Blockchain solutions provider Digital Asset and the Depository Trust & Clearing Corporation (DTCC) have completed their US Treasury Collateral Network pilot project on the Canton Network. The project brought together 26 market participants to carry out 100 transactions.
The project used tokenized “digital twins” of Treasury bonds (USTs) in four use cases using the Canton Network Global Synchronization and DTCC LedgerScan features to demonstrate transaction flows and a case of default.
Faster settlement, even in a default
In the first use case, a digital twin was created of real-world assets (USTs) for an investor and then set aside. The digital twin was registered with the central security depository. The digital twin could be used for the same purposes as the asset itself — trading, lending or collateral, for example.
Next, the tokenized UST assets are encumbered in response to a margin call — a demand for increased value in the investor’s brokerage account. The collateral was transferred in an atomic transaction visible in real time.
In the third case, the investor called for the return of their margin and the call was settled instantly. This type of transaction typically takes a day or longer for settlement.
In the final case, the investor has defaulted. The counterparties informed the custodian that they wanted to seize the encumbered USTs and the margin app operator computed the quantities to transfer to them:
Encumbering collateral for a margin call. Source:
Digital Asset
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Technology that meets Uniform Commercial Code
In the pilot, transactions took place on sovereign blockchains on the Canton Network, which
was launched in June 2023
by Digital Asset and several large financial institutions. Use of the network guaranteed that transactions were instantaneous, but each party remained in control of their data and privacy. DTCC tracked and reconciled changes to tokenized and underlying holdings across the entire market.
Source:
Canton Network
The concept of digital twin was adopted by the Commodity Futures Trading Commission’s Global Markets Advisory Council for Digital Asset Markets Subcommittee earlier in 2024. The authors of the project report
noted
that
fulfilling claims on an asset
is controlled under the Uniform Commercial Code (UCC) and can vary depending on a blockchain’s technology. In the pilot, securing such claims was “provided in the app code and workflow, as well as in the legal contract.”
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