On October 23, the 11th Global Blockchain Summit, hosted by Wanxiang Blockchain Lab, concluded successfully. At the conference, Xiao Feng, Vice Chairman and Executive Director of Wanxiang Holdings, Chairman of Wanxiang Blockchain, and Chairman and CEO of HashKey Group, delivered a closing speech titled "Blockchain: New Financial Infrastructure." The following text is organized based on the live transcription of the event, with slight edits that do not affect the original meaning.
Today, I will share on the topic "Blockchain: New Financial Infrastructure." I want to summarize how the distributed ledger of blockchain has evolved step by step since the birth of Bitcoin's blockchain in 2009, transforming into the infrastructure that is about to reconstruct the financial market.
To understand this evolution, we may need to start with the Bitcoin white paper. The Bitcoin blockchain white paper, titled "Bitcoin: A Peer-to-Peer Electronic Cash System," was published in 2009. Satoshi Nakamoto aimed to create not just a system for sending digital currency, but a new payment clearing and settlement system.
We know that cash has certain characteristics from the perspective of payment, clearing, and settlement. Firstly, it is peer-to-peer: cash payments occur directly between Party A and Party B, and cash payments are settled immediately without intermediaries or clearing processes. Cash payments are "payment equals settlement," with each transaction settled individually— you give money, and the other party gives goods, completing the exchange.
However, cash payments have their disadvantages, such as the inability to facilitate remote payments and the inconvenience of large transactions. The electronic cash system created by Satoshi Nakamoto retains the advantages of cash, such as "payment equals settlement" and individual transaction settlement, while overcoming the disadvantages of cash payments. Therefore, Bitcoin can not only facilitate remote payments but also support large transactions.
In addition to Bitcoin, Satoshi Nakamoto also created a new payment clearing system. Given the various shortcomings of cash payments, electronic currency emerged, making payment, clearing, and settlement more complex—ensuring consistency, completeness, accuracy, and finality of payments remotely requires the involvement of intermediaries, leading to central registration, central custody, central counterparty transactions, and central clearing.
Under the existing banking account system, we first need to swipe a card (payment). After swiping, the PoS machine contacts the account-holding bank to confirm that the account has the funds and holds the money, which is called clearing; finally, the money moves from our account to the merchant's account, which is called settlement. Payment, clearing, and settlement are divided into three steps, making it much more complex than cash payments. After achieving cashless transactions, this process is necessary to ensure the finality, consistency, and accuracy of payments.
From the evolution of financial infrastructure in the United States, we can see that financial infrastructure is always in a state of continuous evolution. Before the 1960s, the U.S. was still in the era of physical stocks/paper stocks. As trading volumes increased, clearing and settlement issues gradually emerged. By the 1970s, the U.S. stock market experienced a "paperwork crisis": as trading volumes continued to grow, the speed of clearing could not keep up with the pace of trading. After transactions, vehicles could often be seen on Wall Street transporting stock certificates from Morgan Stanley to Goldman Sachs and then from Goldman Sachs to J.P. Morgan. This was because different clients purchased stocks from other brokerage clients, and physical stocks had to be delivered through physical transportation. Later, severe clearing delays occurred, causing the New York Stock Exchange to frequently close on Fridays. Why? Because a day was needed to complete the stock settlements for the entire week.
As a result, the industry decided to establish a central depository company to consolidate all stocks under one roof. Although physical stocks still needed to be transported, it was only a transfer between different rooms, significantly improving settlement efficiency.
Later, a central registration, central custody, and central clearing system emerged, and in 1999, the DTCC (Depository Trust & Clearing Corporation) was established to meet the trading volume demands of the U.S. stock market, achieving 100% clearing and settlement on the same day.
Starting in 2025, the U.S. will begin to reconstruct a new payment and settlement system based on distributed ledgers, adopting a peer-to-peer model with fewer steps, higher efficiency, and lower costs, fundamentally built on blockchain technology. Essentially, blockchain is a new type of financial infrastructure, and the definition of financial infrastructure encompasses a complete set of arrangements for transactions, clearing, and settlement.
What are the differences between the old and new financial infrastructures?
The old system, which is the financial infrastructure we are currently operating, adopts a model of central registration, central custody, central counterparty transactions, and central clearing, while the new financial infrastructure based on blockchain distributed ledgers achieves peer-to-peer payment equals settlement and transaction equals settlement. This is why all digital asset exchanges worldwide can easily operate 24/7, while stock exchanges cannot.
