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SIX launched its Digital Collateral Service (DCS), permitting financial institutions to post selected crypto-assets as collateral alongside traditional collateral. Firms managing both bonds and bitcoin, for example, can now post both as collateral to cover a single exposure. However, crypto cannot be used as collateral on SIX exchanges or for repo transactions. The aim is to provide a conventional collateral solution for OTC and bilateral trades of crypto. https://www.six-group.com/en/newsroom/media-releases/2025/20250212-digital-collateral-service.html

"Recent news reports have shone a light on Binance-Peg BUSD ("PBUSD") and how it doesn't always appear to have been completely backed by BUSD issued by Paxos. PBUSD is minted on several blockchain networks including BNB Chain, Avalanche, Polygon, and TRON. PBUSD has always been, and continues to be, 100% collateralized. However, the collateral has not always been stored in a single, dedicated wallet in real time so that the 1:1 backing was not always immediately visible to users. Binance undertook a project to centralize the collateral in a single, dedicated wallet; this was completed on 04 January 2023 so that users have visibility into the 1:1 backing of PBUSD. Minting of PBUSD now only takes place after collateral is added to the dedicated wallet. Centralization of collateral for all Binance-backed tokens into dedicated collateral wallets will be completed by 09 February. This will be visible in the Proof of Reserves system that we are continuing to develop."

The International Swaps and Derivatives Association (ISDA) published a jurisdiction-agnostic guidance note to inform how counsel may approach a legal opinion on the enforceability of collateral arrangements entered into under certain ISDA collateral documentation where the relevant collateral arrangement comprises tokenized securities and/or stablecoins. This guidance note sets forth (i) a basic taxonomy of common tokenization structures and (ii) a non-exhaustive list of key issues to consider when analyzing the enforceability of collateral arrangements involving tokenized collateral.

"In this paper, we study the mechanisms that govern price stability of MakerDAO's DAI token, the first decentralized stablecoin. DAI works through a set of autonomous smart contracts, in which users deposit cryptocurrency collateral, typically Ethereum, and borrow a fraction of their positions as DAI tokens. Using data on the universe of collateralized debt positions, we show that DAI price covaries negatively with returns to risky collateral. The peg-price volatility is related to collateral risk, while the stability rate has little ability to stabilize the coin. The introduction of safe collateral types has led to an increase in peg stability."

Digital Asset published the results of its U.S. Treasury (UST) Collateral Network Pilot that focused on leveraging DLT applications to support market connectivity across the collateral management lifecycle to enhance mobility, liquidity and transactional efficiency of tokenized assets. The tests involved four investors, four banks, two central counterparties, three custodians/collateral agents, and a central securities depository operating fourteen Canton Network nodes, that connected four types of cross-application transactions through ten distributed applications, leveraging DTCC's LedgerScan solution to support dynamic tracking and governance of the assets involved in the pilot transactions. Participants successfully executed 100 transactions. https://www.canton.network/unlocking-collateral-mobility-through-tokenization

Dai is minted by users taking on collateralized debt positions, where collateral is deposited in an Ethereum smart-contract, with a percentage of the asset's value being paid out in Dai. The collateral then gets released once the tokens are repaid, and the Dai are destroyed. Loans that can't be supported by their collateral are placed into liquidation proceedings, in which the collateral is auctioned for Dai to repay the debt. But the price drop allowed bidders to win liquidation auctions for 0 DAI - further worsening Maker's crisis.

JPMorgan Chase & Co is using blockchain for collateral settlements. The bank's first such transaction came on May 20, when two of its entities transferred the token representation of BlackRock money market fund shares as collateral on its private blockchain. The effort will allow investors to pledge a wider range of assets as collateral and use them outside of market operating hours... In the coming months, the bank plans to expand tokenized collaterals to include equities, fixed income and other asset types.

The International Swaps and Derivatives Association (ISDA) has updated an annex to its master derivatives agreement to support the use of tokenized collateral. The Tokenized Collateral Model Provisions do not purport, and should not be considered, to address all issues and considerations that may be relevant in connection to the transfer or receipt of Tokenized Collateral, including, without limitation, enforceability, regulatory, tax and accounting issues and considerations.

