The Structured Finance Industry Group is teaming up with the trade association for the blockchain industry to explore ways that distributed ledger technology can be used to speed up transaction processing and improve transparency.
The two will cooperate on research projects, the first of which was published Monday, and educational programs.
They are also hosting a series of activities at SFIG’s annual conference in Las Vegas this week.
“The securitization process is an ideal candidate for the efficiencies of distributed ledger technology,” Perianne Boring, founder and president, Chamber of Digital Commerce, said in a joint press release.
“Blockchain platforms create a more transparent and secure marketplace allowing the industry to provide better products more securely at lower cost. This will also enable the market to more efficiently comply with regulations, while at the same time allowing automation to create significant efficiencies for the role of the regulator itself. “
Each year, some $1.9 billion of loans, leases and other assets are bundled into collateral for bonds. (The bulk of that is mortgages securitized by Fannie Mae and Freddie Mac). Despite this volume, and the large number of sophisticated financial institutions involved, there is a large amount of manual processing. There is also relatively little information about how these bonds change hands in the secondary market or who holds them.
The study by Deloitte outlines the ways that blockchain can play a role at each stage of the securitization process, by providing a single consistent source of information, a complete, immutable audit trail of all transactions, improving valuation and price discovery, eliminating time lags in information and payment, and increasing the security of transactions.
“With this partnership we can create new, forward-thinking and educational opportunities for our members enabling them to stay fully informed of how technology is impacting their business,” SFIG Executive Director Richard Johns said in the same press release.
“Today’s white paper is just the beginning of what we expect to be a very active and productive partnership.”