Finance
EU paper argues for permissionless blockchain usage in traditional finance – Ledger Insights – blockchain for enterprise
The European Union has published a report exploring the potential for permissionless blockchain in traditional finance (TradFi). It argues that permissionless blockchains should at least be considered as options for TradFi and financial market infrastructures. However, adoption should happen in a cautious manner.
Fabian Schär of the University of Basel is the paper’s author. He wrote one of the most cited early papers on Decentralized Finance (DeFi). While Mr Schär is a proponent of permissionless blockchains and DeFi, the paper is nonetheless objective and thorough.
It argues that permissionless blockchains can be more neutral than private ones, and in turn encourage competition. Unfettered access enabled by public blockchains contrasts with the siloed permissioned blockchains that are proliferating. While public blockchains have drawbacks, there are many widely known workarounds to their challenges, particularly by adding permissions at the smart contract level.
Mr Schär proposes that permissionless blockchains can provide an interoperability layer for layer 2 blockchains, including regulated ones. When smart contracts are on a single chain, they are capable of being composable into more complex functionality. Composability is possible across multiple blockchains but is weaker and messy. We’d note the point about composability is sometimes a blind spot in the TradFi space. Our recent report on DLT payments highlights that some application designs overlook composability and how to address that.
The EU paper doesn’t gloss over the drawbacks of public blockchains, such as scalability, privacy, finality and governance. It delves into each topic, as well as the contentious issue of maximal extractable value (MEV) in which block proposers sometimes reorder transactions at the expense of blockchain users, a type of front running. Mr Schär describes each challenge and the pros and cons of the various workarounds.
Why permissionless blockchains are so topical in TradFi
Clearly asset managers are attracted to the potential of permissionless chains with the likes of BlackRock and Frankin Templeton launching on-chain funds.
From a policy perspective, the paper is timely for three reasons:
In the latter case, one example is Singapore’s global layer one (GL1), a public, permissioned and regulated blockchain, which looks similar to a permissionless blockchain.
The EU DLT Pilot Regime
In early 2023 the EU DLT Pilot Regime came into force, which relaxes some regulations relating to central securities depositories. Most importantly it allows the use of permissionless blockchains. We’ve previously written about DLT Pilot Regime candidate 21x, which plans to operate a trading and settlement infrastructure on a permissionless blockchain. Many of the workarounds mentioned in the EU paper will be put into action by 21x and other DLT Pilot Regime participants.
For example, 21x participants are restricted to known entities and it uses a central limit order book. Hence, market surveillance will result in the identification of MEV activities and the seizure of a frontrunner’s on-exchange assets. If there’s an issue with the blockchain infrastructure then the assets can be moved to a different blockchain.
Another reason why the paper is timely is the ongoing debate by the Basel Committee on Banking Supervision, which recently imposed tighter rules for permissionless blockchains, particularly for tokenized assets that are likely to take many of the precautions mentioned in this paper. This encourages the banks to only engage with permissioned blockchains and creates a divide between them and asset managers who don’t face the same restrictions. The Basel Committee also published a paper addressing potential workarounds, but the EU paper is more technical and goes further.
For anyone wishing to really understand the ins and outs of permissionless blockchains in the context of TradFi, this paper is a must read.
Finance
First Abu Dhabi Bank Chooses Broadridge to Build Global Agency Securities Finance Business
Expansion of securities finance within the UAE and broader Middle East
NEW YORK and ABU DHABI, UAE and LONDON, Dec. 11, 2024 /PRNewswire/ — To drive expansion of Securities Lending in the UAE and wider Middle East, First Abu Dhabi Bank (FAB) has chosen global Fintech leader, Broadridge Financial Solutions, Inc. (NYSE: BR), to support the build out of its global agency securities finance business. This collaboration marks a significant milestone in the expansion of securities finance within the UAE and the broader Middle East region. By leveraging Broadridge’s advanced Securities Finance and Collateral Management (SFCM) solution, FAB is well-positioned to enhance its coverage of global fixed income and equities markets.
“The commitment of both FAB and Broadridge to bring innovative products and solutions to market and to simplifying and innovating trading,” said Darren Crowther, Head of Securities Finance and Collateral Management, Broadridge. “This collaboration caters for the growing demand for securities lending and borrowing within the Middle East and is aligned both with local regulatory needs and with international best practices.”