Eurex Clearing has received non-objection letter from the German Federal Financial Supervisory Authority (BaFin) for distributed ledger technology (DLT) supported collateral mobilization for its clients. The initiative is a collaboration with HQLAᵡ and Clearstream, with J.P. Morgan planning to participate as the pilot clearing member. The objective is to ensure that securities collateral can be accessed and utilized instantly to fulfil central counterparty (CCP) margin requirements, regardless of its physical location. https://www.hqla-x.com/post/eurex-clearing-collaborates-with-hqlax-on-digital-collateral-mobilization

ISDA analysis indicates that netting arrangements relating to digital asset derivatives are likely to be enforceable in certain major jurisdictions (including England and Wales and New York). However, the enforceability of netting in each jurisdiction will depend on the counterparty's local insolvency law, some of which may exclude or omit digital assets from their scope of application. ISDA will therefore begin work in 2023 to update netting opinions in relevant jurisdictions to cover digital assets. When it comes to collateral, it is likely that most (if not all) developed jurisdictions will recognize digital assets as property that will be capable of protection under local law, including for posting as collateral. However, the precise nature and extent of any rights associated with that property interest, the strength of legal certainty and certain technical issues, such as the methods by which that property can be posted as enforceable collateral, will vary based on the applicable jurisdiction(s).

Technology and product innovation are opening new doors which enable collateral managers to optimise and allocate collateral more effectively, posting collateral faster and with greater precision than has been possible in the past.

As part of the ECB wholesale DLT settlement trials using central bank money, HQLAᵡ was involved in an intraday repo transaction where Goldman Sachs borrowed cash from Clearstream in exchange for collateral held on the HQLAᵡ DLT platform. HQLAᵡ is a collateral mobility solution in which assets held by custodians are locked and digitized in the HQLAᵡ digital collateral registry, with the legal agreements enabling collateral to transfer instantly using DLT. In this case, the cash leg of the transaction used the Bundesbank's Trigger solution. The trades were agreed via the Eurex Repo F7 trading system, and Deutsche Börse's Clearstream D7 digital securities platform was used as the market system operator.

The Deutsche Bundesbank and Deutsche Börse have presented the results of a concept study on the use of distributed ledger technology (DLT) in the area of collateral management. This study outlines that, in principle, DLT is capable of delivering further benefits in terms of the velocity and usability of collateral. The two institutions are thus continuing their successful cooperation in researching the capabilities offered by securities settlement based on DLT technology.

"In the IMF working paper, called Privacy provision, payment latency and role of collateral, authors Charles Kahn, Caitlin Long and Manmohan Singh argue that digital currencies are analogous to collateral reuse, where securities are exchanged for cash. Looked at this way, central bank digital currencies (CBDCs) and commercial-bank sponsored tokens may be preferable to stablecoins, such as libra, which are issued by private companies without bank charters. "

JPMorgan has debuted its in-house blockchain-based tokenization application, the Tokenized Collateral Network (TCN) as it settled its first trade for BlackRock. The TCN, using blockchain technology, allows investors to transfer collateral ownership without moving assets in underlying ledgers. It was used by BlackRock to turn shares in one of its money market funds into digital tokens, which were then transferred to Barclays as collateral for an over-the-counter derivatives trade between the two institutions.

HQLAᵡ successfully concluded a feasibility initiative to address pain points in triparty collateral mobility. It uses its platform to transfer securities collateral to - or between - multiple triparty agents without triggering cross-custodian settlements. The HQLAᵡ platform uses distributed ledger technology (DLT) to validate the ownership of the securities at any given point in time.

DTCC and Japan Securities Clearing Corporation (JSCC) conducted a proof-of-concept (POC) to design and develop a cross-industry and cross-product collateral ecosystem by making full use of the "DTCC Digital Launchpad" distributed ledger technology (DLT) based platform. The POC explored how central counterparties (CCPs) could use tokenization to optimize the collateral management process for clearing members and their buy-side firms. In particular, it examined how margin calls and their associated processes could be automated, made more efficient and transparent for all participants using digital assets and smart contracts - or rules that automatically execute on a distributed ledger when certain conditions are met.

This paper gathers various stablecoin price stabilization mechanisms, dividing the methods into four collateral types (fiat, crypto, commodity, and non-collateralized) and two layers (protocol and application) to show that non-collateralized stablecoin on the application layer is the simplest approach for implementation.

MakerDAO is now allowing the centralized USDC stablecoin to be used as collateral for loans after last week's ethereum crash. The platform was left with under-collateralized debt worth millions of dollars after ether (ETH) fell by 30% in 24 hours on "Black Thursday."

The worry is that in dispensing with collateral as a line of defense (or using less of it), the new breed of less-than-fully collateralized stablecoins may not be able to weather a major black swan event, say like a market crash, an outbreak of war or a new pandemic. It's possible that less-than-fully collateralized stablecoins will prove to be an enduring advance in financial technology. If so, they'll imbue DeFi with true stability while simultaneously disconnecting it from the incumbent financial system. Or they could be highly risky assets that offer only the illusion of safety. We'll know which it is when the next big market disruption hits.