Global depositary bank BNY introduces tokenized deposits for institutional clients

In a financial sector undergoing technological change, the global custodian bank BNY (Bank of New York Mellon) has just reached a decisive milestone.

The bicentenary institution announced on Friday via a press release that they are launching a solution which will allow digital representation, or “mirror”, of deposit balances on their digital assets platform. This initiative is part of a global strategy aimed at integrating blockchain technology into the heart of traditional market infrastructures.

Building bridges between traditional finance and blockchain technology

The announcement that global custodian BNY is introducing tokenized deposits for institutional clients is based on a hybrid architecture. Namely, the bank creates digital accounting entries on a private and secure blockchain. These entries represent the claims of already existing demand deposits from clients with the institution, which are then categorized accordingly.

To ensure optimal security and meet compliance requirements, both traditional banking systems and the blockchain track balances, with BNY maintaining a dual record.

This allows for compliance with risk management frameworks and regulatory reporting, while offering the benefits of decentralized technology.

Why exactly has BNY decided to introduce tokenized deposits for institutional clients?

The shift to 24/7 operational models requires financial institutions to be more responsive. By deploying this service, BNY seeks to address several major challenges in today’s market:

• The use of tokenized deposits can make managing collateral and margins more refined, which increases liquidity efficiency.
• Settlement times in the traditional system are often long, so automation via blockchain reduces friction.
• With this infrastructure, payments can be programmed to trigger fund movements almost instantly according to predefined rules.

Carolyn Weinberg, Chief Product and Innovation Officer at BNY, says that this breakthrough allows to “define how liquidity circulates in the modern financial system”, which allows clients to operate with unprecedented speed.

“Tokenized deposits provide us with the opportunity to extend our trusted bank deposits onto digital rails – enabling clients to operate with greater speed across collateral, margin, and payments, within a framework built for scale, resilience, and regulatory alignment,” she said in the bank’s statement.

It should be noted that the BNY, which manages assets close to 58 billion dollars, has been experimenting with tokenized deposits since last year, according to the Bloomberg report. This is an effort to modernize its global payment infrastructure to meet the rapid development of blockchain finance.

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Leading partners for large-scale adoption

Clearly, the success of any such infrastructure depends largely on its adoption by the financial ecosystem. During this launch, BNY has reached out to an impressive variety of participants, from historical financial institutions to natively digital actors.

Amongst the services’ first users we can see such influential names as Citadel Securities, Intercontinental Exchange, Anchorage Digital, Circle, and Ripple Prime.

At the same time, the presence of such asset managers as Baillie Gifford and WisdomTree, as well as specialist services like DRW Holdings and Zero Hash, testify to the growing interest in the blockchain-based treasury solutions.

BNY intends to establish a digital financial fabric that is interoperable and resilient by linking digital assets, like stablecoins and tokenized money market funds, to trusted bank deposits.

Emergence of a programmable financial system

The BNY initiative marks a step towards standardizing digital assets within the portfolios of major global banks.

In the end, these tools may lead to complete automation of institutional cash flows, with the difference between fiat currency and digital tokens disappearing in favor of a single infrastructure.

The logical continuation of this transition towards a more fluid and dematerialized global finance is to expand towards other types of financial transactions while maintaining the focus on guarantees and margins.

Source : BNY