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Citi Securities Services found that almost 90% of market participants are actively engaged in or exploring use cases for digital assets, blockchain or distributed LEDGER technology (DLT).
With over $25 trillion in assets under custody, Citi is the fourth largest custodian in the world.
Digital assets are viewed as a business opportunity and blockchain and DLT is seen as a path to address several issues in the securities sector. There’s a move towards shortening standard settlement times from two days (T+2) to one (T+1) to reduce counterparty risk. In the United States, the SEC kicked off a plan to move towards T+1 and there are similar initiatives in Canada and India.
In last year’s Citi survey, 40% of respondents viewed DLT as core to shortening settlement times, but that’s now down to 21%, with many believing DLT has a role but is not essential.
The ultimate shortening is instant or atomic settlement. Seventy nine percent believe that’s achievable within ten years.
DLT is seen as a useful tool for post trade efficiencies, with 54% of respondents envisaging it reducing costs by 10-30%.
Some believe that efficiencies hold far less allure than revenue opportunities. On that point, 92% view tokenization as a tool to improve liquidity and increase the range of tradeable assets.
Participants in the survey include a dozen financial market infrastructures and 300 other institutions including banks, broker dealers, asset managers, custodians and investors.
Meanwhile, Fidelity Digital Assets also ran an institutional survey but targeting a different audience – on the investment end. There was a significant disparity in digital asset adoption between Crypto and VC hedge funds and high net worth investors (both are notable adopters) versus traditional hedge funds, endowments and pension funds, where adoption was under 10%.
