During October, Eurex Clearing reported it was involved in repo tokenization trades relating to the European Central Bank’s (ECB’s) wholesale DLT settlement trials. Now Dutch bank ABN AMRO has shared more details about the trials where it was the principal.
It started with ABN AMRO bank issuing €1.1 million in tokenized commercial paper in early October. Rabobank and ABN AMRO Clearing bought the paper. The issuance used Clearstream’s D7 platform and was settled using the Banque de France’s wholesale CBDC (wCBDC). The Bank refers to the wCBDC as ‘exploratory cash tokens’ (ECTs).
No less than four central banks were involved. Apart from the Banque de France there was De Nederlandsche Bank (DNB) (regulates bank participants), the Banque Centrale du Luxembourg (the commercial paper used Luxembourg law), and the Deutsche Bundesbank (Clearstream provided the issuance solution and Eurex, the repo trading platform).
The reverse repo transactions
Then in late October, ABN AMRO was involved with four reverse repo transactions, which involved it buying the commercial paper and selling it back at a slightly higher price. All the transactions used the pilot CBDC for settlement. Typically, repo transactions are overnight. A key benefit of DLT for repo is instant settlement. This supports intraday repo transactions, allowing a bank to borrow or lend cash against collateral for just a few hours. ABN AMRO, like many banks, uses repo to manage its liquidity.
The bank highlighted three distinctive aspects of the trials. It was the first time it was involved with repo using tokenized collateral, the commercial paper. Intraday repo was a first for the Dutch bank. Plus, it was the first repo transactions it has settled atomically using tokenized central bank money.
“As the first Dutch bank to register a digital green bond on a public blockchain last year with client Vesteda, the Eurosystem trials further strengthen ABN AMRO’s frontrunner position in the digital assets space and support our commercial digital assets offering to clients,” said Sander Wever, Head of Money Markets and Securities Financing at ABN AMRO. “The CBDC repo trial allows ABN AMRO to explore novel collateral types (tokenised CP issued by ABN AMRO), on-chain settlement and intraday liquidity management solutions for the future.”
He added, “With the potential for CBDC to become widely available for business-as-usual soon, ABN AMRO stands ready for the transition.”
In October, ECB director Piero Cipollone said the Eurosystem is exploring how to build on these wholesale DLT settlement trials. After all, Switzerland extended its wholesale CBDC pilot by two years after an initial six month period.
