Ripple Prime, the institutional arm of San Francisco-based enterprise blockchain firm Ripple, has signed on as one of the first major clients to use BNY's cutting-edge technology that tokenizes regular bank deposits.
The prominent New York-based bank initially announced the new technology earlier today.
Tokenized deposits, explained
Crypto markets operate 24/7/365, but the banking system (wires, SWIFT, ACH) sleeps on weekends and holidays.
This creates "settlement risk." You might need to move millions of dollars to cover a crypto trade on a Saturday, but the bank is closed.
BNY has come up with an innovative solution to create the tokenized version of the money remaining in the bank. These tokens represent a direct claim on the bank’s cash.
These blockchain-based tokens can be moved instantly, which makes them an attractive option compared to traditional solutions. They can be moved instantly, 24/7, and "programmed" to settle automatically.
The initial use case for this tech is "collateral and margin workflow." If Ripple Prime needs to post collateral for a trade with another BNY client, they can simply move the tokenized deposit instantly.
A high-profile partnership
Testing BNY's tokenized deposits builds on the existing partnership between Ripple and the New York-based banking behemoth.
As reported by U.Today, BNY is already the custodian holding the cash reserves that back Ripple’s flagship RLUSD stablecoin.
Being named an "early adopter" alongside giants of the likes of Citadel Securities is significant for Ripple Prime since this places the company inside the circle of "trusted institutional infrastructure."
Alex Dovbnya
Caroline Amosun
Denys Serhiichuk
Gamza Khanzadaev