April 27, 2023
The headwinds facing crypto assets are well known, and the market has understandably taken a more cautious stance when it comes to the asset class, how it is traded, and the infrastructure needed to support further development.
We wanted to get a clearer picture of the challenges and opportunities in this space, so worked with GreySpark Partners to look at the unique aspects of clearing and settlement of crypto assets vs. fiat currency & securities. The full report lays out the current picture in detail, as well as recommendations on how to take things forward.
Restoring banking industry and institutional investor confidence in the viability of the crypto assets marketplace is the first step, and GreySpark Partners believes that wider adoption is predicated on four conditions:
Of these conditions, overcoming the technology gaps is the most pressing challenge for the financial services industry. Third-party vendor solutions need to be developed to functionally link fiat assets and securities clearing and settlement systems with the crypto assets marketplaces constituted on brokerage platforms and exchanges.
Today custody and investment banking industry back-office systems are unable to translate crypto assets clearing and settlement protocols into messaging language that can be understood by fiat-centric systems.
Regulation that is slowly creeping into the crypto assets trading arena may help. Codification of product characteristics and trading standards will naturally lend technology providers opportunities to – piece by piece – unify clearing and settlement protocols that are purposefully designed with institutional investors’ interests in mind.
The challenges are not simple, but there are many aspects that are transferrable from existing approaches. valantic FSA has a successful track record of applying technology to Electronic Trading Automation and Payments Automation – which is also applicable to crypto assets.
A recent example was the launch of “wpNex” at dwpbank. This portal enables 1200 banks and savings banks in Germany to develop opportunities to trade digital assets for themselves and their customers. The first component of the wpNex platform is an offer for trading cryptocurrencies, and the pilot transaction based on Bitcoin has been successfully completed. wpNex is to be gradually expanded and enables the banks and savings banks connected to dwpbank to include the regulated trading of digital assets in their service portfolio for retail customers. valantic FSA provided systems for order routing and portfolio management using our business solutions platform.
As this new infrastructure is developed the conditions for institutional investor adoption and expansion of crypto assets trading will follow. For more insights and detail, “The Clearing & Settlement of Crypto Assets Trading” report is available to download here
Changing what’s possible in financial services
Changing what’s possible in financial services