Tokenizing credit risk using a distributed ledger
To manage credit risk using a distributed ledger, a computing device determines a line of credit to provide from a clearing broker to an investment manager. The computing device mints a token representing the line of credit from the clearing broker by interacting with a distributed ledger maintained by a plurality of participants in a distributed ledger network, and generates a transaction including a transfer of the token representing the line of credit from the clearing broker to the investment manager. The transaction is stored in the distributed ledger and includes an indication of the clearing broker providing the line of credit. Then the computing device transmits the transaction to at least one other participant in the distributed ledger network.
1 . A method for verifying credit of an investment manager using a distributed ledger maintained by a plurality of participants, the method comprising:
receiving, at one or more processors of an executing broker from an investment manager, a request to execute a trade of an asset;
monitoring, by the one or more processors, a distributed ledger maintained by a plurality of participants in a distributed ledger network for a token minted by a clearing broker to the investment manager representing a line of credit provided by the clearing broker, the token including a credit amount, a name of the clearing broker providing the line of credit, and a duration;
in response to (i) identifying the token representing the line of credit provided by the clearing broker to the investment manager, (ii) receiving the token, (iii) determining that the name included in the token matches the name of the clearing broker, (iv) determining that the credit amount is sufficient to cover a cost of the trade, and (v) determining that the token has not expired, placing, by the one or more processors, a fulfillment order for the trade by the investment manager, such that the clearing broker settles the trade; and
burning, by the one or more processors, the token by transmitting the token to a burn address including augmenting a transaction to transfer the token to the burn address with a cryptographic signature from the executing broker according to a private cryptographic key owned by the executing broker to prove an identity of the executing broker.
2 . The method of claim 1 , wherein the line of credit is for particular amount and for a particular duration.
3 . The method of claim 1 , further comprising:
monitoring, by the one or more processors, the distributed ledger for a transfer of the token to the executing broker.
4 . The method of claim 1 , further comprising:
transmitting, by the one or more processors, a request to the clearing broker to settle the trade, wherein the clearing broker settles the trade in response to determining that the token has been burned.
5 . The method of claim 1 , wherein the token is a non-fungible token (NFT).
6 . The method of claim 5 , wherein the token is a fractionalizable NFT configured to be fractionalized into fungible tokens, and receiving the token includes:
receiving a number of the fungible tokens corresponding to the cost of the trade, wherein each fungible token represents a fractional portion of the credit amount for the fractionalizable NFT.
7 . The method of claim 6 , wherein determining that the credit amount is sufficient to cover the cost of the trade includes determining that the fractional portion of the credit amount corresponding to the number of fungible tokens received is sufficient to cover the cost of the trade.
8 . A computing device for verifying credit of an investment manager using a distributed ledger maintained by a plurality of participants, the computing device comprising:
one or more processors; and
a non-transitory computer-readable medium coupled to the one or more processors and storing instructions thereon, that when executed by the one or more processors, cause the computing device to:
receive, at an executing broker from an investment manager, a request to execute a trade of an asset;
monitor a distributed ledger maintained by a plurality of participants in a distributed ledger network for a token minted by a clearing broker to the investment manager representing a line of credit provided by the clearing broker, the token including a credit amount, a name of the clearing broker providing the line of credit, and a duration;
in response to (i) identifying the token representing the line of credit provided by the clearing broker to the investment manager, (ii) receiving the token, (iii) determining that the name included in the token matches the name of the clearing broker, (iv) determining that the credit amount is sufficient to cover a cost of the trade, and (v) determining that the token has not expired, place a fulfillment order for the trade by the investment manager, such that the clearing broker settles the trade; and
burn transmit the token by transmitting the token to a burn address to burn the token including augmenting a transaction to transfer the token to the burn address with a cryptographic signature from the executing broker according to a private cryptographic key owned by the executing broker to prove an identity of the executing broker.
9 . The computing device of claim 8 , wherein the line of credit is for particular amount and for a particular duration.
10 . The computing device of claim 8 , wherein the instructions further cause the computing device to:
monitor the distributed ledger for a transfer of the token to the executing broker.
11 . The computing device of claim 8 , wherein the instructions further cause the computing device to:
transmit a request to the clearing broker to settle the trade, wherein the clearing broker settles the trade in response to determining that the token has been burned.
12 . The computing device of claim 8 , wherein the token is a non-fungible token (NFT).
13 . The computing device of claim 12 , wherein the token is a fractionalizable NFT configured to be fractionalized into fungible tokens, and receiving the token includes:
receiving a number of the fungible tokens corresponding to the cost of the trade, wherein each fungible token represents a fractional portion of the credit amount for the fractionalizable NFT.
14 . The computing device of claim 13 , wherein to determine that the credit amount is sufficient to cover the cost of the trade, the instructions cause the computing device to determine that the fractional portion of the credit amount corresponding to the number of fungible tokens received is sufficient to cover the cost of the trade.
15 . A non-transitory computer-readable medium coupled to one or more processors and storing instructions thereon, that when executed by the one or more processors, cause the one or more processors to:
receive, at an executing broker from an investment manager, a request to execute a trade of an asset;
monitor a distributed ledger maintained by a plurality of participants in a distributed ledger network for a token minted by a clearing broker to the investment manager representing a line of credit provided by the clearing broker, the token including a credit amount, a name of the clearing broker providing the line of credit, and a duration;
in response to (i) identifying the token representing the line of credit provided by the clearing broker to the investment manager, (ii) receiving the token, (iii) determining that the name included in the token matches the name of the clearing broker, (iv) determining that the credit amount is sufficient to cover a cost of the trade, and (v) determining that the token has not expired, place a fulfillment order for the trade by the investment manager, such that the clearing broker settles the trade; and
burn the token by transmitting the token to a burn address to burn the token including augmenting a transaction to transfer the token to the burn address with a cryptographic signature from the executing broker according to a private cryptographic key owned by the executing broker to prove an identity of the executing broker.
16 . The non-transitory computer-readable medium of claim 15 , wherein the line of credit is for particular amount and for a particular duration.
17 . The non-transitory computer-readable medium of claim 15 , wherein the instructions further cause the one or more processors to:
monitor the distributed ledger for a transfer of the token to the executing broker.
18 . The non-transitory computer-readable medium of claim 15 , wherein the instructions further cause the one or more processors to:
transmit a request to the clearing broker to settle the trade, wherein the clearing broker settles the trade in response to determining that the token has been burned.