Why? Because the settlement models differ: the old system uses a "netting" model, while the new financial infrastructure based on blockchain employs an "individual transaction settlement" model, eliminating the need to pause at specific points to clear previous accounts or net before settlement. This is a significant distinction between the two systems.
We all know that the U.S. capital markets are engaged in a competition regarding the tokenization of stock trading. Coinbase has submitted a complete tokenized stock trading proposal to the U.S. Securities and Exchange Commission (SEC). In this proposal, the traditional central registration, central custody, central trading, and central clearing processes are eliminated. If Coinbase's proposal is adopted, half of Wall Street would be unemployed.
Wall Street, of course, is reluctant to accept this reality. Institutions on Wall Street, represented by Nasdaq, also submitted a tokenized stock trading framework proposal to the SEC a month ago, retaining the DTCC I just mentioned. Currently, the DTCC is only responsible for the clearing of stocks, bonds, and funds, but according to Nasdaq's proposal, the DTCC will also take on the role of token clearing in the future, which means that Nasdaq's proposal preserves the jobs of most Wall Street institutions.
Now this dilemma is in the hands of the SEC. It is expected that the SEC will make a ruling in the first half of next year, deciding which proposal to adopt for allowing commercial institutions to trade tokenized stocks, possibly Coinbase's proposal, Nasdaq's proposal, or allowing both proposals to pilot simultaneously, or even merging the two proposals into a compromise solution.
The core differences between these two financial infrastructures mainly manifest in several aspects:
Settlement mechanism. The old system requires multiple intermediaries to complete settlements, while the new system achieves transaction equals settlement and payment equals settlement.
Structural essence. The old system requires centralized registration and custody institutions, while the new system completes registration on a distributed ledger without the need for registration, custody, and settlement institutions.
Trust mechanism. Traditional financial infrastructure requires strong centralized institutions for trust endorsement, while distributed ledgers rely on consensus algorithms and cryptography to establish trust mechanisms.
Risk characteristics. Centralized institutions are prone to single points of failure, while decentralized institutions significantly reduce this risk but also introduce new challenges such as smart contract risks and digital wallet risks.
Service coverage. Traditional financial institutions are constrained and limited by judicial jurisdictions or centralized systems, while distributed ledgers are almost cross-time, cross-region, cross-space, cross-subject, and cross-institution, which is the core difference between the two.
From this perspective, we can find the essence behind all of Trump's actions after taking office: replacing the infrastructure of the U.S. financial market. From congressional legislation to the president issuing a 166-page document on ensuring the U.S. leads in digital financial technology, to the SEC chairman repeatedly stating that the SEC will establish an innovation exemption mechanism, safe harbor plan, and whitelist for all innovations related to crypto, all of this indicates that this is not just the president's personal action, but a unified action by the U.S. legislative body, government executive departments, industry enforcement agencies, and regulatory bodies—moving the U.S. financial market from off-chain to on-chain, allowing the U.S. financial system to operate on-chain. This is also the meaning expressed in the SEC's speeches, which is to replace the financial infrastructure. Perhaps in five or ten years, buying U.S. stocks will no longer be about buying shares but rather buying equity tokens of a certain U.S. company—this possibility is very high.
The SEC chairman has mentioned several times in his speeches the example of "technology changing industries." He said that in the past few decades, the mediums for recording audio have undergone three iterations: the earliest was vinyl records, which evolved into tapes in the mid-20th century, and then into digital media in this century, allowing everyone to store audio on their phones. He also mentioned that the three technological iterations of audio recording technology have completely restructured the global music industry, and distributed ledgers will similarly restructure the U.S. financial system.
This example is very apt, and he also said, "If it can be tokenized, it will be tokenized": everything that can be tokenized will ultimately be tokenized. This statement is the source of "everything on-chain, everything can be tokenized, everything can be traded," and it is also the basis for Coinbase to create a Super APP.
The above are the views expressed by the SEC in several speeches. I have summarized them to demonstrate that what the U.S. is doing is reconstructing the entire financial infrastructure.
What will reconstruction bring? Reconstruction will bring a shift from "digital native" to "digital twin." Before such a reconstruction, Satoshi Nakamoto invented blockchain, and Ethereum enhanced, optimized, and enriched blockchain and distributed ledgers. We created digital native entities like Bitcoin and Ethereum from 0 to 1 on distributed ledgers. These digital native entities have been running for 15 years now, and we can view it as a massive social engineering experiment, which has proven that blockchain distributed ledgers, digital wallets, and smart contracts are valuable. Traditional finance, or digital twins, has taken over the results of this experiment and is beginning to move the entire financial market system onto the chain, onto a new financial infrastructure, with fewer steps, higher efficiency, and lower costs.
