Today, three of the world’s largest financial market infrastructures (FMIs) – DTCC, Clearstream, and Euroclear – released a paper on the state of the industry’s digital asset evolution. The paper calls for increased collaboration to progress an ecosystem that currently includes fragmented standards, varying regulatory treatment, limited integrations with institutional-grade payment rails and siloed liquidity – all limiting factors to the further digitalization of global financial markets. #
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 that two constraints in particular – scale and interoperability – must be addressed as priorities. #
Years of smaller deployments have resulted in sub-scale, isolated pools of liquidity on proprietary DLTs, creating obstacles to growth. In 2023, 74% of DLT projects across the capital markets involved fewer than 6 participants. Today’s digital asset initiatives are also highly disparate, with varying standards and propositions related to settlement and custody processes and inconsistent approaches to the supervision and governance of smart contracts and related DLT protocols. These challenges, if unaddressed, will perpetuate a fragmented landscape, and run counter to the very efficiencies of DLT that the industry set out to capture initially.
As FMIs, DTCC, Clearstream and Euroclear bring their expertise in innovation and driving industry transformation to address these challenges. To advance adoption and scale, DTCC, Clearstream and Euroclear pledge to collaborate with the industry, ultimately reducing the costs of connectivity and enabling consistent operating standards across processes, platforms, and digital assets themselves. #
