Editors’ Choice Awards 2023: Digital Assets Initiative of the Year shortlist

Another new category for 2023, Global Custodian takes an in-depth look at the nominees for the Digital Assets Initiative of the Year award. 

By Editors

Bosonic – Cross-Custodian Net Settlement 

Among the many digital asset initiatives and start-ups out there, Bosonic stood out for us for many reasons. The Cross Custodian Net Settlement (CCNS) is an initiative aimed at eliminating counterparty credit and settlement risk in the digital asset market, and was introduced at a critical time in the institutional digital asset journey.  

As the custody of digital assets for institutional investors continues to emerge as a critical element for the maturity of the asset class – particularly given the events at FTX – the removal of friction and risk has been a key aim of Bosonic for some time.  

The outfit has amassed a 34-strong working group consisting of incumbent custodians, such as State Street, along with trading venues and stablecoin providers, to best address the risks that exist in the digital asset space. Both incumbent providers and digital asset specialists appear intent on further enhancing safety and efficiency across the market in the wake of FTX.  

CCNS enables custodians to net settle on behalf of all their institutional clients who are either trading on the Bosonic network or other digital asset venues that are using the platform for clearing and settlement. 

The launch of CCNS represents the culmination of a seven-year technology build, with the first trades in USDC and ETH now executed, cleared, and settled atomically between two digital asset custodians – First Digital in Hong Kong and Propine in Singapore.  

Rosario Ingargiola, CEO, Bosonic, along with securities services industry veteran Jason Nabi have done a stellar job in positioning the firm to help move the industry forward, along with emerging as a thought leader as digital assets go through the ups and downs of a market phenomenon.  

Digital Asset – DAML Finance 

Most experts within the securities services space will be familiar with the work of Digital Asset by now, with the institution spearheading technological developments across the capital markets for the largest of institutions. 

Daml Finance is an open-source offering within its smart contract platform that provides users with the technological framework for asset tokenisation. As Digital Asset puts it, Daml Finance “flexibly represents assets with standard interfaces, reduces risk associated with complex asset movements, and automates straight-through processing”. 

The product provides the libraries, tools, and guidance institutions need to develop complex financial applications in a fraction of the time and accelerates innovation cycles by abstracting away much of the complexity associated with building multi-asset tokenisation solutions.  

Organisations including Deutsche Borse, Goldman Sachs, Nasdaq and Broadridge – to name a few – have all used Daml for their own initiatives. 

“We are taking a different approach to tokenisation that uses smart contracts to model the entire lifecycle of the asset,” explained Eric Saraniecki, head of strategic initiatives at Digital Asset. “Only Daml Finance can model complex use cases with full composability and settlement finality. Many other solutions only tokenise asset ownership, which is one part of the lifecycle process. With Daml Finance’s extensive asset modelling capabilities, market participants can fast-track development efforts, creating new revenue channels by getting these solutions to market faster.”   

HSBC – Orion 

HSBC become the latest custodian to launch a tokenisation platform in October 2022, enabling financial institutions and corporates to issue digital bonds based on DLT.  The reason it stood out for Global Custodian is the thesis behind Orion, and the future ambitions of the platform.  

The new platform uses blockchain technology as a ‘single source of truth’, whereby asset and settlement tokens sit natively on the platform’s ledger. Transactions occur by exchanging these tokens, achieving digital ‘delivery versus payment’.  

As the bank explained, the tokenisation solutions compliment and expand its custody and asset servicing capabilities. 

HSBC added that the European Investment Bank (EIB) is currently exploring the possibility of issuing the market’s first-ever GBP tokenised bond, for registration and issuance under Luxembourg law, using HSBC Orion.   

In the future, HSBC aims to scale the platform to other locations and asset classes with the next issuances expected in Asia and MENAT. The bank also plans to collaborate and co-create on building and shaping market infrastructure solutions needed for tokenised assets and facilitate atomic settlement of cash versus asset tokens. 

John O’Neill, global head of digital asset strategy, markets and securities services, HBSC, acknowledged the growing demand for digital assets and tokenisation. “We are excited to be meeting this growing need by launching HSBC Orion, our strategic platform for tokenised assets. We plan to use HSBC Orion to facilitate further digital bond issuance and expand its usage to other products in 2023.”  

JP Morgan – Tokenized Collateral Network (TCN) 

Back in May 2022, JP Morgan completed a landmark transaction using tokenised Money Market Fund (MMF) shares as collateral, meeting an industry-wide desire for mobilisation without the transfer of the underlying asset.    

The project sprung a new application called the Tokenized Collateral Network (TCN).  

The network enables participants to transfer tokenised MMF shares as collateral on the blockchain. The launch and development of the network has been said to represent a blueprint for the future for JP Morgan, as it eyes an expansion of the application to equities, fixed income and a range of asset classes. 

The ability to split the underlying asset and the ownership of that asset through the use of tokenisation provides the foundation for mobility and utility where previously this may not have existed.   

JP Morgan’s endeavour was built jointly between its collateral services team and Onyx – the underlying platform on which the bank launched its Intraday Repo application in 2020. 

The application sits between the collateral receiver and provider in future client transactions and tokenises the MMF shares using the blockchain. Both provider and receiver need to be present on the application.   

The technology used to connect the Intraday Repo App to the traditional market infrastructure – the Collateral Token Agent (CTA) – is also leveraged on the new application to bridge the gap between digital and traditional markets.  

Described as a “breakthrough for the industry” and – as previously mentioned – “a blueprint for the future of JP Morgan”, both the transaction and the launch of the network were significant moments of the past 12 months for both JP Morgan and the wider industry.