As Canton Foundation’s executive director, what does your role entail, and how did you first get involved with the firm?
My core career started out in traditional markets, where I worked across Morgan Stanley, Goldman Sachs, and then J.P. Morgan, initially in fixed income risk management. Early on, I developed a deep understanding of the underlying microstructure of the financial system, working on Goldman Sachs’ central funding team, working on funding initiatives across cash management, liquidity management, and also treasury management for the Goldman Sachs Asset Management funds.
I later transitioned to the central trading team within the quantitative investment strategies group, executing macro trades across equities, indices, and FX. I then transitioned to J.P. Morgan, where I worked on electronic FX and credit. In 2016, I encountered Bitcoin while researching Greek government bonds during the sovereign debt crisis. As a macro trader, as well as naturally intellectually curious, I started digging deeper.
What I discovered was not only a new form of asset or currency, but a powerful underlying technology in the form of digital ledger technology (DLT). From that point on, I spent my daytime trading, and my nighttime learning about crypto.
By 2020, my interest had peaked massively around this ecosystem, and so I made a move over to OKX, where I managed the market maker programme and facilitated strategic partnerships as well. After being at the firm for almost four years, I affirmed my initial goal that that I wanted to move into crypto to learn about the technology and the ecosystem. Knowing the power this technology has to transform capital markets around capital efficiencies, along with the operational efficiency, I knew conversion between crypto, blockchain, and traditional markets would eventually end up happening. So after four years, and having learnt about the Canton ecosystem, when the opportunity rose to help lead the Canton Foundation, it felt like the perfect time to make the move.
Today, a core goal of the Canton Foundation is to foster openness, decentralisation, and neutrality across all the stakeholders within the Canton ecosystem. As executive director, my role involves facilitating growth initiatives, developer growth, ecosystem expansion, and go to market initiatives. I also act as a touch point for anyone who is looking to utilise this tech that can be fundamental infrastructure for capital markets, helping coordinate partnerships across the ecosystem.
The Canton Foundation itself is a membership foundation, and we have participants from the largest financial institutions like Goldman Sachs, HSBC, BNP Paribas, Euroclear, and the Depository Trust and Clearing Corporation (DTCC), all the way to crypto native entities such as Cumberland, LayerZero, Ledger, and Copper. These participants all contribute to the governance and token standards for the network.
How does Canton provide for the cross-border repo market? How does the firm’s approach to solving challenges in this area differ from existing infrastructure?
In terms of blockchain technology itself, predominantly in the past, many builders or entities, institutions, or even entrepreneurs, had to make a binary decision around what infrastructure to use.
For example, blockchain can help facilitate 24/7 markets, instant settlements, and composability. But in the past, if organisations chose to build on a public, permissionless blockchain, those networks typically only enabled transparency and interoperability, without privacy and controls. On the other hand, if they chose to build on a private chain, like a Hyperledger, those were private chains that provided privacy and controls, but often operated in isolation — it did not allow for interoperability. There were many tradeoffs that builders had to make.
With the technology that Canton has built, it is a public, permissionless blockchain, but it also allows participants to build in configurable privacy controls and then interoperate all the applications with others on the network itself.
To answer the question around how the institutions are using the Canton technology, they are able to natively issue securities that meet the same types of regulatory requirements and internal client privacy and controls, while protecting their own proprietary data. At the same time, they can interoperate their products or tokenised assets with other institutions on the network itself.
So, as opposed to the current state, where many institutions or many entities are building and launching applications in their own silos, within Canton, they can build those same types of products with their granular level of privacy and control that they need to fit their core strategies or requirements from regulatory to internal controls, while still being able to interoperate or move assets and trade with other partners across the Canton ecosystem natively.
The perfect use case is the repo transactions we have done with DTCC and a couple of trading firms. DTCC operated the repo tokenisation platform, Tradeweb provided the electronic trading and execution venue, and stablecoin issuers supplied tokenised cash through their own applications.
The beauty is that with these different sovereign apps, they were able to talk to one another, settle the transactions natively, and were still able to preserve the privacy and controls that each one of them had to facilitate.
The big difference between doing this on Canton versus a network like Ethereum is that within Ethereum, everyone in the world can see every single transaction that happens, meaning that all activity is fully publicly transparent. Canton, on the other hand, can facilitate when these institutions require privacy on a strict need-to-know basis.
How could financial institutions benefit from being a participant or user of the Canton Network? How have you seen the network develop since inception?
Financial institutions can benefit from Canton by being able to natively launch assets that can meet the same types of security and control requirements that they currently fit into within traditional markets, while still being able to facilitate the core value of blockchains, composability.
Within Canton, you are able to go through the full lifecycle of an asset, from issuance, distribution, trading, settlement, collateral, mobility, and also facilitate the lifecycle events that may happen on a security such as corporate actions.
All this can happen on the Canton blockchain because builders can build in the full business logic around what the assets should do all the way down to the sub transaction level privacy and controls.
Once the assets are built, institutions can have their own access controls, privacy controls, risk compliance parameters, and risk frameworks, while still being able to interoperate or use that asset in order to compose transactions across other institutions or other products within the Canton ecosystem natively. By combining all of these, they are able to preserve 24/7 markets and also facilitate real time settlements should they need to.
