Digital Asset completes pilot to tokenise gilts, eurobonds, and gold
02 October 2024 UK
Image: Saim_Art/stock.adobe.com
Digital Asset has completed a collaborative initiative with 27 market participants to tokenise gilts, eurobonds, and gold.
Euroclear, the World Gold Council, and Clifford Chance were among a group of pilot participants, including investors, banks, central counterparties (CCPs), and custodians.
The aim was to demonstrate how tokenised assets on a blockchain can enhance collateral mobility, improve liquidity, and increase transactional efficiency.
Kelly Mathieson, chief business development officer at Digital Asset, says: “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.”
Digital Asset provided the infrastructure, applications, and connectivity for market participants to test complex business scenarios.
A series of independent Canton blockchains used the Global Synchronizer to interoperate and execute atomic transactions.
Participants remained in complete control of their permissions, exposures, and interactions, the firm says.
Mathieson adds: “Our work with the pilot participants has 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.
“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 programme took place over June and July, and used 14 Canton nodes.
Five types of cross-application transactions were connected using 11 distributed applications, including six registry apps and five margin apps, with 500 transactions completed.
Olivier Grimonpont, head of product management, market liquidity, at Euroclear, comments: “We recognise the immense value in industry experimentation to showcase the advantages of distributed ledger technology (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.”
According to data from the World Gold Council, the average daily trading volume of gold reached US$162 billion worldwide in 2023, and its use as a traded asset remains stable.
Mike Oswin, global head of market structure and innovation at the World Gold Council, says: “By digitising gold, we can overcome the perceived restrictions on moving and storing the physical metal, enabling this high-quality asset to be mobilised and used within financial markets.
“To achieve this, the tokenisation process must be able to specify a Standard Gold Unit (SGU) that represents and transfers the monetary value of an agreed amount of pure gold. An attribute record can be created as a secondary token that will maintain details of the gold bars collateralised in the ecosystem. This would enable all physical gold of trusted integrity to be utilised as financial collateral, irrespective of its physical attributes and location.”
Clifford Chance observed the pilot, providing expert opinion on the legal implications of utilising a digital twin of a real-world asset.
Paul Landless, partner and co-head of fintech at Clifford Chance, says: “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.”
The initiative builds on the Canton Network pilot earlier this year, which established the foundation for composable applications across a global economic network.
Several projects, including the recently announced tokenised US Treasuries Pilot, are exploring more targeted use cases in response to participants’ requests.
Digital Asset and 30 other market participants launched the Canton Network in 2023 as the first privacy-enabled open blockchain network designed for institutional assets, connecting previously siloed financial systems and infrastructure.
Euroclear, the World Gold Council, and Clifford Chance were among a group of pilot participants, including investors, banks, central counterparties (CCPs), and custodians.
The aim was to demonstrate how tokenised assets on a blockchain can enhance collateral mobility, improve liquidity, and increase transactional efficiency.
Kelly Mathieson, chief business development officer at Digital Asset, says: “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.”
Digital Asset provided the infrastructure, applications, and connectivity for market participants to test complex business scenarios.
A series of independent Canton blockchains used the Global Synchronizer to interoperate and execute atomic transactions.
Participants remained in complete control of their permissions, exposures, and interactions, the firm says.
Mathieson adds: “Our work with the pilot participants has 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.
“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 programme took place over June and July, and used 14 Canton nodes.
Five types of cross-application transactions were connected using 11 distributed applications, including six registry apps and five margin apps, with 500 transactions completed.
Olivier Grimonpont, head of product management, market liquidity, at Euroclear, comments: “We recognise the immense value in industry experimentation to showcase the advantages of distributed ledger technology (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.”
According to data from the World Gold Council, the average daily trading volume of gold reached US$162 billion worldwide in 2023, and its use as a traded asset remains stable.
Mike Oswin, global head of market structure and innovation at the World Gold Council, says: “By digitising gold, we can overcome the perceived restrictions on moving and storing the physical metal, enabling this high-quality asset to be mobilised and used within financial markets.
“To achieve this, the tokenisation process must be able to specify a Standard Gold Unit (SGU) that represents and transfers the monetary value of an agreed amount of pure gold. An attribute record can be created as a secondary token that will maintain details of the gold bars collateralised in the ecosystem. This would enable all physical gold of trusted integrity to be utilised as financial collateral, irrespective of its physical attributes and location.”
Clifford Chance observed the pilot, providing expert opinion on the legal implications of utilising a digital twin of a real-world asset.
Paul Landless, partner and co-head of fintech at Clifford Chance, says: “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.”
The initiative builds on the Canton Network pilot earlier this year, which established the foundation for composable applications across a global economic network.
Several projects, including the recently announced tokenised US Treasuries Pilot, are exploring more targeted use cases in response to participants’ requests.
Digital Asset and 30 other market participants launched the Canton Network in 2023 as the first privacy-enabled open blockchain network designed for institutional assets, connecting previously siloed financial systems and infrastructure.
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