BNP Paribas reviews Ethereum blockchain for suitability for money market fund tokenization
- In a pilot project, the French bank BNP Paribas has shares in one for the first time Money market funds issued on the Ethereum blockchain.
- It is seen in the industry as a signal that banks will also view public blockchains as a basis for regulated financial products in the future.
BNP Paribas, created in 2000 from the Banque Nationale de Paris and the Banque de Paris et des Pays-Bas, is a global universal bank for private customers, companies, institutional investors and government organizations.
As part of their blockchain pilot project Shares of a money market fund as digital tokens on Ethereum pictured. Although the blockchain is public, access is restrictive. It is only available to specially authorized investors.
The technical implementation is carried out via the in-house AssetFoundry system. BNP Paribas Securities Services takes on the role of transfer agent, including wallet setup and storage of private keys, while BNP Paribas Corporate & Institutional Banking is responsible for tokenization and connection to the blockchain.
The aim is to digitally map the entire life cycle of a fund share, from the issue through register management to the final settlement.
Banking on public blockchains
The decision to use Ethereum as infrastructure is something fundamentally new for major banks. While they have so far relied almost exclusively on private networks based on the distributed ledger technology DLT, BNP Paribas is now showing that public blockchains are also suitable for displaying sensitive financial instruments.
The project follows an earlier successful tokenization of a Luxembourg money market fund on a private blockchain and represents the bank’s new multi-chain strategy.
More efficient with new market structures
Money market funds are considered an ideal use case for tokenization because they are highly liquid, standardized, and are at the heart of institutional cash management.
By mapping them on a blockchain, transactions can be processed in near real time, compliance checks can be automated and transparency can be increased for all authorized parties.
With its project, BNP Paribas joins other global players such as BlackRock, Franklin Templeton and JPMorgan, who have been evaluating tokenized funds on public chains for some time.
Expanded opportunities
The pilot project fits the bank’s strategy, which is also open to experiments with wholesale CBDCs. A combination of tokenized fund shares and digital central bank money could lead to completely digitalized financial processes in the future.
For European fund issuers, BNP Paribas’ move is a clear indication that the tokenization of classic financial products will become increasingly important in the traditional banking sector in the future.
No Comments