Securities depositories are financial institutions that hold securities, including potentially certain digital assets, in fungible bulk or immobilized form to facilitate transfers and reduce physical handling. In traditional finance, they act as central safekeeping entities, enabling electronic record-keeping of ownership. For digital assets, the concept adapts to secure storage and efficient transfer mechanisms, potentially bridging traditional and blockchain systems. Their role is to streamline settlement processes and reduce counterparty risk.
Context
The application of the securities depository concept to digital assets is a critical area of discussion as traditional financial institutions seek to integrate blockchain technology. A key debate involves how existing regulatory frameworks for depositories can accommodate the unique characteristics of digital assets, such as self-custody and on-chain transfers. Future developments aim to establish robust and compliant infrastructure for the institutional adoption of digital securities.
The UK's Digital Securities Sandbox creates a legal pathway for DLT-based market infrastructure, mandating a systemic approach to operational resilience and risk controls.
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