BoA, with $2.9T in Assets, Joins Paxos to Settle Stocks on Blockchain Tech

Bank of America (BoA) has just joined Paxos Settlement Service, a blockchain-based network that enables same-day securities trades settlement among two parties. Employing blockchain technology, Paxos enables stock trade settlement in minutes, contrasted to the conventional T-2 (two-day) settlement time.

A Threat to the Leading Settlement Services Provider “Depository Trust & Clearing Corp”

Depository Trust & Clearing Corp (DTCC) has been, for the last half-century, the dominant settlement service provider in the equity markets. The company settles the vast majority of transactions in the US, accounting for approximately $2.15 quadrillion (thousand trillion) in 2019, making it by far the leading financial value processor in the world.

Nevertheless, the settlement process through DTCC is generally T+2, meaning the settlement date is two days after the transaction date, which is a relative eternity in a market where thousands of trades can happen every millisecond. Though, for trades that occur before 11 am ET, the settlement date is T+0 or same-day. While DTCC is working to reduce its settlement times, it is not even close to reaching a real-time resembling figure.

On the flip side, the Paxos system uses a permissioned version of the Ethereum blockchain to directly connect investors, enabling high-speed transaction settlement. Ethereum is an open-source, decentralized software platform that enables developers to build and run smart contracts and distributed applications (DApps) without any downtime, fraud, restriction, or interference from a third party on its platform.

Using this innovative blockchain technology, Paxos shortens the conventional two-day settlement time to the astonishingly small-scale T+0 settlement date. This will enable BoA to free up the collateral they would have to post on an overnight basis, and consequently, improves the return-on-assets in this business.

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BoA, the Second Largest US Bank, Incorporates Blockchain

Bank of America, which holds $2.9 trillion in assets, comes as the second-largest bank in the United States right behind JPMorgan Chase & Co, the largest US bank with a whopping $3.03 trillion in assets. BoA serves roughly 66 million consumers and provides support to more than 3 million small businesses in the US.

It does not come as a surprise that BoA is a leader in digital innovation. The bank had previously unveiled its AI-powered virtual assistant, Erica, that can assist account holders with their everyday financial tasks. 

BoA and Blockchain: The Journey so Far

Bank of America, as a leading investment bank and financial services provider, plays an influential role in changing people’s mindsets about financial innovations. Like almost all other financial institutions, the bank encountered cryptocurrencies (mostly Bitcoin) with great negativity, but it did praise the technological innovation behind it.

Earlier this year, the bank published a report titled “Bitcoin’s Dirty Little Secret,” slamming Bitcoin and criticizing its utility. However, in the same report, the leading investment bank called DeFi intriguing, to the surprise of many. 

It is not the first time BoA finds the emerging payment options promising. In 2020, Ripple added Bank of America as one of its clients, approving that the bank had tested out Ripple’s distributed ledger technology. Despite having a negative outlook towards top cryptocurrencies like Bitcoin and Ethereum, it is quite clear that BoA is absorbed by the technology behind these innovations.

Now, do you think BoA will anytime soon change its negative view towards Bitcoin? What will that mean for Bitcoin? Let us know in the comments below.