but for sure, uh, I think you you start to see uh concerted effort in the sense of uh of moving forward both at the public sector side and the private sector side.

SPEAKER_03 22:21

Okay, and Nick, I'm coming back to you here because you know a thing or two about tipping points in the world of securities. You were in custody uh back when uh the financial crisis changed the world. You were working uh obviously in the Middle East. Uh uh I'm gonna say I can't say who it was for, but other banks are available. You you were working uh in the Middle East, uh setting up the very first wave of big international securities uh lending projects out there back in the uh 2010s. You've seen uh these waves come through before. Is this what you're expecting to come, a big digital wave? And if so, what would your advice be to market participants? To how do they get their house in order to start leveraging these digitally issued digital assets held in a CSD and connecting up with crypto and all of that? There must be some good management advice uh you can pass their way.

How Firms Prepare For The Wave

SPEAKER_01 23:20

Okay, so where do how do I start breaking that one down? Um, first of all, I better say to anyone who actually knows me, I wasn't building the securities lending infrastructure across the Middle East or anything like that, just before um some of my old colleagues um start going, hey, you're taking all the credit for our work. Um but yeah, I absolutely was working um primarily in the Middle East, also with a lot of large sovereign investors globally um in and around securities lending prior to and then obviously through the financial crisis. And now that it's it's a strange one, isn't it? Um, in that when I look at this this evolution, I go back to what I say earlier, I think this is just the fact of uh this is where we're starting to, when I look at it, we're starting to look at technology and look at maybe some of the problems that we've had historically and the limitations that we've had from a technology front. And we're actually now able to cure that by putting digital wrappers around it. And I think that's an exciting time. And advice to people in the market, I think we're we're past that now. It gets back to what I said earlier. I think actually the markets looking at this as a an area that's fast becoming more mature, it's an area that they're already comfortable with, um, and they're investing in. I think what they they need to look at though, and again, it comes back to that question of surety, it's there are going to be certain jurisdictions which are stronger because of the control framework and the regulatory framework that's governing it. Um and they're gonna want, you know, they're gonna need to look at the I guess the jurisdictions that they feel have evolved and are mature enough that now this just represents, as I said, um earlier, just another asset class, another kind of another investment opportunity and something that they feel secure enough to invest in. And I think that's it's more to the point, it's looking at that evolution, it's jumping on in the in the markets, the jurisdictions where they feel that that maturity is already there. Um and I think that's going to be key. And good regulatory environment is critical to that.

SPEAKER_03 25:31

Well, I I want to also get your sort of view of the the the sort of the competition here between the the European sort

MiCA Stablecoins And The Clarity Act

SPEAKER_03 25:40

of block with the the Mika uh stable coin developments and then the US sort of block where it's much more reliant on private sector coins. What's the word out there on the conference circuit? Are people looking at this situation and thinking actually the EU and now Switzerland seems to be ahead when it comes to developing stable coins and digital payment rails and digital post trade compared to the US, who of course we always consider to be the leader when it comes to sort of digital and crypto uh finance developments.

SPEAKER_00 26:16

It's uh it's uh it's a it's a compass question, and uh, I hope I'm not entering into any hot uh hot uh topics here because it's uh well let me let me share my personal view and what I hear and observe. And I would say if you look at especially on the crypto and uh crypto asset stablecoin side, I would say regulation and so on, Europe and Switzerland are ahead, yes, on regulation, but not yet on scale. I would say it's a mixed back in that sense. And I think, well, i Europe and Switzerland have been maybe more consistent in the past in terms of uh regulatory framework, you know, same activity, same regulation, independent of technical details or similar, or at least at least that being a guided principle, whereas in the US, maybe historically it's been more fragmented, you know, between different uh institutions and states and similar. And hence now the Clarity Act, I think, bring a lot of value towards that. Uh but at the same time, I mean, capital formation clearly, uh I mean, it's uh still led in the by the US, of course, and product scaling likewise. So does it create an opportunity? Uh maybe. I mean, does it create a European business opportunity? Yes, maybe, but I mean it's it's it has a level of time-bound, time-boundness basically, and uh and uh requires execution in that sense. So, you know, to to to establish oneself as an institutional great crypto provider in in that examples. Uh so to capture that opportunity when institutions may may transfer away from an indirect exposure to more direct exposure. Uh and again, it's not just about Bitcoin, you know, it's also about uh programmable assets, you know, that allow you to to do different business models than just buy and hold and sell and you know, this kind of this kind of uh uh uh transaction specifically.

SPEAKER_03 28:14

And and Nick, do you I mean what about you? You you go to uh a lot of major events, both here obviously and in the US. You've spoken at most of them, actually. I think we'll be coming to that in another episode. And and I'm interested, do you get the impression that market participants are sort of looking at the EU and the sort of regulated stablecoin developments here, and then looking at the US and thinking about okay, one of these is going to land, or are they both just different tools with different risk profiles for different kinds of operation? I mean, what what's what's the the market participant view of stable coins right now?

