Linklaters has advised Eurex Clearing on a successful pilot project for digital payment processing in connection with transactions involving digital securities.

In order to achieve maximum efficiency in the settlement of digitised securities issued and transferred via a blockchain infrastructure, automated payment processes are necessary. For example, by linking the transfer and payment processing through smart contracts. The European Central Bank (ECB) has therefore launched a series of test projects on the securities settlement cycle, including a trial of the settlement of digital securities transfers against payment with central bank money via a blockchain solution.

Eurex Clearing has successfully tested payment settlement via the Banque de France’s DLT infrastructure as part of a pilot project. The use case was cleared repo transactions. The subject of these transactions was a digital commercial paper issued by ABN Amro. It was issued via the D7 platform, which is operated by Clearstream, and traded on the F7 platform of Eurex Repo. It was also the first transaction in which Eurex Clearing managed its own wallet on the DLT technology of a Eurosystem.

In addition to the Banque de France, three other central banks were involved in the ECB’s test projects: the Deutsche Bundesbank, the Dutch De Nederlandsche Bank and the Banque Centrale de Luxembourg.

Burkhard Rinne, partner in the capital markets practice and expert in clearing and settlement at Linklaters:

‘The DLT-based automated settlement of payments for digitised securities is of great importance. The successful pilot project with Eurex Clearing illustrates the potential of the technology. We are proud to have set another important milestone for our client in the further development of the market infrastructure for a digital financial system.”

Linklaters is one of the innovation leaders in the legal integration of distributed ledger technology into financial market infrastructures. Recently, the capital markets team, which has received multiple awards, advised KfW on two groundbreaking transactions involving the issuance and settlement of crypto securities. Prior to that, it advised Commerzbank on the first crypto custody licence of a German full-service bank.

Linklaters advised with Burkhard Rinne (Partner; lead), Florian Baetke and Stefan Gohling (both Managing Associates, all capital markets).