Broadridge’s provision of an agile and robust SFCM platform — the first AWS SaaS deployment in the region — highlights a renewed focus on in the Middle East and indicates readiness to support FAB’s strategic goals. As FAB navigates the evolving landscape of securities borrowing and lending regulations in the region’s markets, this collaboration is expected to yield new opportunities and efficiencies that will benefit clients across the globe.
About Broadridge
Broadridge Financial Solutions (NYSE: BR), is a global technology leader with the trusted expertise and transformative technology to help clients and the financial services industry operate, innovate, and grow. We power investing, governance, and communications for our clients – driving operational resiliency, elevating business performance, and transforming investor experiences.
Our technology and operations platforms process and generate over 7 billion communications per year and underpin the daily trading of more than $10 trillion of securities globally. A certified Great Place to Work®, Broadridge is part of the S&P 500® Index, employing over 14,000 associates in 21 countries. For more information, please visit www.broadridge.com.
Broadridge Contacts:
Investors:
Edings Thibault
Head of Investor Relations, Broadridge
[email protected]
Media:
Gregg Rosenberg
Global Head of Corporate Communications
[email protected]
SOURCE Broadridge Financial Solutions, Inc.
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Finance
IFF Names Michael DeVeau Chief Financial Officer
DeVeau has served in senior global financial leadership roles across the organization during his 15-year IFF tenure, most recently as SVP, Corporate Finance and Investor Relations
NEW YORK, December 10, 2024–(BUSINESS WIRE)–IFF (NYSE: IFF) today announced that Michael DeVeau—currently Senior Vice President, Corporate Finance and Investor Relations at IFF—has been named the company’s Executive Vice President and Chief Financial Officer, effective Jan. 1, 2025. DeVeau will succeed current CFO and Business Transformation Officer Glenn Richter, whose previously announced planned retirement will take effect at the end of 2024.
“We could not be more pleased than naming Mike as our CFO,” said Erik Fyrwald, IFF CEO. “Mike is a trusted, experienced executive at IFF and has been a pivotal leader across our company’s global finance functions over the last 15 years. We conducted a thorough evaluation process, and I am proud that we identified the right leader with decades of industry experience and longstanding relationships with the investment community and our global colleagues from within IFF. Mike will be a strong partner as we continue to strengthen IFF’s financial foundation and execute our long-term strategy to drive shareholder value creation. I would also like to thank Glenn for his many contributions to IFF and wish him all the best in his well-earned retirement.”
“I am honored to assume the CFO role and begin the next chapter of my IFF career,” said DeVeau. “Glenn has been a terrific partner who has significantly improved our balance sheet and positioned IFF for financial success, and I am grateful for his support over the past several years. I look forward to working with him during this transition period and alongside Erik, our Board and the rest of our talented global team to build on our strong business momentum.”
Since joining IFF in 2009, DeVeau has held multiple senior finance leadership roles across the global organization, including as SVP, Corporate Finance and Investor Relations; Divisional CFO, Scent, where he led financial planning, forecasting, analysis, acquisitions and performance management for the company’s largest division; and Chief Strategy Officer, where he guided a refreshed corporate strategy focused on long-term profitable growth, portfolio development and transformation. In his current role, DeVeau oversees the company’s corporate and divisional financial planning and analysis team, with responsibility for corporate strategy and investor relations. Prior to joining IFF, he served in leadership positions in investor relations, finance and corporate development at PepsiCo. DeVeau began his career as an equity research analyst at Citigroup Investment Research. He holds a bachelor’s degree from Fordham University and completed a Global Executive Leadership Program at INSEAD.
Finance
In a shift, Biden to bar most fossil fuel financing overseas
President Joe Biden is poised to back restrictions on international funding for oil and gas projects in a move that could free up billions of dollars for clean energy and crystallize his climate legacy.
It marks a shift from the United States’ approach over the past three years. Biden joined a group of wealthy nations in 2021 to restrict financing of coal-fired power plants in other countries but hasn’t support efforts to expand those restrictions to other fossil fuels.
