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U.S. banking giants experiment tokenization with this cryptocurrency

U.S. banking giants experiment tokenization with this cryptocurrency

The Depository Trust and Clearing Corporation (DTCC), recognized as the world’s largest settlement system, has teamed up with blockchain oracle Chainlink (LINK) to conclude a pilot program with several major U.S. banking firms.

The primary goal of this initiative was to advance the tokenization of traditional finance funds.

Following the announcement of DTCC’s successful completion of the tokenization pilot, Chainlink’s token saw a notable surge of up to 20%.

This pilot, which included prominent Wall Street firms such as JP Morgan (NYSE: JPM) and BNY Mellon, leveraged Chainlink’s Cross-Chain Interoperability Protocol (CCIP) to merge traditional finance with blockchain technology.

According to a report from DTCC, the firm recently completed the pilot program, dubbed Smart NAV, in conjunction with Chainlink. The program was designed to explore an extension of a DTCC service, Mutual Fund Profile Service I (MFPS I), the industry standard for transmitting ‘Price and Rate’ data, also referred to as ‘NAV data’.

The pilot showed that by delivering structured data on-chain and creating standard roles and processes, foundational data could be utilized in various on-chain use cases. These included tokenized funds and bulk consumer smart contracts, which hold data for multiple funds.

Prominent participants included American Century Investments, BNY Mellon, Edward Jones, Franklin Templeton, Invesco, JPMorgan, MFS Investment Management, Mid Atlantic Trust, State Street, and U.S. Bank

Market response and price movements

LINK 7 day price chart. Source: Finbold

Following the release of DTCC’s report, Chainlink’s native token, LINK, experienced a 12.5% increase in value. At press time, LINK surged past $16, with its market cap increasing by 14% in the past 8 hours, triggering the liquidation of $1.96 million in short positions over the last 24 hours. 

This spike in LINK’s price demonstrates the market’s positive reaction to the potential of integrating traditional finance with blockchain technology.

This pilot program is part of a broader trend where major traditional financial institutions are showing a growing interest in real-world asset (RWA) tokenization.

As reported by Finbold, tokenized real-world assets have soared to nearly $8 billion in value as demand surged. 

For instance, on March 19, BlackRock  (NYSE: BLK)  introduced a tokenized money market fund called BUIDL on the Ethereum (ETH) network. This fund allows investors to acquire tokens representing shares in the fund, which primarily invests in U.S. Treasury bills.

The future of tokenized funds

Wall Street firms have long shown interest in blockchain technology but have often hesitated to operate on public blockchains.

In 2023, several notable firms, including Microsoft (NASDAQ: MSFT) and Goldman Sachs (NYSE: GS), joined the Canton Network—a private pilot network aimed at allowing large institutions to explore decentralized infrastructure. 

The new test with Chainlink is different because its goal is to obtain Wall Street data directly from the institutions and make it available for use by smart contracts and other Real World Asset protocols on public networks. 

This marks a significant step towards integrating blockchain technology with mainstream finance, highlighting the potential for real-time, more automated data dissemination and built-in access to historical data.

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