In its first acquisition in 10 years, DTCC acquired blockchain-based financial infrastructure developer Securrency in December 2023 and renamed the business DTCC Digital Assets. Dan Doney, Securrency’s Chief Technology Officer and now Managing Director and CTO of DTCC Digital Assets, oversees the technology strategy that underpins the firm’s digital asset products and services while ensuring they evolve in tandem with client and regulatory needs.
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Doney sat down with DTCC Connection to discuss the acquisition, which he described as “a move to the center of the financial universe” for blockchain.
DC: While distributed ledger technology promises to improve the efficiency and transparency of the global financial markets, it would require disrupting traditional financial systems and infrastructure – and providers’ current business models. Why did DTCC, which already clears most securities transactions in the U.S., acquire Securrency?
DD: DTCC clears approximately $10 trillion of securities transactions every day. It is the center of the U.S. financial markets. In blockchain terms, DTCC is the consensus model for the U.S. financial markets. It’s how we get to a common truth agreed on by all parties. The problem is – it takes two days.
DTCC is leading a significant, industry-wide effort to drive the U.S. financial markets in the coming months from T+2 to T+1. This will have a tremendous impact on the financial markets, of course, and not just in the U.S. but globally. And that’s very exciting. Moving to one-day settlement reduces the risk of trading and the costs associated with that risk. The next question is, how do you get from T+1 to T+0, and that’s where the Securrency acquisition comes in.
In blockchain, you have an exciting technology that can allow trades to settle in five seconds or less. Think about that. If I engage in a transaction, all parties involved agree on the positions in five seconds. Which means I can then engage in a subsequent transaction with those assets just five seconds later. That’s a massive enabler for the financial markets.
The ability to have instruments representing cash positions, commodities, securities across all asset classes trade on blockchain rails in five seconds is striking. And with the opportunity to support more-complex repo and securities lending transactions, it's an exciting future.
And it’s not just the world’s leading financial markets that have access to these technologies – it’s all markets, including emerging markets and people who simply don’t have access to sophisticated financial instruments. Blockchain offers a future financial market infrastructure that is fair and safe for everyone. And that's exciting. It offers enormous potential.
DC: On the flipside, why did Securrency need DTCC?
DD: Firms in the financial industry can’t put their full trust into a startup or algorithm or smart contract. There have to be accountable parties and an entity that stands behind it. In the end, blockchain needs central securities depositories (CSDs), like DTCC, to enable the trading of securities. The concept of a controller or registrar is not going away. With multiple blockchains, someone has to have the total record of ownership. And there needs to be interoperability with traditional rails.
The standards that DTCC are held to are higher than the requirements blockchain currently can meet. For financial markets to rely on blockchain rails, those networks must be brought up to regulators’ standards. That includes security and resiliency standards. The U.S. markets can’t suffer a prolonged outage.
With DTCC’s acquisition of Securrency, you have a combination of the premier financial market infrastructure provider, a great new technology and an enhanced ability to take that technology to the point where it meets regulators’ expectations in terms of compliance, resiliency, and accountability. And that means we can take this very powerful technology for instant settlement and give it the level of assurance needed to transform financial markets globally. We’re excited to join the fray.
DC: From your perspective, how has the blockchain community reacted to the deal?
DD: The reaction of the blockchain community generally has been enormous excitement. This community has long been seeking approval, wanting to be acknowledged as a legitimate, transformational force that appeals to regulators, financial markets and infrastructure providers.
This is the most substantial step in that direction. In all honesty, the blockchain community has not earned the kind of respect that they’ve seeking for many years. Regulators have struggled to understand this new technology and the reality has often confirmed regulators’ fears, such as potential fraud.
DC: Can you touch on how this acquisition can help bolster blockchain’s appeal?
DD: Controls are necessary. Institutional backing is necessary. There must be accountability. If somebody produces a smart contract but you don’t know who that party is, then there’s no accountability when something goes wrong. If a tiny startup does something wrong or makes a mistake, there’s very little the impacted counterparties can do.
Ultimately, you ensure accountability through a balance sheet – and the bigger the balance sheet, the more responsibility you can bear. Without that accountability, without the balance sheet, there is no assurance. In DTCC’s case, it is owned by the industry. You have the highest level of assurance.
This deal is a form of validation for blockchain. The blockchain community recognizes this as their path to legitimacy.
DC: What are the benefits of the two companies’ cultures coming together? How will the change affect the pace of innovation?
DD: The cultural benefits go in both directions. You have a very excited community with a tremendous spirit of innovation coming together with folks who have the experience and scale that will transform financial networks.
There is tremendous curiosity within the DTCC environment. People are very excited to lean forward and there’s a strong sense of teamwork, which is super exciting. There's a natural, cautious nature at DTCC, which – as I mentioned before – is necessary, but teams are determined to get to the next step, to do things the right way and to innovate. This acquisition is a sign of the commitment of leadership from top to bottom to making sure that DTCC is a tech leader.