Unlocking DeFi: A Look inside the Vault

And it relates to the DTCC.

Jason, do you want to kick us off?

Sure.

So DTCC, which is the world's largest global securities depository, announced on July 15th that they have conducted a variety of different transactions across asset classes using tokenized digital twins.

So this is actually something that People have been watching for a while.

About seven months ago, the depository received a no action letter from the SEC, which allowed them to go ahead and do this.

And just to sort of describe it, the depository basically holds a very large percentage of equities and treasuries and other assets in what's called street name.

So they're registered to an entity called Seed & Co., And broker dealers and asset managers trade assets, and they have accounts at the depository that show that they are the beneficial owners.

But the actual share registration doesn't typically change.

What's interesting here is by creating a digital twin, they're in effect moving the asset onto either their own proprietary ledger, which is based on Basu, which is a Linux foundation, but formerly Hyperledger.

Or in this context, they also talked about doing work with the Canton network, which is brought forward by digital asset holdings.

So why I bring this up is you think about having an asset in a place of safekeeping.

The place of safekeeping is moving from the typical DTC registration to a tokenized digital twin.

So the rights are there.

They're the same as the security.

But the depository was allowing for the settlement of, say, equities like Microsoft or ETFs like the triple Qs or SPY.

And then also settlement of treasury securities represented as digital twins.

And they use them for things like collateralization for the central counterparty activities.

The point here is that you've got a monolithic system.

systemically important financial institution that is pushing boundaries by looking at new rails for conducting transactions.

So it was about 30 firms that participated.

They were asset managers, broker-dealers, clearinghouses like CME, and a number of different technology providers across both traditional and decentralized finance stacks.

I've had people ask me, what does this really mean? I'd say it means that the depository is trying to position itself to be able to facilitate faster transaction settlement.

So past few years, we've had shortened settlement cycles from T3 to T2 and then T2 to T1.

And now you're talking about near real-time movement of an asset.