ClearToken is a London-based startup that originally aimed to become a central counterparty (CCP) for institutional digital asset trading. Its backers include Nomura’s Laser Digital, Zodia Custody, Flow Traders, LMAX Digital and GSR. It recently published the first chapter of its whitepaper, which highlights an evolution in its thinking. ClearToken’s ambition has expanded from being a CCP to becoming a central securities depository (CSD). We suspect that’s a lot to do with achieving legal finality of settlement.
“DvP (delivery versus payment) settlement system operators are typically regulated intermediary FMIs such as CSDs and in FX markets CLS Group provides a payment versus payment (PvP) mechanism,” the startups writes.
The alternatives are to settle via a centralized exchange or prime broker, to settle directly on chain, or to use a single venue clearinghouse, such as Citadel Securities’ backed EDX Markets. A key benefit of a CCP over a single venue clearinghouse would be less fragmented liquidity. The paper focuses on the drawbacks of the other two options.
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