SPEAKER_01 28:50

Uh yeah, no, it's it's a really interesting one, and uh I think for me, if I was to put it down, I think it's the one word I would say is fear. And what do I mean by fear? I think whenever you've looked at you know all the various different types of assets that we're talking about under digital, the first fear is it's that kind of the lack of understanding. So how can you assess the risks? Then that actually then moves to the fear of missing out because you then get to a point where you then start looking at it and saying, actually, if I'm not invested in it, am I missing out on returns because everybody else is there? So I think we're just seeing that shift. Is there something fundamental in the way that firms look at the US? And the US is obviously playing a very, very different card regulation, you know, from a regulation perspective to what we're seeing across Europe. I don't know if there is. Um, I'd be honest with you, I'm probably not close enough to say. I actually think now what I hear when I'm speaking to investors um at a very high level is they're they're kind of into that second box now where it's more about that fear of missing out and knowing that they need to be there and looking at how they execute at it, um, you know, their strategy, I should say, if they haven't already. Um I I don't think there's a you know, people look at the US as any more risky as they do Europe, if I'm being completely honest.

SPEAKER_03 30:14

So, okay, that's the guesswork part of the show over. Now we can focus in. No, because it is, it's let's face it, we've been uh, I mean, Nick and I, Marco, have been making predictions when John was here as well, uh, John Kernan, who we have a little uh a little drop-in from John at the end of the show, by the way. I'll be delighted to say he finally sent us uh uh a little WhatsApp uh voicemail from his um from his new uh base of operations in Bogota. Uh we'll we'll come to that later. Uh he's joined the uh six so he's joined the Register brass band there, if you remember them uh from back in the day. I'm sure we can get our crypto sting back. I'll go to the sound effects library.

Collateral Mobility And Programmable Assets

SPEAKER_03 30:52

Um so one of the really sort of you know interesting things here is what these developments can provide for market participants when it comes to collateral fragmentation and collateral mobility and the ability to execute across time zones at all different sort of uh times, the ability as well, of course, to automate aspects of the regulation. And as you've already said, Marco, to to actually have programmable events and smart contracts taking place. I mean, this really is, if you're a bit of a tech nerd like me, this is a real candy shop of possibilities. So custody is the foundation here, Marco, but it's what sits on top of that now. What is the potential? What are the sort of the huge benefits that going digital can bring? It's not just digital for the sake of it, is there? There are some really key opportunities here to reduce costs, to reduce friction, to increase settlement discipline. I mean, what's the really big opportunity here?

SPEAKER_00 31:54

Absolutely, absolutely. No, it's and I think this goes a bit also at the core of what we see as also, you know, a value proposition of why we are doing this, you know, to begin with. Because as you said, I mean, digital for the sake of digital, I mean, it's nice, it's beautiful and shiny, but that's not the point. I mean, it's not the point, maybe as a hobby personally, but not not out of work. And um I think you're right. I mean, if you look at custody, I mean, uh let's take, for example, crypto custody. I mean, that in isolation, I mean, I find it personally good because for the simple reason that eventually this will become a commodity, and therefore having a uh uh an institutional grade provider which can leverage economies of scale will, I think, make a lot of sense to provide such service uh efficiently to the market, which is, by the way, nothing new. Uh, it's part of what uh institutions like FMIs do any day. So that's yes, it's good for that. But in isolation, eh, it's a bit, yeah, it's a bit limited. I think where the real proposition of this whole story goes is when you can start to embed these type of assets, like Nick said before, it's just another asset class, and I agree. When you can start to embed it along the value chain, and when you can start to make the value chain a bit smarter, you know? Uh so for example, and and obviously it is now I picked crypto as an example, but any other digital asset could be a digital bond or a digital equity or whatever, equally, you know, when you have that uh tokenized and supported across the value chain, that's when you can do good stuff. Like uh you mentioned uh usage as collateral, uh optimization of collateral for treasuries, for example, out there. You know, if you can start to pool better together your assets, different asset types in a single collateral pool and reuse this collateral as a basket, as a pool without fragmentation, I mean, that's bound to simplify the life of quite some people and open some opportunities. Uh likewise, you know, if you in in terms of margining activity for OTC or derivatives, list the derivatives, I mean, uh if if you're looking at alternatives to straight cash to post as uh uh uh as collateral, and if you can use again, going back to that pool that I mentioned before of digital assets, which who knows, may include crypto one day as well, I mean that avoids uh um uh uh avoids the possibility that they need to liquidate your underlying holdings to come to the cash. So instead of having the very complex process of liquidating your crypto and losing your upside potential uh uh right there because you need uh to post the call to post cash as collateral, you can post directly crypto and retain that crypto once you release it, you know? This kind of thing. I mean, it's just very practical to be honest, but it's very tangible. Uh it goes without saying you hear a lot, I mean, you just need to open any newspaper or online paper, uh, a lot of move uh activity around uh repos and securities financing, you know, allowing for near s near-instant settlement and collateral mobility, 24-7 collateral mobility, allowing to sweat your assets more than before, basically. And I mean, I always say I don't think this is something that can only be done with uh with uh uh or could never be done in the past, but I think with this technology, uh you can really open the gate to have an efficient way to realize this kind of models that maybe was not that before, or systems were not built for that before.

