The International Swaps and Derivatives Association (ISDA) has partnered with Tokenovate to set up a taskforce related to the Common Domain Model (CDM). The goal is to develop an open-source, production-ready library of smart contracts incorporating CDM functions and workflows to accelerate adoption.
The CDM is an ISDA standard that doesn’t just define the data standards for derivative contracts but also the business processes. When CDM was formulated in 2018 and 2019, there were deliberate efforts to be technology-agnostic as it was intended for use beyond blockchain. Nonetheless, ISDA developed a whitepaper at the time on the use of smart contracts. There’s a slight sense of déjà vu: in 2019 Digital Asset open sourced a similar set of CDM smart contracts developed using its DAML smart contract language.
During this period it was estimated that the CDM could save the industry $2.5 billion if combined with blockchain.
The new smart contract framework will extend the CDM model of data standards and processes to add execution logic. The taskforce will be part of the Fintech Open Source Foundation (FINOS). Its initial work will be to automate interest rate resets, using the 2021 ISDA Interest Rate Derivatives Definition. Despite these interest rate resets being used by trillions of dollars of contracts, the process is still relatively manual. While not all contracts use these resets, the total notional value of all outstanding interest rate contracts was $548 trillion at the end of 2024. The replacement of LIBOR by risk free reference rates (RFR) has made the need more acute.
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