Now, his administration and those of a handful of other rich countries are expected to call for curtailing public financing for oil and gas projects internationally at a virtual meeting Tuesday of the Organisation for Economic Co-operation and Development — a group of 38 countries that collaborate on issues of trade and finance — according to three people who are familiar with the administration’s plans.
“It will have a huge impact and, I think, really leave a strong climate legacy for the Biden administration,” said Kate DeAngelis, deputy director of international finance at Friends of the Earth.
The U.S. is expected to back a so-called emission threshold that would prevent the U.S. Export-Import Bank and other publicly funded export credit agencies from financing carbon-intensive energy projects. That would be in line with interim guidance by the Biden administration to end international fossil fuel financing that was never made public but was viewed by analysts at the Natural Resources Defense Council.
It’s likely the last chance the administration would have to push for an agreement at the OECD. President-elect Donald Trump, who has attacked climate science and promised to drill for more oil at home, is unlikely to support ending fossil fuel investments abroad when he takes office in January.
The move comes amid pressure by climate activists to deliver on a promise Biden made when he took office in 2021 to end overseas financing of all carbon-intensive fossil fuel projects. The U.S. joined dozens of other countries later that year at climate talks in Glasgow, Scotland, in agreeing to stop funding international fossil fuel projects before 2023. Reaching an agreement now, they say, would put rules in place that are tough to unwind, forcing the incoming Trump administration to comply with the deal or pull out of it.
A spokesperson from the Trump transition didn’t respond to a question about how the administration would treat such an agreement but said voters elected Trump based in part on promises he made while campaigning to lower energy costs for consumers.
“When he takes office, President Trump will make America energy dominant again, protect our energy jobs, and bring down the cost of living for working families,” spokesperson Karoline Leavitt said in an email.
Jake Schmidt, senior director for international climate at NRDC, thinks the Biden administration would have supported the agreement if Vice President Kamala Harris had won the election. But Trump’s victory might be pushing the administration to act more quickly.
“They clearly realized the end of the year is fast approaching and their ability to secure a climate win is rapidly winding down,” he said.
‘Finish the job’
The meeting will center on an export credit agency agreement among the European Union and 10 other wealthy nations: Australia, Canada, Japan, South Korea, New Zealand, Norway, Switzerland, Turkey, the United Kingdom and the United States.
It follows a 2021 deal by the U.S. and other rich countries in the Organisation for Economic Co-operation and Development to end public investments in coal power projects that don’t capture and store their emissions.
Earlier this year, the European Union proposed to extend the coal prohibition to cover oil and gas, except in limited circumstances that align with the Paris climate agreement, which aims to limit global temperature rise to 1.5 degrees Celsius.
The idea has earned the support of Canada, Norway and the United Kingdom, among others, but the U.S. has so far not backed it publicly or offered an alternative. That will change Tuesday, when the U.S. is expected to support a separate plan for establishing emission thresholds.
Export credit agencies currently offer billions of dollars in financing for fossil fuel projects, prompting pressure from climate activists who are calling on Biden to fulfill his earlier pledges.
But the U.S. Export-Import Bank has continued to approve financing for fossil fuel projects internationally despite a Biden executive order that instructed federal agencies to end such support.
That matters because although the Treasury Department represents the U.S. in OECD negotiations, the Ex-Im Bank would need to implement any decision reached under it. The Ex-Im Bank has previously said that its charter prevents it from discriminating against specific industries such as oil and gas.
Schmidt of NRDC said an emissions threshold could be seen as a “cleaner and clearer” way to set restrictions than the EU proposal, which could allow for more loopholes if countries don’t explicitly define what types of projects are compatible with the 1.5 C limit.
One remaining challenge, however, will be getting South Korea to join the agreement, particularly amid the political turmoil gripping the nation following a failed effort by President Yoon Suk Yeol to establish martial law. Agreements made at the OECD must be done by consensus.
Last month, three Democratic senators sent a letter to Treasury Secretary Janet Yellen and National Security Adviser Jake Sullivan urging them to use the Tuesday meeting “to fulfill a key and durable promise on international energy finance.”
“Having the senators weighing in was an important reminder that the White House needs to finish the job,” said Schmidt.
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