Major Financial Institutions Release Digital Assets Framework

Clearstream, DTCC, and Euroclear, three of the world’s largest central securities depositories (CSDs) and central counterparties (CCPs), in collaboration with Boston Consulting Group (BCG), unveiled a comprehensive digital assets framework yesterday. This framework is designed to enhance the integration and efficiency of digital securities across financial markets. BCG has previously projected the digital assets sector could grow to a staggering $16 trillion by 2030, highlighting the significant economic potential of this initiative.

The newly released document, “Building the Digital Assets Ecosystem,” builds on a publication from last year that discussed strategies to combat fragmentation in the digital securities sector. As primary recorders of securities transactions, these institutions play a pivotal role in adopting new technologies like distributed ledger technologies (DLT) or blockchain.

Nadine Chakar, the Global Head of DTCC Digital Assets, emphasized the necessity of moving beyond merely recognizing blockchain’s benefits towards achieving tangible outcomes. “We have a unique opportunity to transform the financial system, but it will require collaboration across a wide cross-section of firms,” Chakar stated.

Challenges and Opportunities in Regulation and Technology

Despite the apparent straightforwardness of these principles, the implementation details are complex. Issues like settlement finality may vary based on the blockchain and jurisdiction, affecting smart contracts’ enforceability and legal certainty. On the regulatory front, while many institutions comply with stringent identification and customer verification protocols, the allure of public blockchains for asset managers poses unique challenges, including potential market abuses like frontrunning, known in technical terms as maximum extracted value (MEV).

Jens Hachmeister, Managing Director of Issuer Services & New Digital Markets at Clearstream, highlighted the transformative potential of these technologies. “New technologies bear immense potential to bring financial markets to the next level of efficiency, speed, and safety,” he remarked. Hachmeister called for an industry-wide collaboration and unified standards to ensure the sustainable integration of digital assets into the global financial system, reinforcing the role of financial market infrastructures in laying the foundation for future digital markets.