Bank of America joins Paxos’s blockchain-based settlement network for equities

May 17, 2021 | The Block News | 0 comments


Bank of America, the second-largest bank in the U.S., has joined Paxos’s blockchain-based settlement network for equities.

Bloomberg reported the news on Monday, saying that the network would help Bank of America settle stock trades in minutes rather than days using blockchain technology.

Paxos’s solution is a private, permissioned blockchain network that allows two parties to settle securities trades with each other on the same day. Paxos launched the network in February 2020 after receiving a no-action relief from the U.S. Securities and Exchange Commission (SEC) in October 2019. Paxos also has plans to apply for a clearing agency registration with the SEC.

Once approved as a clearing agency, Paxos’s clients that have joined its network, such as Bank of America, Credit Suisse, and Nomura’s Instinet, won’t have restrictions on volume and number of trades they can settle through the network, a Paxos spokesperson told The Block on Monday.

As in how the Paxos Settlement Service differs from the Depository Trust & Clearing Corporation (DTCC) is that DTCC generally allows settlement of T+2, and T+0 or same day for only those trades that occur before 11 am ET.

Although DTCC aims to shorten the settlement cycle to T+1 by 2023, that won’t be close to what Paxos is offering under the no-action relief for a limited period of 24 months.

The T+0 settlement cycle offered by Paxos “can free up the collateral we’d have to post on an overnight basis,” Bank of America’s head of financing and clearing at Kevin McCarthy told Bloomberg. “The return-on-assets in this business would improve, which has been a challenge.”

© 2021 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

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