Two funds have performed a secondary market trade in what are believed to be the first notes to have been digitised on a private blockchain set up by Guernsey ICC Solidum Re.
In August, Guernsey-domiciled ILS reinsurance transformer and incorporated cell of Solidum Re, Dom Re IC, issued a series of notes created on and settled through a private blockchain known as the ILSBlockchain, replacing the traditional role of Euroclear or DTC for this note issue.
Dom Re issued $14,800,000 Principal-at-Risk Notes, due 2023, an asset-backed securitisation of a reinsurance contract, to six investors. Solidum Re acts as the paying agent and common depository of the permanent global note, as well as the blockchain permission grantor and sponsor.
Artex Risk Services (Guernsey), acting as trustee for assets on the ILSBlockchain, recently cleared a new participant to join the ILSBlockchain. With its own newly created node, the new participant paid US dollars into the trust account with Artex, which credited dollars to the participant’s wallet on their node.
Setting up a trade
Moving on to the next stage, Solidum Partners AG, on behalf of one of its funds, set up a trade on the ILSBlockchain wishing to sell some of its holdings. In setting up the trade, the ILSBlockchain software produced a cryptographic key representing the trade.
Solidum Partners then ‘advertised’ the trade, complete with the key required to execute the opposing side of the trade, on a platform set up and run by Solidum Re. This triggered emails to be sent to all registered participants on the ILSBlockchain.
Participants who wished to react to the offer were able to download the key from the advertising platform and enter it into their node on the ILSBlockchain where they could ‘decode’ the offer.
A participant who held sufficient USD was then able to directly execute the trade on the ILSBlockchain which, within a single ‘Atomic’ transaction, debited their wallet with the required USD assets and credited their wallet with the notes.
Conversely, within the same transaction, the ILSBlockchain debited the Solidum fund’s wallet of the offered notes and credited the wallet with the USD.
Solidum Re Director Cedric Edmonds said: “The transaction was simpler, quicker and more efficient than a standard DTC/Euroclear trade. Solidum can now, via the trustee, arrange for the USD assets its fund holds on the ILSBlockchain to be wired to its fund’s ‘real-world’ custody account.”