Euroclear partners with Digital Asset and World Gold Council to tokenize gilts, gold, and Eurobonds
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Post trade body Euroclear entered into a partnership with several other entities, including Digital Asset and World Gold Council a few months ago to pilot a program aiming to tokenize gilts, gold, and Eurobonds.
The collaborative initiative involved a total of 27 market participants, and it took place over the early summer, in June and July 2024. During the pilot, five types of cross-application transactions were connected on top of Digital Asset’s public chain, Canton Network.
The pilot completed over 500 transactions in total by the time it was over, and according to the involved companies, the collaboration was a big success. They said that it demonstrated the ability to create a digital twin of previously immobile real-world assets (RWAs). As such, their tokenized form managed to grant them new utilities, such as the ability to act as collateral in atomic, real-time transactions.
It is also worth noting that the project took place at a time when gold’s use as a traded asset went up with an average daily trading volume reaching $162 billion on a global level.
Partners’ Representatives Explained The Benefits
Commenting on the move, Euroclear’s head of product management and market liquidity, Olivier Grimonpont said: “We recognize 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 mobilization for our clients, digital technologies like DLT will be key enablers for us to achieve this.”
Digital Asset’s Chief Business Development Officer, Kelly Mathieson, noted that the company’s work with the pilot participants demonstrated that tokenized assets can be used with immediate effect to meet intraday margin calls outside of normal settlement cycles, time zones, or processing times.
World Gold Council’s Global Head of Market Structure and Innovation, Mike Oswin, also shared his thoughts, saying that the digitization of gold allows companies to overcome the perceived restrictions on moving and storing the physical metal. This enables the high-quality asset to be mobilized and used seamlessly in financial markets.
Clifford Chance, a law firm that was also involved in the project, pointed out that using a digital twin of real-world assets also comes with certain legal implications. The company’s partner and co-head of fintech, Paul Landless, stated: “With certain approaches and platforms, a digital twin is not a separate asset and so the impact for master agreements, trading relationships, close-out processes, and valuation approaches are minimised, but it is always important to ensure the digital twin is catered for and reflected into existing product and platform documentation.”
He further explained that some of the legal and regulatory issues can be reduced by viewing RWAs’ digital twins as an operational and record-keeping tool, rather than an asset itself.
