The Depository Trust & Clearing Corporation (DTCC) successfully completed a pilot to tokenize U.S. Treasuries to streamline collateral management processes.
The DTCC, one of the world’s largest post-trade services providers, partnered with blockchain company Digital Asset to test a new approach to collateral management through the tokenization of U.S. Treasuries. The Canton Network pilot involved 26 financial market participants who executed 100 transactions using tokenized bonds as collateral.
The Canton Network was launched in mid-2023 with the goal of unifying the systems of major financial firms.
The main goal of the project is to speed up the processing of transactions, especially margin calls, and to ensure full transparency and traceability of transactions on the blockchain. The trials used digital twins of Treasury bonds, which enabled all stages of transaction processing to occur significantly faster than traditional methods.
The DTCC leveraged the Canton Network’s capabilities to synchronize transactions in real time while maintaining the confidentiality of participant data. Special attention was given to regulatory compliance to assess the viability of this approach under current legislation.
Several projects were implemented as part of the pilot, including:
- Tokenization of Treasury securities. Creating digital twins of U.S. Treasury securities for future use in various scenarios.
- Use of tokenized assets in margin calls. Transferring collateral assets into tokenized form for immediate settlement of margin calls.
- Automatic return of collateral. Immediate return of collateral for settlement of margin calls that traditionally take one or more days.
- Default handling. In the event of an investor default, counterparties could immediately seize tokenized collateral with a fully traceable and legally defensible process.
According to Kelly Mathieson, Chief Business Development Officer at Digital Asset, the success of the pilot confirms that tokenized assets can be used not only to optimize collateral, but also to provide greater transparency in the financial marketplace. She believes that the use of tokenized U.S. Treasury securities as collateral allows for more efficient collateralization while remaining fully compliant with regulatory requirements.
Nadine Chakar, Global Head of DTCC Digital Assets, also highlighted that the pilot demonstrated the potential of tokenization as part of enhancing collateral mobility and unlocking liquidity.
The DTCC is actively exploring various options for using DLT systems to streamline financial transactions. For example, the company previously participated in a series of pilots on the Canton Network, tested blockchain technologies for data management in collaboration with Chainlink, explored tokenized asset settlement with SWIFT, and led a working group to develop a global ecosystem for the tokenization of financial assets.
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