The Depository Trust & Clearing Corporation (DTCC), the world’s largest provider of financial markets infrastructure, has launched a digital asset sandbox to address fragmentation and drive tokenization in the capital markets sector.
Called the DTCC Digital Launchpad, it will involve financial services and technology companies, allowing them to collaborate on pilots “that have a clear path to production.”
DTCC is a post-trade market infrastructure company that provides clearing, settlement and trade reporting services to thousands of financial market participants. In 2023, it processed more than $3 trillion in securities transactions.
The sandbox will address fragmentation in asset tokenization. The sector is expected to represent a $16 trillion opportunity by 2030 as illiquid assets such as real estate become tokenized, making them easily traded globally.
However, this revolution faces the same challenge that traditional railroads struggled with: silos. Today, most tokenization initiatives have conflicting standards and technology, leading to a fragmented ecosystem.
“We have reached a critical turning point in the adoption of digital asset technology, and DTCC is challenging the industry to rethink and reframe its siled approach,” said Nadine Chakar, head of the new sandbox.
“DTCC Digital Launchpad’s ultimate goal is to bring the industry together to build production-ready, secure and efficient digital market infrastructure and standards that will transform capital markets for generations to come.”
The new sandbox offers two versions of launchpads: industry and client. The first will be an open ecosystem where different participants can collaborate on pilots, with DTCC publishing the results of the first series of pilots in the first quarter of 2025. The latter will provide specific solutions for customers’ individual needs, where they can launch their own projects.
Eliminating silos is critical to the success of tokenization. However, the question remains whether DTCC is best placed to lead this initiative. The Jersey City-based giant is the lifeblood of today’s financial markets infrastructure, providing brokerage services that make securities trading safe and secure.
The main advantage of Blockchain in securities trading is the elimination of middlemen, making the processes faster and cheaper. For example, using blockchain’s atomic settlements eliminates the need for central counterparties, which is one of DTCC’s key offerings. Even central securities depositories (CSDs), which the company also offers, can be eliminated via blockchain, with all transactions recorded on a distributed ledger that is secure and immutable. However, removing CSDs would require trading on one blockchain network, so there would be no need to reconcile transactions on dozens of chains.
DTCC, like all its peers, including European leaders Clearstream and Euroclear, realizes that its business model is seriously threatened by blockchain. This has forced the three to invest aggressively in DLT initiatives to ensure their survival. They published a joint paper in 2023 arguing that they should remain at the heart of financial markets, even in a blockchain-powered world, to help coordinate the fragmented solutions.
Brazil to regulate tokenization in 2025
As DTCC and its peers strive to stay relevant in the era of tokenization, Brazil’s central bank has pledged to regulate the fast-growing sector. At a recent industry event, Banco Central do Brasil Governor Roberto Campos Neto also pledged to regulate stablecoins, which have become increasingly popular in the Latin American nation.
Brazil is the leader in digital asset adoption in South America, with Chainalysis’ latest report placing it ninth globally, ahead of countries such as Turkey, Russia and the United Kingdom.
Stablecoins are especially popular as a hedge against fair value depreciation and for cross-border transfers. This has led to a growing number of local stablecoins; just a week ago, the country’s top digital asset platforms – including Mercado Bitcoin and Bitso – announced the launch of BRL1, a stablecoin pegged to the local currency. In August, e-commerce giant Mercado Libre launched MELI, a stablecoin for customers of its digital bank Mercado Pago.
The central bank is concerned about stablecoins. Last year, the governor claimed that much of the adoption is “related to tax evasion or related to illegal activities.”
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