A Fireside with Nadine Chakar, Global Head of DTCC Digital Assets — Transcript

Full transcript

1. 0:01Yay, Nadine.
2. 0:04>> Good morning.
3. 0:06>> Well, this is really what they were all
4. 0:07waiting for was to hear from you.
5. 0:10So, Nadine, why don't you tell them what
6. 0:13it is that you do?
7. 0:15>> I wish I knew.
8. 0:17Uh I uh I manage DTCC's digital
9. 0:20strategy. So, what this entails is
10. 0:24really taking a hundred and fifteen
11. 0:25trillion dollars in assets and trying to
12. 0:27put them on chain. So, that is uh that's
13. 0:31our life's work, I guess, and really to
14. 0:34uh tokenize and digitize the US market.
15. 0:36So, our clients tend to be the largest
16. 0:39uh broker-dealers, banks, uh in the US,
17. 0:42and we're trying to take all that
18. 0:43inventory working with them to put it on
19. 0:45chain.
20. 0:46>> So, why lead this?
21. 0:49I think that uh we've talked about this
22. 0:50before.
23. 0:51Uh didn't have to make this move now.
24. 0:55You could have waited and watched
25. 0:56everybody else and saw what they're
26. 0:57doing, but you're actually leading
27. 1:00this on chain movement. So, why do that?
28. 1:03>> Well, then Alice, as you know, we've
29. 1:04been waiting for 10 years as an
30. 1:05industry, so I I I think I think we're
31. 1:08ready. Um and what we've realized is
32. 1:12a lot of institutions have We we've seen
33. 1:15infrastructures mushroom uh in the US,
34. 1:18and that led to a lot of fragmentation,
35. 1:19and I would say to a certain extent a
36. 1:21lot of uh frustration of not being able
37. 1:24to collate and be uh and and aggregate
38. 1:26these assets and really move as one into
39. 1:28the industry. What DTCC does just in
40. 1:31traditional firm and the tools is we are
41. 1:34the sole post-trade depository in the
42. 1:37US, and really it's a benefit when you
43. 1:39look in Europe, it's very fragmented.
44. 1:41So, right now the conversation in Europe
45. 1:43is how do you move to T+1? Now, we're
46. 1:46talking atomic settlement here, but
47. 1:48they're trying to move into T+1, and
48. 1:49it's harder when you have multiple
49. 1:52measurable fractions. We've been blessed
50. 1:54in the US to have one, which is DTC, but
51. 1:57over the years as we're trying to juggle
52. 1:59and wrestle with how to become more
53. 2:01digital, we've seen a lot of
54. 2:03infrastructure. So, we are a neutral
55. 2:04party that's been able to bring
56. 2:07everybody around the table and create a
57. 2:09common denominator. So, that is where we
58. 2:11started and then we have all this
59. 2:14all this inventory. So, we're putting
60. 2:16down the down payment of some $30 at
61. 2:19some point today uh where where the
62. 2:22markets could could right now tokenize
63. 2:25their assets and start to execute um on
64. 2:27their digital strategies.
65. 2:29>> Okay, so I have two things with what you
66. 2:31just said. You first of all
67. 2:33you said at some point today.
68. 2:36>> So, today's the day
69. 2:37uh that DTCC will open up its
70. 2:40tokenization services uh to
71. 2:43uh to our participants and what that
72. 2:45means uh it's a voluntary service. So,
73. 2:48that that's the first thing. Uh so I
74. 2:50don't think it's going to be like Black
75. 2:52Friday. We open and we see the masses
76. 2:54going in. Unfortunately, I wish it was,
77. 2:56but it's not. Um and it's really going
78. 2:58to depend on on different participants
79. 3:01wanting to convert their assets um and
80. 3:04put them into wallet. We may not have
81. 3:06activity today. I don't know. That's why
82. 3:08I said uh at some point today, but
83. 3:11service is open, the product is there,
84. 3:13and whenever people want to engage, we
85. 3:16are ready for them.
86. 3:17>> So, this is really exciting. Yeah.
