How to make clearing work

Canton's USDCx launch this week is getting a lot of attention. Privacy-enabled USDC settlements, Day 1 adoption from Cumberland/DRW, IMC Trading, and QCP.

Broadridge running nearly $6 trillion/month in repo on Canton infrastructure, based on their last PR, showcasing real institutional traction rather than vapourware.

However, a critical issue remains: credit intermediation. Currently, there are two problematic choices:

Option 1: Crypto exchanges. The $19 billion liquidation cascade in October illustrated the chaos that ensues when an exchange admits it cannot absorb defaults, leading to profitable traders covering the losses of others. This is not clearing; it's disorder.

Option 2: Traditional Central Counterparties (CCPs). While they offer better architecture, obtaining an FCM account can be challenging. Even if successful, you remain exposed to your FCM's creditworthiness, and FCMs are interconnected through mutualized default funds. The only way to feel "safe" is through massive overcollateralization, which undermines capital efficiency.

This leaves us with access issues or ADL chaos—neither is ideal.

A third option exists: leverage capital markets to address capital market challenges. By securitizing tail risk into tranches that investors can price and hold, we can allow markets to absorb counterparty default risk instead of mutualizing it among participants who have not agreed to each other's exposure.

What is hindering your tokenized derivatives adoption—access, capital efficiency, or counterparty credit and access. I have my view.