The Depository Trust & Clearing Corporation (DTCC), which stands as the backbone of U.S. finance, announced on Monday that it will begin facilitating live trades of tokenized assets in July, with a full commercial launch of the service planned for October.
The regulator that handles almost all securities transactions in the country will incorporate blockchain into its $114 trillion worth of custodied assets.
Among the major Wall Street banks that will join in implementing the project include Bank of America, Goldman Sachs, JPMorgan, Morgan Stanley, BlackRock, and Charles Schwab, along with crypto-specific companies such as Kraken, Anchorage Digital, Ondo Finance, and Fireblocks.
The announcement comes after the recent regulatory green light given by the United States Securities and Exchange Commission for the plan. In December last year, the agency gave the Depository Trust Company, a subsidiary of DTCC, the go-ahead to create tokens for traditional custodial assets.
DTCC’s new service will pilot for 3 years
According to DTCC’s statement, the new service will function on approved blockchains for three years, granting digital assets the same legal protections and entitlements as their traditional equivalents.
The protected assets include the Russell 1000, important index ETFs, and U.S. Treasury bills, bonds, and notes.
According to DTCC, the action links traditional and decentralised liquidity and facilitates a greater shift to digital markets, allowing innovations like programmable financing, better collateral efficiency, and 24/7 trading.
“As a global leader in financial services, DTCC continues to galvanize a broad cross-section of industry leaders to facilitate ongoing, robust dialogue that drives widespread digital assets adoption and advances innovation,” Frank La Salla, DTCC President and CEO, said in a statement.
Why is this a big deal?
The DTCC continues to be a crucial player in the financial markets of the United States in relation to settlement and custody services for equities and fixed income securities.
Being a player in handling huge volumes of trades every day, the institution becomes a crucial component of the infrastructure in traditional finance.
The new rollout thus stays as a significant component of the crypto sector, not only because of the magnitude of the institution but also because of its ties with traditional financial institutions.
The institution will be able to connect the trade that takes place on blockchains with the traditional finance sector through its custody network.
This might have a significant impact on increasing the adoption of tokenised assets in mainstream markets and attracting more institutional participants to them.
“Tokenization is an important and critical step toward building tomorrow’s digital infrastructure,” said Nadine Chakar, DTCC’s managing director and global head of digital assets, in a statement.
“DTCC is committed to remaining at the forefront of innovation and championing a scalable, interoperable and risk-managed Web3 ecosystem that harnesses the power of digital ledger technology and delivers real value to the industry.”
DTCC’s move comes in tandem with market trends
The DTCC has gone ahead with its initiative to tokenize assets after gaining approval from the authorities earlier this year. This past December, the U.S. Securities and Exchange Commission approved the use of a pilot program that will see DTCC create a registry for U.S. securities via select blockchains using registered digital wallets.
The move comes on the back of integration of blockchain technology into the heart of traditional financial infrastructure.
Interestingly, the development follows an overall trend towards tokenization being seen in the industry at large. For instance, the New York Stock Exchange has collaborated with Securitize to tokenize securities.
Also, Computershare, which manages shareholder relationships, is teaming up with the same firm to tokenize shares of companies worth billions of dollars.