Aon Managing Director Knox: Lack of Regulatory Clarity Leads to Blockchain Investments Outside of US
In this podcast video interview recorded on December 4th, 2023, Blockchain Journal editor-in-chief David Berlind speaks with Aon Managing Director James Knox who was one of the panel discussion moderators at the Boston Institutional Digital Assets Forum's end-of-year event in Boston, Massachusetts. The discussion primarily revolved around the current trend where investment into blockchain technology is more likely to happen in international jurisdictions where there's more legal certainty than not. Knox notes that global enterprises are gravitating towards jurisdictions outside the US, such as Germany and Singapore, where there is more regulatory clarity in the digital asset space. Investments, as well as activities like the adoption of blockchain as a platform, are being influenced by the still-evolving yet crypto-permissive guidelines offered by legislation and regulators in these and other international jurisdictions.
The conversation covers specific international examples such as Project Guardian from the Monetary Authority of Singapore and Markets in Crypto-Assets Regulation (MiCA) in the European Union. These and other government-led initiatives are essentially welcome mats to blockchain innovation, encouraging early adopting enterprises to set up their operations in these regions. Knox emphasized that regulatory certainty extends beyond investments to broader blockchain activities, including tokenization, stablecoins, and NFTs. Regulator interest in stablecoins is growing due to their efficiency and cost-effectiveness compared to traditional financial instruments based on US dollars.
The interview concludes with insights into Aon's role in the blockchain space. James highlights Aon's provision of consulting advice and insurance to companies involved in digital assets and blockchain. The insurance coverage includes protection against cyber threats, theft of digital assets, and other risks. Overall, the interview underscores the importance of regulatory clarity in shaping the global landscape of blockchain investments and activities, with Aon playing a crucial role in providing risk management solutions for companies navigating the ever-evolving blockchain space.
By David BerlindPublished:December 13, 2023
Full text transcript of David Berlind's Interview with Aon Managing Director James Knox at the Boston[Institutional Digital Assets Forum
David Berlind: Today is December 4th, 2023. I'm David Berlind with Blockchain Journal. This is the Blockchain Journal podcast and I am standing here with James Knox. He is managing director at Aon, and Aon is a... You're a moderator here of one of the panels at the Boston [Institutional] Digital Assets Forum.
So James, thanks very much for joining me on the Blockchain Journal podcast.
James Knox: [It's a] pleasure, David. Thank you.
Berlind: Yeah. So I was inside watching the last panel that you moderated. [You] did a great job by the way, and a lot of this panel's discussion centered on the idea of regulation. And I thought it's pretty interesting, because what we're seeing out there is how all of the enterprises and global brands that are investing in blockchain, they seem to be following where there is regulatory certainty. We see a lot of activities in like Germany, you see stuff going on in India where there's a little more regulatory certainty, not so much here in the US. [Do] you want to comment on that a little bit?
Knox: Sure, David. Thanks for that. So yes, we are seeing jurisdictions around the world outside the US offer investors, [and] finance institutions more regulatory clarity in the digital asset space. So it's not surprising where that the money is going to go. Investments are going to go where there's more regulatory clarity so people know how their investments are going to be treated by the local regulators.
Berlind: Is it just investments or is it other activity? For example, just adopting blockchain as a platform? Because, it's kind of hard to adopt blockchain without also, for example, holding some crypto because you have to pay the chain fees and all of that.
Knox: It's much more than just investments. For instance, you know there was an announcement several weeks ago that Wisdom Tree, Oasis Pro – great company – J.P. Morgan, Apollo, they developed a platform to tokenize assets right on the blockchain. This is done under under the auspices of the Singapore Monetary Authority, not the US reason for that is very simple.
In Singapore, they have clear guidelines offered by legislation and regulators there on how digital asset companies can operate in that jurisdiction. And because of that, it's going to attract companies that want to set up shop in Singapore, and that will be beneficial for their investors.
Berlind: Yeah, that you're talking about Project Guardian, right? Which is was run by the Monetary Authority of Singapore. And they did a whole bunch of prototypes, and they got many companies, multinational financial firms like J.P. Morgan from around the world involved in those pilots.
Knox: Correct, but also it's just not Singapore. You look at Europe right now, [the] European Union, they're coming out, they promulgated the rules called MiCA (Markets in Crypto-Assets Regulation.) MiCA is extremely broad but also gives [a] really good, clear definition of what you can do and what you cannot do in the digital asset space. MiCA touches NFTs, custodians, exchanges, [and] wallets, and that's what's needed here, is that clear regulatory certainty of what, how you can operate in that space.
Berlind: Yeah, I noticed that – for example, in Germany, you see some of the biggest German banks, Siemens, they've been tokenizing stuff. So that's that's another place that's a little... it's actually more crypto-friendly in Europe than some of the other places that are covered by the European Union.
Knox: Correct and it's just not tokenization. You know, we mentioned on the panel stablecoins.
Stablecoin issuance is growing. Stable coin usage is growing. And again looking outside the US, you're looking at MiCA. They've given them very strong edicts and promulgated rules on how you can operate with stablecoins in that in that space.
Berlind: Why are stablecoins getting so much interest right now among regulators? What's the big deal with stablecoins?
Knox: Because stablecoins can be a very valuable asset. Now we're not talking algorithmic stablecoin – they are very dangerous. What we're talking about is stablecoins that are pegged to the dollar or pegged to some collateral that is 100% supporting the stablecoin. If you've got that, it should be as good as gold.
Berlind: But, you say they're very valuable, but at the end of the day, they're still pegged to an asset and they're not really changing in value. They're valuable in some other context. What's that context that they're valuable to?
Knox: The context is usage, right? They can... instead of selling... issuing an instrument in US dollars, now you can do [so] with the stablecoin. It's much more efficient and it it could be a lot less expensive than dealing with US dollars.
Berlind: Look at, for example, some of the work that J.P. Morgan that you said is doing with their Onyx platform, coin systems in particular. They are leveraging the low cost and quick settlement times of 24/7 availability. Are those the big three advantages over traditional finance rails?
Knox: 100%. Speed is a huge factor. Efficiency is a very big factor. These factors are going to change [the] finance system as we know it.
Berlind: Now, do you think the old financial system is going to be completely replaced or are you still going to have that?
Knox: We'll always have the old financial system in place, but the financial system that you can look at 5-10 years from now is going to be almost unrecognizable to what we're working with today.
Berlind: Well, that would be interesting to see that happening. What is Aon's role in all of this?
Knox: Aon provides consulting advice and insurance to all the... most of the players in this space. Most of the companies and digital asset[s] in the blockchain space. We're providing insurance for them. We're providing advised consulting on how they can protect themselves in the sometimes choppy waters.
Berlind: What do you mean by insurance? Do you insure against volatility or something else?
Knox: So what we're... well, we're not actually [an] insurance company themselves. We provide access to insurance to protect themselves against cyber threats, protect themselves if they're holding onto digital assets in case it gets stolen, and other areas.
Berlind: OK, so that if somebody else gets your the keys to the wallet or something like that?
Knox: 100%, yes.
Berlind: OK. Well, James Knox, managing director at Aon, thank you very much for joining me –
Knox: Pleasure. Thank you very much.