In April, financial solutions giant SEI announced it had joined forces with relative minnow Ctrl Alt to take part in the Bank of England’s Digital Securities Sandbox (DSS) initiative. For a company with the size, range and might of SEI, what was the attraction of partnership over internal innovation? Capital Pioneer spoke to SEI’s Sneha Shah, head of new business ventures, and Justin Hayer, director of new business incubation, to find out more…
Capital Pioneer: Why partner rather than develop something in-house, especially since SEI is known for being agile, nimble, and tech-savvy?
Sneha Shah: I lead New Business Ventures, a role established about two years ago. We recognised that markets are accelerating faster than ever. While SEI has historically stayed ahead of market trends for our customers, we now need dedicated resources to continuously monitor developments like AI and blockchain. Our team explores these frontiers, identifies what’s relevant, and integrates it. While the US is moving quickly in this space under the current administration, the UK’s regulator has been very open to sandboxes, experimentation, and industry collaboration. This made it an exciting place for us to operate.
Ctrl Alt came onto our radar and when we met the team, we were impressed by their combination of real-world and digital assets experience. They were gaining significant traction both in the UK and in other markets like the UAE. They also have a global business relevant to our operations in the US.
Justin Hayer: This is a paradigm shift from “electronic” to “digital” in the financial world. Digitisation is crucial for achieving the efficiency and access that SEI aims for. There’s immense hype because the promise is truly spectacular.
I appreciate Ctrl Alt’s ability to integrate current realities with future possibilities. They share our view that this won’t be a sudden transition. Many technologists in this space, including digital incumbents, understand the tech and security requirements, but they often don’t grasp the business journey needed to get there. Ctrl Alt speaks our language, understanding the pain points we face in traditional finance. They comprehend the steps required to bridge to the new digital form of our electronic operations in technology and asset management today and share our practical approach to achieving it.
CP: Much of the practical application of this new technology gets lost in the discussion of its huge potential. What’s your take?
JH: This is a crucial point. Tokenisation began as early as 2017, gaining momentum around 2019. That period was what I’d call the “theatre period” of tokenisation innovation. In 2021, we saw massive VC inflows into tokenisation that brought many “eyes” into the space, only to be sullied by the FTX fiasco of 2022 – collateral damage from crypto impacting real world asset tokenisation.
The tokenisation projects that persevered have renewed interest from the market the last year or so and are continually gaining momentum. Many of those POCs and consortium projects are starting to manifest, at least partially or to a certain extent, half of the journey needed for network effect. We’re now seeing high-quality assets being wrapped in production for leverage and use. However, it’s a bit of a chicken-and-egg situation: who moves first? You put high-quality assets on-chain, but how do you make the user experience and the buy-side willing to take the plunge into tokenisation?
Tokenisation on its own will become commoditised, but there’s a nuance to what you do around tokenising that truly makes the difference. There are complementary actions needed to make it easier. From an investor’s perspective, it can’t feel so complicated. They need to use existing experiences, tools and things they’re accustomed to, but be able to access assets that offer more, whether that be faster, cheaper, or they can do something with the asset—like collateralising or commercialising it— seizing an opportunity not available with the traditional version. At some point, we’ll simply discuss assets that “do more”. Tokenisation doesn’t necessarily have to be overtly visible.
One of our initiatives with a large client, US Bank, focuses on making our SEI Wealth platform accessible to the digital economy without changing the user experience. We could debate if that’s truly “on-chain” for the investor, but many investors simply don’t care. Our role is to make it seamless. How can someone access an account, identify an asset with better features, advantages and benefits, and use the same “buy” button to facilitate the back end? If it’s faster, cheaper and more secure, people will shift in that direction. We haven’t had that watershed moment yet, but we’re getting there. Products like this one with US Bank are trying to standardise things like “FIX on-chain”, creating adapters that allow you to plug into one experience but access multiple blockchains. There’s Swift’s collaboration with Chainlink’s CCIP, and other digital natives are working on interoperability, which is ultimately necessary.
The other aspect that’s not quite there yet is the acceptance of standards. It’s easier to achieve consensus in blockchain than in the traditional sense because the technology somewhat enforces a standard. But we’re approaching a point where these interoperability solutions will be much easier to access, allowing existing businesses to bring off-chain assets and investors on-chain. We already have mechanisms to bring quality assets on-chain.
CP: How does the industry get to where it’s going?
SS: We’re at a pivotal moment. We’ve always had major technologies that transform markets. I recall the beginning of digital identity and KYC, and similar questions arose: where’s the jurisdiction? How will it be done? Self-sovereign identity versus centrally held? We learned that in fast-moving markets, the important thing isn’t just a build-buy or partner strategy, but a build-buy and partner strategy.
We need to move as fast as possible with many small experiments involving regulators, clients, other partners, and sometimes even competitors. Standards are being created, and the only way to be part of that conversation is to have these tools in play. When we developed our blockchain and tokenisation strategy, we analysed our current business footprint and envisioned how it might be reimagined in the future. We saw so many ways it could either disrupt or create opportunities that we realised we just choose one partner. We need to work with multiple partners across jurisdictions, build some things ourselves, and continuously learn. Rapid learning is crucial in this industry’s current state.
JH: This isn’t my term, but “coopetition”—collaborating with your competition—is vital. The promise of what this technology can do to streamline the market and enhance accessibility to financial and capital markets is so substantial that the pie becomes large enough for everyone to win. We can all have a role to play, and it doesn’t necessarily mean we have to be at each other’s throats. That will come later. But to shape the industry to a point where we can differentiate ourselves and create our competitive moats, coopetition is vital. So, we’re collaborating on standards, POCs, and other initiatives with people we would normally compete with, to drive industry growth and adoption of these new technologies.
SS: Investors don’t care about the underlying technology. There’s a tendency with new emerging tech, and AI has the same problem, for people to focus on the technology itself. It becomes the “shiny object,” and you forget the purpose. This is why our focus is on experience, efficiency and access, because that’s what the client cares about. They don’t care what tool you’re giving them, if they can do it efficiently, get the experience they’re looking for and have access to the services they need. We try very hard not to glamorise the technology.
CP: How do you think capital markets will change and what’s your timeline?
SS: The danger with some of these new technologies is that we could go faster. However, it’s like the transition from steam to electric power. Many companies that simply plugged electricity into their steam-powered buildings without changing the underlying plumbing didn’t truly benefit. It will be similar with tokenisation. Many people will just plug in pieces but won’t reimagine processes. The market leaders will be those bold enough to ask, “Do we really need to do it this way? Why are we doing it this way?” So, while it might take time for the entire industry to catch up, a set of leaders will emerge very quickly by reimagining the model in exciting ways.
JH: The reason the sandbox collaboration with Ctrl Alt is so important is that the regulator is willing to listen to how we could effectively change the market dynamics of how value is delivered from an issuer to an investor. That value chain today has checks and balances due to regulation that arose from fraud or the inability to reconcile between counterparties to mitigate counterparty risk. When a technology can essentially facilitate and create that same level of trust between counterparties, they are open to rethinking what we know today. There is a process to follow, which includes feedback and working with the regulator and others, as it is going to be such a huge task to reorganise an entire industry.
SS: We didn’t want to just be a “fast follower”. It’s our job to experiment, which allows us to learn and is ultimately going to produce a better result for our clients.
