Collateral requirement
The collateral compliance module ensures assets are backed by verifiable reserves. Learn how to configure collateral ratios and issue collateral verifications.
The collateral compliance module ensures your tokenized assets are backed by verifiable reserves. When enabled, the blockchain validates that sufficient collateral exists before allowing new units to be minted.
This module only applies to minting operations. Regular transfers between wallets are not affected by collateral requirements.
How collateral validation works
When you attempt to mint new units of an asset with the collateral module enabled, the system performs the following checks:
The module checks if the asset's identity has a valid collateral verification. The verification must be issued by a trusted issuer and not expired. The collateral amount must meet or exceed the configured ratio based on the post-mint total supply.
Roles and responsibilities
Two roles are typically involved in managing collateral compliance:
| Role | Responsibilities |
|---|---|
| Asset issuer (governance role) | Configures the collateral module during asset creation. Sets the collateral ratio and trusted issuers. |
| Trusted issuer (verification issuer) | Issues and manages collateral verifications. Must be registered in the trusted issuers registry. |
Separation of duties
The asset issuer configures how collateral is validated. A separate trusted issuer (often a compliance officer or auditor) issues the actual collateral verifications based on off-chain proof of reserves.
Configuration parameters
When configuring the collateral module during asset creation, you set three parameters:
| Parameter | Description | Valid values | Example |
|---|---|---|---|
| Proof topic ID | Identifies the verification type to check. The system provides a default collateral topic. | System-provided topic ID | collateral (ID: 565916...0528) |
| Collateral ratio | Required backing ratio in basis points. 10000 = 100% backing. | 0 to 20000 | 10000 (100%), 15000 (150%) |
| Additional trusted issuers | Issuers not in the platform registry. Only needed if your issuer is not globally registered for the collateral topic. | List of wallet addresses | Leave empty to use registry issuers |
Understanding collateral ratios
The collateral ratio is specified in basis points (1/100th of a percent): - 0 = Collateral enforcement disabled (not recommended) - 10000 = 100% backing (1,000 minted units require 1,000 collateral) - 15000 = 150% over-collateralized (1,000 minted units require 1,500 collateral) - 20000 = 200% maximum ratio (1,000 minted units require 2,000 collateral)
Configure collateral during asset creation
Open the Asset Designer
Navigate to Asset management > Asset designer in the sidebar.
Complete asset setup
Follow the wizard through asset class, type, and basic configuration. See Create asset for details.
Enable collateral requirement
On the compliance modules step, select Collateral requirement from the available modules. This module requires collateral proof before token transfers.
Configure collateral settings
Set your collateral parameters:
- Proof topic ID - Select the collateral topic from the dropdown (system default is pre-configured)
- Collateral ratio - Enter the required backing ratio in basis points (10000 = 100%, 20000 = 200%)
- Additional trusted issuers - Add any issuer addresses not in the platform registry (optional)
Complete deployment
Review your configuration and deploy the asset. The collateral module is now active.
Issue a collateral verification
After the asset is deployed, a trusted issuer must add a collateral verification to the asset's identity before minting can occur.
Prerequisites
You must be either:
- A trusted issuer for the collateral topic (see Trusted issuers registry)
- OR have the governance role on the asset
Verification fields
| Field | Description | Format |
|---|---|---|
| Amount | The collateral value backing the asset | Number (in asset units, e.g., 1000 for 1000 units worth of collateral) |
| Expiry | When the verification expires (must be in the future) | Date and time |
Navigate to Entities
Go to Participants > Entities in the sidebar. This section shows all entities (including assets) that have an on-chain identity. Entity addresses use the Web3 display format, so you can see avatars and any saved display names alongside the address.
Select your asset
Find and click on the asset you created that you want to issue the collateral verification for. Assets appear in the entities list because they have their own on-chain identity.
Open verification management
On the asset's entity detail page, locate the Identity and verifications tile. Click Manage verifications to view all verifications issued on this asset's identity.
View existing verifications
You'll see a list of all verifications currently issued on this asset. This may include pricing, classification, or other verifications depending on your asset configuration. Click the Add verification button in the top right corner to open the verification creation form.
Enter collateral details
In the verification form:
- Verification topic - Select collateral from the dropdown
- Amount - Enter the total collateral amount (e.g., 10000 for 10,000 units)
- Expiry Timestamp - Select a future date and time when this verification should expire
Submit the verification
Review the verification details in the confirmation screen, then click Issue verification to submit the transaction.
Plan for renewal
Collateral verifications have an expiry date. Plan to renew verifications before they expire to avoid blocking future minting operations.
Example scenario
A company wants to issue equity shares with 150% collateral backing to provide extra investor protection.
Configuration
- Collateral ratio: 150%
- Proof topic: System default (collateral)
- Trusted issuers: Empty (using global registry)
Collateral verification
- Amount: 15,000
- Expiry: December 31, 2025
Minting simulation
| Operation | Current supply | Mint amount | Post-mint supply | Required collateral (150%) | Available collateral | Result |
|---|---|---|---|---|---|---|
| Initial mint | 0 | 5,000 | 5,000 | 7,500 | 15,000 | ✅ Allowed - 15,000 ≥ 7,500 |
| Second mint | 5,000 | 3,000 | 8,000 | 12,000 | 15,000 | ✅ Allowed - 15,000 ≥ 12,000 |
| Third mint | 8,000 | 5,000 | 13,000 | 19,500 | 15,000 | ❌ Blocked - 15,000 < 19,500 |
Why the third mint fails
The third mint fails because:
- Post-mint supply would be 13,000 units
- At 150% ratio, required collateral = 13,000 × 1.5 = 19,500
- Current collateral verification only covers 15,000
- A new collateral verification with higher amount is needed
To unblock
- Have the trusted issuer issue a new collateral verification with amount ≥ 19,500
- Retry the minting operation
Troubleshooting
| Issue | Cause | Solution |
|---|---|---|
| Minting blocked with "Insufficient collateral" | Collateral verification amount is less than required | Issue new verification with higher amount |
| Minting blocked with "No collateral verification" | No valid verification exists on asset identity | Have trusted issuer issue a collateral verification |
| Minting blocked with "Verification expired" | The collateral verification has passed its expiry date | Issue a new verification with future expiry |
| Cannot issue verification | User is not a trusted issuer or doesn't have governance role | Request trusted issuer role or governance role from administrator |
Next steps
- Create asset - Deploy a new asset with compliance modules
- Mint assets - Issue new units after configuring collateral
- Configure equity collateral (API) - Programmatic configuration for developers
- Trusted issuers registry - Become a trusted issuer