above: Digital Asset’s Eric Saraniecki

In the pursuit of bringing legacy financial systems into a blockchain-based world, sometimes an old adage is best: don’t fight the Fed.

That’s a bit tongue in cheek but does capture how Digital Asset is approaching the latest development in its Daml smart contract platform. Called Daml Finance, it’s an effort to instill certainty in the settlement process for markets from bonds to stocks and beyond. The $44 trillion U.S. stock market, for example, is dependent on the Federal Reserve, on the one hand, and the Depository Trust and Clearing Corp. (DTCC), on the other, to ensure that the correct amount of money changes hands for the correct number of Apple shares.

While both the Fed and the DTCC are efficient at what they do, when they come into contact with each other there can be problems, said Eric Saraniecki, head of strategic initiatives at Digital Asset. So rather than try to change how the backend systems work at the Fed and DTCC, Digital Asset is trying to streamline them by tokening assets that can be processed by smart contracts within a blockchain ecosystem.

“The problem is in the interaction between those two systems,” Saraniecki said, referring to the Fed and DTCC. “That’s where you find this massive amount of friction.” Errors in the settlement process can come from a lack of money or an incorrect message or just a glitch in the system. They are costly and often difficult to pinpoint where something went wrong.

“You can’t guarantee the payment and the security are going to go through,” Saraniecki said, which leads to “a really complicated dance to make all this stuff work for something as simple as a securities settlement.”

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If, on the other hand, the Fed and DTCC used the same type of smart contracts that were built on top of Digital Asset’s Canton blockchain, there could be certainty that the Fed and DTCC transactions update at the exact same time, Saraniecki said.

“Being able to say, ‘I know for certain this will settle in 24 hours’ is fundamentally different than ‘we’re going to try to settle in 24 hours and see what happens,’” he said. “The certainty is key, not necessarily the timing.”

Goldman Sachs, Clearstream and the life insurance company Zinnia are using Digital Asset’s systems to tokenize assets. Saraniecki said there has been a lot of interest in using Daml Finance in the bond market and in sports wagering. In the derivatives space, customers are asking about how to manage margin payments using Daml Finance, he said.

Read more: Q&A With Eric Saraniecki of Digital Asset, the Man Who’s Lost More Bitcoin Than You Own

Another aspect of blockchain technology that could help streamline securities settlement is how a blockchain incorporates information about transactions in an on-going real-time way. That’s different than typical settlement services that ask each counterparty to submit trade details from one moment in time. If the two sides don’t match, there’s a problem.

Blockchain offers “visibility into where you are, combined with the technological certainty that when you go to do something it will happen in its entirety or it won’t,” Saraniecki said. “That’s the combination that matters.”