Central Securities Depositories Looking To Blockchain
February 27 2019 - 2:00PM
ADVFN Crypto NewsWire
Bitcoin Global News (BGN)
February 27, 2019 -- ADVFN Crypto NewsWire -- A small group of
central securities depositories (CSDs) in Europe and Asia are
considering how they might collaborate on a new infrastructure to
custody digital assets. These financial institutions are making a
seemingly complete reversal from what the majority of the rest of
the financial industry is doing. Where most attention is paid to
how investments can be made in Bitcoin without actually holding the
currency, these organizations are looking to store the coin itself.
In this way, their function as a business remains parallel to what
they were created for in the late 1980s and early 1990s.
“A new world of tokenized assets
and blockchain is coming. It will probably disrupt our role as
CSDs. The whole group decided we will be focusing on tokenized
assets, not just blockchain but on real digital assets.” - Artem
Duvanov, head of innovation at the National Settlement Depository
(NSD) of the Moscow Exchange Group
The stock market boomed in the
1970s and 1980s. Because of this, the antiquated physical paper
based shareholder systems were beginning to fail. Central
Securities Depositories emerged to solve the problem. These
financial institutions focus solely on holding stocks, bonds and
securities in certificated or uncertificated (dematerialized) form
in one spot, rather than the certificates of ownership needing to
be physically transferred when a stock market purchase and sale is
made. This is now all done electronically, which vastly improved
efficiency of 5the process. However, blockchain technology will
likely take this further.
Similarities to
Cryptocurrencies and Blockchain
The primary functions of CSD run
parallel to many of the strengths being seen with Bitcoin and the
blockchain technology field that emerged from it:
-
Safekeeping Securities
-
Deposit and withdrawal through
relationships with the transfer agent and/or issuers, along with
the underwriting process or listing of new issues in a
market.
-
Dividend, interest, and principal
processing, as well as corporate actions including proxy voting
Payment to transfer agents, and issuers involved in these
processes
-
Securities lending and borrowing,
matching, and repo settlement, or ISIN assistance.
-
Pledge - Central depositories
provide pledging of share and securities. Every country is required
to provide legal framework to protect the interest of the pledger
and pledgee.
In almost all of these situations,
use of cryptocurrencies or a blockchain network would automate the
process further, with completely integrated authentication and
transparency of the transfers themselves.
The group was formed last year as
the International Securities Services Association (ISSA), and in
that time the founding group of 15 has doubled to 30. They have set
a deadline for a prototype platform to present at the annual SIBOS
conference in London in October.
By: BGN Editorial Staff
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