Vanguard to Go Live on Symbiont's Blockchain Platform for Foreign Exchange in Q3 2020

Mutual fund giant Vanguard has completed another blockchain pilot that aims to change the risk profile of foreign exchange transactions.

Jun 26, 2020 at 8:45 p.m. UTC
Updated Sep 14, 2021 at 8:57 a.m. UTC

Mutual fund giant Vanguard has completed another blockchain pilot that aims to change the risk profile of foreign exchange (FX) transactions.

The Valley Forge, Pa.-based investment firm ran the pilot on Symbiont’s Assembly blockchain with participation from State Street, BNY Mellon and investment firm Franklin Templeton. Vanguard and Franklin Templeton acted as dealer banks and State Street and BNY Mellon acted as counterparty banks as well as custodians, said Symbiont’s foreign exchange lead, Joe Ziccarelli.

Symbiont believes the foreign exchange platform will go into production in the third quarter of 2020, Ziccarelli said.

“The pilot has helped to prove out some of the capabilities that address areas of uncompensated risk in collateral-linked instruments like FX forward contracts,” Melissa Kennedy, a Vanguard spokeswoman, said in an emailed statement. “Over the next twelve months, we will continue to build out capabilities on the platform with our partners.”

The FX announcement follows a digital asset-backed securities pilot Vanguard announced the completion of earlier this month. The FX pilot’s completion also shows that the Assembly blockchain could quickly become a viable option for many large enterprises engaged in FX, Ziccarelli said.

According to Ziccarelli, the pilot proves a use case for Assembly that applies to all foreign exchange contracts including swaps and outrights, which is a FX transaction where two parties agree to buy or sell a certain amount of currency at a predetermined rate in the future.

Buy-side and sell-side firms use foreign exchange for hedging and speculative purposes. The market is governed by contracts that serve as credit agreements which specify how the over-the-counter (OTC) market should exchange the collateral used for these transactions.

The calculations and collateral movement often take two or three days to process.

“[Currently] you are two or three days removed from being protected against the sort of underlying credit risk that’s associated with those transactions,” Ziccarelli said. “Now you can be protected in as soon as the last calculation period.”

The Festival for the Decentralized World
Thursday - Sunday, June 9-12, 2022
Austin, Texas
Save a Seat Now

DISCLOSURE

Please note that our privacy policy, terms of use, cookies, and do not sell my personal information has been updated.

The leader in news and information on cryptocurrency, digital assets and the future of money, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups. As part of their compensation, certain CoinDesk employees, including editorial employees, may receive exposure to DCG equity in the form of stock appreciation rights, which vest over a multi-year period. CoinDesk journalists are not allowed to purchase stock outright in DCG.

Trending

1
US Appeals Court Orders SEC to Bring Enforcement Actions to Jury Trials

The 5th Circuit Court of Appeals found that the targets of SEC enforcement actions had their constitutional rights violated by the use of in-house judges.

The 5th Circuit Court of Appeals found that the targets of SEC enforcement actions had their constitutional rights violated by the use of in-house judges.

2
First Mover Asia: Pine Wants to Test the Liquidity of the NFT Market; Cryptos Are Well-Red

The number of users on NFT markets is at its lowest point this year, but still higher than in 2021. The crypto lending platform sees an opportunity.

The number of users on NFT markets is at its lowest point this year, but still higher than in 2021. The crypto lending platform sees an opportunity.

3
CFTC Chair Indicates Agency Will Increase Crypto Enforcement: Report

Rostin Behnam said the agency was facing a rapidly increasing number of cases and would add resources to address crypto fraud.

Rostin Behnam said the agency was facing a rapidly increasing number of cases and would add resources to address crypto fraud.

4
LimeWire Signs Deal With Universal Music for Music NFT Licensing, Blockchain Gaming in Focus

The most valuable crypto stories for Wednesday, May 18, 2022.

The most valuable crypto stories for Wednesday, May 18, 2022.