ISLA/Ashurst: Preparing the Global Master Securities Lending Agreement (GMSLA) for an Evolving Digital Asset Landscape

Securities lending is crucial in facilitating market liquidity and flexible financing, playing a vital role in the smooth functioning of financial markets. Meanwhile, digital assets could transform liquidity management and revolutionize today’s securities lending market. Given the potential for such developments in the securities lending market, it is important to ensure that the existing framework for securities lending is sufficiently flexible and able to cater for those developments when they arise.

The issues that arise in the context of digital assets broadly break down into the following categories:

a. Legal – questions relating to the way in which a digital asset is constituted and, consequently, whether it is capable from a legal perspective of being subject to personal property rights; how those personal property rights can be transferred (either on an outright title transfer basis or by way of security); and how a non- defaulting party can exercise its rights in respect of transactions in digital assets upon the default of its counterparty.

b. Commercial – questions relating to the extent to which digital assets can be used in securities lending transactions (whether as the loaned asset or as collateral); the allocation of commercial and economic risks arising from transacting in digital assets; and whether and/or how to preserve the economics of a securities lending transaction involving digital assets.

c. Documentation – questions relating to whether amendments are required to the existing securities lending documentation to accommodate securities lending transactions involving digital assets.

This paper presents a fundamental first step in analysing these key considerations and the issues that may arise. The purpose of this paper is to identify these considerations and propose a path forward towards the use of the Global Master Securities Lending Agreement (GMSLA) in documenting transactions involving digital assets.

The full paper is available at

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