SPEAKER_03 35:19

I mean, it's interesting, isn't it, Nick? We we talk a lot and we hear a lot of talk as well in the industry about AI replacing people, but we haven't even got close to AI yet. And yet the the the efficiency savings and the cost savings of having all these different classes of asset and different kinds from you know real assets to digital assets all together in one CSD, that is going to reduce the need to have as many people working on keeping your collateral flowing and managed and looked after, isn't it?

SPEAKER_01 35:51

Yeah, I'm I'm listening to this, I must admit, and there's there's part of me that's just thinking, wow, can you remember, you know, uh how it used to be and just how dated that it seems like, you know, I when I started out, I was in the Stone Age. You know, some of the efficiencies that this drives, you know, it just allows you to optimize as well so easily, your collateral, etc. It's yeah, it it's amazing. And as you said, we're not we're not talking about AI here. Um I think what we're just talking about is just how technology is a you know is a facilitator to drive, you know, to drive efficiencies. Um it's yeah, it I I I must admit, I I'm listening to I'm listening to this and thinking, oh my god, I don't know, I'm stuck in a TR. I'm in the I'm in the wrong side of the business. I did I I need to um drop a quick email to Rafa. Um for those who don't know, Rafa runs our security services business.

SPEAKER_03 36:53

I I was gonna say, I mean, from the TR perspective though, I mean, obviously you're you're downstream and there's only so much you can do because you're regulated, you can't help clients change their data, improve their data quality, and that sort of stuff. You just feed them back reports that they have to use to do that. But I I'm guessing as well, this uh there are some benefits that will come to you from uh receiving reports that are coming through from you know different kinds of asset that might be involved in a transaction, but they're all held in the same CSD, and so the data is going to be uh more likely to be harmonized across them and all that sort of stuff. So hopefully, will it make your life easier?

SPEAKER_01 37:31

Yeah, I mean, if you think about it, anything that makes it easier for market participants downstream will make it easier for the trade repositories. What it will do is, you know, ultimately it's going to simplify the reporting. If you're simplifying the reporting, then it makes it easier for things like, you know, your match and your reconciliations, which equally for participants, it's reducing a cost burden on them, I think, overall. Um, and for the TRs, it should simplify those processes again. Um, so I just think it's a win-win when you look at it, the way it's evolving.

Adoption Speed And The Next 12 Months

SPEAKER_03 38:04

Where do you expect the market to move? Do you think that everyone is going to seamlessly adopt this? Because Nick, you and I both know that there are still people out there who use Excel spreadsheets uh somewhere in the office. It hasn't all migrated to the golden source that we talked about those years ago with Alexander Beck's. Uh, you know, there isn't a golden lake of data in the sky yet. It seems that there can be a it's like turning a tanker, isn't it, this industry. So what what do you think? What do you think adoption is gonna look like a year down the line, given your experience of working in this space?

SPEAKER_01 38:38

I'll be honest with you. I am it's so hard. I tell you why this is so hard when I sort of discuss this. One, I always put my disclaimer out, I am definitely not the expert. The other thing is, I can remember sitting in conferences 10 years ago um and having speakers from the big global banks, and we were talking digital currency then. And you know, we're 10 years down you know, down the road, and we're still talking about digital currency, we're still talking about you know, political governments, we're talking about whether they're going digital, they're move to digital, etc. So if you'd have asked me 10 years ago, I actually would have said take up would have happened by now. Um and I'm actually surprised that it's been as slow as it has. And I think now we're at that point where it's gaining momentum and it's growing. And I think that that speed and the inevitability of it, um, we're at that point. So I think we're we're gonna we're seeing and we're we're gonna just see that gather speed, that take up. I mean that that's kind of the feel that I get. Um, although I again I put my disclaimer out there, sitting in the TR world, I'm not as close to this now as I maybe used to be once.

SPEAKER_03 39:58

Well, I'm gonna then hand the last question over to you, Marco, which is the same one, I guess, but you know, a slightly different angle. What do you think a year from now is gonna be the big hot issue on your desk? What's gonna be top of your agenda a year down from integrating into six SIS?

