ClearToken, the London-based market infrastructure startup has released the first chapter of its white paper, “The Case for a CSD for Digital Assets: Chapter One – The Settlement Challenge,” outlining its vision to function as a central securities depository (CSD) for digital assets. The firm draws comparisons to CLS in the FX market and argues that a regulated CSD could help solve structural inefficiencies in the settlement of digital assets.
The publication examines the limitations of both off-chain and on-chain settlement models. Off-chain processes are often dependent on unregulated intermediaries, which can introduce counterparty and systemic risks. On-chain transactions, while offering transparency and automation, are said to face challenges such as network latency, limited scalability, and a lack of common standards. The absence of netting and the requirement for prefunding are also highlighted as constraints on capital efficiency, particularly across fragmented liquidity pools and trading venues.
The white paper references past market failures, such as the 1974 collapse of Bankhaus Herstatt, as reminders of the importance of settlement finality and risk controls. ClearToken argues that, much like traditional financial markets required regulated infrastructure to support growth, digital assets need similar safeguards to reach institutional scale.
Backers
As reported by Ledger Insights, ClearToken is backed by several industry stakeholders including Zodia Custody, Laser Digital (Nomura), Flow Traders, and LMAX Digital. The firm plans to develop a shared post-trade infrastructure that can serve multiple venues and custodians in the digital asset ecosystem.
