David Creer, Global DLT and Crypto Lead at GFT, explains how GFT is partnering with Digital Asset to transform custodial service operations across capital markets through the use of Daml smart contracts across distributed ledger technology.
Global custodians play a critical role in capital markets. From cross border securities to tax processing of asset holdings, custodians are constantly faced with the burden of direct liability along with the cost and risk associated with indirect asset control. To date, there is no transparency between custodians, intermediaries, beneficial owners, or any secured party as it relates to transactions, customer profiles, and more.
Limited System and Application Support for Multi-Entity Transactions
An area of great concern for custodians is position maintenance and tax processing. Position maintenance has limited systems for maintaining positions and ensuring custodians have the most accurate information at all times. Additionally, tax processing has no system for post-trade alerts regarding transaction settlement. However, each of these functions, as well as the entirety of custodian operations, are optimal use cases for distributed ledger and smart contract technology. The multi-entity nature of these transactions provides the ideal operating environment for distributed applications across distributed ledgers.
Pairing Distributed Ledgers with Daml Smart Contracts to Automate Multiparty Workflows
Distributed ledger technology provides a means for businesses to efficiently transact assets across a public, private, or hybrid network of computers in real-time, enabling businesses to react to changes more quickly and eliminate overhead. This decentralised model no longer places trust in a single entity to carry out complex processes and reconcile data discrepancies. Instead, distributed ledgers create a single source of truth where transactions and data sharing are automatically processed. Through the use of smart contracts, automated multiparty workflows can be realised without the risk of stolen or exposed data. Only the entities permissioned to view the data with explicit actions outlined in the code will have the ability to transact across that data set.
GFT has partnered with Digital Asset to bring Daml, the interoperable and vendor-agnostic smart contract development framework, to businesses across capital markets. Combining distributed ledgers with Daml smart contracts enables multiple parties in a transaction to view and act on data in real-time without the burden of reconciliation or manual processes. Daml also provides built-in functions for handling authorisation, privacy, and tracking while explicitly specifying who can view or act upon a contract.
Developing a Single Source of Truth for Global Custodians
In the “Revolutionise Global Custodian Services with Distributed Ledgers and Daml” paper, GFT proposes a solution leveraging blockchain technology and Daml smart contracts. This solution would create a single source of truth with a consortia of entities engaging with custodial services. The solution ensures consortia participants are acting on the most accurate data with extreme data privacy built into the application. This solution would show asset positions, information regarding unsettled trades, product settlement alerts, automate corporate actions, and ensure SRD II compliance.
Learn more about GFT’s global custodian solution and additional opportunities for improvement within capital market functions in the “Revolutionise Global Custodian Services with Distributed Ledgers and Daml” paper.
For more information about Daml and custody services, listen in to ‘Your Immutable Future’ podcast with David Creer and Rodrigo Medgenberg, Sales Director, EMEA at Digital Asset.