U.S.-based financial innovation firm R3 that is leading a blockchain consortium of over 70 of the world's largest financial institutions, along with five of its members and financial resource management specialist HQLAX, have built a collateral lending solution for liquidity transfers, IBTimes reported.

The five other participants in the partnership include CIBC, Commerzbank, Credit Suisse, ING, and UBS. The partners jointly developed an operating model for a digital collateral receipt (DCR) lending marketplace. Built on R3’s Corda blockchain platform, the model manages and executes financial agreements of institutions in a perfect synchrony with their peers.

“The implementation of new bank regulations for liquidity, mandatory clearing, and margin requirements for OTC derivatives has caused a significant increase in demand for high-quality liquid assets. As a result, there is a heightened need for a marketplace that facilitates large scale, cost efficient collateral transfers across the global financial ecosystem, and Corda exceeded the most demanding requirements,” David Rutter, CEO of R3, stated, as reported by IBTimes.

The blockchain project demonstrated the potential to build a digital collateral receipt lending market that is designed to aid the market participants redistribute liquidity more effectively and more cost-efficiently.

The five participants of the project will work along with R3 and HQLAX in order to transform the proof-of-concept into a live pilot and production platform. Both R3 and HQLAX will engage the regulatory community for showcasing the prototype as well as receiving feedback for shaping the production-ready platform.

“The collaborative effort and proactive engagement by the project participants were truly impressive, and the value proposition to help shape the target operating model of the HQLAx platform resonated strongly with the bank participants. This project is an excellent example of the R3 business model of testing use cases in its Lab and Research Centre in preparation for production-ready deployment,” Guido Stroemer, CEO of HQLAx, said.