DTCC Requires Financial Sector To Help Blockchain Security Issues
The Depository Trust & Clearing Corporation (DTCC) desires the financial sector to develop a consortium alongside regulators to decrease risks linked with blockchain.
In a white paper published on Wednesday, the New York-based post-trade financial services firm stated participants in the financial sector should serve to establish a set of “agreed-upon standards” that could discuss some of the security matters surrounding the technology.
“In light of the speed of digital transformation within the financial services sector, DTCC calls for a coordinated strategy for the development of a principles-based framework to identify and address DLT specific security risks,” states the whitepaper.
The industry consortium can more efficiently recognize best practices and promote baseline security procedures, the whitepaper reads. To enhance its effectiveness, DTCC states standardization “requires collaboration from professional organizations, the financial services sector, and its regulators.”
DTCC has intended to integrate blockchain into its operations for the past couple of years. Although Wednesday’s white paper debates, some of the connected risks have not been appropriately addressed and could leave old players unguarded.
Addressing these risks will enable firms to recognize potential security risks more promptly; the white paper reads. More comprehensive security standardization may also increase overall understanding and user confidence in the technology, as well as to foster greater alliance.
By incorporating regulators in the formulation of the framework, the firm argues will assure alignment with proposed legislation that can also be better protection for industry participants as well as consumers.
DTCC is the world’s biggest trade repository, holding information for more than four-fifths of the universal derivatives market. Its central role has aided standardize basic practices in traditional markets like including a cost basis data framework – defining the original value of an asset for tax purposes – in equities clearing.
Although there have been some early attempts to enter standardized blockchain security practices, DTCC claims it can “leverage our unique role within the financial services sector” to commence developing a broad framework that can be utilized by all industry participants.
DTCC has already initiated the process of standardizing a new blockchain-based financial system. It called on participants to adopt its guidelines, published in March 2019, for the post-trade processing of tokenized securities.