DTCC tests tokenised asset service ahead of October launch

The Depository Trust & Clearing Corporation has demonstrated a tokenisation service for assets held at its Depository Trust Company unit, using the tokens in production-environment market workflows ahead of a planned October launch. Finextra reported that the exercise involved dozens of market participants and technology providers, including JPMorgan, Microsoft, Nasdaq and Circle.

The demonstration follows a December no-action letter from the US Securities and Exchange Commission to DTC, which Finextra said allowed the market infrastructure group to proceed with a service for tokenising real-world assets held in DTC custody.

DTCC’s Tokenisation Service is designed to create tokenised representations of securities already held at DTC. Those digital representations can be delivered to wallets selected by DTC participants, while the underlying DTC-held securities can be moved between conventional and tokenised forms, according to Finextra.

That structure keeps the asset anchored in the existing custody framework while allowing participants to use a digital representation in workflows built for tokenised markets. Finextra said DTCC positions the service as a way for participants to reach additional liquidity pools and execute digital asset strategies with more flexibility.

The conversions took place on two networks: HyperLedger Besu, used as DTCC’s private network, and Canton, described by Finextra as a public network. DTCC used the two chains as part of a multi-chain approach intended to provide resiliency, scalability and choice.

The event covered several transaction types across asset classes inside a DTC production environment. Finextra said these included collateral pledges, securities lending, US Treasury and repo delivery-versus-payment trades, equity delivery-versus-payment trades, equity delivery-versus-delivery trades, equity token transfers and central counterparty margin workflows.

Delivery versus payment links securities delivery to the corresponding cash payment, reducing the settlement risk that one leg completes without the other. Delivery versus delivery applies a similar linkage to exchanges of securities. By testing tokenised assets in these workflows, DTCC sought to show that digital representations can be used in market processes that already support regulated securities activity.

Frank La Salla, DTCC’s president and chief executive, said the exercise showed the group could apply institutional controls to tokenised markets. “DTCC demonstrated that we can apply the same institutional rigor to tokenization as we do for traditional assets while continuing to safeguard the integrity and resiliency of the global financial markets,” he said.

La Salla also described the service as infrastructure for broader digital market activity. “The DTCC Tokenization Service will institutionalize tokenized markets on day one and will be a critical enabler of the digital ecosystem of the future, while reinforcing trust, safety and scale in a digital world,” he said.

DTCC occupies a central role in US post-trade processing, making its approach closely watched by banks, brokers, asset managers and market technology firms assessing how tokenised assets may interact with existing settlement and custody arrangements. The planned October launch will test whether the model can move from demonstration to service delivery for DTC participants.

This story draws on original reporting from Finextra Research.