SPEAKER_00 40:18

By the way, my computer just started doing some updates, so I'm a lot looking at one minute from now. But let me let me try to answer mine did that too. I and I don't know if it's a second 12 months or maybe 24 months, I'm not sure. But in for sure, uh on custody, what I would say is that institutional custody will have will will have or will be on a good way to converge around regulated infrastructure. Uh so we but we will still be in a hybrid phase, as I mentioned before, no overnight surprises. So models like we mentioned earlier, CSD-based models uh like ours will be uh uh will be uh recognized as uh standards or reference standards for high quality custody because of the uh of the uh uh of the natural um natural features that uh such institutions bring to the table. Uh particularly where clients need legal certainty, so the higher they go, the more volume you go in institutional, the more legal certainty you need, of course. And uh having said that, I don't think we will see full standardization yet. I mean, uh you will have large banks and specialist custodians continuing to exist, of course, they also have their own solutions. They're also using that to learn and explore and to build on top of it. And that will not uh just disappear overnight, clearly. I think it's natural and normal to have this kind of coexistence. And on the on, you know, what I see in terms of um scope in terms of assets or similar is uh I think it's a bit of a structural split between regulated assets, uh um stable coins, ETFs, uh, tokenized securities uh that are being pulled into the institutional infrastructure, just like mentioned at the beginning without integration, but also large parts of the crypto-native ecosystems like the DeFi and especially permissionless uh protocols that may remain outside of it. Not because of technology or because uh it's not uh they're not good models. It's not because of that. But I would venture saying it's because they don't yet map cleanly into a legal and supervisory framework. And therefore, from an institutional point of view, you just don't know how to take that, so to see. So, in in closing, I would say that to me the direction is clear. Institutions won't bring the entire crypto ecosystem into their world, but they will bring those parts that can behave like financial instruments to scale in that sense.

SPEAKER_03 42:39

I'm just gonna say now, we've all had alerts come up on our computers saying the computers have to update because our conversation is so cutting edge the computers can't keep up with that. No. They can't keep up with that that's that's what you

Wrap Up LinkedIn Invite And John

SPEAKER_03 42:53

get. You heard it here first on the Red Strand up. Okay, that's it. We are out of time. Sadly, I guess all that remains is us to say a very quick thank you and uh goodbye to uh our very special guest this week, Marco Kessler, head of digital assets at Six and leading the new Six SIS project, the merger of the digital CSD and the crypto custody services together into one seamless, integrated, frictionless digital pipe. Uh, Marco, thank you very much for joining us today.

SPEAKER_00 43:25

Thank you, Andrew. Thank you, Nick. Thank you, everyone. Highly appreciate that.

SPEAKER_03 43:30

And of course, a huge thank you to my most regular co-host, uh uh, the man who hopefully is is isn't going to suddenly go and join a fintech startup, Mr. Nick Bruce. Nick, thanks very much.

SPEAKER_01 43:42

Yeah, thanks, Andrew. And yeah, again, a huge thank you to Marco. Um, it's been great having you on the show.

SPEAKER_03 43:47

That's great. Okay, that's all from us right now, from me and from Manuel Morena Garcia, here in the virtual studio with us, our producer who makes sure all this magic happens so we can just turn up and you know, uh make our computers look old-fashioned. Uh, a huge thank you from everyone at uh Regis TR and at the Sex Group. And do remember to join us on our LinkedIn page. That's LinkedIn.com slash company slash regis, where you can network with uh Marco and with Nick and with John and everyone who's been on the show in the past, and of course with Manuel and myself. And now, as I mentioned earlier in the show, a few words from Mr. John Cernan, formerly the CEO of Registrum in the UK, and also as we knew him, our long-suffering Brexit correspondent, the man who put the canary in the wharf, who was Devonshire but never square, and used to look after St. Mary's Axe. John has left the six group now, but he managed to find the time to send us a message deep from his new secret bunker in the jungles of South America.

SPEAKER_02 44:49

Hi team, it's JK here. The uh the canary has finally flown. Um I'm calling you from uh Honda in uh Colombia. I'm absolutely melting. It's so beautiful here. Having a great time heading to the desert tomorrow and a couple more weeks of adventure before I head back to Europe. So just want to say bye to everyone, bye to all the listeners, and uh thanks for listening and staying with the show so long. Gonna miss you guys, but obviously I'm gonna continue to be an avid listener. And uh who knows? Uh well no doubt we'll speak soon. Take care, everyone. Much love, John.

SPEAKER_03 45:46

And remember, you've been listening to the Register Roundup, which is brought to you by Register TR, a member of the Sixth Group, and features members of the Registr team and special guests expressing their personal opinions, not the opinions of Register as an organization. There's no representation made as to the accuracy or completeness of information in this podcast, and neither should it be taken as any legal, tax, or other professional advice.