Custody bank Northern Trust is trying the trading of fractionalized bonds on a blockchain.
Working with Singapore-based debt markets firm BondEvalue, the bank is giving asset servicing to huge, high-grade bonds that will be tokenized and isolated for retail investors on Hyperledger Sawtooth. These bonds are typically huge for single investors, but the nature of the bonds is attractive.
The move displays Northern Trust’s continued enthusiasm for the innovation after it grew then sold its private equities blockchain, which quickens the time to market for new high tech private equity funds. Northern Trust is the 24th biggest bank in the U.S., with $124.3 billion in assets.
“We’re building capabilities we feel will be reusable across multiple asset classes and multiple jurisdictions,” Justin Chapman, Northern Trust’s worldwide head of market advocacy and innovation research, commented on the new bond pilot. “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.”
Through the Monetary Authority of Singapore’s Sandbox Express, BondEvalue was offered authorization to introduce a blockchain-based bond exchange in Singapore. Northern Trust will custody tokenized bonds and facilitate transactions with the oversight of the regulator.
In case the pilot is effective, the bank intends to also join in the creation of BondEvalue’s business model.