- Financial giants like BlackRock and Fidelity are pushing into tokenisation.
- However, a lack of clear standards could hold back blockchain adoption.
- That’s what three financial plumbing firms set out to change with a new whitepaper.
BlackRock CEO Larry Fink’s end goal of tokenising traditional assets just got a power-boost from three massive firms providing the plumbing of global financial markets.
They’re companies most have never heard of: The Depository Trust and Clearing Corporation, Euroclear, and Clearstream.
But they are hugely important pieces of the world’s financial markets.
They joined forces on a new whitepaper, which outlines principles for safe and reliable tokenisation of assets like stocks and bonds — paving the way for companies looking to tap into a market projected to be worth $16 trillion by 2030.
Big recent pro-crypto events including the approval of spot Ethereum ETFs in the US “are watershed moments that signal a shift toward broader institutional adoption,” Nadine Chakar, managing director and head of DTCC Digital Assets, told DL News.
Chakar said the DTCC was happy to see strong interest in blockchain tech, but the financial industry needs a push.
That’s where the DTCC, Euroclear, and Clearstream hope their whitepaper will help.
Not household names
The three firms may not be household names.
But, the DTCC, for example, clears about $10 trillion of securities transactions daily. Its user-owners include large investment banks like JPMorgan, Citigroup, and Morgan Stanley.
Clearstream and Euroclear are the DTCC’s equivalents in European markets.
These firms are generally very involved in helping to develop standards for high finance — and now they’re hoping to give investment banks and asset managers a way to adopt blockchain technology.
While banks have issued around $4 billion of tokenised bonds, and firms like BlackRock and Franklin Templeton are offering tokenised money market funds to investors, the whitepaper said it’s just the start.
Blockchain can help banks and asset managers offer clients faster and cheaper services, while also cutting their annual global infrastructure operational costs by up to $20 billion, the whitepaper said.
Yet, broad adoption of blockchain technology in financial firms is still low — only 37% of the financial industry are using blockchain technology, according to a trade organisation survey.
And projects are often confined within the walled gardens of highly competitive investment banks.
The whitepaper does the following:
- Puts forward six core principles addressing compliance and best practice all along the chain of digital asset creation.
- Addresses the lifecycle of a digital security — from its issuance to how firms should interact with clearing agencies like the DTCC, to how assets should be safeguarded once created.
- Recommends that the principles become the responsibility of a neutral third-party like an financial industry organisation that can develop them further.
“We see this work as a fundamental building block to the discussion around standards,” Chakar said.
“That will allow us to speak a ‘common language’ on tokenisation, including how we facilitate interoperability across platforms and systems — both on-chain and legacy.”
Joanna Wright writes about the intersection of traditional financial markets and crypto. Reach out to the her at joanna@dlnews.com.