DTCC and BNY Launch Collateral-in-Lieu Service to Boost Tokenized Asset Clearing

Source: DefiPlanet Original Title: DTCC and BNY Launch Collateral-in-Lieu Service to Boost Tokenized Asset Clearing Original Link:

Quick Breakdown

• DTCC and BNY introduce the Collateral-in-Lieu (CIL) service, with Federated Hermes executing the first repo trade.
• CIL reduces duplicative margining, optimizes capital use, and supports clearing of tokenized assets and crypto-backed securities.
• The service expands institutional access, enhances transparency, and prepares markets for mandatory clearing in 2026–2027.

The Depository Trust & Clearing Corporation (DTCC) and BNY (NYSE: BK) have introduced the Collateral-in-Lieu (CIL) service under DTCC’s Fixed Income Clearing Corporation (FICC) Sponsored General Collateral offering, with Federated Hermes, Inc. executing the first repo transaction. The service aims to enhance clearing efficiency for tokenized assets and other crypto-adjacent digital securities, reflecting the growing convergence of traditional and digital markets.

Margin and capital efficiency for crypto markets

The CIL solution reduces duplicative margin requirements by applying a central counterparty (CCP) lien “in lieu” of sponsor guarantees and traditional margin posting. This approach streamlines settlement, enabling participants in crypto and tokenized asset markets to clear transactions efficiently while remaining compliant with regulatory standards. Leveraging BNY’s triparty infrastructure, the service supports both conventional repo and tokenized security executions, an essential capability as digital assets increasingly interact with traditional collateralized markets.

By eliminating double-margining and optimizing capital usage, the CIL framework offers a scalable solution for institutions exploring blockchain-based securities, stablecoins, and tokenized U.S. Treasury instruments. FICC’s model enhances operational efficiency and transparency in clearing crypto-backed repo products, providing a robust foundation for the evolving digital asset ecosystem.

Institutional access and market adoption

The CIL service broadens access to cleared repo markets for institutional crypto investors, paving the way for broader adoption of tokenized assets within regulated frameworks. Collaboration with BNY and Federated Hermes underscores growing confidence in integrating digital assets with established clearing infrastructure.

DTCC anticipates increased uptake as market participants prepare for mandatory clearing requirements in 2026 and 2027, supporting liquidity, operational resilience, and regulatory compliance. The service highlights the critical role of centralized clearing in bridging traditional finance with blockchain-based securities.

In a related regulatory milestone, DTCC has received a no-action letter from the U.S. Securities and Exchange Commission (SEC), allowing the firm to deploy a tokenized deposit solution without immediate enforcement action, further solidifying its position at the forefront of digital asset infrastructure.