Interoperability comes to the fore in digital assets

GMEX Group has acquired Pyctor from ING as a provider of digital and conventional exchange and post-trade business and technology aimed at developing interoperability of cryptocurrencies and digital assets which currently includes silos verticals and multiple blockchains.

ING said in a statement that it has created Pyctor, a post-trade market infrastructure for secure digital custody and transactional network services that also offers interoperability between permissioned and public blockchains. Pyctor was incubated in ING Neo’s innovation lab in Amsterdam in collaboration with major financial institutions and regulators.

Olivier Guillaumond, global head of innovation labs and fintech at ING, said in a statement that Pyctor was another success story at ING Neo, the innovation division. He said: “We have now found the right partner in GMEX to take Pyctor to the next level. It brings the ideal connectivity between multiple trading parties and custodians of digital assets, while solving the interoperability problems encountered in the market.

GMEX Group Managing Director Hirander Misra said the company had been developing technology for digital assets since 2017 and realized there was a real need to look at blockchain interoperability. GMEX had considered developing its own technology to solve the problem, but found that ING was looking to make Pyctor a neutral offering in the wider market.

“Pyctor has proven itself in an FCA sandbox with a number of blue chips,” Misra said. “The IT department has been battle tested for security and has a Know Your Customer/Anti-Money Laundering capability. The synergy was perfect and it also accelerates our infrastructure development roadmap.

Misra is named president of Pyctor and further leadership appointments will be announced in due course. ING will continue its relationship with Pyctor and collaborate through the Dutch bank’s digital asset team.

Last year, GMEX addressed fragmentation and lack of platform interoperability in digital assets by launching the Digital MultiHub. The cloud-based global trading and post-trade digital market infrastructure platform was built with AWS to facilitate third-party trading and post-trade services in traditional and digital asset markets.

Misra explained that GMEX can connect to multiple custodians with MultiHub, but Pyctor also allows different blockchain networks to talk to each other through a secure sidechain at very low cost through its proprietary Multi-Party Computation (MPC) custodial technology.

Hirander Misra, GMEX

“The beauty of the MPC solution is that wallets are distributed and users can lock exposure to each other to achieve settlement finality without risk exceeding that exposure. Compared to locking your assets in a given portfolio or on a given exchange, this is scalable and capital efficient,” he added.

Greater interoperability is important because asset managers do not want all of their assets in one custodian.

“The crypto ecosystem is currently full of vertical silos, but we are really trying to offer a horizontal solution across the whole market rather than telling everyone to use our regulated custodian,” Misra said. “We definitely need to move away from this silo-based complexity.”

He went on to say that APIs provide some layer three interoperability, but layer two requires interoperability across multiple public and private chains and ultimately between smart contracts.

GMEX will integrate Pyctor and launch products during this year. The company has spoken to a number of institutions that want to offer crypto products, but also need reliable enterprise-grade infrastructure.

Misra said GMEX helps solve KYC/AML issues, but the technology would also be able to plug in services from third-party vendors who are experts in, for example, coin forensics or tokenization platforms. He thinks most institutions don’t necessarily want to be on a blockchain, and in particular don’t want to be on multiple chains, but want exposure to the asset class through their existing platforms.

“We provide economies of scale so institutions can be on or off chain, using APIs like REST, Swift or FIX,” he added.

For example, GMEX Fusion created an API for TP ICAP to connect to digital asset custodians and Misra said many custodians are now connecting which is becoming a standard.

“As with FIX, industry needs to drive emerging standards so that they are commercially adopted,” he said. “We have a lot of background intellectual property that we have created around margin, risk management and the clearing process. “

In the long term, he expects institutions to be able to set up digital assets as collateral for traditional securities and vice versa. As products evolve, hybrid instruments will develop that exist in either form and an interoperable infrastructure really helps to cope with this evolution according to Misra.

He said: “Centralized activities aren’t going away anytime soon and we can help facilitate that common ground where everything co-exists.”

Misra also believes that the current crash in crypto valuations is beneficial by allowing the market to rationalize and expose business models that were unsustainable.

“Over the next three or four years we’re going to see a period of real innovation and building and there’s a real need for this infrastructure game,” he added.

In a year, he expects the level of institutional adoption to increase. GMEX is also likely to diversify as the business is being increasingly addressed in sustainability, as the markets for water, energy, climate and carbon credits are fragmented, so there is a use case for digital assets.

Infrastructure development

In. In June this year, PolySign, a fintech company providing blockchain-enabled digital asset infrastructure for institutional investors, announced the closing of its $53 million Series C funding round with participation from investors such as Cowen Digital, Brevan Howard and GSR.

Jack McDonald, PolySign

Jack McDonald, chief executive of PolySign, told Markets Media in June that the infrastructure provider had an initiative to create a cross-chain settlement layer for a large, agnostic group of asset transfers.

McDonald said: “We are working with very large asset managers and service providers to create a settlement layer that we call PolyNet. It’s six months away from any kind of rollout in a commercial sense, but it’s a really exciting strategy for us that will help take us overseas and open up our customer base.

For example, if an investor wants to trade in fiat currency for a token interest in a building, or a fractional interest in a venture capital fund, or for a cryptocurrency, all of these different trades could be brought together in a single ecosystem. . The messaging layer is comparable to FIX messaging, a standard in the traditional financial sector across asset classes.

Anton Katz, Talos

In May this year, Talos, which provides institutional digital asset trading technology, announced a $105 million Series B funding round that values ​​the company at $1.25 billion. The following month, Talos and Trading Technologies International announced that the companies had partnered to expand TT’s cryptocurrency offering globally by leveraging the Talos infrastructure and market connectivity directly from the TT platform.

Anton Katz, co-founder and managing director of Talos, told Markets Markets in May that market participants were asking more questions about risk management and capital efficiency.

Katz said, “We strongly believe that we are going to see other asset classes migrate to the digital asset rails. It’s almost inevitable and it’s just a matter of time.