‘Crypto Winter’ Highlights Importance Of Custody

Dan Watkins, head of global market infrastructure EMEA at BNY Mellon, said the crypto winter underscored the importance of trusted custody providers to protect assets in the event of bankruptcy.

Watkins spoke on a panel on capital markets innovation at the AFME Operations, Post-Trade, Technology & Innovation 2022 (OPTIC) conference in London on September 27.

The fall in crypto valuations, which has been dubbed “crypto winter,” reminded everyone that custody isn’t always necessarily exciting but it is important according to Watkins. Investors have found that assets held by some crypto exchanges are not protected in the event of bankruptcy.

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“As a custodian with an upcoming offering in the digital custody space, we’ve seen an avalanche of interest in a true old-fashioned bankruptcy remote service, ‘my assets don’t disappear when things go wrong ‘” Watkins said.

HQLAᵡ DLT platform

Watkins pointed out how BNY Mellon has used distributed ledger technology because warranty efficiency is very important and the industry is trying to remove delays.

In July 2022, BNY Mellon and Goldman Sachs completed the first agency securities lending transactions, worth hundreds of millions of US dollars, using the HQLAᵡ DLT platform. HQLAᵡ created ISIN-level securities trackers called digital collateral records (DCRs), the first of their kind, from loaned securities it received from BNY Mellon and gave Goldman Sachs a digital copy of the transactions.

Digital collateral registrations allow holders and agents to transfer ownership of any security on the HQLAᵡ distributed ledger without conventional settlement mechanisms and pave the way for eligible clients to reuse ISIN-level DCRs in subsequent collateral obligations at a later date. or more tripartite agents.

Amar Amlani, Head of Digital Assets EMEA at Goldman Sachs, said in a statement: “This represents another key step in our adoption of DLT to facilitate traditional financial activity to unlock efficiencies between market players. ”.

D7 platform

Samuel Riley, chief executive of Clearstream Holding, agreed on the panel that there needs to be a business case for using new technologies.

He highlighted the launch of the D7 platform, the infrastructure component of Deutsche Börse’s “7 Market Technology” series covering trading, clearing, settlement and analysis across global networks and various asset classes. assets. The platform will enable financial institutions to issue, register and transact electronic financial instruments and enable end-to-end processing of the entire lifecycle of digital assets.

“D7 is not a game of profitability,” Riley said. “It’s a bet on the ability to adopt a new technology and integrate it into a current business where it adds value.”

Samuel Riley, Clearstream

The platform allows Deutsche Börse to bring products that were usually over-the-counter into a more digital environment. Riley said: “Data opens up a whole new set of opportunities that aren’t accessible today.”

Deutsche Börse’s D7 partners include Digital Asset, which helps build the standard representation of digital instruments, while blockchain enterprise software provider R3 and cloud computing and virtualization technology company VMWare are working on protocols for digital instruments. decentralized networks. The team also uses Microsoft for cloud components.

D7 aims to connect to both in-house developments and independent services based on blockchain and DLT. For example, HQLAᵡ can connect to the platform.

Valeria Zafar
Valeria Zafar, Digital Asset

Valeria Zafar, Director of Sales, EMEA at Digital Asset, told the panel that financial institutions have moved away from pilots over the past two years to use new technologies to address key challenges in their business.

She continued that regulation has acted as a trigger in many cases, such as in Germany, which introduced legislation for electronic securities registers and added a new license for keeping registers of crypto securities.

“In Germany, regulation was a trigger for the D7 platform and we saw a big transformation there,” she added. “Switzerland is another great example where regulation in Europe has been much more accommodating to innovation.”

Standardized data

Vikesh Patel, head of capital markets strategy at SWIFT, told the panel that another innovation in capital markets is that the language of finance is becoming more standardized.

“In a world where you have more structured standard data, it becomes quite exciting in terms of what you can do with algorithms,” he added. “Artificial intelligence and machine learning can detect predictive behavior that can provide alerts for action, rather than people wading through that information.”

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‘Crypto Winter’ Highlights Importance Of Custody

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