Blockchain set to transform loan trading and collateral markets
After breakthrough proofs of concept in the spring, two large projects are now quietly moving forward into pilot production that could see blockchain technology transform wholesale markets at the core of the global financial system.
Synaps, a joint venture between Ipreo and Symbiont, used the latter’s smart contact technology in an experiment in the first quarter of the year with a group of 19 banks and asset managers drawn together by Credit Suisse that focused on servicing and settlement in the $1 trillion secondary market for US loans.
The syndicated loan market remains a crucial source of funding to many companies, while higher capital regulations have reduced banks appetite to provide loans.
The success of this proof of concept has now raised the prospect of three-day settlement bringing many new investors into what has hitherto been regulated as a less-liquid asset class that has traditionally operated on 16- to 20-day settlement times.
Emmanuel Aidoo, head of the distributed ledger and blockchain effort at Credit Suisse, approached many of those 19 participants to discuss various pain points in loan trading over the 12 months leading up to the proof of concept.
He gives Euromoney the latest update, saying: “We are working to put a few dozen smaller loan transactions, where we or other participating banks are the agent, onto a distributed ledger platform using smart contracts in production next year.”