How do we marry the regulated market and the decentralised one? Do we really need to?

“I definitely think we need to because, obviously, the more adoption we have, the more risks everybody runs - with assets being transferred or invested for instance. I believe that regulation exists for a reason, it isn’t just to hamper innovation as it may sometimes be seen. It exists also to protect our clients, ourselves, and to protect the economy. As a financial institution which is regulated, we see regulation creating a level playing field for example when it comes to providing safety that our customers and other institutions deserve.”

How might we see the decentralised space evolve over the next few years?

“Interesting question, because there are always new terms being come up with. To be honest, what we have seen before, for instance with the rise of ICOs [Initial Coin Offerings], this was the tokenisation of anything you could imagine […] Then we had the rise of non-fungible tokens [NFTs], but in reality NFTs have existed for a really long time.

“Funnily enough, when we were working on a use case with payments and cash, we needed to take the non-fungibility to emulate the real fungibility cash has - which was needed for that specific use case. This is because if you would normally have a fungible asset as cash, then you can exchange it. But, if the asset suddenly becomes non fungible, and is unique, then you cannot exchange as freely are you can trace other aspects of it which you might not want”.

“Obviously new use cases for everything in this ecosystem are being found, they’re renamed, marketed, and new ecosystems and business models are created around them.

“That’s something that I'm really looking forward to, because we can always learn from that, and our own services might be improved in ways that our clients might find interesting.”

What emerging technologies might make an impact on the space?

“We’re seeing a lot of emerging technologies already starting to evolve and to complement each other. For example, we’re seeing a lot of machine learning in order to make better or faster decisions. Those decisions are then recorded on the blockchain which creates like a loop, where you take that data and you train a robot to make decisions. For example, a lot of information used in decentralised finance algorithms are fully automated, and are based on smart contracts. Therefore, you see a lot of decision making loops being closed.

“We also have been seeing a lot of quantum. People are worried about advancing quantum and the fact that some of the blockchains out there are not quantum-resistant. ING has experimented with quantum-resistant protocols to make sure that the distributed ledgers that we use are also resilient that kind of breakthrough.

“We also see quantum being used for anti-money laundering, for fraud, and price discovery. Again, those decisions being made by an algorithm are then put on the distributed ledger. So besides the evolution of distributed ledger as a whole, we also see that emerging technologies are starting to combine efforts to have a more robust solution.”

What trends are you seeing in DLT? What does the future hold for the space?

“In DLT, we’re seeing a lot happening in the in the financial markets. We see, for example, a lot of debt being put on distributed ledger technology. In the past, we saw a lot of things happening on trade finance because it was a really old and traditional type of process. When we saw that some efficiency gains were met and were encountered, then people got to work deploying those type of solutions.

“But now we're seeing the rise again, of bonds being issued, the rise of ESG ratings, or carbon offsets being recorded on distributed ledger. There are a lot of projects where you can you can track carbon emissions and then sell carbon credits through a free market.

“So I think a lot will happen in the regtech space, but more on the decentralised finance side. It is attracting a lot of interest. We see a lot of the financial market infrastructure being replicated there, for example, with companies offering FX, swaps, perpetuals, etc. There's going to come a point where, if they want inclusion of a bigger set of customers, they will need to comply with certain regulations. If you’re investing you want the trade to be treated properly, same with a security or a loan etcetera.”

How will the Metaverse and web3 impact financial services?

“I think we’re going to start seeing a transition. Right now, everyone is struggling to have one definition. You already see terms like web2 and web3 being merged into web2.5. But I think this is just different names for the same kind of thing.

“Web3 is distributed ledger, with pretty much everything based on blockchain, everything is open source, the tokenisation of a value changing hands. There's a whole technology stack being developed, to support access to that web3.

“On the other hand, you have the web2 companies, such as Roblox and a lot of the gaming companies moving into web3. They have one advantage, which is the user interface. Those user interfaces are already very easily known and handled by everybody, and web3 doesn't have that. If you really want to access something in web3 it is seriously a pain - there is still a lot of friction.

“Therefore, when it comes to web2.5, it is something that we are going to start seeing a lot as companies begin working on how to ease-in their use, and access to web3 for normal people. Digital immigrants as myself or other people that might struggle a little bit and might not understand things like: where is your asset? Where are your private keys? How do you remember your key length? Where do you keep them?

“There are some companies already working on these things, but a lot of those services are really only for developers - you really need to know a little bit of Python in order to get access to certain things. So, I think there's a lot of opportunity to help in the use and the safety of those solutions for a lot of people.”

Mariana Gomez de la Villa spoke on the panel titled ‘How do we move the regulated market to DLT?’ during Money 20/20 Europe.