Guidance for memorandum of law examining the validity and enforceability of collateral arrangements using the ISDA model provisions for tokenized collateral

The purpose of this guidance note is to inform how counsel may approach a legal opinion on the enforceability of collateral arrangements entered into under certain ISDA collateral documentation where the relevant collateral arrangement comprises tokenized securities and/or stablecoins (together, “Tokenized Collateral”).

This guidance note sets forth (i) a basic taxonomy of common tokenization structures and (ii) a non-exhaustive list of key issues to consider when analyzing the enforceability of collateral arrangements involving Tokenized Collateral.

This guidance note is intentionally high level and jurisdiction-agnostic. For that reason, the tokenization structures may not map directly into recognized existing legal categories in various jurisdictions. Nevertheless, they represent observed structures in the market and reflect important differences, including the key operational characteristics of each structure to the extent they are relevant to the transfer and settlement of Tokenized Collateral.