As financial institutions increasingly explore public blockchains for regulated use cases, questions of performance, compliance and confidentiality have moved to the forefront. Institutional adoption depends not only on speed and cost efficiency, but also on whether blockchain infrastructure can meet the stringent regulatory and operational requirements of banks, asset managers and global enterprises.
This year, OMFIF convened the Public blockchain working group to present its first report. Following extensive discussions with regulators from around the world, the working group has formed a comprehensive picture of the regulatory challenges hindering the adoption of public blockchain at commercial banks.
Jon Sabol, associate general counsel at Aptos Labs, and PBWG participant, explains how Aptos is positioning its Layer 1 blockchain to support compliant, high-performance applications for institutions and brands, and why purpose-built infrastructure is critical to scaling trust in public blockchain systems.
OMFIF: You represent Aptos Labs. Can you tell us what that is?
Jon Sabol: Aptos Labs, founded in 2022, is the core development team building the Aptos blockchain – a next-generation, high-performance, proof-of-stake Layer 1 blockchain. Aptos Labs also builds applications and developer tools for the blockchain and has its roots in the Libra and Diem projects at Meta – where much of the founding team worked previously – and has attracted significant venture capital support from VCs such as a16z and Multicoin Capital, as well as leading financial institutions such as Tiger Global, Apollo and Franklin Templeton.
OMFIF: You said ‘high-performance’ to describe Aptos. In what respect? Is this about throughput?
JS: Yes, throughput is a big part of it. Since Aptos had its roots in a project intended to enable billions of Instagram, Facebook and WhatsApp users to transact on-chain, the technical capacity to deliver speed at scale was built in from the start. Unlike many blockchains where transactions are processed sequentially, Aptos enables ‘parallel execution’ where multiple transactions are executed simultaneously. Parallel execution – and other novel technological advances – enables Aptos to process more than 20,000 transactions per second, unlocking use cases that would not otherwise be possible on a blockchain. Additionally, Aptos employs a novel smart contract programming language called Aptos Move, which offers unmatched power and flexibility for blockchain development and was designed with safety and security as a priority.
OMFIF: What about transaction fees? Those are charged in the underlying token. Is there a risk of volatility and cost fluctuation?
JS: Gas fees on Aptos are typically a fraction of a penny, making even microtransactions economically viable. While these can fluctuate, this low price has been consistently maintained and it’s low enough that even if the costs increased by a factor of 10, network transaction fees are still not going to be prohibitive, particularly compared to other networks where gas fees can be a limiting factor.
OMFIF: You mentioned institutions and brands using Aptos. Can you give some examples?
JS: There are currently hundreds of projects live on Aptos. Within financial services, some of these include BlackRock’s Buidl Fund, Franklin Templeton’s OnChain US Government Money Fund and Apollo’s Diversified Credit Securitize Fund (ACRED), which gives holders access to Apollo’s global credit strategies. Additionally, the world’s largest stablecoins have launched natively on Aptos, which has played a pivotal role in Aptos’ ecosystem growth, with more than $1bn in native stablecoins on Aptos.
OMFIF: For regulated institutions that are launching on Aptos, there has to be some functionality around who can or can’t hold assets and how they’re transferred. How does that work?
JS: Regulated financial institutions that issue tokens on Aptos or any other blockchain must meet their existing compliance requirements – which often includes controlling who can hold their assets, how those assets are transferred and under what conditions. Aptos has the tools in place to support those needs. The network’s Fungible Asset standard permits issuers to implement role-based access (mint, burn, freeze, claw-back among others) and allows regulated institutions to embed compliance logic – know-your-customer attestations, travel-rule messaging or limits – directly in the asset. There’s a lot of flexibility built into the Aptos platform.
OMFIF: What about confidentiality? Blockchains are typically transparent, but there’s good reason for regulated institutions to not want their customer information shared publicly.
JS: Regulated financial institutions and their customers often expect confidentiality when transacting. But public blockchains, by design, are open, revealing a transaction’s key details and making it challenging for regulated financial and enterprise-grade use cases to adopt the technology. A new feature being explored – Aptos Confidential Transactions – would make a user’s transaction amounts confidential to the public, opening up the space for developers to build compliant, confidential use cases. Sender and recipient information would still be visible publicly, and the token issuer would have the ability to nominate an auditor that would have access to all transaction information while ensuring certain sensitive transaction information remains confidential.
Jon Sabol is Associate General Counsel at Aptos Labs.
This was originally published in OMFIF’s Public blockchain working group report: ‘Driving public blockchain integration in banking’.
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