We know that J.P. Morgan has its own JP Coin and has established eight core nodes globally. Suppose you are making a cross-border remittance within the J.P. Morgan system, for example, sending money from New York to Hong Kong. Through the traditional banking account system, via SWIFT and intermediary banks, the final arrival time may take more than a day; if sending from Africa, it could even exceed a week, with a fee of 3%. However, initiating a remittance from New York to a J.P. Morgan account in Hong Kong only takes 2 minutes because the remittance becomes a token at the moment of initiation, and when the money arrives in Hong Kong, it is converted back to U.S. dollars. This is the new financial market infrastructure and also the digital twin.
Digital twin begins in 2024, and RWA also belongs to the digital twin. In fact, the U.S. is approaching this from two aspects:
Tokenization at the funding end. There are three models for currency and fund tokenization:
Stablecoins. Stablecoins are essentially the tokenization of funds or currency.
Deposit tokenization represented by J.P. Morgan. Last year, HSBC launched a pilot for deposit tokenization in Hong Kong, and the Hong Kong Monetary Authority set up a regulatory sandbox specifically for bank deposit tokenization, with various institutions experimenting. Deposit tokenization is also the tokenization of funds or currency.
Central bank digital currency. The digital yuan is also a form of currency and fund tokenization. Whether it is central bank digital currency, deposit tokenization, or stablecoins, the ultimate goal is to tokenize currency/funds. The tokenization of funds/currency is an irreversible trend. As for which model will ultimately occupy a larger share, it is still unclear and difficult to judge.
II. Asset Tokenization. Starting in 2024, institutions such as BlackRock, Fidelity, and Franklin Templeton have gradually begun to tokenize various types of funds under their management, such as money market funds, U.S. dollar bond funds, and equity funds. Once the asset-side tokenization reaches a certain scale, a blockchain-based financial market system built on new financial infrastructure will be essentially complete. In the next 3 to 5 years, we are likely to see a blockchain financial market system gradually taking shape and achieving a closed loop.
Blockchain, as an emerging financial market infrastructure, is gradually replacing the existing traditional financial infrastructure.
So, what are the benefits of currency tokenization? Throughout the history of currency development, the credit attributes of currency can be summarized into three types:
Natural Attribute Currency. In the period before the emergence of fiat currency, items such as shells, gold, silver, and copper coins had their credit endorsement derived from their natural attributes. These materials are products of nature, and through refinement and processing, humans have endowed them with currency attributes, thus categorizing them as natural attribute currency.
Legal Attribute Currency. Since the emergence of sovereign states following the 1774 European Treaty of Westphalia, certain currencies have been legislated as the legal tender or sovereign currency of a country, such as the U.S. dollar and the Chinese yuan. The credit of this type of currency can be seen as granted by law, thus belonging to legal attribute currency.
Technical Attribute Currency. Bitcoin is a currency formed under a complete set of digital technologies, including distributed ledgers, digital wallets, cryptography, and consensus algorithms. These digital technologies empower it, allowing it to become a form of currency recognized by an increasing number of people. We refer to this type of currency formed by technological empowerment as technical attribute currency.
The credit attributes of currency essentially fall into these three categories.
Tokenized currency, however, is the only currency in human history to possess dual attributes.
Before becoming a token, tokenized currency is a form of fiat currency, thus possessing legal attributes and legal endorsement; for example, a U.S. dollar stablecoin is first and foremost a U.S. dollar, which has legal attributes. When it is minted as a stablecoin on the blockchain, it also acquires the technical attributes endowed by blockchain, cryptography, consensus algorithms, and digital wallets. Therefore, it is a currency with dual attributes. Compared to single-attribute currencies, dual-attribute currencies are technically more advanced and represent the latest form of currency development.
Recently, Ray Dalio, the retired founder of Bridgewater Associates, stated in an interview that he believes the ultimate currency in the world is gold, as only gold can be called true currency. He argues that fiat currencies like the U.S. dollar, British pound, euro, and Japanese yen are essentially debts based on national credit, fundamentally still a form of debt reliant on credit issuance.
Additionally, someone has written a book titled "The Last Economy," which has not yet been translated into Chinese. The book mentions that after the development of AI, the economy may have reached its peak. The author describes that before the emergence of AI, blockchain, and the internet, the form of human wealth was primarily manifested through the rearrangement of atomic structures. For example, turning soil into bricks and then constructing houses, where people perceive houses as valuable and a form of family wealth, is essentially a reorganization of atomic structures.
