Massive, “groundbreaking” blockchain securities deal another example of crypto-tech changing how banking works behind the scenes.
Credit Suisse and ING have just executed the first transaction using HQLAx securities lending app on R3’s Corda blockchain platform. The trade, which saw something in the region of €25m of Dutch and German government securities change hands, is described as “groundbreaking” by the Swiss banking giant’s press release.
A traditional securities lending transaction sees individual underlying securities transferred between accounts. However, HQLAx – described as a “collateral lending application” – legally transfers the titles of baskets of securities through the transfer of ownership of Digital Collateral Records (DCR) using a system underpinned by R3’s blockchain implementation. David E. Rutter, CEO of R3, commented, “Collateral lending is a great example of a process that can be revolutionised by blockchain technology, and this live trade between two major global banks marks a significant milestone for the market.”
Credit Suisse says that the use of such DCRs “can ultimately help enhance regulatory transparency, mitigate systemic risk, reduce operational risk, and help financial institutions manage capital more efficiently”. Romain Dumas, Head of Rates Repo and Collateral Optimization at Credit Suisse Securities (Europe) Limited, added that, “The success of this first live transaction speaks to the potential for blockchain technology to help improve collateral fluidity by creating a more efficient, transparent, and cost effective marketplace for liquidity transfers.”
For its part, Ivar Wiersma, Head of Wholesale Banking innovation at ING, commented, “This transaction proves the progress we are making towards deploying Distributed Ledger Technology for the benefit of our clients and society by making the financial industry more efficient and more resilient.”
This serves as another example of how Blockchain tech is making its way into the nuts and bolts of banking, following interesting announcement on the consumer side from Santander and HSBC in recent days.