Spanish stock market operator BME and Renta 4 have carried out the first test for the digitisation of the certification process of collateral pledge using blockchain.
This is aimed at eliminating the need to use and exchange physical certificates. The proof of concept entailed the constitution and release of collateral pledged by Renta 4 Banco to cover customer's positions at BME Clearing, BME's central counterparty.
The system will bring about a radical improvement in the participants' operational and risk management as they will gain direct access to the information and participate in the validation of pledge agreements, BME explained.
This proof of concept has been fully developed by BME in collaboration with the regulators and different financial institutions while Renta 4 has served as the pilot firm.
Berta Ares, head of Digital Transformation at BME, said: "DLT technology allows us to reduce times drastically and improve the operation and control of the system, providing legal certainty for electronically generated certificates and maintaining privacy and compliance with the General Data Protection Regulation".
BME and Renta 4 Banco will keep working on the developments necessary to allow the system to go live by the end of 2019.