Banks including Bank of America, Citadel, DTCC, and Tradeweb participate in a blockchain-based Treasury repo initiative on the Canton platform.
US Treasuries Tokenized on Blockchain Pave the Way for 24/7 Trading
A groundbreaking transaction has taken place in the US Treasury market, marking a significant milestone in the adoption of blockchain technology. The transaction involved the tokenization of US Treasuries and their exchange for the USDC stablecoin in an on-chain repurchase agreement (repo), and was facilitated by Tradeweb, a major fixed income trading venue with average daily repo volumes of $777 billion in July.
The participants in this first-of-its-kind transaction included Bank of America, Citadel Securities, the DTCC, and Societe Generale. The underlying Treasuries were held in custody by DTCC subsidiary the DTC and tokenized on the Canton Network.
The Canton Network's decentralized, interoperable framework allowed for the atomic (simultaneous) settlement of both legs of the repo fully on-chain, mitigating settlement risk and enabling continuous availability—what traditional finance calls 24/7 trading. This model supports the Global Collateral Network initiative, aiming to create an always-on market infrastructure combining institutional compliance with programmable settlement capabilities.
Tokenized Treasuries (UST) were custodied by DTCC's DTC and "mirrored" on the Canton Network as freely transferable digital assets usable as collateral in on-chain repo agreements. The USDC stablecoin was minted natively on Canton to represent the cash leg, allowing for instant exchange without dependence on traditional settlement systems like Fedwire. This provides instant liquidity and reduces friction in financing transactions.
Justin Peterson, Tradeweb's Chief Technology Officer, stated that the trade reflects the power of collaboration in building a more connected, resilient, and always-on global capital market ecosystem. This evolution can transform global capital markets into a more connected, resilient ecosystem that operates without the constraints of legacy systems, potentially reducing settlement risk by up to 90% as per preceding DTCC and Euroclear pilots.
In summary, tokenizing Treasuries on a permissioned blockchain using USDC for on-chain repos creates the foundation for 24/7 capital markets by enabling seamless, instant settlement and financing transactions anytime globally. This innovation aligns traditional financial institutions with emerging decentralized financial technology to unlock higher liquidity, continuous market access, and greater operational efficiency. The transaction serves as a proof of concept for the potential of blockchain technology to revolutionize the US Treasury market, potentially leading to increased competition and innovation.
- This groundbreaking transaction in the US Treasury market, facilitated by Tradeweb, showcases the industry's adoption of blockchain technology for analysis and potential restructuring of traditional, 24/7 trading methods.
- The application of tokenization in the exchange of US Treasuries for the USDC stablecoin, as seen in this pioneering transaction, offers insights into harnessing technology for capital market efficiency in the finance industry.
- The collaboration between major institutions like Bank of America, Citadel Securities, the DTCC, and Societe Generale in tokenizing Treasuries demonstrates the industry's readiness to leverage technology for innovation and growth.
- The continuous availability of capital markets facilitated by tokenization on blockchain could revolutionize the news cycle, enabling instant, round-the-clock financing transactions and insights from ongoing market activity.
