The Depository Trust and Clearing Corporation announced a new digital collateral management platform on Wednesday.
The platform is the first industry demonstration of DTCC's Digital Launchpad launch last fall, and uses blockchain solutions the DTCC has been investing in for years.
The collateral management platform is built atop LF Decentralized Trust's Besu blockchain, according to a press release. Besu blockchains are distributed ledgers based on the ethereum protocol.
"Collateral mobility is the 'killer app' for institutional use of blockchain," said Dan Doney, chief technology officer of DTCC Digital Assets. "By using smart contracts to automate the full range of collateral operations, we enable complex trade execution across markets in real time at any time, even in volatile conditions."
The financial crisis of 2008 shone a spotlight on collateral management. When derivatives contracts, especially those backed by mortgages, lost value, banks were eager to claw back collateral to get some value out of those contracts. The lack of a centralized system updated in real time made collateral management a challenge for all parties.
DTCC stated in the press release that the firm's goal with the platform is to use tokenized collateral management to increase collateral liquidity, mobility, and velocity and "
Blockchains may streamline the flow of collateral across siloed infrastructure, potentially unlocking capital and operational efficiencies for DTCC and others in the collateral trading space, the organization said.
"Our goal is to highlight how we can enable real-world, institutional-grade digital collateral market infrastructure," said Nadine Chakar, global head of DTCC Digital Assets, in a statement. "This platform is unique in that we've created something that's more open, flexible, dynamic, and comprehensive than any previous digital collateral initiative."
Chakar, one of American Banker's 2023
DTCC started experimenting with blockchain technologies in
DTCC will demonstrate the new platform in a live event, "The Great Collateral Experiment," on April 23.
"Our work does not stop today," Chakar said. "We plan to continue building on this collateral model, engaging with the industry and our regulators to develop the standard for tokenized collateral across global jurisdictions, working with the buy-side to give them more direct market access, and laying out the regulatory and legal path to implementation."