87. 3:20>> Thank you.
88. 3:24>> I mean, you've been on this journey
89. 3:25personally for quite a while.
90. 3:27>> It's been a while.
91. 3:28>> And I think that when I think about DTCC
92. 3:31and where they are, you had to you and
93. 3:34maybe Frank really had to push this to
94. 3:36say the look into the abyss and say
95. 3:38we actually want to compete here instead
96. 3:40of be
97. 3:42competed against just by everyone.
98. 3:44>> I got to give Frank LaSalla personally a
99. 3:46lot of credit for taking the risk
100. 3:50and the way DTCC DTCC's been innovating
101. 3:52and uh doing work in this space for a
102. 3:55longer period of time. I would say the
103. 3:57pendulum swung in 2023 when they
104. 3:59acquired of company I was running,
105. 4:01Securrency, uh to do that. And it was
106. 4:04Frank's uh vision and my colleagues on
107. 4:06the executive committee and the board
108. 4:08that really took that leap of faith. And
109. 4:10he'll tell you when when he when he did
110. 4:13this acquisition, it was a hedge. They
111. 4:15didn't know which way it was going to
112. 4:17go. And if we look uh at history, it
113. 4:19wasn't till eight late '24 that we
114. 4:22started to see that things were getting
115. 4:24a little bit clearer and that we can
116. 4:26move forward. Um and from there, we
117. 4:28moved at rapid pace. In 2025, we got our
118. 4:31no-action letter December of 2025. We
119. 4:34got our no-action letter uh from the
120. 4:36regulator that gave us the legal
121. 4:39certainty to move forward. And here we
122. 4:41go. 45, 46 weeks later, we're ready to
123. 4:45to go live. So, um it's been a journey,
124. 4:47but it's really the vision and
125. 4:49perseverance of Frank and the team uh
126. 4:52that put us in a position to succeed.
127. 4:54>> So, I have two questions around this.
128. 4:55First, I want to talk about the public
129. 4:57blockchain aspect. Obviously, you guys
130. 4:59have announced that you're building on
131. 5:00Stellar. Um part of the reason why
132. 5:02you're here, but also I love you, so I
133. 5:04would have you here regardless.
134. 5:05>> Likewise.
135. 5:05>> Um but the idea of a public blockchain
136. 5:09having regulated securities on it, was
137. 5:11that a heavy a high bar for you?
138. 5:13>> Well, it it took a lot of convincing, a
139. 5:16lot of explaining, a lot of education.
140. 5:18But this is my personal opinion. I think
141. 5:20the pub the the future is definitely
142. 5:22public. Um and we deliberately chose a
143. 5:25multi-chain approach. So, we we are
144. 5:28we're going to be very careful. We don't
145. 5:30want to pick winners and losers. We
146. 5:31can't. Um so, we have put out our
147. 5:35parameters of what we need in a chain.
148. 5:38Uh Stellar went through them in flying
149. 5:40colors and a couple of others. So, while
150. 5:43today we're launching on two chains, in
151. 5:45the very near future, we'll have uh a
152. 5:48lot more. And Stellar being the first uh
153. 5:51among them uh to hopefully go live. I
154. 5:53think we're looking at Q1, Q2 at this
155. 5:55stage to announce. So, we're very
156. 5:57excited about that. And we the the the
157. 6:00name of the game here is to give
158. 6:01participants choice. Uh Uh, but we also
159. 6:04want to make sure that, as you know,
160. 6:05every chain caters to a certain use
161. 6:07case. So, we want to make sure that our
162. 6:09clients can go where they need to be
163. 6:12without the heavy lift uh, of having to
164. 6:14do that themselves. So, we think that is
165. 6:16the right approach. Um, I talked about
166. 6:18115 trillion dollars in assets, but
167. 6:21there's also four quadrillion dollars in
168. 6:24settlement that goes through our pipes
169. 6:26um, on a yearly basis. So, at this point
170. 6:28in time, there's not a chain that can
171. 6:30help us
172. 6:31do all that. And when we launch, uh,
173. 6:34we're also looking to process corporate
174. 6:36actions on chain. So, speed,
175. 6:38scalability, resiliency is all important
176. 6:40factors, and that's why we have to go
177. 6:42with a multi-chain approach. But,
178. 6:44looking forward to jumping on Stellar,
179. 6:46uh,
180. 6:47sooner than later.
