The Case for a CSD for Digital Assets: Chapter 1 – The Settlement Challenge
In this first chapter of our new white paper, "The Case for A CSD for Digital Assets: Chapter One - The Settlement Problem" we examine the structural challenges in both on-chain and off-chain digital asset settlement models and why a regulated digital CSD is essential to enabling institutional adoption. Through historical parallels and real-world market failures, this paper outlines the lessons that must be learned to ensure the safe, scalable, and efficient evolution of digital asset markets.
Settlement is the backbone of financial markets, ensuring certainty in asset ownership and trade. While blockchain introduces transparency and programmability, technology alone cannot replace the structured safeguards that markets rely on. True efficiency requires both innovation and institutional-grade infrastructure.
This chapter examines the structural weaknesses in digital asset settlement, from the risks of unregulated off-chain intermediaries to the operational challenges of on-chain execution. Drawing on historical market failures, we highlight why prefunding, fragmented liquidity, and the absence of netting create inefficiencies that traditional finance solved decades ago.
A regulated digital CSD bridges this gap, integrating the speed and flexibility of digital assets with the risk controls and scalability of traditional settlement infrastructure. As digital markets mature, aligning technological advancements with established financial principles is essential to unlocking their full potential.