In a white paper, the Depository Trust and Clearing Corporation ("DTCC") outlined guiding principles for the post-trade processing of "security tokens" (i.e., digital assets that are considered securities) to ensure that risks are properly identified and managed.
According to the DTCC, a platform that provides the post-trade processing of security tokens should:
- have an enforceable legal basis for "each material aspect of its activities in all relevant jurisdictions";
- adopt governance arrangements to support the platform's operation;
- appropriately manage "legal, credit, liquidity, operational and other risks";
- provide settlement finality;
- minimize the risks associated with the issuance, settlement and custody of security tokens;
- meet high standards of resilience and security; and
- maintain the privacy and confidentiality of relevant records while preserving access to regulators and external auditors.
Commentary / Mark Highman
The DTCC provides a thoughtful analysis of the principles that should govern the post-trade processing of security tokens and other digital assets. Of particular interest is the analysis of centralized (or "permissioned") and decentralized ("permissionless") networks, the specific risks inherent in each type of network, and how the high-level principles for post-trade processing of transactions outlined by the DTCC would apply to each type of network.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