181. 6:48>> soon enough, maybe. Can't happen soon
182. 6:49enough. Okay, but I want to ask you,
183. 6:51when we I hear
184. 6:53sometimes, and we actually, uh, were at
185. 6:56a dinner one night, or one of your
186. 6:57colleagues was at dinner with us, and
187. 6:59people criticize the idea of a digital
188. 7:01twin.
189. 7:02You want to talk a little bit about
190. 7:03that, and why that makes sense for you?
191. 7:06>> That is really unfortunate. Uh,
192. 7:08so, a digital twin, uh, for us made all
193. 7:11the sense in the world, right? We have
194. 7:13existing securities that are sitting in
195. 7:15custody today, and my colleague will
196. 7:19argue that is the native, the true
197. 7:21native issuance. So, what we've done is
198. 7:25we've created a conversion process. We
199. 7:27can go from legacy
200. 7:29to digital, and vice versa. You could do
201. 7:32that all day long if you're bored. We
202. 7:34use the same Q Sip to ensure that we
203. 7:36don't fragment liquidity. Um, and that
204. 7:39is really important. Uh, while we're all
205. 7:41enthusiastic about tokenization, we've
206. 7:43also got to realize liquidity's pretty
207. 7:46thin, um, and when you got large
208. 7:48institutional investors, we've got to
209. 7:49cater to that. So, that's really
210. 7:51important. Um, and and contrary to
211. 7:53public opinion, digital digital twins do
212. 7:56trade 24 hours a day. They're
213. 7:57composable, they're programmable, they
214. 8:00do all the things,
215. 8:02uh, that a native issuance does. Uh,
216. 8:04actually, native issuance cannot
217. 8:06flip-flop between most states. Um and
218. 8:09the only thing is we don't maintain the
219. 8:11records on chain. We still but we are a
220. 8:14heavily regulated depository. We are
221. 8:16what we call the good control location.
222. 8:20Um and we have to keep um our records.
223. 8:22We are the record keeper
224. 8:24um of the United States. So, we believe
225. 8:26the digital twin is the most elegant,
226. 8:29um the most uh predictable, and uh
227. 8:33useful um
228. 8:37construction that is that that's out
229. 8:38there. And the last thing I'll say,
230. 8:40because of the digital twin concept, we
231. 8:43were able to give institutional
232. 8:45investors the certainty they need around
233. 8:47the legal framework, the compliance
234. 8:49framework. Those do not change. And if
235. 8:52you're an institutional investor, reason
236. 8:53we haven't moved as a market is because
237. 8:56they couldn't get that comfort that the
238. 8:58rug wasn't going to get pulled
239. 9:00underneath them at some point. So, the
240. 9:02digital twin does all that. And frankly,
241. 9:06I'm not I'm not taking it personally
242. 9:08yet, uh but I think the digital twin is
243. 9:12really is going to help us push forward
244. 9:14the markets into tokenization. Native
245. 9:17issuance, again, the two models they
246. 9:19exist today, they'll continue to exist
247. 9:22uh tomorrow. But I'm biased. I think
248. 9:24I've got a better model.
