Today State Street Digital announced it is working with blockchain securities startup Digital Securities Depository Corporation (DSDC) to provide custody services for digital depositary receipts (DDR). DSDC operates a blockchain platform for regulated financial institutions that enables Americans to trade UK stocks.
American Depositary Receipts (ADRs) are a trillion-dollar market. DSDC’s platform enables a digital version of unsponsored ADRs, initially for UK FTSE 350 companies to be traded in dollars in the US with state-side custody and settlement in DTC.
“Having them (State Street) take care of the custody activities for the underlying securities of our digital cross-border securities brings considerable confidence to both investors and our other network members,” said Alistair Jones, CEO of DSDC.
Apart from custody State Street will provide transaction settlement, dividend collection, and FX payment services.
So why use a DDR rather than a regular unsponsored ADR? “The servicing component, which has been around since the 1920s and has severe shortcomings, will receive a major upgrade from DSDC’s distributed market infrastructure,” said Thorsten Peisl, CEO of KALYP Technologies, which provides the blockchain technology. Peisl also previously worked at State Street.
Improved servicing translates into more competitive FX rates, faster issuer payments, and the ability to enable shareholder voting.
In terms of technology, the platform provides a digital securities register and inter-firm workflow with selective transparency.
DSDC aims to sign up service providers that are regulated broker-dealers, transfer agents and global custodians. They will participate in a marketplace to identify the most competitive online provider for a securities service task.
KALYP uses enterprise blockchain Hyperledger Fabric.
Meanwhile, in June State Street launched its Digital division that targets cryptocurrency, central bank digital currency, blockchain, and tokenization.