DTCC to buy Securrency as asset tokenization rises on Wall Street

Depository Trust and Clearing Corp. announced Thursday it has agreed to buy a blockchain technology firm, in an effort to drive the global adoption of digital assets in capital markets.

DTCC will acquire Securrency, a company that offers trading, settlement, servicing and tokenization of digital assets, expediting the major clearinghouse's efforts in the sector. The deal, expected to close in the next several weeks, marks DTCC's first acquisition in a decade, and comes as major players like JPMorgan Chase, Citigroup and BNY Mellon are working to support the tokenization of assets.

Frank La Salla, president, CEO and director at DTCC, said in an emailed statement to American Banker that the Securrency acquisition will help drive the market's use of blockchain-like distributed ledger technology. He added that the industry's view on distributed ledgers has evolved in recent years.

"We've moved from 'DLT is going to change everything' to a more realistic view that, while DLT still holds great potential, it won't disrupt the whole ecosystem," La Salla said. "We believe the industry is now ready to engage in implementing DLT where it makes sense, and this acquisition has the potential to help organize the industry's efforts and processes, allowing for interoperability between traditional and tokenized assets." 

He added in a prepared statement that the technology will help reduce settlement times, facilitate transparency and risk management, and enhance regulatory oversight.

Financial terms of the deal weren't disclosed, but Bloomberg reported DTCC is paying about $50 million to buy Securrency.

DTCC will use the acquired technology to embed digital assets into its existing products, as well as research and develop new blockchain-based products. La Salla said in the email to American Banker that the team will enhance the technology over the coming months, but didn't share a specific timeline. The company will also license the Securrency technology, so firms will be able to use the technology to create new digital assets alone or in collaboration with other market participants.

Annapolis, Maryland-based Securrency, once acquired, will become a fully-owned subsidiary of DTCC and will operate under the name DTCC Digital Assets. About 100 Securrency employees will join DTCC, including several C-suite leaders. Nadine Chakar, CEO of Securrency, will lead the new entity at DTCC. Chakar, who will report to DTCC Chief Information Officer Lynn Bishop, took the reins at Securrency earlier this year after overseeing State Street Digital. 

"As we join forces with DTCC, we are excited to bring together DTCC's infrastructure capabilities with Securrency's technology to embrace a future where the digitization of capital markets is at the forefront of innovation," Chakar said in a prepared statement. 

Chakar, who was named one of American Banker's Most Influential Women in Fintech in May, added that the deal will help build scalable infrastructure important to the "mass adoption of digital assets." She told American Banker earlier this year that it's a challenge to educate traditional financial firms about blockchain.

"From all of the research you look at, we are going to see the world tokenized," Chakar said in the spring. "Successful leaders will be the ones who recognize this and who will be able to bring the various stakeholders in this industry together and guide them towards a common vision: to drive this remarkable technology forward, to ensure the ecosystem is capable of handling this remarkable innovation, and ultimately to continue the work of building the foundations of tomorrow's capital markets."

Last week, JPMorgan debuted its in-house, blockchain-based tokenization collateral platform, facilitating a collateral settlement between BlackRock and Barclays. Blackrock used JPMorgan's Ethereum-based Onyx blockchain and Tokenized Collateral Network to tokenize shares in one of its money market funds. The tokens were then transferred to Barclays to act as collateral in an over-the-counter derivatives trade. 

Earlier this year, BNY Mellon's securities services and digital leader, Roman Regelman, said blockchain and tokenization technology is one of the bank's top innovation priorities.

Citi launched Citi Token Services last month to facilitate cross-border payments, liquidity management and 24-7 trade finance by turning clients' deposits into tokens. Ryan Rugg, global head of digital assets in Citi's Treasury and Trade division, said in a September interview with American Banker that the ability to tokenize assets like equities and bonds is the "holy grail."

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"I think we're at an inflection point," Rugg said. "[We're] making sure that we future-proof that infrastructure so that if regulation does change and starts approving that, and our clients want to use it, we have the platform built out in a safe and sound way."

Timothy Massad, who previously served as chairman of the U.S. Commodity Futures Trading Commission, said in an interview with American Banker last month that blockchain technology can offer better interoperability and accessibility, but can also introduce risk and governance concerns. He added that tokenization can enhance efficiency.

"The future of this technology is about tokenizing things that have real value, as opposed to a lot of the tokens we've seen today," said Massad, who's currently a research fellow at Harvard University's Kennedy School of Government. "Whether that's tokenized deposits or tokenized stocks, bonds or real estate, there are going to be issues with respect to … how do we then record those and how do they get transferred?" 

Acquiring Securrency is DTCC's latest technology innovation as the capital markets environment evolves. Earlier this year, the Securities and Exchange Commission finalized rules to condense the settlement cycle from two business days (T+2) to one (T+1), meaning market participants will have to speed up the time from trade execution to when the trade is final when the rule goes into effect in May 2024. DTCC has been active in advising clients and updating internally to meet T+1, which will require altering workflows and technology.

DTCC's La Salla added in the Thursday release that the group will aim to increase market stability, efficiency and risk mitigation. 

"We look forward to building on our past work to drive consensus around the standards, controls and frameworks necessary to support regulatory-compliant digital asset solutions and development of the right architecture and infrastructure to ensure widespread interoperability," La Salla said in the statement.