Investment giant Vanguard, in partnership with blockchain firm Symbiont, has successfully completed the first phase of a blockchain pilot designed to digitize the issuance of asset-backed securities (ABS).
During the pilot, Vanguard and Symbiont, which have been leveraging blockchain technology to improve capital markets since December 2017, worked with a large US ABS issuer, as well as BNY Mellon, Citi, and State Street, and successfully modeled the full lifecycle of an ABS settlement on distributed ledger technology (DLT) network by replicating end-to-end transaction flows.
“The vision for pairing Symbiont’s Assembly DLT with smart contracts—self-executing contracts that are triggered when an agreed-upon event occurs—is to offer increased information flow, enhance price discovery and secondary market liquidity, and automate key corporate actions through the use of a common infrastructure that is open to all market participants,” Vanguard said.
Mark Smith, CEO of Symbiont, said that there is considerable significance to the completion of the pilot program, adding that the successful demonstration of an ABS issuance is a momentous step forward in fundamentally changing capital markets infrastructure through blockchain technology.
“2020 may be the year that, for the first time, market participants will see a live ledger-based issuance,” Smith said.
According to Vanguard, the pilot provides the technical and operational foundation critical to supporting an asset issuance on a distributed ledger network. Market dynamics, such as periods of sustained volatility and illiquidity, have highlighted the need for faster, increasingly transparent and more automated markets where digital capabilities can help alleviate liquidity and funding concerns.
“Vanguard is dedicated to providing innovative, world-class solutions that help advance the financial services industry,” said Warren Pennington, principal and head of Vanguard’s Investment Management FinTech Strategies Group. “By digitizing and streamlining the ABS issuance process, we will be able to increase the speed and transparency of transactions while reducing costs and minimizing exposure to risk, which ultimately leads to a more efficient business model for future generations of capital market activity.”
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