During the SIBOS banking event yesterday, David Durouchoux from Société Générale (SocGen) FORGE explained that combining tokenization and derivatives is crucial to encourage the sector to grow. However, derivatives are not part of the EU DLT Pilot Regime, which relaxes certain laws for DLT and tokenization.
Derivatives traders have to provide collateral as margin when prices move against them. However, traditionally the transfer of collateral is slow because it takes time to settle. This results in added risks. It also means when traders want to withdraw collateral, it takes time. Hence, the desire to explore alternatives such as tokenization.
Meanwhile, Stateside there are moves afoot to get the Commodity Futures Trading Commission (CFTC) to support DLT-based collateral used for margin. We spoke to the CEO of Hashnote, a traditional finance (TradFi) affiliated firm that has launched a tokenized money market fund, USYC. He sees the crypto world as a stepping stone to getting tokenized money market funds (MMFs) accepted as collateral in TradFi.
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