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Perspectives: Digital assets
18 Plays12 minutes ago
Digital assets and cryptocurrencies are among the fastest growing areas in finance, with increasing demand from both private and institutional investors. But are they really moving from fringe to mainstream? This is the big question tackled in this episode of HSBC’s Perspectives series – featuring Lucy Gazmararian, Founder and Managing Partner of Token Bay Capital, and John O’Neill, HSBC’s Group Head of Digital Assets and Currencies, in-conversation with Piers Butler, HSBC’s Head of Global Research Direct.
Watch or listen to understand more about key developments sparking renewed interest in this space – including the regulatory landscape, expectations around the stablecoin market, and what a tokenised future could look like.
This episode was recorded on the sidelines of the HSBC Global Investment Summit in Hong Kong on 27 March 2025. Find out more here: grp.hsbc/gis
Token Bay Capital is a venture capital fund manager that invests in blockchain and crypto startups.
Disclaimer: Views of external guest speakers do not represent those of HSBC.
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Transcript
Introduction to HSBC Global Investment Summit 2025
00:00:05
Speaker
Welcome to Perspectives from HSBC. Thanks for joining us. And now on to today's show.
00:00:13
Speaker
Welcome to Perspectives, our podcast series from behind the scenes at HSBC's Global Investment Summit 2025. twenty twenty five I'm Piers Butler and I'm delighted to be joined by two guests, Lucy Gassmerarian, founder and managing partner of Token Bay Capital, and John O'Neill, Group Head of Digital Assets and Currencies at HSBC.
00:00:34
Speaker
Lucy and John, welcome. Thanks, Chris. So you're fresh off the the panel that you just held at the at the yeah GIS, so well done on on that. So John, if I can start with you, the theme is, can digital assets go mainstream?
00:00:46
Speaker
But is that in fact the right question? are digital assets already becoming
Are Digital Assets Becoming Mainstream?
00:00:50
Speaker
mainstream? So I think what we're finding if we talk to our customers is people at different stages of their adoption journey for for digital assets and i think it's probably the same for crypto as well. I think some people view as a fringe subject, others view it as very much part their mainstream already.
00:01:07
Speaker
But what I said on the panel is that over the last two years the proportion of our customers who really view this as a mainstream subject really has materially increased. So we find it's in a lot of client conversations.
00:01:18
Speaker
It's really come up in a lot of policy conversations as well. So we very much think it's increasingly a mainstream subject. Well, and judging by the room, which was ran, it is a topic of of great interest. So, Lucy, I could sense in in in your voice the excitement from some of the recent announcements that have come out out of the U.S. so maybe share with us some of that excitement.
US Embraces Crypto: A Watershed Moment
00:01:38
Speaker
I think listen a lot of different regulatory jurisdictions have been working on their crypto assets regulations and frameworks for since 2018. And actually before that if you're thinking of sort of jurisdictions like Malta Gibraltar um the jurisdictions are getting more international financial centers. You know you've got Hong Kong Singapore the Middle East and China's very been very clear on its stance in crypto. But to have a major economy like the U.S.
00:02:05
Speaker
now not fight the industry but actually embrace the industry and really actually set out how they're going to make the U.S. ah a leader in this digital financial technology is really a watershed moment for the industry because crypto has really been fighting against the establishment since its inception. It's you know an organic retail bottom up um initiative. That's how it came to the world through Bitcoin.
00:02:28
Speaker
And now we're in a position where we're being embraced top down by the most powerful people in the world. How does it feel? It's like. And it's actually, crypto is kind of confused because we're so used to fighting. You sort of had a sort of siege mentality. Exactly. And if you gauge the sentiment on crypto Twitter, it's really extraordinary. It's like, hang on a minute. Has the wind just been taken out of our sails? Wait, Trump is like telling us to create all these frameworks.
00:02:51
Speaker
And there's almost sort of, you know, lacking its identity right now. It's trying to sort of recalibrate because actually what's about to happen is crypto is about to underpin global financial markets and our global financial system.
00:03:03
Speaker
And the US is going to lead this. So it's utterly incredible what is happening at this present moment in time in terms of crypto's history. And from HSBC's perspective, does that mean we suddenly have to go a lot faster in terms of how we adapt to to crypto assets?
HSBC's Commitment to Digital Assets
00:03:19
Speaker
So I think you know yeah we always get into definitions here and we we prefer digital assets than cryptocurrencies. For us at HSBC, we're very committed and have been for a couple of years now to developments in digital assets and also safe forms of digital money.
00:03:33
Speaker
So we've tokenized physical gold. We've created digital bonds and also, as I say, interested in making sure monetary development proceeds in a very safe manner.
