HashKey Group Joins DTCC Digital Assets Group
HashKey Group is the first digital asset service provider in Asia to join DTCC’s Digital Assets Advisory Services Industry Working Group. DTCC’s working group comprises over 100 financial firms and digital asset companies such as JPMorgan, Goldman Sachs, Nasdaq, and the New York Stock Exchange.
Working group focus is on how to accommodate tokenized assets within the traditional financial markets. Examples include asset issuance, settlement, custody, and cross-infrastructure integration and interoperability. With its headquarters in the regulated Asian market of Hong Kong, participatory members add further experience and expertise in that region to the group.
HashKey’s Background in Asset Tokenization
HashKey has digital asset service offerings and has undertaken tokenization of real-world assets throughout the Asia-Pacific region. In 2023, HashKey has active participation in several projects relating to the Hong Kong Monetary Authority, Project Ensemble Architecture Community and the Tokenized Bond Expert Group.
HashKey is in a good position to discuss operationalizing tokenized securities in line with existing financial market regulations and could provide tel blown insights. Participation also adds more representation of Asian digital asset firms to global tokenization discussions.
Tokenized Securities Infrastructure by DTCC
Since last year, DTCC has been carrying out tests to see how tokenized securities can interact with existing market systems. Last month, DTCC conducted its first tokenized securities transactions in a live production environment using securities held by the Depository Trust Company (DTC).
The cases included several use scenarios involving the use of institutional equity transfers, collateral pledges, securities lending and delivery-versus-payment transactions. The transactions included U.S. Treasuries and repos, illustrating that this type of technology can be used for more than just purely representing assets.
DTCC tested infrastructure across a private blockchain built on Hyperledger Besu and the public Canton Network. Reported assets in the trials were the Microsoft and Circle shares, the Invesco QQQ Trust, SPDR S&P 500 ETF and a BlackRock Treasury ETF.
JPMorgan Participates in DTCC’s Tokenization Experiments
JPMorgan has participated in a similar tokenization experiment conducted by DTCC. One transaction included shares of the Invesco QQQ Trust, where the underlying securities were left in custody of DTC while digital records of the securities were maintained on the blockchain.
This is an important case because it demonstrates that, in this model, tokenization can be implemented without the replacement of the current custody model. It leaves existing securities ownership rights and custody arrangements in place.
DTCC Pushes for October Launch of Tokenization Services
DTC (a DTCC subsidiary and the major U.S.-domiciled central securities depository) holds more than $114 TTD in securities, representing securities held within the system and not indicating that all those assets have been tokenized.
DTCC has promised to launch tokenization services in October 2021. In line with these services, DTC participants would be able to tokenize securities already held in DTC and transfer them to custodial wallets.
The model can allow securities held in DTC custody to remain unchanged and can provide participants with the flexibility to switch between tokenized and non-tokenized formats.
Significance of HashKey’s DTCC Membership
Being a HashKey DTCC member is their first step towards creating a link between institutional financial infrastructures of Asia and digital asset markets. However, as of now, the company has no public DTCC integration, jointly issued tokenized product or commercial agreement.
For now, HashKey’s role seems to be limited to the working groups and some discussions on the ongoing standards for institutional tokenized securities. That said, the simple fact of their inclusion talks volumes on the general shift of the industry towards incorporating blockchain technology with existing capital markets.
