JPMorgan Ventures into RWA Issuance! DTCC Cloud Sandbox Digital Launchpad: Driving Settlement Automation and Asset Tokenization

The Depository Trust & Clearing Corporation (DTCC) recently launched a new sandbox platform called Digital Launchpad, aimed at creating an open ecosystem for market participants and technology providers to test and launch solutions within this sandbox. The platform supports multiple blockchains and constructs a secure and efficient digital market infrastructure, allowing customers to test DTCC products without incurring significant costs. Source

Digital Launchpad provides a multi-cloud environment that supports multiple chain networks

Digital Launchpad supports various cloud platforms, integrates multiple chain networks, and also offers fundamental Web3 tools to enable market participants to quickly develop and test solutions on different technological platforms.

Dual Launchpad: Industry and User Exclusive Spaces

The Launchpad is divided into "Industry Launchpad" and "User Launchpad." The Industry Launchpad provides a collaborative space for market participants to collectively address key issues, while the User Launchpad offers individual users a personalized space to develop customized solutions using DTCC's software products without the need for high costs.

Support for Tokenized Asset Issuance, Optimizing Collateral Management with Smart Contracts

Digital Launchpad supports the issuance of tokenized assets such as cash, stocks, bonds, etc., and utilizes smart contracts to automate business processes. This significantly enhances market transparency and efficiency, especially in collateral management, where smart contracts can effectively manage margin processes and optimize risk control.

Public and Exclusive Environments, Flexibly Supporting Diverse Needs

Users can choose to collaborate in a public environment or develop in an exclusive space to meet the needs of different development stages, allowing market participants to flexibly test and deploy their digital asset solutions.

Below is a conceptual diagram of DTCC's Digital Launchpad ecosystem:

Collaboration with JSCC for Digital Collateral PoC

DTCC collaborates with the Japan Securities Clearing Corporation (JSCC) on a Proof of Concept (PoC) for digital collateral management, exploring the application of blockchain and Distributed Ledger Technology (DLT) in capital markets, with a focus on tokenized assets and improving collateral management efficiency.

Utilizing Hyperledger Besu for Proof of Concept

JSCC uses the Ethereum client Hyperledger Besu for the Proof of Concept, focusing on simulating and automating margin call processes. Through the combination of digital assets and smart contracts, processes can be automated on a distributed ledger.

Four Key Operational Points

• Rapid Tokenization: JSCC can quickly issue tokenized cash, stocks, and bonds using DTCC's Digital Launchpad platform.
• Smart Contracts and Process Automation: Automating margin calculations and collateral access through smart contracts improves process efficiency and enhances communication efficiency among Central Counterparties (CCP), clearing members, and clients in central clearing transactions.
• Shared Database and Support for Intraday Operations: Establishing an on-chain shared database enhances transparency, allowing buyers and sellers to quickly swap and manage collateral on the same day, increasing asset management efficiency.
• Enhancing Risk Management and Capital Utilization

Note: Central Counterparties (CCP) act as intermediaries between buyers and sellers, facilitating trade clearing and settlement.

Operational Steps and Explanations

1. Establishing a Blockchain Node Network: JSCC sets up a blockchain network on the Launchpad, including nodes for seller clearing members and buyer clients, enabling both parties to participate in collateral transactions and management.

2. Issuance of Digital Assets: Setting up a "Token Issuance Node" responsible for tokenizing digital assets such as cash, stocks, and bonds on the network. These assets can move and exchange freely on the blockchain, providing support for collateral.

3. Smart Contract for Managing Margin Requirements: Creating versatile smart contracts to add margin calls for seller clearing users. These smart contracts also allow clearing users to allocate margin requirements to their buyers, assisting in collateral access.

4. Separate Account and General Account Management:

   • Separate Account: JSCC's nodes can directly calculate the required margin amount for users with independent accounts (Client B).
   • General Account: For users with general accounts (Client C), smart contracts need to provide detailed ownership information of collateral to CCP. However, the system can further enhance privacy protection and maintain account hierarchy.

5. Oracle Node and Shared Database:

   • JSCC creates an Oracle node as an on-chain shared database, providing users with static and market data such as collateral standards, latest asset prices, and discount rates to help them predict or test their collateral value more accurately and assess the effectiveness of risk control strategies.

6. Custom User Interface:

   • JSCC also develops a user interface for clearing members and their clients to initiate and track transactions, and access real-time asset prices and market data provided by Oracle.

DTCC collaborates with Chainlink to provide on-chain data integration services, with participation from JPMorgan.