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banks absolutely cannot trade , it ’ s a spot offering . Our upcoming launch of a centrally cleared cash settled future next year will bridge a gap , because banks will be able to use general clearing via their CCP . It will be the same plumbing , it will look and feel like a grown-up traded futures product , and this will definitely bring confidence .
The more regulatory determinism we gain in the next few years the better , and believe me there will be a ton of pressure to get frameworks out there now .
Abeetha : As a U . S . regulated investment bank we cannot hold the physical , either spot or on our balance sheet , and that basically prohibits us from providing ancillary activities or solutions to our clients . I ' m looking at regulation for crypto very closely and we would like to and hope to see some advancement in this space .
Laurie : What role can other market participants play in driving the institutional space forward ? Abeetha : The issue of netting I think is very interesting . If you look at the role of CCPs for example , they sit in the middle of that post-trade environment . We have trading houses at the top , CCPs in the middle and then the CSDs at the bottom who provide the settlement . Now by and large all the markets around the world are typically T + 2 settled , if you are trading traditional securities on-exchange . In the crypto world there is no concept of clearing , when you look at purely native assets . The reason for that is atomic settlement on-chain . So what is the role of CCPs in the future ? Could we move the market to T + 0 settlement and essentially eliminate the role of CCPs ? We think that would actually be detrimental to the market because you ’ d end up grossing up all your settlements , it would have an impact on funding and liquidity , and so on . We think there is a sweet spot for settlement , especially when it comes to netting . There is benefit to reducing that settlement cycle from T + 2 to T + 0 , but perhaps T + 0 end of day , or intra-day . This is where custodians and clearing houses can play a big role . We think we ’ ll see a world where different platforms inter-operate . Interoperability is key . We don ’ t want to create the same set of problems in a new space , where platforms don ’ t talk to each other because the token on platform A can ’ t talk to the token on platform B . So there ’ s work to be done in standardising this space , defining what is a digital asset , how can we define a token and how can they transfer and interact . That will help tackle some of the big issues we have like netting , counterparty credit risk , reduced settlement cycles , and make the market much more efficient and scalable .
Taylor : With regards to netting there are a couple of different people , Copper being one , working hard on creating a clearing housetype solution based on Layer 1 , or using a permissioned chain , and effectively what that will do is enable T + 0 at mid-day or end of day so that traders and market makers can synchronise . Right now you have an issue where a client may want to settle T + 1 but your liquidity provider wants to settle at the end of the day . All of a sudden that creates a mismatch . What can we do ? Getting together and trying to enforce some level of unanimity across standards will really help facilitate the way things transact . Solutions like Copper are a huge step in that direction .
Sabrina : The standards issue is very interesting . In traditional finance , there are certain windows and agreed standards around settlement . With digital assets there is as yet no real consistency . The market is also 24 / 7 so choosing the right point in time , when everyone wants to be aligned , is an art rather than a science . We don ’ t want to replace one problem with another .
Jenna : But everyone has to buy into the concept , otherwise it doesn ’ t work . Today , we typically settle T + 1 , because clients fund , and then we give them a line to use intra-day . That works , but it ’ s balance sheet-intensive . To support that next wave of institutional clients , the piece where everyone comes together and follows suit in the same settlement network is key . That hasn ’ t really happened so far but we ’ re starting
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