Northern Trust, the custody bank, is testing the trading of fractionalized bonds on a blockchain.
Working with BondEvalue, a Singapore-based Debt Markets Company, the bank is providing asset servicing for large, high-grade bonds which will be tokenized and divided for retail investors on Hyperledger Sawtooth. These bonds are normally too large for individual investors, but the quality of the bonds is attractive.
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However, the move shows that Northern Trust’s continued interest in the technology after it developed and sold its private equities blockchain, shortens the time to market for new high-tech private equity funds.
Likewise, with $124.3 billion in assets, Northern Trust is the 24th largest bank in the U.S.
Justin Chapman, the Global Head of Market Advocacy and Innovation Research at Northern Trust, said:
“We’re building capabilities we feel will be reusable across multiple asset classes and multiple jurisdictions.” Justin Chapman
“Our focus on this initiative is to help bring the exchange to life and then we offer the highest grade asset servicing capability in that digital environment.” Justin Chapman
Through the Monetary Authority of Singapore’s Sandbox Express, BondEvalue was given permission to launch a blockchain-based bond exchange in Singapore. However, Northern Trust will grab tokenized bonds and conduct transactions with the regulator’s oversight.
Thus, if the pilot is successful, the bank plans to also participate in the development of BondEvalue’s business model.