HQLAᵡ, the DLT collateral mobility platform, can operate in the US under a no action letter received from the Securities and Exchange Commission (SEC). Eurex Clearing recently leveraged the platform to accept DLT-based collateral for margin purposes, one of the first instances worldwide at a traditional regulated venue. The key benefit is enabling instant transfer rather than needing to wait for T+1 or T+2 settlement. Collateral mobility is of particular interest to TradFi institutions, with HQLAᵡ backed by Deutsche Börse and numerous systemically important banks including BNP Paribas, BNY Mellon, Citi, Goldman Sachs, HSBC and JP Morgan.
The SEC letter was addressed to both HQLAᵡ and Clearstream International, which acts as the trusted third party and collateral custodian for the platform. The underlying assets are locked in place and digital collateral receipts are issued that can be transferred instantly. Technically, this is digital collateral rather than tokenized collateral. Until now the platform has used the R3 Corda permissioned blockchain, but HQLAᵡ plans to migrate to Canton technology following a recent funding round in which Broadridge and Canton Network developer Digital Asset participated.
The rationale for applying for the no action letter is that there is a possibility HQLAᵡ could be considered to be operating as a clearing agency. HQLAᵡ is planning to apply for a more permanent conditional exemption from the requirement to register as a clearing agency, with the NAL giving it 36 months of breathing space. However, the SEC is also imposing additional restrictions during that period.
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