BNY launches blockchain-based accounting for tokenized funds

Bank BNY announced the launch of a digital transfer agency services platform based on blockchain. The new solution will allow for maintaining the registers of tokenized fund owners on a distributed ledger and will become part of a strategy to modernize Wall Street infrastructure, as reported by the FT.

The new digital division will operate in parallel with the traditional transfer agency business system, which handles transaction processing and records the ownership of assets.

The company stated that blockchain could become a single source of truth for ownership rights, reduce the number of intermediaries, and speed up transaction settlements.

According to BNY's Head of Product and Innovation, Carolyn Weinberg, this initiative has the potential to transform financial market infrastructure.

"We see this as modernizing the function that is at the core of every fund transaction by moving ledgers and registers onto the blockchain," she noted.

Currently, BNY's transfer agency business services around $8.6 trillion in assets across 7.6 million accounts, while the bank's total assets under custody and administration exceed $59 trillion.

First Clients

The first user of the new platform will be the UK investment company Baillie Gifford, which will use it to launch the UK's first fully native tokenized fund operating under local regulation.

Additionally, similar infrastructure is planned to be adopted by BlackRock and the money market and liquidity management division Dreyfus, which is part of BNY.

Baillie Gifford noted that blockchain provides a single register agreed upon by all market participants.

Franklin Templeton CEO Jenny Johnson also emphasized that financial companies spend significant resources reconciling data between different systems, whereas blockchain allows for maintaining one common source of information that is updated in real-time.

At the same time, BNY acknowledged that traditional financial infrastructure will operate in parallel with blockchain solutions for many years to come, and the adoption of the technology comes with new risks, particularly potential vulnerabilities in smart contracts and cross-chain bridges.

Recall that we previously reported that Morgan Stanley launched exchange-traded products based on Ethereum and Solana, expanding its range of cryptocurrency ETPs.