Home News Bank of America partnership with Paxos will allow same-day trade settlements

Bank of America partnership with Paxos will allow same-day trade settlements


According to Bloomberg News, Bank of America has joined the network created by stablecoin issuer Paxos Trust to transact stocks in minutes rather than days using blockchain, the latest sign of the growing adoption of the technology on Wall Street.

The second largest US bank joins Credit Suisse Group AG and Instinet Nomura Holdings Inc. in the Paxos settlement system. Thus, this is the third bank that started to use the Paxos settlement service approved by the regulator. In 2019, the Securities and Exchange Commission authorized Paxos to launch a pilot blockchain-based stock settlement program. At the present time, its use limited by internal transactions awaiting the approval of the regulatory authorities.

The service will allow Bank of America to complete transactions on the same day. Although the process usually takes two days for the US stock market. So the security for the transaction can return to the owner the very next day. Thus, the profit ratio will increase. According to Kevin McCarthy, BoA’s head of finance and settlement, the bank has been “testing internal transactions for several months now”. And will provide customers with access to the new platform after obtaining a license to launch clearing.

In July 2020, Paxos launched Crypto Brokerage, a service that allows companies to integrate digital currency buying and selling into their own business processes. His first client was a division of the fintech startup Revolut US.

In the same month, media outlets reported that payment giant PayPal had selected Paxos to manage cryptocurrency assets under the new service.

Paxos poses a threat to competitors

The Paxos system is one of several where banks are using blockchain to change their interactions with the markets. JPMorgan Chase & Co. uses a modified version of Ethereum to enter buyback agreements overnight from the end of last year, with daily transactions exceeding $ 1 billion. Goldman Sachs Group Inc. is also preparing to join this market.

McCarthy said the bank liked the flexibility and cost savings offered by Paxos.

Moving to more flexible and faster stock settlement could threaten Depository Trust & Clearing Corp.’s half-century dominance in the stock markets. According to Paxos CEO CharlesĀ Cascarilla, only trades registered by the DTCC before 11 a.m. can be settled on that day. With the exception of about 75% of all shares traded on that day.

The current settlement time is about two days, during which sellers’ money from buyers gets stuck in the market.

This is ages compared to technology, when transactions can occur in milliseconds. The Paxos system connects investors directly using the Ethereum version of the blockchain. While the DTCC is working to reduce settlement times, it is far from being able to do so in real time.

“Mainstream adoption”

Paxos CEO CharlesĀ Cascarilla says that attracting customers like Bank of America is critical to the widespread adoption of technology. Promoting blockchain adoption in banking and other industries is key to the technology’s success.

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