Definition ∞ A Central Securities Depository (CSD) holds and settles securities transactions. CSDs operate as central custodians for financial instruments, providing services for the safekeeping of securities and the processing of transfers. They play a fundamental role in traditional financial markets by reducing counterparty risk and streamlining post-trade activities. Their function ensures the efficient and secure movement of ownership records for stocks, bonds, and other assets.
Context ∞ The emergence of digital assets and blockchain technology presents both challenges and opportunities for traditional CSDs. There is ongoing discussion regarding how CSDs might integrate distributed ledger technology to modernize their operations and handle tokenized securities. The future involves evaluating hybrid models that combine the regulatory oversight of CSDs with the efficiencies offered by digital asset platforms.
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