If you are wondering what a Crypto Depository Receipt (CDR) does, you probably aren’t alone. Some of the biggest names in cryptos are working on CDR platforms that could create some major changes in the financial markets. CDRX is among the companies that are working on popularizing CDRs, and creating new levels of safety and efficiency in settlement technology.
Coinbase is probably moving in the same direction as CDRX. In a recent presentation at TechCrunch Disrupt in San Francisco, Coinbase CEO Brian Armstrong expanded on why cryptos could be the next big thing in the world of financial transfers,
“Web 1.0 was about publishing information, web 2.0 was about interaction and web 3.0 is going to be about value transfer on the internet because now the web has this native currency and so applications can be built that instantly tap into this global economy on the internet.”
The idea that existing asset classes like equities and bonds could be traded via a new asset class is potentially revolutionary. While Brian Armstrong didn’t jump into the idea that a new form of crypto could be used to trade existing instruments, that is exactly what CDRX working to create.
CDRX Has a Bold Vision
Like most things in the existing financial system, settling trades in the stock market isn’t especially efficient. CDRs address one of the biggest inefficiencies in the world of corporations. When a person buys a share in a company, the exchange is only responsible for making sure the trade is settled, and money paid turns into a share in a company. Once a person owns that share, all the other corporate business has to be handled.
CDRs could make things far easier. Instead of having to hold public meetings, and pay accountants to distribute dividends, CDRs can make most corporate responsibilities automatic. A smart-contract can easily pay out a dividend, and online voting could save an untold amount of money for shareholders annually.
Additionally, CDRs make fractional ownership easy. If a small investor wants to buy a fraction of an expensive share, CDRs make it simple. This could also be used for many other sorts of assets, like bonds, or cryptos. CDRX is working with regulators to deal in numerous financial instruments, and is also gearing up to handle cryptos as well.
Blockchain for an Enormous Market
The existing market for stocks, bonds and other derivatives is worth more than 600 trillion dollars. As long as regulators are willing to go along with CDRs, a platform like CDRX could bring rapid change to the established financial order. One of the biggest advantages that CDRs offer to all involved is rock-bottom trading fees, which make as much sense to an individual investor as they do to a high-frequency trading operation.
Depending on how regulators view CDRs, they could become popular quickly. Because a CDR is simply a new way of holding an existing asset, they could be used to convert existing equity and debt instruments into a form that would be much easier and cheaper to trade. It is hard to say when CDRs could begin to catch on, but given their low cost of use, there is a major financial incentive to drive their adoption.
Potentially Easier Trading Across the Board
While the crypto market has been under pressure all year, cryptocurrencies are probably here to stay. CDRs can also be used to safely trade cryptos, and offer a level of security that many unregulated exchanges can’t match. In the same way that a stock or bond could be converted to a CDR, any crypto could also follow the same path to becoming tradeable via a CDR.
David Ward, the CEO of CDRX, had this to say on his company’s scope and potential reach,
“In creating our CDR product, we have sat with investors, issuers and regulators to address their frustrations with traditional markets. We are at the forefront of these developments and unlike other securitised token models, direct participation from issuers is not required. Our approach leverages a proven route to securitisation which, following regulatory approval, allows immediate conversion of the entire market.”
CDRs are probably still in their infancy. Like most things in the blockchain space, regulations and industry adoption will probably lag the potential for efficiency that CRDs bring to the marketplace. CDRX seems to be aware of this. The new platform may be able to use crypto trading as a way to demonstrate their platform’s viability, as the existing financial system catches up to what blockchain offers a much wider user base.