00:03:46
Speaker
So we think there's a lot within particularly the institutional space which we're seeing for digital assets. I think in terms of the wider cryptocurrency space, which is what Lizzie was referring to,
00:03:57
Speaker
It's going to be very interesting over the course of this year to see how those policy announcements, I would say, in DC play out in terms of the market reality and how markets change and develop. So, yeah, there's a lot there's a lot to develop in 2025. So, yes, a lot up in the air, i think.
00:04:14
Speaker
I was literally just coming onto this podcast, had just interviewed Paul McEl, our global head of FX research was asking him, when are you going to have to start forecasting digital
Predicting Global FX Stablecoin Markets
00:04:24
Speaker
currencies? And he was equivocal ah about that. But um um strategic reserve in the U.S., mean, it's It's quite incredible.
00:04:33
Speaker
And coming back to FX, you know, when we get stable coin regulation and framework and, you know, the rules of the road for how U.S. dollars and other fiat currencies are going to run on blockchains, we're going to start getting global FX stable coin markets.
00:04:49
Speaker
FX markets are about to become extremely fast 24 seven cross border instantly much lower cost and it's going to really open up opportunities for new countries to really get involved because payments is about to increase increase and improve inefficiency by an order of orders of magnitude.
00:05:08
Speaker
And so fx is is is is is part of the story as well. I mean, at the moment we're all focused on US dollar backed stable coins. Gold backed stable coins are also, you know, a piece of the market, but very small. work US dollar backed stable coins are about 99% of stable coins today.
00:05:26
Speaker
But I'm already in discussions, like I can't name names with different central banks and they're looking to have their own fiat government issued currency as a stable coin to be able to run on blockchains and plug into this new infrastructure.
00:05:38
Speaker
And so it's really going to change the payments landscape because it's going to cut out intermediaries. It's going to reduce fees and payments can happen 24 seven, no five, seven days. You know, if you're if it's a if it's a cross border transaction with a, you know, a country that emerging markets, it can it can sometimes the whole transaction can actually fail.
00:05:58
Speaker
So we're about to eradicate that. And, you know, sit settlement and payment is about to happen in minutes, not days.
Hong Kong's Role in Tokenized Assets
00:06:04
Speaker
um Here we are in Hong Kong. Is it fair to say, John, that Hong Kong has embraced digital currencies more so than perhaps some other financial centers?
00:06:12
Speaker
Hong Kong really has embraced the subject overall. um I won't speak for the HKMA, but maybe some observations I would make is In terms of digital and tokenized assets, there's a very strong push to make Hong Kong as you say, P is a global center.
00:06:27
Speaker
And we've had really material cooperation with HKMA and other market participants as well in terms of driving that agenda and driving liquidity in Hong Kong. So we think that's been pretty effective in terms of um all the different monetary types, some of which Lucy is referenced.
00:06:44
Speaker
stablecoins, cryptocurrencies, tokenized deposits. I think the focus for Hong Kong and also many other global financial centers has been providing regulatory regimes and recognizing these are a market reality and certainly for things like tokenized deposits, which are tokenized commercial bank money.
00:07:03
Speaker
HSBC is very committed to you know driving developments in that. And in terms of stablecoins, which Lucy was referring to, in Hong Kong, as in many other locations, there's now a regulatory regime in place.
00:07:14
Speaker
And I think part of the focus of that from global regulators is just making sure a reality is safely regulated, particularly if those products being made available to consumers. So I think there's quite an important protection point there as
Vision of a Tokenized Future
00:07:28
Speaker
well.
00:07:28
Speaker
on the landing page of your website. I did my research. Thank you for visiting tokenmakeapital.com. It says backing the blockchain businesses of tomorrow. And then he goes on to say we believe in a tokenized future.
00:07:44
Speaker
What is a tokenized future? Is that the picks and shovels of the crypto gold rush? I maybe have to change the word future because yeah we believe in a tokenized reality. It actually, um I really think it's it's upon us. I think this idea of getting money on blockchains, which is about to happen in the course of this year, is going to be an enormous game changer. It's going to unleash because a lot of the financial institutions,
00:08:06
Speaker
have all been experimenting with this technology. There's been a lot of what they call proof of concepts or POCs where you're sort of, it's a pilot or it's one-off issuance of a bond. But essentially what they've been doing behind the scenes, and John can to attest to this a lot more than than I can, is extreme experimentation that's been going on for five years plus.
00:08:26
Speaker
So what this new technology is as the Internet brought new types of businesses to the world that we hadn't thought of before. I mean, did
Evolving Perceptions of Crypto
00:08:33
Speaker
we all think that Facebook was going to be or Meta is going to be one of the world's biggest companies when people were sort of getting comfortable with the Internet and with even social media.
00:08:42
Speaker
But here we are. When you have new technology as infrastructure, it gives rise to new businesses, new use cases, new ways of bringing marketplaces and people, the buyers, sellers together.
