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Clearing house TradFi turns to blockchain to settle transactions

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Clearing house TradFi turns to blockchain to settle transactions
  • DTCC Launches Distributed Ledger Technology Platform for Settlements
  • Tokenization is on the Rise, Bank for International Settlements Says in 2020

The Depository Trust and Clearing Corporation (DTCC) has launched a private, licensed blockchain network as an alternative settlement platform.

Project Ion, which leverages distributed ledger technology (DLT), now processes an average of 100,000 bilateral equity trades per day, DTCC announcement Monday.

“Project Ion’s goal is to ultimately provide a resilient, secure and scalable alternative settlement service to customers, with the ability to leverage DLT for businesses that want to take advantage of emerging technology,” said DTCC in a statement.

DLT offers a safer, cheaper and more efficient alternative to traditional settlement methods, Murray Pozmanter said in the release. Pozmanter is Managing Director and President of DTCC Clearing Agency Services and responsible for global business operations.

Other blockchain settlement efforts

A distributed ledger is a record of transactions held between a network of computers or nodes. The use of DLT typically relies on cryptography to allow nodes to securely propose, validate, and record changes and updates to the synchronized ledger without necessarily needing a central authority, such as a 2020 report of the Bank for International Settlements (BIS).

BIS researchers have said that DLT and securities tokenization could transform post-trade clearing and settlement operations, but the inherent credit risk and liquidity challenges associated with traditional methods remain.

“To be successful, tokens will need to interact with account-based systems, at least in the meantime,” the researchers wrote in the report.

Financial institutions have become increasingly interested in leveraging DLT in recent years for transactions and settlements. Also in 2020, Swiss credit announced a DLT-based platform for investment funds.

More recently, a consortium of French banks experimented with the use of a private blockchain settle debt securities in October 2021. This followed a test by the French bank Societe Generale use public Ethereum and monetize MakerDAO’s DAI stablecoin through the issuance of euro-denominated bonds.

Signature Bank customers can initiate real-time Fedwire transactions using Signet, the company’s DLT payment platform, since April 2022.

BNY Mellon and Goldman Sachs in partnership on HQLAx, a DLT-based securities lending platform. Its first transaction was finalized in July 2022.

Project Ion is designed to meet rigorous regulatory standards and deliver the resiliency, volume capacity, security, scalability and risk controls that DTCC is known for, the company said in the release.


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    Senior Reporter

    Casey Wagner is a New York-based business journalist who covers regulation, legislation, digital asset investment firms, market structure, central banks and governments, and CBDCs. Prior to joining Blockworks, she reported on markets at Bloomberg News. She graduated from the University of Virginia with a degree in media studies. Contact Casey via email at [email protected]

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