BNY, Citadel Securities Tokenize U.S. Treasury to Speed Up Wall Street Financing

The transaction shows how blockchain-based government bonds can help businesses move collateral between settlement and financing faster.

BNY, the world's largest custodial bank, and trading giant Citadel Securities announced Tuesday that they have struck a deal using U.S. Treasury documents that show how blockchain technology could help Wall Street move assets between trading and funding more quickly.

This transition focused on collateral, an important part of the financial markets. Banks and commercial companies use US government bonds to secure short-term loans and finance business activities. Transferring these securities between accounts and settlement systems can be time-consuming and tie up assets that could otherwise be used.

The effort comes as Wall Street looks to bring traditional assets to the blockchain. Companies including BlackRock, Franklin Templeton and JP Morgan have embraced tokenized funds and securities, betting the technology can shorten settlement times, automate processes and make it easier to move assets.

The purpose of the BNY-Citadel Securities deal was to demonstrate how tokenized government bonds can move from settlement to financing, potentially allowing companies to re-collateralize sooner and free up cash for other deals. "Efficient movement of high-quality collateral is fundamental to well-functioning markets," Don Doherty, director of digital asset operations at Citadel Securities, said in a statement. He added that reducing delays during the trading life cycle can improve the way institutional markets function.

BNY said it plans to introduce more digital cash and tokenized deposit capabilities to support blockchain-based settlement and financing.

Meanwhile, the bank said it expects to increase the operating hours of its traditional settlement systems for U.S. Federal Reserve-eligible securities and tripartite trades, and aims to catch up with European and Asian trading hours next year. Tripartite transactions are a form of short-term financing in which the bank manages collateral between borrowers and lenders.

"Using the US Treasury's iconic representation in settlement and funding, we are enabling a more connected, efficient and always-on financial system," Carolyn Weinberg, director of innovation and market transformation at BNY, said in a statement.

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