00:08:54
Speaker
And that is what crypto and blockchain is going to do. So when I say I believe in tokenized future, I believe in the superiority of this plumbing of financial markets in terms of crypto assets, digital assets running on blockchains, open source public blockchains is going to give rise to new use cases and companies. And my job is to find those companies and work with them and back them and you know hopefully see see these enormous businesses grow into huge success stories.
00:09:24
Speaker
ah How hard is that though? Because as we know from the Internet age, um many are called and few are chosen to use the expression. VC is is is high high risk stakes, high risk stakes, high reward. Right. So but what's interesting actually being a venture capitalist in this space, I think so many investors have been put off by the word crypto and the negative connotations with crypto, which is for money launderers and criminals and you know essentially that was the world's first use case for crypto. So it it took a while to sort of shed that reality. And for a long time I couldn't utter the word crypto.
00:09:59
Speaker
Certainly not when I started the business. TokenBay was very much a digital assets venture capital fund. And now again, crypto has come back. It's acceptable. It's cryptography. you know It's short for crypto. This is what the technology is.
00:10:10
Speaker
And now we're realizing that it is just not used for a legal activity. And actually we're now looking at the really exciting part of it. So I think it's scared a lot of investors away from the space. You know, as with any new technology, there's a lot of speculation. There's a lot of froth. There's, you know, it's become famous for pump and dump ah schemes, yeah meme coins, for rug pulls, for you name it.
00:10:33
Speaker
But actually, If you're looking at it through the lens of sort of a traditional finance person, you're early to the game. There are the gems there. There are the businesses that are building the stablecoin companies, that are building the crypto custodians, that are providing insurance coverage for the new breed of regulated and institutions that are going to come in. And these are just a handful of the companies that I've backed.
00:10:54
Speaker
And so, you know, I wasn't put off by negative connotations. I saw through of the promise of the technology and and it's it's it's paying off. And John, from HSBC's perspective, so even though there's that negative kind of connotation from cryptocurrencies and what have you, actually the demand.
Bitcoin ETFs in the US
00:11:11
Speaker
And in fact, I was going to ask you this question about when the Bitcoin ETF was launched. I looked it up. I hope this number is correct, but apparently 100 billion has flowed into these ETFs in the last 12 months.
00:11:24
Speaker
so So even if it's not entirely accurate, the volumes are significant. So there is demand. i mean, is it a younger generation that's asking you, or is it across the board? There's certainly demand and we talked little bit about the bit Bitcoin ETFs so on the panel earlier and there have been a remarkable success story.
00:11:40
Speaker
But I think one of the key features driving the Bitcoin ETFs and particularly in the US has been, as you know, if you invest in an ETF for, let's say, oil or energy or anything else, is that you don't touch the actual underlying product, right? You you pay your profit and losses in dollars or euros or whatever the ETF is denominated in.
00:12:00
Speaker
So I think the secret with the ETFs has been really to allow a very wide range of investor types to very easily access product where they're getting price exposure, but they're not actually exposed to the actual underlying coins in the same way as if it was, as I say, a commodities ETF.
00:12:17
Speaker
They wouldn't have to take delivery of the oil or yeah whatever it might be. Right. So I think that's been a very material development. I also think one thing will be very interesting to see is if price discovery for ah cryptocurrencies, Bitcoin being the classic example, if it moves into the ETF or futures market, because if you think of, again, oil or um commodities, agricultural products, it's generally the price discoveries through the futures. right So it'd be very interesting to see whether the derivatives start to leave the cash, basically, which is kind of classic market story.
00:12:51
Speaker
But Piers, I think they're going back to just the discussion a few minutes ago.
Blockchain's Benefits and Product Selection
00:12:55
Speaker
I think it's really um interesting or certainly the way we think about HSBC to differentiate between the infrastructure and the liability when you're thinking about money.
00:13:05
Speaker
So blockchain based infrastructure is a form of technology, has a lot of potential, as Lucy has said, and there are a lot of benefits. But the principal benefit is more rapid settlement with legal finality.
00:13:17
Speaker
And you really have to marry the legal finality to the technology to make it work. That's certainly what we've found with with our digital efforts. But I think over and above that, you can settle bonds more quickly. you can maybe exchange tokenized gold more quickly.
00:13:31
Speaker
um There is the question about who is creating the financial liability, who's creating the bond if if it was a fixed income asset. In the case of stablecoins, cryptocurrencies, who is actually creating the money?
00:13:43
Speaker
And with some stablecoins, what we've seen historically in markets is pegs have been broken or come under stress. And therefore, I think, loosecy witness so not so sustainable yeah yeah yeah so stable yeah for some of them so So I think being very careful in your your product selection as always is really important, particularly for this new market. So you need good advice from HSBC. So I think HSBC is not providing, as you know, is It's direct advice on those kind of products at the moment.
