Much had been debated about putting fiat money on distributed ledgers, but hardly any action has been taken beyond proof of concept.
IHA Markit, the market infrastructure giant, May soon change this. They are developing a new blockchain based system to manage the payment leg of syndicated loan trading and later a wider range of financial transaction. Stax the conceived system of smart contract and wallets is so developed that it will eliminate the last mile of wire transfers, where each transaction has its own wire.
This system will simplify and reduce workload around cash reconciliation between parties in a syndicated loan. This may involve as many as 30 banks.
A new world of digital assets can be broken down into distinct categories. There is Bitcoin we all know as indigenous digital assets. Given the volatility of cryptocurrency, makes financial players wary. Which is why a more compelling possibility is that central banks decide to issue digital versions of their fiat currency. However, this may take time to turn into reality
A more pragmatic approach is to use digital wallets to represent, in token form, some fiat money that has been deposited in a traditional trading account.
This is precisely what HIS Market is doing with Stax, and will do pilot testing this summer.
The managing director and head of product management at the London based company, Mr John Olesky, stated that HIS bank customer will wire money in the old-fashioned account. The deposited amounts are then converted into digital wallets on a private network, and eventually, the digital wallet will allow for the ongoing settlements of transactions.
‘’We believe we can settle trades 24 hours a day. So you eliminate those wires and reduce time and effort’’ told John Olesky
Loans and others
Syndicated loans are large(OVER 1 $TRILLION ANNUALLY) and important market. A large number of these loans are settled through HIS Markit loan solutions created in 2007.
The aim of Stax, unlike other DLT, is to make settlement simpler rather than instantaneous.
As per Olesky when a trade is ready to close and perform cash settlement is decided by smart contracts, therefore the system doesn’t shorten the trade lifecycle. This can take up to 20 days for syndicated loans, which is deliberate in order to account for primary issuance and secondary trades, varying interest rates kicking in and so on.
Olesky E its not about reducing timer but about reducing work.Even if a 10 step process is reduced to 7, its great. He says that loans just happen to be their first use case of Stax.
He says” we have built in a generic way and we have already met with exchanges and talked about derivatives and other asset class’’
For Stax to work for different types of payments, modification in the smart contract has to be made.
Nevertheless, Olesky said the fundamental payments rails of Stax could be applied elsewhere
‘’The rest of the infrastructure will work for any type of payment that is based on tokenism of fiat.period,’’ he said.’’Take something very natural like cross country swap-Well, that’s just like a list of cash obligations that you must check against a digital wallet’’
