Bank of America made a smart move by partnering with Paxos Settlement Service, a permission-based blockchain network. BOFA’s novelty allows customers to settle stock trades in minutes, a process that used to take days.
Blockchain technology became so relevant these last year, that even the second-largest bank in the United States is now capable of settling stock trades reportedly over blockchain technology, and proudly announcing it.
According to Bloomberg, Bank of America officially joined Paxos Settlement Service platform to grant same-day settlement of stock trades, over blockchain technology.
Kevin McCarthy, BOFA’s chairman of financing and clearing, commented that Bank of America, “has been conducting internal transactions for the past few months,” among other tests.
In a nutshell Paxos will offer the service to Bank of America’s clients upon approval as a clearing agency.
Paxos and BoA are Making Changes Happen
This partnership between BOFA and the Paxos decentralized platform will allow a “more flexible and faster” stock settlement system compared to the good ol’ Depository Trust & Clearing Corporation, or DTCC.
The classic DTCC settlement time usually takes around two days to complete. Here Paxos’ service is suitable for customers ready to be settling some stock trades, in minutes. Bank of America is a direct participant in DTCC.
McCarthy expressed that the bank can now reset the settlement cycle down to T+0 and unlock the collateral the bank had to post, all on an overnight basis. By this, Bank of America is addressing the challenge of the return-on-assets as an improvement largely needed.
The Government is On Board
Paxos was able to launch its settlement service for equity trades officially in 2019 only after being granted a no-action relief issued by the U.S. Securities and Exchange Commission (SEC).
In this line, Zurich-based financial institution Credit Suisse, together with Instinet, a trading exchange company within Nomura Holdings, also participated in a similar pilot, and managed to settle U.S.-listed stock trades in hours.
Stablecoin operator Paxos announced back in April that the firm is behind obtaining the license to operate as a clearing with the SEC.
