State Street tests blockchain for securities lending
State Street is concluding its testing of a blockchain system from securities lending and is pondering its roll-out in 2017, according to Reuters.
Tests were carried out over a seven-month period.
Hu Liang, senior managing director of the Emerging Technologies Centre at State Street, told Reuters “the aim is to enhance the operational aspect of securities lending”.
“In a lot of cases there is no automated linkage to say which account it (the collateral) should go back to,” Liang commented. The new blockchain system would solve this problem – it would create a digital token associated with the collateral posted by an investor to borrow securities from State Street’s clients.
This digital token could then be used for other transactions.
The blockchain solution would create a digital, immutable record of how the collateral had been used, making it easier and quicker for State Street to return the collateral to the borrower’s account once their lending position had been unwound, Liang explained.
The solution would also reduce manual intervention and create more accurate records for regulatory reporting.
State Street is one of the world’s largest custodian banks and securities lending providers.