The TRADE’s Crystal Ball 2021: FinTech, RegTech and crypto

Gaze into The TRADE's crystal ball for insights from FinTech and RegTech providers, as well as participants in the crypto space on their predictions for the year ahead.

Today only one third of regulatory reporting systems are in-house built. Unsurprisingly, given their DNA and legacy systems, the largest financial institutions are the least likely to be using vendors. However, it’s increasingly clear that regulatory reporting is a necessary obligation rather than a business differentiator and that regulators will not accommodate late or inaccurate reporting.

As such, large firms are slowly starting to consider abandoning expensive, resource intensive in-house solutions in favour of vendor-led options that offer the benefits of ‘safety in numbers’ and ‘crowd wisdom’ in which the cumulative knowledge and experience of the vendor and its clients support accurate, regulator-approved and cost-effective reporting.
– Ronen Kertis, CEO, Cappitech

2021 will see big changes to the RegTech industry across four key areas. We expect more regulatory reporting vendors to struggle (as we saw with CME and Deutsche Bourse) on the back of the price war in the market – and for fees to increase for remaining providers. Regulators will clamp down on poor data quality and increase their focus on MAR, which has already begun at the FCA.

Surveillance will continue to evolve as people combine office and home working, with more focus on behavioural analytics and stringent policy enforcement. Finally, I expect the industry will move away from data silos, and instead adopt more efficient holistic solutions, where all data resides on a single platform which can be extensively used across compliance functions – for regulatory reporting, communications and trade surveillance.
– Matt Smith, CEO, SteelEye

There’s little doubt that institutional investor adoption of digital assets is heading toward a tipping point. 2021 could be a pivotal year for this asset class due to several developments. First, regulatory clarifications of practices around digital assets at the federal level and expansion of prime and other services that support institutional investments.

Then maturation of risk, execution and reporting tools required for professional investors and strong institutional client demand driving the embrace of digital assets by asset managers. Together, these factors will contribute to a more familiar investment environment for institutional investors, drastically driving adoption forward.
– Anton Katz, CEO, Talos

The most certain prediction is the continued requirement for efficiency. Market volatility, and thus profits, are low so the banks must do more with fewer people. The supervision and surveillance systems must give traders their time back so they can monetise the opportunities that arise when volatility returns. In addition, compliance and 1LOD (first line of defence) functions will increasingly focus on (and invest in) keeping pace with advances in technology – combining remote working with the emergence of new communication channels presents challenges for all firms trying to supervise employee behaviour.
– John Crouch CEO, Ideal Prediction

2021 is the year standardisation of the cryptoasset markets starts to occur, thereby fulfilling another pre-condition for the asset class to go mainstream.

ISO will launch its Digital Token Identifier (DTI) standard to uniquely identify every tradable cryptoasset in the same easy manner that equities, bonds and OTC derivatives are already identified in the traditional capital markets. This identification will enable efficient cryptoasset price discovery, sourcing of liquidity and identification of counterparties for trades.

Central banks and other public bodies will continue their exploration of the best ways to regulate the new financial asset class without throttling the breakneck innovations taking place with a necessary first step being to identify the standards the marketplace should adopt. We anticipate ISO standards such as the DTI will provide the glue that will coalesce the activities of such public bodies with the private sector initiatives taking place.
– Sassan Danesh, managing partner, Etrading Software

As mainstream recognition grows of Bitcoin’s utility as a store of value and custody solutions mature from both a technical and a legal clarity perspective, we expect to see a number of banks begin to offer custody and execution services to customers during 2021. We see a rapid increased adoption of institutional crypto trading and, due to the similarities in the markets between digital assets and FX, it will largely be the FX and precious metals trading teams that are involved. 

Adoption will be driven by institutional grade connectivity using robust technology to access multiple geographically distributed venues.  Fragmentation is a significant issue in both crypto and FX markets, and low latency multi-venue connectivity for market data and trading will increase access and transparency, as well as allow institutional teams to leverage their systems for trading FX to offer services to clients in this burgeoning asset class.
– Alexis Atkinson, founder, crypto and forex connectivity start-up, 4OTC

The year 2020 was transformative for the digital asset industry due to increased interest and involvement by both institutional players and regulatory bodies. Driving institutional adoption has been the regulatory clarity and guardrails established by the OCC and SEC and the availability of more institutional-grade platforms that provide the high levels of security and performance these firms require.

The creation of new cryptofinance products and the participation by prominent traditional financial institutions like Franklin Templeton and BNP Paribas, two of Curv’s newest clients, will motivate an increasing number of firms to enter the market in 2021.
– Itay Malinger, co-founder, CEO, Curv

2021 will be a year where artificial intelligence, machine learning and natural language processing further synthesises the relationship between fundamental investment research and trade execution for actively managed investments. We will see new and improved AI models deployed that will unlock the ability for active managers to draw new correlations across an investment organisation’s entire universe of qualitative research in order to identify new trading opportunities and emerging trends within portfolio holdings that would otherwise not be immediately visible on the surface.
– Hoony Youn, CTO, MackeyRMS