Tokenized collateral model provisions for inclusion in ISDA 2016 Credit Support Annexes for Variation Margin (VM) (the Tokenized Collateral Model Provisions) ) are intended for use by parties transferring tokenized securities or ‘stablecoins’ that utilize distributed ledger technology (Tokenized Collateral) as collateral pursuant to a 2016 Credit Support Annex for Variation Margin (VM CSA).

The Tokenized Collateral Model Provisions enable parties to make certain changes to the VM CSA to accommodate the use of Tokenized Collateral, including:

• The ability to designate specific Eligible Credit Support (VM) as Tokenized Collateral;
• Expansion of the Transfer mechanisms to include Tokenized Collateral;
• Amendments to the Distributions provisions to provide for distributions of issuer-led airdrops relating to certain forms of Tokenized Collateral; and
• Amendments to the Local Business Day provision to reflect the 24/7 operation of distributed ledger technology;

The Tokenized Collateral Model Provisions do not purport, and should not be considered, to address all issues and considerations that may be relevant in connection to the transfer or receipt of Tokenized Collateral, including, without limitation, enforceability, regulatory, tax and accounting issues and considerations. Parties should consult with their own legal and tax advisers and any other adviser it deems appropriate prior to using the Tokenized Collateral Model Provisions, including in order to determine:

• whether the transfer mechanisms set out in the Tokenized Collateral Model Provisions accurately describe the process by which legal title in the relevant Tokenized Collateral may be effectively transferred; and
• how and whether finality of settlement may be achieved and demonstrated with respect to the relevant Tokenized Collateral.