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FMIs Role in Advancing the Digital Asset Era

By DTCC Connection | 3 minute read | September 18, 2023

DTCC, Clearstream, and Euroclear released a new white paper to the industry - Advancing the Digital Asset Era, Together, which calls for increased collaboration to progress an ecosystem that currently includes fragmented standards, varying regulatory treatments, limited integrations with institutional-grade payment rails and siloed liquidity – all limiting factors to the further digitalization of global financial markets.

Over the last few years, the industry’s efforts around the use of new technologies have accelerated learning and helped market participants to identify the benefits of and constraints related to DLT on a smaller scale. Firms have documented the early operational and liquidity benefits of DLT and digital assets (often at an experimental level) and have begun to evidence their ability to radically reshape securities issuance, accelerate settlements and empower data transparency.

Today, these potential benefits are becoming increasingly achievable for market participants, leading to an increase in technical maturity, regulatory evolution and market adoption. Having proven what is possible, the focus of many industry platforms and players is now on deepening the functional capabilities of their platforms and integrating them into existing processes, while adding new counterparties to their DLT networks to drive instrument liquidity and production scale.

While the last several years have seen a growing number of initiatives seeking to establish digital asset-based solutions, the paper suggests that industry-wide transformation will likely slow, unless these challenges are addressed. The paper highlights two constraints – scale and interoperability – that must be addressed as priorities.

As FMIs, DTCC, Clearstream and Euroclear bring their expertise in innovation and driving industry transformation to address these challenges. They view their role as helping to drive digital transformation in the industry by facilitating scale, ecosystem connectivity and industry-wide consistency through collaborate with the industry, ultimately reducing the costs of connectivity and enabling consistent operating standards across processes, platforms, and digital assets themselves.

Working in collaboration with industry players, the three firms aim is to connect the industry and to break down barriers to digital asset security adoption (with a focus on real-money assets) by facilitating:

  • Reduced costs of connectivity and entry for existing and new market entrants.
  • Standardization of processes across the digital asset lifecycle — and hence, reduced operating risk and costs.
  • Consistent operating standards for platforms, assets and smart contracts within a well-regulated framework.
  • Increased optionality and choice of platforms, facilitating connectivity through greater industry consensus on integration and standards.
  • Improved interoperability between traditional securities and payment infrastructures, supporting ongoing automation across the asset lifecycle.

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