Host: And speThe DTCC, the institution that clears and settles virtually every securities transaction in America, just launched its tokenisation service this month. The infrastructure running underneath it belongs to my next guest’s company. Joining me is John Hallahan from Fireblocks. John, let’s start with what Fireblocks actually did in the DTCC tokenisation pilot.
It is great to join you this morning. We have been involved with the DTCC tokenisation service for the last number of months, working in an industry working group with a number of participants. That was with a view to getting live with the initial version of pilot trades in July. To put it very simply, what we provided Citadel with was infrastructure to access the network of DTCC — which was on the Canton blockchain — the interface to onboard with DTCC and register wallet addresses, and the ability to actually hold and transfer the assets. What does that mean for Citadel? They were able to get a tokenised version of the security. They were able to move it to counterparties including BNP Paribas and Societe Generale, and they were also able to post it to the CME as collateral. Finally able to use that security and that collateral in a very efficient way.
The DTCC handles $4.7 quadrillion in securities annually. What changes now that it is moving on-chain?
This is a great opportunity for everyone in the industry. Financial market infrastructure can bring industry participants together — and that is what has been proved by the DTCC’s work. The service lets participants move tokenised assets between each other around the clock, whereas today with securities and collateral you move that in fixed windows. That means you can cover your positions in a more efficient way and use different securities that DTCC holds in custody as collateral in a more efficient way. And it gives a really good signal to the market that this is production infrastructure and digital assets are a use case many organisations should be focusing on.
Most people think of Fireblocks as a crypto custody platform. Now you are the plumbing underneath Wall Street’s tokenisation infrastructure. How did that shift happen?
When Fireblocks first came into being eight years ago, we were very focused on the crypto market — making sure crypto players, market makers, liquidity providers, and OTC desks could move crypto in very secure ways. But that same infrastructure we scaled on the crypto side is now being used by many financial institutions. We work with over 100 banks — large banks like BNP Paribas and BNY Mellon. Wall Street organisations are looking to do three things: custody assets in a very secure way, move those assets to counterparties, and issue assets — whether cash or securities. Fireblocks provides a really good suite of services for that. We see banking as our biggest growth market, along with payments.
The DTCC service is voluntary for eligible participants. Why would a bank choose not to join?
I cannot speak for every bank. But what this provides a lot of banks is a safe way to enter into digital assets and a really good opportunity to start building infrastructure. A bank needs to look at client demand, legal and operating principles. But from my perspective — if you are a bank looking to get into this space, this is an excellent project to start testing those flows. If I was head of digital assets at one of the eligible participants, I would be very excited to participate.
Fireblocks has over 160 live accounts in the UAE. What are institutions here actually doing with digital assets?
The UAE has been a pioneering region for us. Pretty much every use case in digital assets is being done at some scale — whether by firms regulated by VARA or ADGM. We have custody and exchange services. Payments companies facilitating cross-border flows — for corporates like Zodia Markets or for remittances like MoneyGram and Western Union. And an emerging trend around tokenisation — work with organisations like crypto and tokenised real estate, and some banks around tokenised money that we hope to share soon.
Is real-time collateral mobility — the big promise of tokenisation — actually happening yet?
It is definitely real, but we are early. The DTCC trials from July really showed with organisations like Citadel being able to move collateral to counterparties bilaterally — for repo trades, posting margin — that these use cases are real. What we expect is more financial market infrastructure following the lead of DTCC. Is it real? Absolutely. Are we early? Yes. But the promise is there.
When does this go live?
The DTCC tokenisation service launches on the 28th — at the end of this month. We are working with several of the participants including Citadel to be ready for that date. You would expect to see some really interesting trades happening from the end of this month.
What happens if this does not scale fast enough in the three-year window?
The DTCC has done really well by bringing all the industry together and allowing the industry to choose the use cases which make most sense. There were trades for repo, for posting collateral, for securities lending and posting margin. They have allowed the industry to self-choose. Supporting different blockchains, supporting different use cases — that is the best way for success.
What is the next thing after the DTCC that changes how institutions think about digital assets?
Every institution participating in the DTCC — but also institutions outside of it — now needs to have a strategy with board-level approval. That is number one. And then the most important thing after that is to define your crawl-walk-run capability. What do I need to do to start in a very small basis and crawl? What do I then need to bring into production in the walk stage? And then what do I need to run and actually start bringing these use cases to market?
Thank you so much John for being here with us today.
Thank you.
John Halahan: Thank you.
