SIX launched the new Digital Collateral Service (DCS) today, permitting financial institutions to post selected cryptocurrency assets as collateral alongside traditional collateral.
The new product offers a solution through which clients can manage traditional securities and cryptocurrency collateral. Firms managing both bonds and bitcoin, for example, can now post both as collateral to cover a single exposure. This will simplify operations for traders and their counterparts significantly, enhancing portfolio management efficiency and minimizing counterparty risk. SIX has developed this service by combining and leveraging expertise from different areas in its international custody business and SDX.
Beyond providing a more seamless and holistic collateral management platform, DCS leverages the crypto custody infrastructure of SDX, delivering users enhanced safeguarding mechanisms. The default protection for collateral held in this type of account structure adds a layer of security that many institutional investors have been seeking to justify greater participation in institutional cryptocurrency trading.
Commenting on the launch of the new offering, David Newns, Head SDX, said: “The role of cryptocurrencies in collateral management will become increasingly important. Our new and fully integrated solution empowers product issuers, traders, brokers, and market makers to optimize their collateral usage, whether it’s crypto or traditional securities, with built-in risk management safeguards. This allows financial institutions to embrace crypto collateral on a larger scale.”
Christian Geiger, Head Clients & Products Securities Finance, SIX, added: “Building on our role as a trusted financial market infrastructure and leveraging the flexibility of our state-of-the-art Triparty Agent, we are thrilled to expand our offerings to include cryptocurrencies as a new asset class for collateralization. With the growing institutional appetite for digital assets, we are committed to meeting the needs of this highly risk-conscious investor segment through our established and reliable services.”