249. 9:26>> Uh okay, so you mentioned that liquidity
250. 9:29doesn't just come with tokenization. You
251. 9:30guys have solved some of that by going
252. 9:32back and forth. But where does the value
253. 9:34show up first? Collateral mobility,
254. 9:36managing risk over the weekend when
255. 9:38markets are closed, or is there
256. 9:40something else that we
257. 9:41>> All of the above. Uh I mean, we live in
258. 9:43a very volatile
259. 9:45uh markets right now, and the ability to
260. 9:48be able to move your collateral and
261. 9:49collateralize anytime, anywhere
262. 9:52that you want, um is is a benefit. Um
263. 9:55and the ability of taking your DTCC
264. 9:57assets, and they don't have to be DTCC
265. 9:59assets, they can be any assets,
266. 10:02and be able to use them as collateral is
267. 10:04really uh interesting. Um
268. 10:07anybody that's actually worked in a back
269. 10:10office uh knows how painful it is Uh to
270. 10:13do
271. 10:14any sorts of asset servicing on these
272. 10:17assets when they're out there. So, we're
273. 10:19reducing the the friction that comes
274. 10:21with collateral. No buffers or minimal
275. 10:24buffers.
276. 10:25The We We just had a client on Friday,
277. 10:27actually. They built their own wallet.
278. 10:30They connected to our Basue framework,
279. 10:34which we overlaid with a privacy
280. 10:36network, and they were able
281. 10:38collateral to Japan and back within
282. 10:41nanoseconds. In today's world, that
283. 10:43doesn't happen. Just think of the time
284. 10:44zone constraints that we have. So, we
285. 10:47know it works. We know it's going to add
286. 10:48benefits.
287. 10:50We know there'll be tremendous amount of
288. 10:51capital savings there. And, you know,
289. 10:55when you have more capital, you can
290. 10:56trade more, and that makes everybody
291. 10:58happy. So,
292. 10:59we believe risk management you can
293. 11:01manage that now in real time. You can
294. 11:03manage your collateral. So, a lot of
295. 11:04good stuff there.
296. 11:05>> All they avoid. I love that. So, you
297. 11:07guys net about 95% of what it clears,
298. 11:10right?
299. 11:11And the crypto industry talks constantly
300. 11:13about instant atomic settlement. Where
301. 11:16do those ideas clash? And what should
302. 11:18builders understand how capital markets
303. 11:21actually work before they design for
304. 11:23them?
305. 11:23>> They don't They don't clash.
306. 11:25They They That's the beauty of this
307. 11:27technology and in the infrastructure
308. 11:30that is a is afforded to all of us is
309. 11:32they do coexist. So, think about this.
310. 11:36Four quadrillion dollars. There's not
311. 11:38enough money in the system to allow us
312. 11:41to settle those atomically. Real-time
313. 11:44gross settlements. It's just not enough
314. 11:46money. So, there will be assets that
315. 11:49will definitely settle atomically. Just
316. 11:52know that about that. We will need to
317. 11:54figure out
318. 11:57increase our settle our netting cycles,
319. 11:59our settlement cycles. So, we will need
320. 12:01to find that balance. Now, the nice
321. 12:03thing here is we are not making the
322. 12:06rules. We're not trying to figure out
323. 12:08alone how to do this. We have
324. 12:11user groups, client advisory boards.
325. 12:14Some of you in this room could I'm sure
326. 12:16are part of them. So, this is a dialogue
327. 12:19with the industry right now to figure
328. 12:21out the best way to do this. But, my my
329. 12:23advice to all the builders in this room,
330. 12:25just because we can, doesn't mean we
331. 12:27should. And we need to look
332. 12:30at the unlikely consequences of doing
333. 12:32some of the stuff. So, everything is And
334. 12:35then the other thing is not everything
335. 12:38runs like clockwork or has we designed
336. 12:40it, unfortunately.
337. 12:41Settlement buffers also give us time,
338. 12:44time to be able to deal with mistakes,
339. 12:47time to deal when systems go down. So,
340. 12:49we've got to factor all that in our
341. 12:51thinking as we as we push forward.
342. 12:54But, we'll definitely see a surge of
343. 12:57more atomic settlement. But,
344. 12:58unfortunately for everybody, we will
345. 13:01need to have it coexist with traditional
346. 13:03settlement cycles.
347. 13:05>> Well, and that actually changes over
348. 13:07time, very likely.
349. 13:08>> Of course. I mean, we'll do settlement
350. 13:10more frequently. We'll we'll reduce the
351. 13:12buffers as they're and we'll increase as
352. 13:15much as we can on the atomic. Who knows?
