Transforming Collateral Management with Digital Assets

Digital asset technology is set to have a transformational effect on financial markets, bringing new efficiencies, business models, and liquidity opportunities to the ecosystem. It gives us the opportunity to reshape the entire value chain, from primary market issuance to post-trade activities like custody and asset servicing. Institutional demand for tokenization of real-world financial assets is growing, and its impact on capital markets could be similar to the impact the Internet had on information exchange. This technology promises to revolutionize how we approach capital markets, unlocking new value and streamlining processes across the industry.

Collateral Management on the Digital Launchpad

As leading infrastructure providers for the financial industry, DTCC and Japan Securities Clearing Corporation (JSCC) have been exploring how blockchain and distributed ledger technology (DLT) could have a transformative effect on global capital markets. We’ve been examining how tokenization of real-world assets could revolutionize collateral management by addressing long-standing inefficiencies in existing business processes while introducing new capabilities.

As part of our collective active pursuit of the transformative potential of digital assets in collateral management, JSCC leveraged DTCC’s Digital Launchpad to develop a groundbreaking proof of concept (PoC) focused on Central Counterparties (CCPs). Given their vital role in capital markets, CCPs are a critical part of the collateral management value chain, receiving collateral deposits across a diverse range of products. By leveraging digital assets for collateral processing, CCPs can potentially enhance market stability, improve digital asset quality, and increase the efficiency and liquidity of collateral.

This PoC goes beyond the deposit and return of digital assets, cash, stocks, and bonds as collateral. It offers innovative solutions aimed at overcoming existing constraints and exploring new business opportunities.

We encourage you to read the pilot report to learn more about the specifics of this groundbreaking experiment conducted on the DTCC Digital Launchpad, highlighting the practical applications, market impact and the path forward.