Economy of Scale: New Finance (Sponsored Content)

Sean McHugh · Virtual Assets Regulatory Authority (VARA)

Hedge funds and banks will eventually trade equities, bonds, FX, commodities and crypto from one desk.

McHugh says he expects a future in which a hedge fund in London, Hong Kong or New York sends orders across equities, fixed income, commodities, currencies and virtual assets. He expects every big hedge fund and bank to give virtual assets shelf space. He calls this TradFi and virtual-asset convergence, which he says the regulator is preparing firms for.

“there'll be a day when there's a hedge fund in London, Hong Kong, or New York sending orders to equities, fixed income, commodity currency, and virtual assets.”at 3:37

Rhys Merrick · Ripple

Bitcoin ETFs permanently changed crypto; institutions now offer custody and trading, not just speculate.

Merrick says the Bitcoin ETF rollout changed the market and that it cannot be reversed. He says institutions that once shunned crypto now offer custody and trading. He cites BlackRock and Franklin Templeton entering as adding credibility, and says banks are tying digital-asset businesses to profit and loss in business units rather than keeping them in innovation teams.

“When the Bitcoin ETF kind of rolled out, that really changed this market... you're not gonna get the toothpaste back in the tube around that.”at 6:05

Sean McHugh · Virtual Assets Regulatory Authority (VARA)

Crypto will stay volatile for a while; holders of all-in virtual assets are fully long volatility.

McHugh says virtual assets will remain volatile for a while, excluding stablecoins. He points to meme coins and perpetual futures as the most-traded, volatile segments. He argues clients must understand the volatility, noting that anyone with all their money in virtual assets is fully long volatility.

“This will remain a volatile asset class for a little while... anyone who has like a 100% of their money in virtual assets is a 100% long vol, right?”at 13:43

Rhys Merrick · Ripple

Stablecoins are a huge benefit for cross-border payments, which are shifting to near-instant settlement.

Merrick argues customers now expect cross-border funds to arrive near-instantly, unlike the days a US-bound payment can take. This pushes institutions, fintechs and payment providers to use digital assets. He says over 50% of global payments settle in dollars, and many do not touch the US, so routing Middle East-to-Asia payments via the US is inefficient. Stablecoins fix that.

“the expectation of the customer has changed and ultimately that is driving the financial institutions... So stablecoins is a huge, huge benefit there. If you think US dollar payments globally, I think over 50% of total global payments are settled in dollars.”at 7:23

Sean McHugh · Virtual Assets Regulatory Authority (VARA)

Stablecoin payments are expanding rapidly; Middle East–Africa corridor volume is up 40–50% year on year.

McHugh says stablecoin payments are expanding quickly and that the payments case is now as important as Dubai's trading case. He says payment firms are applying for licences and cites Middle East–Africa trade-corridor growth of 40–50% year on year. He credits Dubai's geography, four hours from one-third of the world's population and eight hours from two-thirds, as the reason firms come.

“is certainly an area of growth that we're seeing expand rapidly... the growth just between The Middle East and Africa is up 40, 50% year on year in terms of that corridor, that trade corridor.”at 8:20

Rhys Merrick · Ripple

Dubai's two-way regulator dialogue is rare and draws firms that older, arm's-length frameworks would not.

Merrick says Dubai's regulators, including VARA and the DFSA, learn from firms and iterate rules with them. He contrasts this with many global regulators who keep the industry at arm's length. He criticises some frameworks as slight tweaks to eighty-year-old policy that do not match what the technology can do. He says this environment is why international businesses come to the region.

“It's a two way dialogue... The regulators here are like VARA, like the FSA are looking to learn, to understand your business... Actually, that's the biggest takeaway that why I think international businesses are coming to this region.”at 10:46

Rhys Merrick · Ripple

Tokenised money market funds and repo collateral will grow into a big market.

Merrick says tokenised money market funds already hold billions of dollars of assets under management and are getting traction. He says institutions are discussing using tokenised assets as collateral. He expects the repo market to be a large opportunity that will grow tokenisation and let firms use tokenised assets.

“The tokenization of money market funds is certainly getting some traction. There's already billions of dollars worth of assets under management there... we see the repo kind of market and opportunity as a big space that I think will kind of explode.”at 13:05