The team at Security Token Advisors, which aims to “reinvent” finance with security tokens, reveals that the world’s top 100 banks in terms of assets under management (AUM) are learning how to “reinvent themselves” with blockchain or distributed ledger technology (DLT).
The Security Token Advisors (STA) team writes in a blog post that the world’s largest private banks have been looking into new Fintech solutions such as security tokens and blockchain or DLT for the past few years.
The STA team notes that startups often provide the “source of innovation” for large corporates, however, this hasn’t really stopped major banks from launching platforms that leverage the latest technology. According to STA’s research, 7 of the 10 largest banks in the world have publicly announced initiatives involving blockchain and/or security tokens.
As noted by the STA team, the China Construction Bank (with $3.6 trillion in AUM) has been conducting research into developing solutions that use security tokens or blockchain tech in some way to enhance existing operations.
As reported recently, China Construction Bank had announced that they were partnering with Fusang in order to tokenize $3 billion worth of bonds, however, the sale was canceled shortly before going live.
As confirmed by the STA team, the Bank of China might have been more prepared than the CCB because it introduced its own $2.8 billion tokenized bond at the beginning of this year.
The Bank of China is reportedly using a blockchain-enabled solution to issue loans to SMBs so that they can continue to make contributions to the nation’s economy.
According to the STA team, no public statements from Bank of China regarding blockchain were found, however, there’s an article about the institution’s projects that may involve DLT-based applications.
A reporter noted:
“According to statistics, as of the end of September 2019, China Banking and Insurance Trust has cooperated with a number of insurance companies in electronic insurance policy custody, accumulating more than 4 million electronic insurance policies in custody, and has added more than 300,000 new custody per month since the beginning of this year.”
The STA team further noted that Japan’s MUFG Bank (with $2.9 trillion in AUM) had announced in November 2019 the launch of its “ST Research Consortium” and its goal to create “next-generation” financial transaction services using blockchain or DLT. Before making this announcement, MUFG Bank had invested in Securitize, an established tokenization and issuance platform.
Last year, HSBC had also announced that it would settle $20B worth of assets with a blockchain-powered custody platform by March 2020.
As confirmed by the STA team:
“HSBC’s platform, known as Digital Vault, is set to allow investors to access real-time records of securities purchased on private markets. Although no clear updates on this development have been released, it is clear that the bank has been preparing for a move to digital securities and has expected an increase in the demand for related services for over a year now.”
The STA team also pointed out that JPMorgan Chase, the largest US bank and sixth-largest in the world in terms of AUM, announced the launch of a Digital Coin in order to support the instant transfer of payments between institutional clients.
The STA team noted:
“The multinational investment bank (JP Morgan) further discloses that the Coins are sent over a blockchain network for money movement and for payment in securities transactions. Though the announcement describes the Digital Coin as a prototype, the bank also itself is the first U.S. bank to successfully test a digital coin of its nature. Most recently, JP Morgan made a deal with blockchain firm ConsenSys to sell off its Quorum blockchain platform.”
JP Morgan’s management states:
“We have always believed in the potential of blockchain technology and we are supportive of cryptocurrencies as long as they are properly controlled and regulated. As a globally regulated bank, we believe we have a unique opportunity to develop the capability in a responsible way with the oversight of our regulators. Ultimately, we believe that JPM Coin can yield significant benefits for blockchain applications by reducing clients’ counterparty and settlement risk, decreasing capital requirements and enabling instant value transfer”.
(Note: for more details on blockchain-based security tokens and their applications being introduced by major banks, check here.)