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Six major digital asset liquidity providers are collaborating on an on-chain collateral management system for bilateral derivatives, marking a significant expansion of the Canton Network's institutional finance initiative.
B2C2, Cumberland DRW, FalconX, and GSR have joined the project as design partners alongside Flowdesk and QCP, which began development in January. The application will be available to all over-the-counter bilateral derivatives traders when it launches in the third quarter.
The collaboration leverages Canton Network's privacy capabilities to address inefficiencies in the crypto derivatives market, which stem from limited regulatory frameworks. Current bilateral markets are often fully or over-collateralised, creating capital inefficiencies, while tri-party agents for collateral management add costs.
Digital Asset's partnership with these market participants aims to introduce an automated and cost-effective alternative powered by the Canton Network's unique permissioning system, which allows for privacy in margining and risk management.
"We're pleased to welcome these new partners to the Canton Network as we expand the scope and impact of our on-chain margining initiative," said Georg Schneider, Head of Financial Products at Digital Asset. "This will serve the demand for enhanced privacy and capital-efficient infrastructure, and prove out the use case for traditional financial derivatives markets. We look forward to welcoming the firms on board and working closely with them to shape the future of finance."
Cactus Raazi, CEO Americas at B2C2, said: "At B2C2, we believe the widespread adoption of digital assets depends on infrastructure that matches traditional finance standards. As a top liquidity provider in institutional crypto markets, we're dedicated to building scalable solutions that connect traditional and digital finance. Canton's on-chain collateral solution is a crucial advancement, boosting capital efficiency, automation, and privacy in bilateral derivatives."
Chris Zuehlke, Partner at DRW and Global Co-Head of Cumberland, commented: "We are excited to support Canton's on-chain collateral solutions within our bilateral derivatives business. Our firm has long championed the adoption of blockchain technologies, and this initiative perfectly aligns with our mission to make markets more efficient through innovative solutions. We believe interoperable, privacy-enabled networks like Canton will play a critical role in the convergence of traditional and digital markets. As one of the largest liquidity providers in crypto options, we know first-hand that institutional investors are ready for this type of collateral management solution."
Joshua Lim, Global Co-Head of Markets at FalconX, said: "We're pleased to contribute as a design partner in developing on-chain collateral settlement for bilateral derivatives. Exploring applications like this allows us to test new infrastructure that could support more efficient and secure trading between institutional participants."
Simranjeet Singh, Head of DeFi Trading at GSR, added: "The promise of crypto is true ownership of value, and seamless flexibility in its utilisation. By developing solutions for on-chain derivative margin optimisation on Canton, Digital Asset is bridging the liquidity gap between crypto-native players wanting access to institutional capital and traditional players venturing into the ever-expanding digital assets space. That capital efficiency unlock is here to stay."
The solution will feature on-chain collateral agreements encoded as smart contracts, enabling automatic execution and enforcement of terms in line with ISDA CSA Initial and Variation Margin compliance requirements. Using the Canton Network, parties gain real-time access to data shared only among transaction participants, allowing for streamlined automated margin workflows, instant tokenised collateral pledging, and improved dispute resolution.
The system ensures privacy of collateral transactions, limiting access to confidential terms and on-chain movements to relevant counterparties. Key advantages include 24/7 margining regimes where margin can be paid on demand, shorter margin cycles, reduced risk and margin requirements, and incorporation of novel collateral types such as yield-bearing stablecoins or tokenised money market funds.
The Canton Network is the first public, permissionless blockchain purpose-built for institutional finance, combining privacy, compliance, and scalability. Governed by the Global Synchronizer Foundation with participation from leading global financial institutions, Canton enables real-time, secure synchronisation and settlement across multiple asset classes on shared, interoperable infrastructure. Initially developed by Digital Asset and now open-sourced, Canton supports decentralised governance and collaborative app development.
