Bank of America (BofA) will start using blockchain technology to settle stock trades, reducing the settlement period from days to minutes

Bank of America has joined the Paxos Blockchain Stock-Settlement Network as it looks to improve its stock settlement process. The second-largest bank in the United States will now be using blockchain technology to settle stock trades.

Per the Bloomberg report, the Paxos Blockchain Stock-Settlement Network uses blockchain technology to settle stocks for financial institutions. Bank of America is now joining the likes of Credit Suisse Group AG and Nomura Holdings Inc.’s Instinet on the Paxos Settlement Service.

Kevin McCarthy, head of financing and clearing at the BofA, revealed that the bank has been using the settlement system for internal transactions over the past few months. If the Paxos system is approved as a clearinghouse, the bank intends to start using the service for its clients. He added that “We can determine the settlement cycle down to T+0. We then can free up the collateral we’d have to post on an overnight basis. The return-on-assets in this business would improve, which has been a challenge.”

The Paxos Settlement System intends to make the stock-settling process faster and more efficient. According to Paxos Chief Executive Officer Chad Cascarilla, the Depository Trust & Clearing Corp is the dominant stock-settling company in the equities market. However, Cascarilla lamented that the DTCC misses 75% of all stocks traded since it only executes trades logged by 11:30 a.m, thus causing the average stock-settling period to be about two days.

However, thanks to the Paxos system, banks and other financial institutions can settle trades within minutes. The Paxos Settlement Service was approved by the US Securities and Exchange Commission in 2019, granting it the license to settle equity trades for financial institutions.

This post was originally published on Coinlist.