2019-12-04 Meeting notes

Date

04 Dec 2019

Attendees

• Vipin Bharathan

• Kirthi K

• mani pillai
• Ron Quaranta

Agenda

• Recap of TTF call and vision for collaboration (work with the group on a specific use case like custody and use the TTF to define it as a composable artifact that can be applied to tokens of any type. We would do this by doing a workshop, perhaps in phases where the first phase would be a rough draft and then iteratively improve it so we can get it in a place to contribute it to the TTF.)
• Ontology & Capital Markets - what is ontology? How does Semantic standards and languages promote interoperability?- FIBO
• Climate SIG and its offshoots in ECB  Full paper: in ECB (https://www.ecb.europa.eu/pub/pdf/scpwps/ecb.wp2318~44719344e8.en.pdf)
• LEI and its place in Capital Markets
• FiNOS: OSS meeting (Open Source Strategy meeting)

Discussion items

Recordings

audio_only.m4a

Notes

Lead off with the Anti-Trust Policy and Code of Conduct

Introductions

The discussion focused on Custody as it relates to the TTF collaboration.

• mani pillai & Ron Quaranta felt that TTF nor CDM needs to address Custody as it is a function not a part of the standard. Ron brought in FIX that is a messaging standard
• Vipin Bharathan disagreed: standards are not purely on messaging like in FIX or FpML; it is due to the inadequacy of these existing standards, that new standards like CDM bring into its ambit contractual aspects like payouts and performance critera; also given that CDM wants to expand its horizon into securities other than Swaps or Derivatives, they may need to address Custody. As far as TTF goes, it is a composition based method; behavioral and other primitives combine to define a specific token. It is also a pragmatic framework; going from visual design to code. So custody may well be in its scope.
• Mani said that institutional adoption of TTF may increase due to the backing of Microsoft. He also presented the Digital Asset solution Swapshub was working on: Given below is a condensation of that discussion (some terms have been defined and some more aspects have been clarified):

• Custody: Condensed version of what was discussed.

  What is custody: It is a delegated possession of securities on behalf of the owner. In retail crypto-currencies, if you have an account with an exchange, and you let your account hold crypto-currency or cash; the exchange has "custody" of your assets. There is legal hair-splitting on whether possession or control implies custody. The latest ruling by the SEC on custody by Investment Advisors goes into this in depth.

  Digital Asset custody -

  Centralized: models similar to what happens with dematerialized securities. Usually, this constitutes having control of the private key that can move the securities. The actual mechanics of this movement for securities can be achieved without a private key; if the system for accounting is held closely by a single entity like the DTCC who have their own procedures and processes for the movement of assets.

  Between centralized and decentralized: One of the key principles of accounting as applied to computer security is segregation of duties; a way to bring in more eyes and hands into the execution a vital and sensitive task to prevent fraud. Removing agency from just a single actor or role. This implies some form of shared control over the private key for moving the security. This translates to multi-party computation (MPC) where agreement (or a signature) from multiple parties are required, with variants like m of k signatures. In practice this may involve several steps. One MPC in practice unlocks a master key which is then used to move the security (Fidelity - anecdotal). Other considerations:

  • Bankruptcy of the custodian

  • Bankruptcy of the owner

  • Insurance held by custodian against inadvertent losses (loss of key, theft of funds etc)

  • Use of HSMs to do the signing (or on the cloud PKCS11 based approaches)

  • Regulation governing the custodian; what are the requirements (look at SEC requirements for custodians); how deep a balance sheet do they need to have?

  • Lending of the digital asset-

• We discussed FIBO, but briefly and we will have the presentation another day. mani pillai's main point was that we need to look at use cases and adoption.

• Ron Quaranta asked whether he could bring the TTF to his members and also engage them in listing actual use-cases that they would like to make public.
• It was agreed that meetings on Dec 18 and January 1st be cancelled due to the holidays. The next meeting will be on Jan 15.

Action items