Capital markets News

Euroclear working on DLT-based bond issuance, settlement solution


Today a legal staffer at Euroclear confirmed that it is working on a DLT-based bond issuance and settlement solution that could be launched this year. 

Euroclear’s Bart Garré told Coindesk that it is “finalizing the first minimum viable product of a DLT platform”. Two other newsworthy points are the solution is not particularly part of the EU DLT Pilot Regime which relaxes some regulatory requirements. And the DLT platform will link to legacy bond markets to ensure liquidity. 

The liquidity point has already been addressed elsewhere. When UBS issued its CHF 375 million ($410m) blockchain bond via SIX Digital Exchange last year, it did the same. In that case, the bond was native to the SDX blockchain and held in the SDX central securities depository (CSD) but assets could be locked and mirrored in the conventional SIX CSD. This allows some investors to buy tokens, and those who are not keen can still invest conventionally.

It’s not hugely surprising that Euroclear is planning to launch a solution. Its main competitor Deutsche Börse’s Clearstream, unveiled D7 last year. While the D7 platform used smart contracts from the start, the current version is for centrally registered digital securities under German’s eWpG legislation, with more than one hundred issuances so far. The next stage is so-called crypto securities, where the registration uses DLT.

Meanwhile, Euroclear has been active across numerous blockchain use cases. In 2021 it led a consortium for wholesale central bank digital currency (CBDC) trials with the Banque de France using the CBDC to settle government bonds. Last year it announced an investment in Fnality, the blockchain-based settlement network that uses a synthetic CBDC for wholesale payments.

And at the end of last year, it participated in commercial paper pilot trials with Rabobank, where the Dutch State Treasury issued some of the commercial paper.

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