Executive Summary
In 2020, as the digital asset ecosystem grew exponentially, institutional participants faced a critical bottleneck: the lack of a standardized, secure post-trade infrastructure for digital assets. Traditional markets rely on Central Securities Depositories (CSDs) to pool assets, eliminate counterparty risk, and allow net settlement. Early digital asset exchanges, by contrast, forced participants to deposit assets directly on-venue — exposing them to major security vulnerabilities and counterparty insolvencies.
Drawing on our background in building clearing systems in Japan and crypto exchange solutions, Touch-Fire built a Distributed Ledger Technology (DLT)-native CSD prototype on R3's Corda platform and presented it to Archax in March 2020. Eighteen months later, Archax successfully launched Montis Digital — the pioneering blockchain-native digital CSD infrastructure for Europe.
Mar 2020
Prototype presented to Archax
18 months
Prototype to live regulated utility
Corda
R3 enterprise DLT network
DvP
Native on-ledger delivery vs. payment
The Challenge: A Broken Settlement Model for Digital Assets
Traditional capital markets function seamlessly because trading is separated from safekeeping. Investors deposit assets inside a CSD; trading occurs across associated venues without assets physically moving; and transactions settle via Delivery vs. Payment (DvP) on a net end-of-day basis, backed by guarantee funds. The digital asset ecosystem had none of this infrastructure — and participants paid a steep price for its absence.
Without a central depository pooling assets, institutional participants were forced to pre-fund accounts across dozens of disparate trading venues simultaneously. Capital that could not be deployed was effectively wasted — reducing market efficiency and increasing the opportunity cost of participation for institutional fund managers.
Because assets sat siloed on individual exchange platforms, intraday liquidity transfer between venues required full on-chain withdrawals and re-deposits — adding hours of settlement lag and significant transaction costs to routine rebalancing flows.
Constant withdrawal and deposit mechanisms across exchange-controlled private key infrastructure created persistent attack surface. Unlike a traditional CSD — where assets are held by a single regulated custodian under strict operational controls — digital asset venues held private keys in proprietary systems of widely varying security maturity.
The frequency of high-profile exchange hacks and key compromises in this period demonstrated that the "always-on" withdrawal architecture of early digital exchanges was structurally incompatible with institutional risk management frameworks.
Assets held in exchange-controlled wallets were directly exposed to the financial health of the exchange itself. Unlike securities held at a CSD — which are legally segregated from the CSD's own balance sheet — digital assets deposited on exchange platforms were, in practice, unsecured claims on a private company.
The subsequent wave of exchange insolvencies in the broader industry vindicated this concern. Institutional participants who had deposited assets on-venue suffered significant losses that would have been structurally impossible in a properly designed CSD model.
The Solution: A DLT-Native CSD Architecture on Corda
Using R3's Corda network, Touch-Fire designed a fully functional CSD prototype engineered to handle both internal (digitally native) and external (tokenized / cloned) capital market assets — mirroring the full functionality of a traditional CSD within a DLT-native architecture.
[ Asset Issuers ] ---> [ Notary & Issuance Registry ] ---> [ CSD Ledger (Corda) ]
|
[ External Exchanges ] ---> [ Data Ingestion Buffer ] |
| |
v v
[ Net Settlement Layer ] ---------> [ Participant Accounts ]
|
v
[ Cryptographic Vault (Unbound) ]
The Notary acted as the institutional entry point to the CSD — validating that digital asset issuances conformed to strict regulatory and legal rules before minting assets on the ledger. The registry enforced token standard compliance, including ERC1400 security token frameworks, before any asset could enter the depository.
This layer also handled the lifecycle of tokenized external assets — ensuring that "cloned" representations of traditional securities were matched one-to-one with verified underlying positions held in external custodian systems, maintaining complete legal equivalence.
Rather than relying on exchange-controlled private key infrastructure, the prototype integrated Unbound cryptographic key management technology directly into the vault architecture. This replaced the "physical safe" of a traditional CSD with a cryptographically hardened, institutionally managed key management system.
Assets held within the Corda CSD were never exposed to the exchange layer — mirroring the legal segregation model of a traditional CSD, where participant assets are held off the depository's own balance sheet and ring-fenced from operational failures.
The prototype built an end-of-day aggregation layer that ingested gross trade data from external exchanges via a data buffer, then netted multiple offsetting positions down to a single settlement instruction per participant pair. This "net settlement" model — standard in traditional markets — dramatically reduces the volume of on-chain transactions required and eliminates the settlement risk of individual gross trade failures.
Settlement instructions were executed natively as Corda state transitions, providing cryptographic finality and an immutable on-ledger record of each net position transfer — without relying on external database synchronisation.
The prototype demonstrated full lifecycle management of assets directly on-ledger, including programmatic corporate action processing. A stock split implementation — one of the more complex corporate events in traditional markets — was successfully modelled as an automated Corda flow that scaled asset distribution across all participant vaults without altering the underlying real financial value.
This proved that the architecture could handle the full operational scope of a regulated CSD, not merely custody and settlement — including the event processing that currently requires significant manual intervention at traditional market infrastructure providers.
Technical API Implementation
The prototype mapped traditional CSD functionality directly to DLT data classes via REST endpoints, demonstrating a clean programmatic interface for exchange and custodian integration:
POST
/createToken
Token issuance and IPO flows — mints assets on the Corda ledger after Notary validation
POST
/allocateAccount
Provision participant accounts linked to the Depository — creates the segregated vault structure
POST
/transferShare
Execute ownership state transitions between entities — cryptographically final on-ledger
POST
/stockSplit
Programmatic asset distribution across all vaults — without altering underlying financial value
The Outcome: Scaling to Montis Digital
The prototype demonstrated that a fully functional, institutionally viable CSD could be built natively on distributed ledger technology — addressing each of the structural failures that had prevented institutional capital from entering the digital asset market at scale.
18 months later
Montis Digital — Europe's First Blockchain-Native Digital CSD
The architectural validity of the prototype was confirmed when Archax successfully launched Montis Digital as a standalone, regulated market utility in Europe — the pioneering blockchain-native digital CSD infrastructure on the continent. The core design principles proved in the Corda prototype — on-ledger issuance, cryptographic safekeeping, net settlement, and programmatic corporate actions — became the functional foundation of a live regulated market infrastructure serving institutional participants.
By holding assets centrally within the DLT-native CSD, participants could trade across multiple associated venues without assets physically moving — eliminating the pre-funding overhead that fragmented institutional capital across the digital asset landscape.
Assets held in the Corda CSD were legally and cryptographically segregated from exchange operational risk — mirroring the protection model that traditional CSDs provide. Institutional participants no longer required exposure to exchange solvency risk as a condition of market participation.
The prototype demonstrated that every major function of a traditional regulated CSD — issuance, safekeeping, net settlement, delivery vs. payment, and corporate actions — could be implemented natively on enterprise DLT without dependency on legacy database infrastructure.
Related Capabilities
Touch-Fire's post-trade infrastructure expertise spans traditional clearing systems, digital asset exchange back offices, and DLT-native settlement architectures — built from live deployments at regulated exchanges across Asia, Europe, and the Americas.
Post-trade processing, net settlement, and regulatory reporting for traditional and digital asset markets.
The KYC, whitelisting, and custodian gateway infrastructure built alongside the Corda CSD work for Archax.
End-to-end exchange, CSD, and clearing solutions for regulated venues across traditional and digital asset markets.