NASDAQ’s Journey Toward Digital Assets Institutionalization

Asia Blockchain Review
July 28, 2020

The Head of Digital Assets at NASDAQ, Johan Toll, recently had a conversation about the announcement that surrounded a technology agreement with enterprise blockchain software firm R3 in a push towards the wider institutionalization of digital assets.

As part of this co-operation, Nasdaq’s Market Technology business will leverage R3’s enterprise blockchain software Corda, along with professional services and support in building full life cycle solutions for digital assets marketplaces.

By tapping Corda Enterprise, Nasdaq can bolster its broader platform and partnership strategy in order to support new institutional grade assets utilizing Corda Enterprise to manage the complete asset life cycle for new and existing market infrastructure operators on a 24x7x365 basis.

Toll believes that blockchain connects market participants in a fully digitalized and immutable way, facilitating frictionless transactions between the participants.

He is of the opinion that there’s an agreed format for interacting, workflow or process, and all participants on the platform or network follow the same rules. “No one can cheat, double spend, or remove any agreed transactions, technology creates trust between all network participants,” he added.

Toll revealed that Nasdaq embraced blockchain early on from the mid 2010s, and conducted numerous projects and proof-of-concepts that embraced distributed ledger technologies.

As Nasdaq engaged with traditional exchanges and start-up marketplaces, the huge potential in both tokenized assets and adoption of blockchain technology became clear.

For one, they provide open access to and facilitate price discovery in new types of asset classes that enable capital formation, as well as allow expansion into nascent product categories and client segments.

They also can improve legacy processes by reducing the need for manual intervention and data reconciliation between multiple disparate systems. 

Toll outlines five aspects that need to be aligned to institutionalize digital assets. “The technology needs to be mature enough…we need to identify valid business cases where real problems can be solved…the projects must be funded properly…the regulators need to be on board…finally, market participants need to be prepared for the transformation,” he added.

According to Toll, this new relationship between Nasdaq and R3 will play an important role in Nasdaq’s continuous development of solutions and services that support the creation and growth of dynamic, trusted digital asset marketplaces.

“We initiated discussions with R3 around its Corda Enterprise platform because it is designed specifically for highly-regulated environments with stringent requirements on quality of service, and R3 is among the first blockchain pioneers to serve the world’s leading centralized financial institutions,” he explained.

“Overall, our goal is to provide financial institutions with an easily accessible, complete solution to issue tokens and build trusted, digital asset marketplaces designed for high security for trading and settling them within an ecosystem that supports growing volumes, as well as business and product development,” he elaborated.

Looking ahead, Toll feels that a digitalized workflow will enable market participants to connect easily with one another. New types of financial and non-financial marketplaces for trading digital representations of physical assets and certificates will be created. Participants will be able to track and trade their assets easily through their entire life cycle by operating on a harmonized, shared platform. At the end of the day, Toll believes that many different networks will be created across the globe, built on an array of distributed ledger technologies. As he reiterates, “again, standards are key, and once interoperability is achieved, we will likely see some consolidation over the longer term,” he concluded.

Sources : Nasdaq and R3.

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