353. 13:17Maybe you give the end user the choice
354. 13:19of what they want to do. So, there's
355. 13:21multiple ways of skinning that cat, but
356. 13:23this is an industry discussion. We don't
357. 13:25want We don't want to be the deciders
358. 13:27here.
359. 13:28>> So, you recently put out a paper with
360. 13:29City and Swift, the connective tissue of
361. 13:32digital finance.
362. 13:33How do you How do tokenized assets they
363. 13:35move across chains and then back to
364. 13:37traditional rails without breaking the
365. 13:39liquidity? Liquidity's obviously a big
366. 13:41part of that. And who sets those
367. 13:43standards or who should set those
368. 13:44standards?
369. 13:45>> Same Same answer. It's got to be the
370. 13:47industry. I mean, we throw away we throw
371. 13:49around the word interoperability like
372. 13:51it's a done deal. And the reality, it is
373. 13:53not. We're interconnected.
374. 13:56I can connect to you, you can connect to
375. 13:57me. Yes, but to do what you're saying is
376. 14:00still not in practice where it needs to
377. 14:03be. Now, we play around with it, we get
378. 14:05it there.
379. 14:06And DTCC, using partners in the
380. 14:08industry, we've been able to insert
381. 14:10ourselves as a systemic orchestrator to
382. 14:13how we move these assets on different
383. 14:15chains, and it's really important
384. 14:17liquidity is a factor.
385. 14:19Data is another factor. Every chain
386. 14:21looks at data differently. And when we
387. 14:24start to process corporate actions,
388. 14:25that's your dividend payments, that's
389. 14:27your maturities, we've got to figure out
390. 14:30a way to aggregate all that from
391. 14:31different chains, get one data standard
392. 14:34so we can process.
393. 14:36And that is a discussion that needs to
394. 14:37happen in the industry. DTCC started the
395. 14:39conversation, and we are we are
396. 14:42fortunate because we have the power of
397. 14:44gathering people, but we need the best
398. 14:46minds in this room and the industry at
399. 14:49large to help us figure out how to set
400. 14:52those standards
401. 14:54and how to get everybody to play by the
402. 14:56same rules.
403. 14:57>> So, I think that one of the things that
404. 14:59you were talking earlier about the whole
405. 15:00notion of the digital twin and how that
406. 15:02annoys you.
407. 15:04I get very annoyed by the fact that
408. 15:06people talk about the idea that this
409. 15:08isn't the the integration isn't coming
410. 15:10live until 2027 and then all of the
411. 15:13volume will move to other chains because
412. 15:16we're not there on your launch day. Tell
413. 15:17me about that.
414. 15:19>> Well, first of all, I'm sitting here, so
415. 15:21of course I'm going to say that's not
416. 15:22true.
417. 15:24But no, I truly believe that's not true.
418. 15:27As I said earlier, this is not a Black
419. 15:29Friday sale. I think integration
420. 15:32adoption is going to be slower than you
421. 15:35and I would like.
422. 15:36That is a fact. Institutional investors
423. 15:39don't move
424. 15:41that quickly, not because they can't,
425. 15:44because they've got many factors.
426. 15:46They've got to make sure they don't
427. 15:47break anything in the process. So,
428. 15:49they're you know, when you say measure
429. 15:51twice, cut once, they'll measure a
430. 15:53thousand times before they cut. So, I
431. 15:55think we do have time. But Stellar also
432. 15:58is getting stronger and better with
433. 16:00every day that goes by.
434. 16:02You know, this morning the speaker I
435. 16:04think before was talking about the work
436. 16:06Ascend has done building repo. Shout out
437. 16:10to
438. 16:11our colleague
439. 16:13and friend Dennis O'Connell who who was
440. 16:15part of that. We're very proud of the
441. 16:17work he's done there. You've introduced
442. 16:19Bell. You're making the system more
443. 16:21quantum resilient, faster. So, we're
444. 16:24excited about all the new things that
445. 16:26you're bringing to the table. And I
446. 16:28don't I don't I do not think it's too
447. 16:30late. Stellar will be on board with Q1
448. 16:33Q2. There'll be many more that will
449. 16:35occur later on, but I don't think
450. 16:37anybody's disadvantaged by time.
