The first blockchain-based repo transaction using USDM1, the Marshall Islands’ digital sovereign bond, as collateral was completed, with the securities transfer, settlement, and repurchase conducted entirely on a distributed ledger. The full cycle took less than 10 minutes.
Virtu Financial, M1X Global, and Tradeweb completed the first blockchain-based repo transaction using the USDM1 digital bond as collateral. All operations were conducted on Canton Network using atomic settlement, with cash and securities transferred between the parties simultaneously.
USDM1 was issued by the Republic of the Marshall Islands with support from M1X Global and structured under New York State law as a fully collateralized Brady-style bond. It is backed 1:1 by short-term U.S. Treasury securities held in segregated custody and intended to be protected from the bankruptcy of service providers.
Virtu Financial acted as the liquidity provider and counterparty to the bilateral repo transaction. USDM1 is available through Tradeweb. Anchorage Digital, BitGo, and tZERO provide institutional custody services. Bank of Guam, whose deposits are insured by the U.S. Federal Deposit Insurance Corporation, also supports the instrument.
The issuance documentation was prepared with the involvement of law firm Cleary Gottlieb. It provides for the issuer’s waiver of sovereign immunity to the customary extent, transfer of title in repo transactions, collateral substitution, and collateral reuse.
The transaction followed the structure of a traditional repo backed by government securities. It consisted of 2 stages: the initial sale of the bond and its subsequent repurchase. Both stages were completed in less than 10 minutes. Under standard sequential T+1 settlement, the full cycle takes at least 2 business days.
According to the transaction participants, atomic settlement on Canton Network reduces the risk of nonperformance during the settlement period and prevents the temporary increase in balance-sheet positions typical of T+1 settlement. This allows collateral to turn over faster and capital to be redeployed without waiting until the next business day.
According to the project participants, USDM1 holders have a first-priority security interest in the underlying assets under Articles 8 and 9 of the U.S. Uniform Commercial Code. The instrument is classified as an investment security and can be included in close-out netting sets under International Swaps and Derivatives Association (ISDA) standards and the Global Master Repurchase Agreement (GMRA).
The organizers also said USDM1 allows sovereign collateral to be treated as a Level 1 high-quality liquid asset. Under the Basel 3.1 standardized approach, this structure requires less risk-weighted capital than corporate stablecoins, shares in tokenized money market funds, or unrated digital assets. Unlike digital payment instruments, the bond continues to generate coupon income when pledged as collateral or used to meet margin requirements.