Similarly, cars represent another form of atomic structure transformation and reorganization. Wealth is obtained through the transformation of atomic structures and is stored in new atomic structures.
And what about Bitcoin? Bitcoin is a new form of wealth presented through the rearrangement and combination of bit structures. Bitcoin, Ethereum, and others belong to this category.
As humanity enters the digital age, the Fourth Industrial Revolution—the digital revolution—drives changes in wealth structure, which also explains why Bitcoin has value. From being questioned as a scam at $100, to skepticism at $1,000 and $10,000, the doubts gradually diminish as it rises to $100,000, because more and more people realize that in the digital age, future wealth is likely to be primarily represented by the reorganization of bit structures.
When humanity enters the digital age, since the digital revolution of the Fourth Industrial Revolution, the structure of wealth has changed, which also explains why Bitcoin has value. From being questioned as a scam at $100, to skepticism at $1,000 and $10,000, the doubts gradually diminish as it rises to $100,000, because more and more people realize that in the digital age, future wealth is likely to be primarily represented by the reorganization of bit structures.
New wealth is nurtured on new financial infrastructure, which is precisely the role that blockchain plays as a technology born for the AI and digital age. It is a complete set of financial infrastructure created for future new economic structures, new economic organizations, and new forms of wealth.
Why do we need this form of wealth based on bit structures? Why do we need tokenization?
Firstly, the digital economy and the digital age have characteristics that transcend time, space, subjects, and regions. In the digital world, Newtonian physics no longer applies. You can "build" a house in the air that accommodates hundreds of thousands of people without needing a foundation. The law of gravity is ineffective in digital space, and many physical structures and laws do not function here. Therefore, there must be a new form of wealth and financial service to represent things and value carriers in digital space, which is precisely why we need tokens, as well as tokenized currency and tokenized assets based on the reorganization of bit structures.
Once a token is minted on a public chain, it inherently possesses global visibility, meaning anyone in the world can find it on the public chain, thus granting it global investability. Investors do not necessarily need a bank account; they can invest in other tokens globally through USDT. Any asset holder hopes that their assets can achieve global liquidity and be globally investable.
The new financial infrastructure enhances clearing and settlement efficiency and reduces costs. Any commercial activity that can be realized with fewer steps, higher efficiency, and lower costs will inevitably replace the existing methods that involve more steps, lower efficiency, and higher costs; this is basic business logic.
The turnover time for funds has been significantly shortened; for example, J.P. Morgan's JP Coin improves settlement efficiency from 24 hours to 2 minutes.
In the digital age, with the development of open-source hardware, robotics, and AI agents, as AI begins to create wealth, there will inevitably be a demand for payment, collection, and disbursement. The currency of the digital age and the AI age must be programmable currency, enabling payments between machines through smart contracts. Currently, only technologies based on distributed ledgers, digital wallets, and smart contracts can provide a complete programmable currency solution. This is also a significant reason for the tokenization of currency, funds, and assets. In the future, assets created by AI will also possess programmable attributes, and the currency required by AI will also be programmable currency.
On the last slide of my presentation, I want to clarify several concepts. When we talk about tokens, tokenization, digital currency, and digital assets, we can actually separate them, and when you discuss these topics, you must understand which category you are referring to.
Payment Tokens. Stablecoins or the previously mentioned bank deposit tokenization and central bank digital currencies are collectively referred to as "payment tokens," intended for payment and settlement. These tokens require licenses, and countries are formulating relevant regulatory policies for stablecoins.
Reserve Tokens. Represented by Bitcoin as "digital gold," which I believe everyone is familiar with.
Functional Tokens. Commonly referred to as "digital oil." I mentioned this morning that blockchains can be divided into two categories: those that do not support applications and those that do. The former is represented by Bitcoin, while the latter includes Ethereum, Solana, etc. The design goal of the latter is to encourage broader usage, while Bitcoin's design intention is to reject widespread use. In common law countries and regions (such as Hong Kong and the U.S.), reserve tokens and functional tokens typically do not require approval.
Securities Tokens. This includes the tokenization of financial assets such as stocks, bonds, and funds. These tokens require approval and must be licensed, compliant, and subject to regulation.
Meme Tokens. Represented by Trump Coin, Meme Tokens do not possess real value but may provide emotional value to some extent, similar to the behavior of collecting Labubu trendy toys. Some people spend hundreds of thousands of dollars bidding for special editions of Labubu, just as others are willing to purchase Trump Coin. Memes are a cultural phenomenon referring to personal IP and influencer economies in the internet age.
Alright, that concludes my presentation for today. Thank you, everyone!
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