Euroclear, a central securities depository (CSD), was in a group of participants that tokenised gilts, eurobonds and gold using distributed ledger technology (DLT).
The successful pilot was said to take tokenisation a step forward and it also involved The World Gold Council and blockchain solutions provider, Digital Asset.
DLT serves as the legal record and validates the secured party’s control over real-world assets received as collateral in case of counterparty default.
Law firm Clifford Chance was also among the broad group of pilot participants, which included investors, banks, central counterparties and custodians,.
The aim was to demonstrate how tokenised assets on a blockchain can enhance collateral mobility, improve liquidity, and increase transactional efficiency.
The pilot, which took place over June and July, involved 27 market participants and used 14 Canton nodes of the Canton Network, the financial industry’s “first and only public chain”.
Five hundred transactions were completed and the collaboration was said to demonstrate the ability to create a digital twin of these previously immobile real-world assets and use those tokenised assets as collateral in “atomic, real-time transactions”.
Olivier Grimonpont, Head of Product Management, Market Liquidity, Euroclear said: “We recognise the immense value in industry experimentation to showcase the advantages of DLT for the market. As we strive to deliver even better and faster collateral mobilisation for our clients, digital technologies like DLT will be key enablers for us to achieve this.”
Kelly Mathieson, Chief Business Development Officer at Digital Asset, a blockchain solutions provider, said: “This signals another step forward in the development and adoption of tokenised assets in collateral management, creating a more mobile operating model across different parties.”
The pilot demonstrated that tokenised assets can be used with immediate effect to meet intraday margin calls outside of normal settlement cycles, processing times, and time zones.
Mathieson added that it also demonstrated how the ledger can serve as the legal record and has validated the secured party’s control over the digital twin and real-world assets received as margin or collateral in the event of a counterparty default.
The pilot also showed that by digitising gold, the perceived restrictions on moving and storing the physical metal can be overcome, said Mike Oswin, Global Head of Market Structure and Innovation at the World Gold Council.
Clifford Chance’s Paul Landless, Partner, Co-Head of Fintech at the law firm, offered an opinion on the legal implications of utilising a digital twin of a real-world asset.
“With certain approaches and platforms, a digital twin is not a separate asset and so the impact for master agreements, trading relationships, close-out processes, and valuation approaches are minimised, but it is always important to ensure the digital twin is catered for and reflected into existing product and platform documentation.
“As an operational and record-keeping tool rather than an asset, some of the legal and regulatory issues can be reduced while avoiding extensive surgery or a wholesale reset of established product and asset documentation.”
Asset tokenisation project for collateral declared a success
