BNY, the world’s largest custody bank, and trading firm Citadel Securities said Tuesday they completed a transaction that moved a tokenized U.S. Treasury from settlement into financing, a workflow test in the triparty repo market, per the announcement.
The point of the exercise was speed of collateral. Banks and trading firms pledge U.S. government bonds to secure short-term loans and fund trading, and in a triparty transaction a bank manages that collateral between borrowers and lenders. A tokenized bond can be shifted programmatically between settlement and financing, which would let firms reuse collateral sooner and free up cash for other trades.
“By using a tokenized representation of a U.S. Treasury across both settlement and financing, we are enabling more connected, efficient and always-on financial system,” said Carolyn Weinberg, BNY’s chief innovation and market transformation officer. Dan Doherty, digital assets operations lead at Citadel Securities, called efficient movement of high-quality collateral fundamental to well-functioning markets.
The infrastructure push extends past the test itself. BNY said it plans to add digital cash and tokenized deposit capabilities to support blockchain-based settlement and financing, and expects to extend the operating hours of its settlement systems for Federal Reserve-eligible securities and triparty transactions toward European and Asian trading hours next year, its stated expectation rather than a confirmed launch.
The deal lands in a market where BlackRock, Franklin Templeton and JPMorgan have already moved into tokenized funds and securities, betting the technology shortens settlement times and makes assets easier to move. What the repo test did not disclose is the size of the transaction or which blockchain platform carried it.
