Check out DTCC Digital Launchpad featuring our collaboration with Japanese Securities Clearing Corporation (JSCC) to optimize collateral management using digital asset technology. Dive into the PoC and a Q&A with JSCC, where they share their inspiration, key lessons learned, and what’s next on their digital journey.
Q. What motivated you to explore digital asset technology for collateral management, and how does this align with your broader goals?
A. Efficiency and optimization in collateral management are critical in today’s financial markets. As a CCP (Central Counterparty), our mission is to provide stability, mitigate risk, and ensure market continuity. We envision a future where digital assets drive significant improvements in efficiency and risk reduction, with collateral management as a key pillar of this transformation. Given our role as the largest recipients of collateral, it’s only natural for CCPs to actively pursue the opportunities digital asset collateralization offers in realizing this vision.
Q. What were the key reasons you chose the DTCC Digital Launchpad for your PoC? How did it support your project needs?
A. DTCC Digital Launchpad aligned perfectly with both our technical and strategic objectives. Most of JSCC’s cleared trades involve sell-side and buy-side participants outside of Japan, making a globally standardized and harmonized framework for digital assets an essential requirement. Since joining the open-source Hyperledger Foundation in 2023 (renamed "LF Decentralized Trust" in 2024), we’ve had discussions with DTCC and realized that we share similar approaches to standardization, open source, and ecosystem development. This alignment made the Digital Launchpad an ideal choice for our PoC, enabling us to efficiently address key business needs.
DTCC Digital Launchpad provided a complete DLT environment and managed critical infrastructure elements like node set-up and token issuance, saving us significant time and resources. This allowed us to focus on smart contacts, application development, and ecosystem design – directly addressing the business solution.
Q. Can you share any challenges faced during the project? How were they addressed?
A. This was our first opportunity to conduct a DLT PoC in an environment operated by an external provider. Initially, we were concerned about clearly defining the boundaries between the Digital Launchpad’s infrastructure and our application areas. However, DTCC provided thorough documentation and clear explanations, which made it easy to establish the most suitable approach. Since our initial experiment, DTCC built out the Digital Launchpad into a collaborative environment where industry players can co-develop digital asset solutions, paving the way for an interconnected financial future. We see exciting opportunities to further engage and innovate within this ecosystem.
Q. What did you learn as a result of the PoC? What will you do next?
A. From a DLT infrastructure and platform perspective, we explored a path toward global harmonization. Following the white paper announcement (hyperlink), we received strong interest and support from other FMIs and clearing members, about future-oriented solutions for digital asset collateral management.
From a business use case perspective, we validated several key aspects of our digital asset solution, including:
- Streamlining margin call distribution and collateral deposit/withdrawal execution.
- Reducing double funding through digital “collateral swaps”.
- Establishing shared smart contracts and applications commonly used by CCPs, clearing members and clients.
- Publishing collateral eligibility, haircut, and market data using a shared on-chain database.
Looking ahead, our next PoC will likely explore cross-border collateral use cases, such as:
- Interoperability of collateral swaps across multiple CCPs, utilizing digital assets issued on multiple DLT networks.
- Lifecycle event management of digital assets held as collateral by CCPs.
Q. What are some of the broader benefits of tokenization and digital assets that your firm hopes to capture?
A. As an FMI like DTCC, we believe collateral tokenization will significantly enhance market efficiency and offer more options for market participants. We see this as a critical step in the evolution and stabilization of the entire financial system. With collateral tokenization, we have an opportunity to drive a wide range of breakthroughs, addressing many of the existing inefficiencies caused by cross-industry, cross-border, and cross-product challenges in today’s financial markets.
Q. What message would you share with the industry about the future of digital assets in traditional financial markets, and what steps do you believe are crucial to accelerate adoption and industry-wide integration?
A. To realize the full potential of digital assets in financial markets, it’s essential to first envision the ideal solutions they can enable and bring together key stakeholders to align on business strategies and technical solutions. The DTCC Digital Launchpad serves as an excellent platform for facilitating these critical discussions and accelerating collaboration to drive industry-wide adoption.