By
Godfrey Benjamin
April 17th, 2024
BofA said that adopting innovative practices in the current market structure is crucial to offer better services to their customers. The banking giant will offer real-time trade settlements to its clients using Paxos’s Ethereum-based trade settlement solutions.
Traditional financial players are jumping to blockchain solutions in order to provide better services to their customers. On Monday, May 17, Bank of America (BofA) announced its partnership with Paxos Trust Co for instant stock-trade settlements.
The banking giant will use Paxos’s settlement services which will reduce the stock trade settlement period to minutes instead of days. As per the Bloomberg report, Paxos works not only with Bank of America as it already offers this service to other banking giants like Japan’s Nomura Holdings and Switzerland’s Credit Suisse.
What Paxos Offers to Bank of America and Others
Besides, Paxos has also secured an SEC license in 2019 to conduct equity trade settlements. Thus, Paxos has attained strong legitimacy among traditional financial players who are willing to adopt blockchain. Paxos is also offering a new dimension for traditional firms to interact with the markets.
Kevin McCarthy, head of financing and clearing at the Charlotte, North Carolina-based firm said that Bank of America has been conducting some internal transactions over the last few months. Upon receiving the license of a clearing agency, it will immediately start offering the services to the clients. McCarthy said that cost savings and flexibility offered by the Paxos platform have appealed to several banking firms. Referring to the same-day trade settlements, he further added:
“We can determine the settlement cycle down to T+0. We then can free up the collateral we’d have to post on an overnight basis,” which could lead to big savings. “The return-on-assets in this business would improve, which has been a challenge.”
Competing with the Depository Trust & Clearing Corp
Instant trade-settlement solution providers like Paxos will directly compete with traditional players like the Depository Trust & Clearing Corp. (DTCC), said Paxos CEO Chad Cascarilla. Currently, the DTCC dominates the equity settlements market, however, Paxos is looking to eat into its market share.
Chad adds that DTCC’s two-day settlements are now an age-old practice and new-age investors need something that can settle trades in milliseconds. The Paxos System leverage the Ethereum blockchain for such real-time settlements. Chad notes that pushing blockchain tech in banking and similar industries is the key to their success. “The way we get mainstream adoption is by having firms like Bank of America come on and feel comfortable,” he said.
Bina Kalola, BofA’s head of global banking said the lender is looking forward to adopting innovative solutions.
“That flexibility and change in workflows to bilateral settlement is very interesting. Everyone is partnering and that’s critical. We will go through this journey together, and the collaboration and partnerships really matter. We will see a new way of doing things that will benefit everyone,” added Kalola.