Adoption of ISO DTI standard for crypto assets on the rise

While the Securities and Exchange Commission’s approval of the first US-listed exchange traded funds to track bitcoin has fuelled interest in digital assets in general, the adoption of the ISO DTI standard for crypto assets is also gaining interest. 

Most recently, CCData, an FCA-authorised benchmark administrator and provider of digital asset data and index services, announced a partnership with the Association of National Numbering Agencies and the Digital Token Identifier Foundation to introduce Digital Token Identifiers and International Securities Identification Numbers into CCData’s Asset Metadata solution. 

The integration of these two identifiers means stakeholders of both parties can access metadata for more than 7000 digital assets and respective ISO identifiers via CCData’s REST API. 

“There is a realisation by these early adopters that there’s really no need to reinvent the wheel on how to identify the tokens and manage the reference data,” says Rowan Varrall, associate director at the DTIF, the body responsible for issuing digital tokens such as stablecoins, cryptocurrencies and electronic money with unique DTIs under the ISO 24165 standard. 

“Everyone really wants to avoid potential issues such as bilateral mapping across different systems, or different names across exchanges. Everybody talks about interoperability, but getting into the detail of what this actually means is really having a standardised way of actually referencing digital assets,” says Varrall. He concedes that this “might seem straightforward”, but argues that “is an absolutely critical step in making sure that we don’t run into bottlenecks”. 

Watershed moment

The approval of bitcoin ETFs by the US regulator in January — seen by many as a watershed moment, as reported by The Banker — meant that for the first time investors could publicly trade securities that offered exposure to the price movements of bitcoin without the complexities of directly buying and storing it themselves. 

The SEC’s approval specifically mentions bitcoin exchange traded products, as opposed to ETFs, but the industry is now widely considering it applying to the latter too, and looking at ETP as the umbrella term under which ETF fall. However, some have pointed out that general ETPs are different from an ETF investment vehicle, which is subject to many more investor protections.

One of the results of the rise in bitcoin ETFs has been a general increase in institutional investor appetite for crypto assets. This comes with the need for those assets to have the same hallmarks of transparency, trust and reference data familiar to investors of traditional, non-crypto financial assets.

“After the bitcoin ETF approvals, we’ve seen some of the fastest ETFs ever in history in terms of the amount they’ve actually been able to raise, it’s incredible,” says Toby Winterflood, chief product officer at CCData. The ETFs have seen a huge push in moving the industry forward, along with the recent moves by major regulatory institutions to look more closely at tokenisation.

Winterflood points to the UK’s Financial Conduct Authority’s work with the Monetary Authority of Singapore, the Financial Services Agency of Japan, and the Swiss Financial Market Supervisory Authority on “Project Guardian” to share knowledge and examine the benefits, regulatory challenges, and commercial use cases of asset and fund tokenisation. 

Bitcoin-tracked ETFs are not allowed in the EU, due to the Undertakings for the Collective Investment in Transferable Securities regulation. Instead, Europe has exchange traded notes that are not awarded the European gold standard Ucits label. 

In the UK, the FCA has recently updated its position on ETNs, saying it will “not object” to requests from recognised investment exchanges to create a UK-listed market segment for crypto asset-backed ETNs. These products would be available for professional investors, such as investment firms and credit institutions authorised or regulated to operate in financial markets only. 

Drive towards standardisation

But even without crypto asset ETFs, Europe will see a drive towards standardisation — instead borne from its Markets in Crypto-Asset regulation, known as MiCA.

The European Securities and Markets Authority is widely expected to embed the DTI standard under MiCA. In its second consultation paper on the technical standards specifying certain requirements of MiCA, released last October, it says the DTI is “the most appropriate and wide-spread existing standard to identify a crypto asset”.

“Realistically, a lot of firms only have the capacity and the resources to start looking at these standards with a regulatory mandate,” says Varrall. “It looks like this is what will happen in the EU.”

“The proposals under MiCA would set the DTI as the crypto asset identifier for crypto asset service providers for pre- and post-trade transparency, order book management and record-keeping purposes, as well as documentation for stablecoin issuers,” explains Varrall. 

Right now, according to Varrall, 95 per cent of the market capitalisation of stablecoins have DTIs. Recently, SDX, a leading financial market infrastructure for digital assets, based in Switzerland, adopted the DTI ISO standard. 

“Everybody’s conscious of investor protection and market integrity, and these types of standards are really that foundational baseline of actually being able to address these challenges,” says Varrall. 

As traditional financial instruments move to incorporate distributed ledger technology, and digital tokens are increasingly being held, bought and sold as assets, there is the need to define how both can interoperate. 

As The Banker has previously reported, the Digital Token Identifier Foundation has been working with ISIN issuer ANNA to develop new ISINs for crypto assets, and to issue DTIs for traditional financial instruments that use blockchain.

Stephan Dreyer, managing director for ANNA, says: “Our aim is to bring greater transparency to the spectrum of new innovative assets through the use of global interoperable standards. This partnership provides a step forward for applying consistent identification standards to the growing universe of digital assets.”