00:14:11
Speaker
um but leastcy i imagine in terms of you know and investment choices you've gri I'm not giving financial advice either. Just to be very clear. It's in terms of the products you're investing in, that kind of perspective in terms of who's creating the but All of that is going to come, isn't it? Two questions. One is in terms of a a sense of time. ah How has the sort of time horizon shortened for you in the last 12 months?
00:14:35
Speaker
Like was something that you thought was going to happen in five years time now when do you think it's going to happen? Does that make sense? Yes, it does. I think the whole crypto story has just been accelerated.
Crypto's Potential to Transform Finance
00:14:45
Speaker
But actually the whole crypto story has been really fast.
00:14:49
Speaker
Bitcoin's white paper was 2008. We're 16 years in. And the US president has basically said the US wants to be a global leader and it's going to underpin the new financial markets and global financial system in 16 years.
00:15:01
Speaker
And if you add AI, which is not the topic of today's discussion, if you add AI into the equation, which is going to really help accelerate this even further because there's a really nice you know a coordination between AI and blockchain and crypto is going to speed it up even more.
00:15:15
Speaker
And we're moving to a world where finance is going to be completely transformed. It's you know people say and it's a global financial system but the majority of the world are not participants and crypto is really solving the access issue. It's giving individuals with anyone around the world internet connection and a digital asset wallet to participate in financial markets.
00:15:37
Speaker
and to have access potentially to U.S. dollars. These are people that never could access U.S. dollars. um So it's really going to change the game and it's going to bring more people into global financial markets and it's going enhance wealth creation for for everyone involved.
00:15:55
Speaker
And so it's great to see administrations and regulators really starting to appreciate that side of the equation. So considering Bitcoin 16 years old, I'd say we're doing pretty well.
00:16:06
Speaker
And John, maybe the analogy is you're working on a project and you thought you had two years to deliver it and then the top of the house say, no, I want it next week. Time has definitely been up, I think. And yeah, certainly many the announcements we've seen, which we referred to throughout this podcast from the US, are very dramatic announcements, right?
00:16:23
Speaker
I think what will be interesting to see is how those are implemented. As I said earlier, some of the announcements and all of them are really about the US aligning with what's happened already in other jurisdictions in other financial centers. So comprehensive legislation for digital assets is entirely welcome and is is something which happened in many locations including here in Hong Kong.
US Digital Asset Legislation Alignments
00:16:44
Speaker
I think some of the announcements undoubtedly are completely unique. The Bitcoin Reserve is the one that's got lots of headlines. course, what we should know, and you kind of referred to this, I think earlier Lucy, is that that is cryptocurrencies which is already owned by the US government.
00:17:01
Speaker
often through seizures for financial crimes. So it's really repurposing something for a different purpose. Yeah, I do like that. It's really. Crypto is all about the narrative. It's all about the way you spin it. So, and I think actually more material was that although there was suggestion in some of those announcements that there might be provisions in the future for acquiring Cryptos was clear that that would have to go through Congress and we saw a bit of a sell off in the Bitcoin market that day as a result. Right. So I think the devil is in the detail and even more so in the implementation.
00:17:34
Speaker
But certainly it's it's very exciting and the amount of attention the subject is getting is increasing. What we should also remember is more opportunities, but we need need to be cognizant of the risks and and there are risks in in this subject as there are in other financial subjects. So, yeah, the the pressure deliver will increase. Our clients are asking for that.
00:17:53
Speaker
But, yeah, we also remain very focused
Summit Reflections and Success
00:17:55
Speaker
on the risks. Yeah, which is a which is a fair point. yeah um You've both been at the GIS for the last two and a half days. It's been intense. Any sort of sort things that have surprised you or takeaways?
00:18:06
Speaker
Lucy, you. Wow, the number of attendees and how focused they are on the whole event and every single panel and you know incredibly high quality content, high quality attendees.
00:18:19
Speaker
Great to see everything, just you know all this networking and buzzy atmosphere in in Hong Kong. i mean it's It's my first yeah GIS, hopefully I'll come back, but um I think it's been absolutely phenomenal. Yeah, i think it's very exciting. i think, as you say, Lucy, it's just the scale.
00:18:32
Speaker
I think we we've had 4000 attendees or something like that um over the three days. So just people bursting to get in the room, which we saw in the crypto panel earlier. think people are just really interested in participating in the discussions.
00:18:46
Speaker
And it's just great to be at HSBC conference, which I think compared to all the other conferences that go globally, people really want to talk about the subjects. right so So it really is an active conversation.
00:18:57
Speaker
John and Lucy, thank you very much for joining me today on this really interesting conversation as part of the Perspectives podcast series. Thank you all. Thank you for joining us for this episode of Perspectives.
00:19:10
Speaker
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