DTCC brings tokenization to the mainstream with upcoming DSM platform

Rick Steves

DSM will initially interface with the Public Ethereum Network, but will incorporate additional public and private blockchain support based on client and market demand.

The Depository Trust & Clearing Corporation (DTCC) has announced a new platform to streamline the issuance, transfer and servicing of private market securities.

As part of its strategy to bring private markets infrastructure into the 21st century, the firm’s Digital Securities Management (DSM) platform will offer access to participants through both central and distributed infrastructure, leveraging a cloud-based architecture to enable the book entry recordkeeping of securities as well as support the burgeoning digital asset ecosystem by providing the option to create tokenized representations of a security.

The project is subject to regulatory approval, but the authorization will be a major milestone not only for the DTCC but for the wider trading industry.

Besides the common market infrastructure and standards across private markets, DSM will bring tokenization to the mainstream.

Michael Bodson, DTCC President and Chief Executive Officer at DTCC, commented: “DTCC has a long history of innovating to make the global financial services industry more efficient, and we continue to explore new and emerging technologies to support the digitalization and tokenization of assets.

“The DSM platform offers a unique opportunity to implement new technology and streamline processes in the private markets while relying on the secure and resilient infrastructure that we have long provided for the public markets.”

The new DTCC DSM platform will support securities through their full life cycle. Institutional partners will be able to enjoy reduced operational costs through standards and increased automation, including security identifiers; electronification of transfer restriction approvals; gross settlement as early as T+1; and
cost mutualization of non-differentiated services, such as centralized stock record keeping and codification of transfer restrictions.

Another feature of the Digital Securities Managament platform is that broker-dealers are likely to gain the ability to hold customer assets.

DSM will optimize primary issuance and transform secondary markets, creating new business model and distribution opportunities for participants while facilitating a digital asset ecosystem.

DSM will initially interface with the Public Ethereum Network, but will incorporate additional public and private blockchain support based on client and market demand.

Jennifer Peve, Managing Director, Head of Strategy and Business Development at DTCC, commented: “DSM is capable of transforming the private markets, unifying an increasingly fragmented space under a common infrastructure that can automate manual processes, reduce costs and risks, and open up more opportunities for investors.

“DSM is the culmination of a hugely collaborative effort with our clients, industry representatives and other key stakeholders, whose feedback was critical in developing a solution to modernize, digitalize and ultimately transform the private market ecosystem.”

DTCC is still building out the DSM platform, which is expected to launch the service in early 2022, subject to final regulatory approval.

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