This is an excerpt from the 0xResearch newsletter. To access full editions, subscribe.
Twitter is abuzz with pro-crypto individuals claiming that “blockchains will replace TradFi,” specifically targeting the DTCC (Depository Trust & Clearing Corporation) as the primary post-trade clearing and settlement house for US securities markets.
Owned by a consortium of major banks, the DTCC holds a monopoly on securities settlement, processing trillions of dollars in value daily. The idea of the DTCC adopting blockchain technology was once considered laughable, but times have changed.
Recently, the DTCC announced the development of a new platform called “Collateral AppChain” for real-time collateral management using tokenization. Their “Great Collateral Experiment” showcased how this platform could revolutionize the handling of treasuries, equities, money market funds, and cryptoassets globally, eliminating settlement delays and liquidity constraints.
This move by the DTCC signifies a shift towards embracing blockchain technology, a trend already observed in the financial sector. The Collateral AppChain, while likely to operate on a centralized validator set, offers advantages such as improved efficiency and lower costs compared to public blockchains.
Despite potential limitations in composable with DeFi and regulatory compliance requirements, the DTCC’s initiative raises questions about the future role of public blockchains in securities trading. While public blockchains may lack the liquidity and scalability of the DTCC’s AppChain, their decentralized nature presents unique advantages.
Ultimately, the DTCC’s foray into blockchain technology highlights the evolving landscape of financial infrastructure and the ongoing debate surrounding the role of public versus permissioned blockchains in the future of finance.