loan position tokens
What Is an LPT?
A Loan Position Token (LPT) is a non-rebasing token issued on Canton Network upon loan execution. It is the on-chain representation of a credit position — encoding all terms, collateral references, and legal agreement hashes in a single transferable instrument.
Unlike rebasing market tokens (used by protocols like Wildcat, where token balances adjust with accrued interest), LPTs are non-rebasing. The token represents a fixed claim: the right to receive Principal plus accrued interest at maturity, secured by custodian-held collateral under the GMSLA.
LPT Structure
Each LPT encodes:
principal
Loan principal amount in Settlement Asset
baseAPR
Fixed annual interest rate (basis points)
tenor
Loan duration (days)
maturityDate
Exact maturity timestamp
collateralType
Asset type posted as security (e.g., BTC, ETH)
collateralValue
Collateral value at origination
custodianId
Qualified custodian holding the collateral
initialLTV
LTV ratio at origination
marginCallLTV
Threshold triggering margin call
liquidationLTV
Threshold authorizing liquidation
gmslaRefHash
Cryptographic hash of the governing GMSLA schedule
custodianSignature
Custodian's co-signature confirming collateral encumbrance
transferability
Trading rights: Restricted, Known Lenders, or Free
Custodian Co-Signature
Every LPT is co-signed by the custodian at issuance. The co-signature confirms:
Collateral has been received and encumbered
The Account Control Agreement is in effect
Custodian will execute monitoring, margin call, and release instructions
The collateral reference in the LPT matches the actual custodial position
This co-signature is what connects the on-chain token to the off-chain custodial reality — providing verifiable proof that the LPT is backed by real, encumbered assets.
Transferability
LPT transferability is defined per-transaction in the Term Sheet. Three levels:
Restricted
LPT cannot be transferred. The original lender holds the position to maturity. Used for bespoke, relationship-driven credit where the borrower needs to know their exact counterparty.
Known Lenders Only
LPT can be transferred to any participant who has:
Completed KYC/AML verification via a qualified custodian
Executed the Multi-Party GMSLA
Been whitelisted as a Known Lender in Parthenon's permissioning system
This is the default for most institutional credit. It enables secondary market liquidity while maintaining the permissioned, verified counterparty model.
Free
LPT can be transferred to any Canton Network participant. This level is reserved for highly standardized, low-risk credit products where broad distribution is desired. Even at this level, participants must meet Canton Network's base compliance requirements.
Secondary Market Trading
Known Lenders can trade LPTs on Module 2's orderbook:
Sell an LPT: List the position with an ask price. The price reflects the present value of future cash flows (principal + remaining interest) adjusted for credit risk and time to maturity.
Buy an LPT: Purchase a credit position from another lender. Transfer of the LPT transfers all legal rights under the GMSLA, including the right to enforce against the borrower.
Price Discovery: The orderbook provides transparent bid/ask pricing for credit positions, enabling market-driven credit pricing.
Canton Network's sub-transaction privacy ensures that secondary market activity is visible only to buyer, seller, and custodian — competitors cannot observe trading patterns, position sizes, or pricing.
Legal Effect of Transfer
Transfer of an LPT transfers all rights under the MLA to the transferee, including:
The right to receive principal plus accrued interest at maturity
The right to enforce the GMSLA against the Borrower
The right to instruct the Custodian to liquidate collateral upon an Event of Default
The benefit of the custodian's co-signature and Account Control Agreement
The borrower is notified of lender changes but cannot block a transfer if the transferee meets Known Lender requirements.