451. 16:39>> Did you guys hear that? She said that
452. 16:40the volume is going to come. She said
453. 16:43that.
454. 16:43>> The volume will come.
455. 16:45>> [laughter]
456. 16:47>> Uh okay. So, now
457. 16:48>> I do I do want to add one thing. It will
458. 16:50be the client's choice to choose the
459. 16:54chain of their choosing, I guess, right?
460. 16:57So, there's a lot of Stellar
461. 17:00clients out there. I know there's a lot
462. 17:01of I heard the the names of Franklin
463. 17:04Templeton, WisdomTree, right? So,
464. 17:07there's volume on Stellar today. They'll
465. 17:09be able to benefit from the connection
466. 17:11to us, the same as we'll benefit from
467. 17:13the connectivity to Stellar. It is a
468. 17:14client decision. So, DTCC is not
469. 17:17impeding that volume on Stellar in any
470. 17:20way, shape, or form.
471. 17:21>> Uh okay. So, the Stellar integration,
472. 17:232027, uh first half of the year. For the
473. 17:26institutions and developers here, what's
474. 17:29the one thing you need from the
475. 17:30ecosystem to get early adoption to real
476. 17:33scale? Wallets, custody, compliance,
477. 17:35tooling, data. What is it that you need
478. 17:37from this ecosystem?
479. 17:38>> Well, the ecosystem is playing its role,
480. 17:40right? Like building resilient,
481. 17:42scalable, and secure infrastructure is
482. 17:44key. And I think collectively we've done
483. 17:47a lot of work there. Now, we've got to
484. 17:49give them a reason
485. 17:51uh to jump into the water, right? We've
486. 17:53got to give them products that gives
487. 17:55them yield, products that they can
488. 17:58help their clients achieve their
489. 17:59investment objectives, right? So, it's
490. 18:02starting to build products like
491. 18:03Ascendant, others will as well, the work
492. 18:06that uh Franklin in in in WisdomTree are
493. 18:09doing. So, now we need to build
494. 18:11products.
495. 18:12Um the infrastructure, we could still
496. 18:14use more, right?
497. 18:16Um more choice, more resiliency, better
498. 18:18into And then we need to deal with what
499. 18:21we talked about. Interconnectivity is
500. 18:23key. Uh standards is key and that's what
501. 18:26gives an institutional investor the
502. 18:28comfort that their assets are safe.
503. 18:32They're not going to have somebody from
504. 18:33compliance tapping them on the shoulder
505. 18:35and going like, "Hey, you didn't think
506. 18:37of this or you didn't think of that."
507. 18:38So, it is a journey uh and I think
508. 18:41collectively we've done there's a pretty
509. 18:44good down payment on infrastructure.
510. 18:46Now, we've got to give them a reason to
511. 18:48get there and that's going to be good
512. 18:49products that they can sell to their
513. 18:52clients and make money. Yeah.
514. 18:56>> Nadine, I am constantly um in awe of the
515. 18:59journey that you've had and how much
516. 19:01focus you had on this. I want to thank
517. 19:02you and I want to congratulate you. I
518. 19:04know it's not launched yet, but it will.
519. 19:06>> It will.
520. 19:06>> It will be today.
521. 19:08>> I hope so.
522. 19:08>> And great work on your part and the
523. 19:10team's part and it is just a really,
524. 19:12really big step for the industry.
525. 19:14>> Dena, likewise, you personally and the
526. 19:16Stellar team have been amazing partners
527. 19:19um and we're looking forward to
528. 19:20continuing that journey together. So,
529. 19:21thank you.
530. 19:22>> Nadine Chakar, everyone. Thank you.
531. 19:24>> Enjoy the conference.