Post-trade body Euroclear has completed its pilot to tokenise gold, Gilts and Eurobonds for collateral management.
Euroclear completed the pilot in collaboration with Digital Asset and the World Gold Council, which included 27 participants, such as investors, banks, CCPs, custodians and a central securities depository.
The initiative executed 500 transactions and used the digital twins of real-world assets as collateral in real-time transactions, aiming to see how Distributed Ledger Technology (DLT) can revolutionise collateral mobility, enhance liquidity and boost transactional efficiency.
In an announcement, Euroclear stated that the collaboration demonstrated the ability to create a digital twin of these previously immobile real-world assets and use those tokenised assets as collateral in atomic, real-time transactions.
Olivier Grimonpont, Managing Director and Head of Product Management, Market Liquidity at Euroclear, said: “We recognise the immense value in industry experimentation to showcase the advantages of DLT for the market. As we strive to deliver even better and faster collateral mobilisation for our clients, digital technologies like DLT will be key enablers for us to achieve this.”
Additionally, the pilot also validated the secured party’s control over tokenised assets, which it says highlights their potential to meet intraday margin calls and enhance the financial ecosystem’s efficiency.
“Our work with the pilot participants has demonstrated that tokenised assets can be used with immediate effect to meet intraday margin calls outside of normal settlement cycles, processing times, and time zones,” said Kelly Mathieson, Chief Business Development Officer at Digital Asset.
This pilot took place at a time when the demand for gold as a traded asset continues to rise, with the average daily trading volume in 2023 reaching $162bn globally, according to the World Gold Council.
In addition to the demand for gold increasing, sovereign Gilts and Eurobonds are seen to offer a deep pool of high-quality liquid assets.
Mike Oswin, Global Head of Market Structure and Innovation at the World Gold Council, commented: “By digitising gold, we can overcome the perceived restrictions on moving and storing the physical metal, enabling this high-quality asset to be mobilised and used seamlessly within financial markets.”
Earlier this year, the European Central Bank (ECB) invited several companies to create use cases for the transaction process of central bank money on DLT, intending to create use cases that focus on the securities settlement process.
