Digital CCP

Bring Centralised Clearing to Digital Assets

Without centralised clearing, the digital asset trade lifecycle cannot be fully optimised.
ClearToken will provide centralised clearing and settlement services in digital markets to market participants across a variety of asset classes. As a horizontal CCP, ClearToken will be able to facilitate clearing across venues based in almost any jurisdiction and aims to open up interoperability to the market beyond its current limited scope in traditional securities.

ClearToken’s horizontal structure has an important benefit for risk management and collateral requirements.
As in traditional finance clearing, risk will be managed through margin and default fund contributions. However, ClearToken will support multi-exchange clearing; as transactions are novated, they are netted off in real-time reducing margin requirements and freeing up capital compared to distributed positions across exchanges. OTC transactions will also be cleared and netted further reducing credit risk and margin requirements.

This is a transformative change to the current cumbersome bilateral arrangements in which exchanges are conducting clearing processes themselves either directly to a third party or exchange-owned custodian. Positions must be constantly realigned by participants between venues and custodians in order to prevent substantial credit exposures building up with individual exchanges.

ClearToken will Eliminate Current Market Obstacles

As a digital market CCP, ClearToken will provide critical infrastructure needed to remove many of the growth inhibitors to digital asset adoption:

Bilateral Risk
Reduction in the settlement and credit risks involved in bilateral settlements associated with non-CCP cleared venues and OTC trading, enhancing market stability through well defined and regulated default management processes.
Participation
Increased participation in central clearing model by necessity leads to network effects improving cost efficiencies, reducing KYC and AML overheads.
Alignment
Introduction of a trading model that provides benefits of a traditional market infrastructure and corresponding to applicable laws, superseding the pre-funded nature of current crypto markets.
Use-Case Augmentation
Benefits of cross-margining, rehypothecation and other elements of central clearing will realize broad potential and expansion of DLT use-cases.
Regulation & Control
Appeal to conduct and prudential regulatory authorities by way of assurances provided by rules and measures imposed by a regulated CCP, even where the status of some financial instruments may not be strictly in scope.

Clearing Requires Legal Certainty to be Effective

ClearToken is committed to achieving regulatory approval from the strongest regulators in financial services, in every jurisdiction in which we operate. Governments and regulators are showing increasing concern in digital markets, and so the legal and regulatory landscape around them is constantly evolving around the world.

ClearToken is fully engaged with legal developments in multiple jurisdictions as introducing the regulatory rigour of traditional finance central clearing and settlement in digital markets is central to ClearToken’s mission. Therefore, the comprehensive regulatory frameworks in the UK makes it an attractive destination for ClearToken to pursue Systemic Importance.

The UK has extensive experience in supervising and managing risks in the financial sector, providing a stable and transparent regulatory environment for clearing houses. They also cooperate with international regulatory bodies to ensure that UK-based clearing houses meet global standards.

Additionally, post-Brexit, the opportunities for the UK to develop a best-in-class Fintech and digital assets market will allow ClearToken to take advantage of such developments in the UK market.

To ensure that we provide the most trustworthy option for clearing and settlement in the market for digital assets, ClearToken will only partner with entities that meet our strict and rigorous criteria, in addition to regulatory standards.

Three Phases for Digital Asset Clearing

ClearToken will be a clearing house for a wide variety of digital assets, and expects to progress through 3 Phases of digital asset class adoption:

Crypto assets including fiat-backed stablecoins, digital currencies and blockchain infrastructure tokens.
Tokenised securities – both DLT native and fungible tokenised depository receipts for traditional securities.
Non-financial assets including real-world assets (e.g. commodities), licenses, IP, permits, leases, and loans.

Associated spot, derivative and lending products will be overlaid on the underlying asset classes.