Lastly, as I mentioned, firms can have one asset with its own governance and controls, but still be able to compose transactions with others on the network. Today, some of the partners across the ecosystem who have used the tech for their real-world asset tokenisation initiatives around traditional securities have included Goldman Sachs, HSBC, and BNP Paribas. Goldman Sachs has GSDAP, HSBC has Orion, BNP Paribas has NeoBonds, and then most recently, the DTCC has tokenised US Treasuries for short term financing.
One of the bigger transactions partners we have is Broadridge, which is a traditional markets financial technology firm that has used Canton to build a repo financing product. They currently do about US$350 billion worth of repo transactions per day, which is quite incredible to see happening on the Canton ledgers.
How does Canton Network support interoperability? How significant is interoperability in a digitally-focused world?
Interoperability is the means of allowing for different blockchains or different products to talk to one another. Within the Canton Network itself, because we built it as a network of networks, interoperability is native. Therefore, there is no need for bridging mechanisms for native applications and assets to compose atomic transaction. Typically bridges across varying networks impact the atomic settlement or expose vulnerabilities where hacks may occur.
By having a network where there is no need for bridging, especially if people are building natively, the network is more strongly secured than just using bridges and messages to move information back and forth. Within traditional markets, interoperability is done through messaging and reconciliation, which causes frequent time lags and can result in operational risk issues.
By using Canton — where all the different sovereign applications within our network of networks are able to communicate and move value and assets natively — it allows for a much faster, real-time settlement, or atomic instant settlement, than if firms go through traditional markets where there is still messaging and reconciliation, or through crypto, where they may use bridges, but it may come with a lot of heartaches and potential vulnerabilities.
How does the network ensure the privacy of collateral transactions, while limiting the access of confidential terms and onchain movements to the relevant counterparties?
Privacy was built in at its fundamental core for Canton, and so the network is structured to ensure that anyone building applications or launching assets can build the privacy preserving features at the sub transaction level. From the initial origination of the asset, institutions can structure it to enable selective disclosures so it can allow for transparency on a need-to-know basis.
The privacy features and privacy preserving capabilities come from the initial sub transaction level where it is built into the smart contract, similar to traditional legal contract. Then, when a transaction is facilitated, there are selective disclosures, so relevant parties get to engage within the transaction and see what they are entitled to access.
Within the Canton smart contract language, you can build granular business logic to facilitate transactions similar to a traditional contract.
January saw Digital Asset’s third set of transactions on the Canton Network. How does this demonstrate increased global collateral mobility in action?
With regards to collateral mobility itself, there is over US$300 trillion of high-quality liquid assets that are out there, but only about 10 per cent of it is used for collateral. One of the core rationales around that is because of the cut-off times and the settlement times, or even because of the operational challenges with different legacy systems within traditional financial markets.
By solving these challenges using blockchain technology, especially the technology that we built at Canton, we are able to unlock this liquidity that is encumbered for pre-funding / pre-positioning or stuck simply due to settlement times. By tokenising traditional securities natively, the full rights, obligations, and claims of those assets are brought onchain and also facilitate the ability for composability of those assets across different financial markets.
Overall, the use cases mentioned in January are the initial steps and workflows that are showcasing that by natively tokenising different assets, for example, with US Treasuries — we are able to facilitate 24/7 markets. We are able to facilitate real-time settlement for those different assets. And lastly, we are able to enable those securities to allow new forms of composability and new forms of mobility around different assets within the market.
By using blockchain technology, we are also able to reduce counterparty and operational risks. Eventually, as more assets become tokenised and functioning within blockchain rails, we can also end up reducing systematic risk. When standards are set and there is strong core technology like blockchain to facilitate it, it will be possible to prevent or remediate systemic risk quickly, as people will have the ability to transact and evaluate the impacts of their transactions, with that real-time risk management and capital not being encumbered. All of this would be unlocked when the books and records are on interoperable blockchains.
How does real-time, cross-border collateral mobility change liquidity management for securities finance participants?
As mentioned previously, by having real-time settlements, firms do not need to encumber or move assets for pre-funding across different regions in the world. Various markets close at different times globally. Market moving events may occur when the markets are closed where you cannot fully price or hedge an asset. Therefore, by having real time settlements and the ability to settle trades, moving those assets is much easier through tokenised securities and composability. It improves capital operational efficiencies around these different securities in the markets.
How will entities such as Canton Network help to shape future infrastructure for the securities finance market? If we look at the market five years from now, what does it look like in your mind?
Five years from now, ideally, Canton would be a fundamental infrastructure across all capital markets, allowing market players to be able to natively issue assets, manage their risk, and facilitate different funding, trading, and collateral mobility initiatives seamlessly.
That will improve the capital and operational efficiencies for different institutions. Lastly, with this technology and the ability to tokenise different assets, it will improve different verticals such as payments, collateral, mobility, and overall different assets could be used to compose transactions across products and other assets. In this sense, traditional capital markets assets could be used in DeFi as well, and vice versa.
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