Digital Asset and a group of capital market participants plan to launch the Canton Network, a ‘privacy-enabled’ interoperable blockchain network designed for institutional assets. Its stated goal is to “responsibly unlock the potential of synchronised financial markets.”
Cathy Clay, executive vice president, global digital and data solutions, Cboe Global Markets, said, “At Cboe, we believe the tokenisation of real world assets may offer an unprecedented opportunity to create new market infrastructure and drive efficiency in the trading of products across the globe. By leveraging new blockchain technologies, we can potentially unlock new opportunities for market participants. Efforts like the Canton Network will help our industry further explore this frontier.”
The project is expected to provide a decentralised infrastructure that connects independent applications built with Daml, Digital Asset’s smart-contract language. That would potentially create a ‘network of networks’, to help previously siloed systems in financial markets interoperate with the appropriate governance, privacy, permissioning and controls required for capital markets. “The Canton Network vision strives to enable seamless connectivity across various blockchain networks in the industry. Such solutions are a key building block for future digital and distributed financial market infrastructures,” Jens Hachmeister, head of issuer services & new digital markets at Deutsche Börse Group.
Chris Zuehlke, partner at DRW and global head of Cumberland, said, “The Canton Network is a powerful answer to industry calls for a solution that harnesses the potential of blockchain while preserving fundamental privacy requirements for institutional finance.
This unique approach, coupled with the ability to execute an atomic transaction across multiple smart contracts, is the building block needed to bring these workflows on chain. DRW is proud to have participated in the founding of Digital Asset and today is excited to see this transformative project come online.”
The Canton Network says it aims to make markets reconciliation-free so that assets, data, and cash can synchronise freely across applications. For example, asset registers and cash payment systems are distinct and siloed systems in today’ markets. “With the Canton Network, a digital bond and a digital payment can be composed across two separate applications into a single atomic transaction, guaranteeing simultaneous exchange without operational risk. Likewise, a digital asset could be used in a collateralised financial transaction via connection to a repo or leveraged loan application.
The network identifies three issues it says have been shortfalls to adoption of blockchain technologies: The lack of privacy and control over data Trade-offs between control and interoperability with operators forfeiting full control of applications by using a shared pool of validators to gain interoperability. The inability to scale due to applications competing for resources and the inherent capacity limitations caused by how public blockchains operate.
The Canton Network says its approach removes these obstacles by balancing the decentralisation of a network with privacy and control, with participants able to safeguard permissions, exposure, and interactions across the network to support security, regulatory and legal requirements. The network can connect existing blockchain systems, such as Deutsche Börse Group’s D7 post-trade platform and Goldman Sachs’ GS DAP, while reportedly retaining privacy and permissioning. The number of Daml-built applications will increase the number of potential connections on the Canton Network.
Canton Network participants will begin testing interoperability capabilities across a range of applications and use cases in July, and participants include:3Homes, Australian Stock Exchange (ASX), BNP Paribas, Broadridge, Capgemini, Cboe Global Markets, Cumberland, Deloitte, Deutsche Börse Group, Digital Asset, The Digital Dollar Project, DRW, Eleox, EquiLend, FinClear, Gambyl, Goldman Sachs, IntellectEU, Liberty City Ventures, Microsoft, Moody’s, Paxos, Right Pedal LendOS, S&P Global, SBI Digital Asset Holdings, Umbrage, Versana, VERT Capital, Xpansiv, and Zinnia. The ASX recently pulled its project to replace its existing settlement system, CHESS, with a blockchain-based settlement system. designed by Digital Asset, costing the exchange group AU$245-255 million, (US$170 million) via a ‘de-recognition charge’.
©Markets Media Europe 2023
