Overcoming Obstacles to Digitization of Structured Credit


Charlie Moore is the CEO of Global Debt Registry

The standardization and development of distributed ledger, or blockchain, technology has led to numerous capital markets sectors exploring its potential uses. For some, the applications are manifest and simple to implement. For others, early explorations have led towards the realization that a large, decentralized database may not currently be the best way to store and transmit information.

The structured credit industry sits somewhere in the middle of these two spectrums. While there has been significant industry discussion and some very notable pilots and early implementations, the industry as a whole still relies on email, spreadsheets, and CSV files to support transactions. At Global Debt Registry, we have identified [four] broad areas as the most important obstacles that the securitization industry needs to get comfortable with in order for widespread adoption of technology in this area: scalability, privacy, standards, and regulatory comfort.

Let’s look at each of these areas, lessons learned to date and the main approaches being taken by innovators in this industry.


The most frequently raised challenge in recent months has been around the performance and scalability of Blockchain. This has been prompted by the performance of early projects in trading, settlements, and payments. Many of these markets feature high-frequency transactions, large volumes of data and extensive networks of active participants. These characteristics do not apply to transactions in Structured Credit. Collateral is updated every few weeks with spreadsheets of Thousands of accounts, not billions of data points daily. Latency is not proving an issue in the rollout of our common ledger nor most debt capital market initiatives. A typical ABS desk can update and synchronize their entire portfolio of collateral positions on the GDR ledger every couple of weeks in just 30 minutes.


Individual loans contain sensitive personal information, such as the names, dates, and social security numbers of the borrowers. The full representation of the loan as a digital asset will require the original authoritative copies of the loan documents on chain. While the technologists continue to innovate in this area, there are multiple use cases in this asset class that does not require the sharing of sensitive data, such as collateral pledging and waterfall management. The need to exclude this sensitive data is a key reason why we don’t see the evolution of into digital assets as a viable path in the near term.

The vast majority of capital markets implementations are private, permissioned blockchains. There is little appetite or rationale to change the access paradigm. On this form of the common ledger, governance rules can determine who has access to what information, while still maintaining seamless information transfer for those approved to be on the ledger.


The key challenge to establishing data standards (or process, legal language, or any other standard) is an economic incentive. Why bother? Historically the parties benefitting from standards are different from those implementing and paying for them. The benefit of distributed ledgers creates benefits across the value chain, including originators and servicers, encouraging the adoption of data standards. This will not be instant and will need to work within the current system and market constraints, but where there are savings there is a stronger business case to change.

Regulatory Clarity

There is a clear existing regulatory framework to protect investors in securities, as well as consumer protections to consider, including specifics on asset custody and due diligence requirements. A loan becoming a digital asset will clearly be subject to the Howey test, however, there are many other applications of blockchain without digitizing the actual asset.

The SEC are currently demonstrating a strong understanding and support for the underlying technology within existing regulatory frameworks. This includes the digital transformation of markets enabling cheaper access and lower barriers for smaller deals and participants in markets.

Ultimately we believe blockchain has the ability to give increased integrity to the asset data underpinning the structured credit market, while also creating new efficiencies across the ecosystem.

The Pioneers

There are dozens of fintech credit initiatives globally starting to demonstrate value with Blockchain technology at different stages of the loan account lifecycle. Many are focused at the securitization stage, automating the waterfall and looking to disintermediate underwriter fees. New originators, particularly in Asia, are exploring loan origination on chain. Most adoption here is likely with new market entrants, not requiring systems change.

We see these companies, brick by brick, removing obstacles and demonstrating the feasibility and potential for digital structured credit.

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