Deutsche Bundesbank and Deutsche Börse publish concept study on DLT-based collateral management

23 January 2020

The study outlines that, in principle, DLT is capable of delivering further benefits in terms of the velocity and usability of collateral.

The study comes to the conclusion that DLT-based solutions have the potential to support this goal as tokenized securities and baskets substantially improve collateral mobility and unlock further efficiency gains. Still, DLT-based structures have to be embedded in the existing, highly integrated system landscape of the financial industry, and resilient legal frameworks need to be developed.

Specifically, the joint study elaborates on a model where:

• tokens representing underlying securities and specific related rights are introduced;
• collateral – a specific ISIN or a basket of securities – is mobilized via tokens without any movement in the underlying assets;
• a specific trust function is introduced which secures the interests of the token holder with regard to the physical securities in custody.

Deutsche Börse and the Deutsche Bundesbank have already successfully completed phases I and II of the joint project BLOCKBASTER (BLOCKchain BAsed Settlement TEchnology Research) project. The two prototypes developed in this context and operating on the basis of blockchain technology support the settlement of securities transactions, payments, interest payments and repayments when a bond matures. The underlying technology used in the two prototypes appeared to be fundamentally suitable for the live operation of a financial market infrastructure.

Based on the results of the joint research so far, the Deutsche Bundesbank and Deutsche Börse intend to continue to work together in exploring the potential offered by distributed ledger technologies.

Full press release on Deutsche Bundesbank

Full study on Deutsche Bundesbank

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