Bank of America (BofA) plans to use blockchain technology to settle equity transactions in order to shorten the settlement period from days to minutes
Bank of America has joined the Paxos Blockchain Stock-Settlement Network to improve its processes for settlement of equity transactions. The second largest bank in the United States now wants to use blockchain technology to settle equity transactions.
According to a report by Bloomberg, Paxos Blockchain Stock Settlement Network uses blockchain technology to conduct equity transactions for financial institutions. Bank of America is now joining the Paxos Settlement Service, joining Credit Suisse Group AG and Instinet of Nomura Holdings Inc. to.
Kevin McCarthy, Head of Financing and Clearing at BofA, announced that the bank has been using the settlement system for internal transactions in recent months. If the Paxos system is approved as a clearing house, the bank would like to use the service for its customers. „We can determine the billing cycle down to T+0 and then release the collateral that we would need to book overnight. Total return on capital in this business would improve, which has been a challenge so far“ he added.
The Paxos accounting system is designed to make the inventory calculation process faster and more efficient. According to Chad Cascarilla, Managing Director of Paxos, Depository Trust & Clearing Corp (DTCC) is the dominant settlement company on the stock market. However, Cascarilla complained that the DTCC escapes 75% of all traded shares because it only executes trades logged at 11: 30 a.m., which means the average settlement time for stock trades is about two days.
However, thanks to the Paxos system, banks and other financial institutions can settle their transactions within minutes. The Paxos Settlement Service was approved by the U.S. Securities and Exchange Commission (SEC) in 2019. The SEC granted the Company a license to conduct equity transactions for financial institutions.