Northern Trust is one of the world’s last true Global Custody banks, covering all bases of the traditional definition. Now, Northern Trust is looking into the trading of fractionalized bonds on a blockchain. The Chicago-based bank is working with BondEvalue, a company focused on the debt market to provide the service.
The initiative is providing asset servicing, something crucial to the bank’s core strategy, for large, high grade bonds that will be “tokenized”, and divided for retail investors through Hyperledger Sawtooth. The process will allow individual investors to participate in an investment area that until now has only been available for institutional investors due to the size of the trades.
The news does not come as a surprise, as Northern Trust has consistently shown interest in blockchain technology. In fact, the bank developed its own private equities blockchain and decreased the length of time to market certain private equity funds.
While Northern Trust falls out of the top 20 banks in the United States in terms of annual revenue and assets, it is one of the leaders in asset services, marking major financial institutions as its clients on that side of the bank’s business.
A Northern Trust spokesman stated that their strategy is to help build an exchange, but then focus on being the industry leader in asset services through digital platforms. Ultimately, Northern Trust sold the private equities blockchain but continued to service its clients.
BondEvalue is based in Singapore, and is planning a Block Chain based bond exchange in the country while Northern Trust will conduct the transactions. The Monetary Authority of Singapore will oversee the initiative to assure regulatory standards. Northern Trust’s plan is to expand the relationship with BondEvalue once the initiative is successful.
The bank still offers traditional services such as asset management and private wealth management with locations throughout the United States for its high end clients, and retail locations in the Chicago area. However, Northern Trust’s focus on blockchain technology is an example of a large banking institution leveraging one of its core competencies in a partnership to open up new revenue streams using cutting edge technology.