Efficiently Transferring Gold as Collateral

Sector: Tertiary sector · Industry: Banking and financial services · Organisation: Digital Asset, Euroclear, World Gold Council · Maturity level: Pilot

Digital Asset, Euroclear and the World Gold Council conducted a pilot in June and July 2024 on the Canton Network to tokenise gold, British government bonds and Eurobonds. Participants trialled the use of these assets as collateral as well as atomic transactions and more flexible round-the-clock mobility. A successful pilot is documented, but not widespread production operation.

Documentation status

Description

Digital Asset, Euroclear and the World Gold Council demonstrated in summer 2024 how traditional assets can be used more efficiently as collateral through tokenisation. Until now, the transfer of physical gold or Eurobonds has required complex administrative coordination and several intermediate steps. By using the Canton Network, these assets can be digitally represented and exchanged between banks with almost no delay.

The joint pilot project by Digital Asset, Euroclear and the World Gold Council took place in June and July 2024 on the Canton Network. The focus was on trialling digital representations of gold, British gilts and Eurobonds to validate their usability as loan collateral. Atomic transactions were simulated via interoperable smart contracts, in which ownership rights and considerations are transferred synchronously. Participants particularly examined the more flexible, round-the-clock mobilisation of assets. The project successfully demonstrated technical feasibility, but has not yet progressed to widespread production operation.

Perspectives

B2B — organisations perspective

For financial institutions, the digital representation of gold and bonds means a significant simplification of cross-border collateral management. Synchronous settlement enables faster handling of margin calls and reduces settlement risks in bilateral trading.

Employees perspective

Employees in settlement and clearing departments benefit from automated transfer processes and standardised data flows. This reduces the manual effort required for investigations and discrepancy checks in day-to-day work.

Benefits

General

B2B — organisations

Employees

Challenges

General

B2B — organisations

Employees

Technology foundation

The interoperable Canton Network enables institutional participants to connect financial applications in a data protection-compliant manner. Smart contracts are used to represent tokenised assets such as gold and bonds, allowing atomic transactions to be settled directly between participating financial institutions without counterparty risk.

Implementation examples

Tokenised Collateral Pilot on the Canton Network

Conventional processes for providing gold and bond collateral are fragmented, time-consuming and unnecessarily tie up liquidity in the interbank sector.

Digital Asset, together with Euroclear and the World Gold Council, trialled the tokenised transfer of gold and government bonds as collateral. The project demonstrated intraday mobilisation of asset classes via the Canton Network.

In June and July 2024, Digital Asset, Euroclear and the World Gold Council conducted an institutionalised pilot test. Tokenised versions of physical gold, British gilts and Eurobonds were used as loan collateral on the Canton Network. The experiment showed how atomic settlement processes reduce settlement risks and support intraday transferability. The results demonstrate the fundamental feasibility for regulated financial institutions, but do not yet represent commercial production operation.

Eliminating settlement delays and synchronising the transfer of ownership in collateralised transactions.

Tags

Tokenisation, Collateral Management, Gold, Canton Network, Smart Contracts

Sources

  1. Tokenization Allows More Efficient Collateral Transfers
  2. Unlocking New Collateral Pools and 24x7 Mobility
  3. Digital Asset, Euroclear and World Gold Council Participate in Successful Pilot

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