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CME Group Considers Launching Token to Modernize Collateral Markets
Key Takeaways
- CME Group is exploring launching its own digital token while testing how tokenized assets could serve as collateral in markets;
- CEO Terry Duffy said the company is considering tokenized cash and a CME-branded token that may operate on a decentralized network;
- The potential CME token would be separate from its Google Cloud partnership, which focuses on blockchain-based payment systems.
CME Group, the major derivatives exchange based in Chicago, is considering issuing its own digital token.
The company is studying how tokenized assets could be used as collateral in financial markets, according to CEO Terry Duffy.
During an earnings call, Duffy said the team is assessing several ways to manage margin requirements. These include using tokenized cash and possibly launching a CME-branded token that could work on a decentralized network.
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He said, "Not only are we looking at tokenized cash <...> we’re looking at different initiatives with our own coin that we could potentially put on a decentralized network for other of our industry participants to use".
Duffy noted that the credibility of a token’s issuer plays a key role in whether market participants will trust it as collateral. He explained that tokens from an important financial institution might seem more reliable than those issued by smaller banks trying to create their own versions for margin purposes.
The reference to tokenized cash connects to CME’s partnership with Google Cloud announced in March. The two companies began testing blockchain-based systems for wholesale payments and tokenized assets through Google Cloud’s Universal Ledger.
If CME decides to issue its own token, it would be a separate effort from the Google project.
CME Group operates global futures and options markets for assets such as interest rates, stocks, commodities, and cryptocurrencies.
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