US Banks Join DTCC and Chainlink in Fund Data Tokenization Pilot

Last Updated on May 17, 2024

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Key Takeaways:

  • DTCC and Chainlink Pilot Program: The DTCC and Chainlink successfully completed a pilot aimed at enhancing the tokenization of traditional finance fund data using blockchain technology.
  • Participation and Outcomes: Major U.S. banking firms, including JPMorgan and BNY Mellon, participated, leading to improved data management and broader API solutions for price data.
  • Future Implications: The pilot supports further exploration of blockchain applications in finance, such as tokenized funds and automated data dissemination, enhancing industry practices.

The world’s largest settlement system, the Depository Trust and Clearing Corporation (DTCC), and blockchain oracle provider Chainlink have concluded a pilot program aimed at increasing the tokenization of traditional finance fund data.

This initiative included participation from several major U.S. banking firms, including JPMorgan and BNY Mellon.

The Smart NAV Pilot program was designed to standardize the method of providing net asset value (NAV) data of funds on blockchains using Chainlink’s Cross-Chain Interoperability Protocol (CCIP), according to a DTCC report published on May 16.

“The pilot found that by delivering structured data on-chain and creating standard roles and processes, foundational data could be embedded into a multitude of on-chain use cases, such as tokenized funds and ‘bulk consumer’ smart contracts, which are contracts that hold data for multiple funds,” the report stated.

These capabilities could facilitate future industry exploration and support numerous downstream applications, including brokerage services, more automated data dissemination, and easier access to historical fund data, the report added.

The pilot established improved automated data management, minimized disruption to existing market practices for traditional financial institutions, enabled clients to access historical data without manual record-keeping, and provided broader API solutions for price data, as noted by the DTCC.

Key U.S. banking firms involved in the pilot included American Century Investments, BNY Mellon, Edward Jones, Franklin Templeton, Invesco, JPMorgan, MFS Investment Management, Mid Atlantic Trust, State Street, and U.S. Bank.

The DTCC report comes amid growing enthusiasm for real-world asset tokenization among major traditional financial institutions.

For instance, on March 19, BlackRock launched a tokenized money market fund called BUIDL on the Ethereum network, which offers native U.S. dollar yields.

The fund allows investors to buy tokens representing shares in the fund, which invests in assets like U.S. Treasury bills and is referred to as the “digital liquidity fund” because it operates as an ERC-20 token on the Ethereum blockchain.

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