Martin Quensel has spent nearly a decade pursuing tokenization. The co-founder of Web3 native asset manager Anemoy, which is built on the Centrifuge protocol (which he also co-founded), Quensel believes in tokenization as the future of finance.
His career has been preparing him for this moment. Quensel began as a software developer at SAP before co-founding BayBrain, the first iPhone QR code app. Next, he co-founded Taulia, which grew into a supplier financing force. Then came Centrifuge and Anemoy.
Quensel was more intrigued by stablecoins than pure cryptocurrencies. Crypto Winter and the ICO hype cycle strongly hinted that it was too early for commercial blockchain rails, so what was the next (first) logical step?
Credit.
“How can we build credit structures and connect seamlessly, borrowing and lending for real-world use cases?” he asked. “That’s when we started to launch the first pools together.”
Early Anemoy use cases included tokenizing treasury bills and bonds. Today, the company has $4 billion in assets under management. Many of its real-world asset tokenization projects are still going strong.
Quensel was an early tokenization proponent
Quensel started working on what is now known as tokenization in 2017. Was it even a thing that far back?
He admits it wasn’t known as tokenization back then. The focus was on disintermediating the known intermediaries and building a better financial system from scratch. Do more than unveil a band-aid solution by eliminating the need for middlemen like payment service providers and maybe even banks.
“A lot of the pieces you have in the credit or financial value chain are just not required,” Quensel said. “More should be orders of magnitude more efficient.”
Eliminating those unnecessary steps improves transparency and can return 30% or more of costs to participants.
In 2018, business NFTs, where an asset such as an invoice or loan was wrapped around an NFT, were a focus. The NFTs would create a foundation upon which financial and credit structures could be built. Why those pioneers didn’t know it at the time, they were creating the tokenization industry.
Quensel said RWAs have always had important roles in DeFi. When traditional DeFi products delivered low yields, investors could still benefit from T-bills. Then came BlackRock’s involvement, which accelerated on-chain demand. Folks long clamoring for an instant, liquid yet yield-generating instrument would soon get their wish.
Tokenization’s applications in remittances and supply chain finance
Given his background in supply chain finance, does Quensel see opportunities for tokenization in that sector? The answer is a huge “yes”. Improved speed and lower costs help everyone, especially folks in emerging markets like Argentina, Turkey and Vietnam, where there is high inflation, export restrictions and limited access to international financial markets. That includes remittances sent by those working overseas, and payments and invoices for a growing number of SMBs.
“Emerging market suppliers, small and mid-sized ones especially, would really enjoy the speed of payment, and the cost of payment is order of magnitude lower,” Quensel said.
The motivation behind Stripe’s Bitcoin rewards card ploy
Stripe’s recent partnership with Visa and Fold to introduce a Bitcoin rewards card is a recognition that stablecoins are the future, and those who get in on the ground floor have a commanding position in the future of finance. Quensel said traditional payment providers recognize it’s impossible to compete on fees because blockchain is much more efficient.
“Stripe is betting on more and more merchants, points of sale, etc, accepting stablecoins as a payment method,” he said. “Every phone can install a wallet.”
“It’s just a matter of time. I think stablecoins will replace a lot of the payment structures we see today, pretty sure. And I think the US is seeing this and betting that the dollar dominance is maybe even improving.”
“Blockchain is borderless. Why do I need different currencies? If anything can be dollar-based, it’s more a question of whether I want to be dollar-based. But it’s very, very convenient, because it provides fungibility between your different stablecoins and use cases. Everything is basically measured in dollars. It’s all dollars.”
Direct Bitcoin ownership is always best, he reasoned. It can be used as collateral so its owners can make money elsewhere. Bitcoin rewards can only be offered because somebody, somewhere, is using it as collateral and generating more wealth.
“Or you can own Bitcoin directly, and earn those rewards directly, and, most likely, a few times more than you would get on your credit card,” Quensel countered.
RIP CBDCs
Stablecoins’ advent is another nail in the CBDC coffin. Quensel said central banks are slow and don’t understand the technology. Add in MiCA, the GENIUS and STABLE Acts, essentially sanctioning compliant stablecoin issuance, and who needs a CBDC?
“If that stablecoin is fiat-backed, it’s all good for the central bank, because (they) cannot endlessly mint new stablecoins,” Quensel said. “You can basically mint a stable coin against directly on-chain-represented collateral. And that is maybe even the better use case, because that is even more transparency than you will ever have in traditional finance.”
“The central bank can print money at any time. The banks that have a relationship with the central bank can print money at any time. They just call it fiat.”
Additional benefits of stablecoins
Quensel said stablecoins can include additional functionality. If collateral value drops below a threshold, the coins could be immediately liquidated. Similar systems showed their worth after the FTX and Silicon Valley Bank crashes.
Forget about Bitcoin being the payment system of the future, too. Quensel said it’s better as a value aggregator. Stablecoins are a better fit.
Tokenization, AI, smart contracts: Futire applications
Looking ahead, Quensel sees more assets coming on-chain. He’s encouraged by NASDAQ’s and DTCC’s recent moves, though he acknowledges growing pains are likely. Make the tokens the shares, make equities available on-chain.
“These things are happening; they’ll revolutionize financial markets as we see them. Now, how can you actively build capital structures, secondary trading, and market making? That is what we need to see first before we see more mass adoption.”
Quensel sees the RWA pie growing faster than the cryptocurrency one. As more structures are built, more investors move on-chain, and that will transform traditional finance.
“I think there are two possibilities, and it really depends on regulation,” Quensel said. “It’s either kind of still a very centralized system, and it’s just using blockchain as a route to transfer and trade.”
“But the more compelling one is understanding that smart contracts need to be regulated and audited in the future by financial regulators and not the participants anymore. Because those smart contracts replace the participants. Then we create a completely new financial system, which is orders of magnitude more of a fit than what we are seeing today.”
“It’s also basically enabling it for AI, because AI in a centralized ecosystem would always work for the benefit of the centralized party providing a service, whereas a system autonomously deployed on a blockchain can directly compete with other AI systems when it comes to investment advice, risk assessment, and thousands of other use cases.”
Quensel said the smart contract safeguards the AI. That will come at some point. When it does, users will get most of the benefits.