IHS Markit to Tokenize Syndicated Loans

IHS Markit is reportedly creating a new blockchain-centered platform to facilitate the payments leg of syndicated loan trade, which will eventually transition to other financial negotiations. Called Stax, this collection of wallets and smart contracts aims to remove the last process of wire transfers, where each dealing has its own wire.

"It's not always about reducing time; for us, it's about reducing work," said John Olesky, the company’s managing director and the head of product management. "If we can take something that involves 10 steps down to seven, great."

Should everything go swimmingly, the system will be able to eliminate workload around cash transfer between two groups involved in a syndicated loan, according to CoinDesk. The traditional process of such method usually requires collaborating with as many as 30 different banks. The London-based company seeks to conduct its first preliminary run this summer.

IHS Markit is looking to store fiat money in a traditional trading account and use digital wallets to represent it via a token form. IHS bank customers will be able to wire deposits into a conventional account where the amount is converted into a digital token in a private network. As the tokens are stored in the wallet, this will then allow customers to settle certain trades.

Olesky told Coindesk that they can complete transactions 24 hours a day by eliminating the wires, thus reducing time and effort. "We don't think that wire system procedures, technology, and uptime should be barriers anymore,” the managing director added.

Syndicated loans are estimated to be at a $1 trillion issuance on a yearly basis, most of which are settled through the company’s loan solutions system. Despite using the blockchain tech, which can drastically reduce trade transactions, the IHS Markit’s system will still take up 20 days to be completed.

This is due to the smart contracts deciding if the trade is primed for closure and will perform the monetary transfer. The delay is also in some way intentional since a lot of factors are still being factored in, such as primary issuance, secondary transactions, changing of interest rates and more.

This announcement will certainly thrill crypto enthusiasts as more and more big-wigs are coming in to play in the digital space. But a lot of investors out there are still wary to integrate blockchain into their system. Nevertheless, the fear is lessening, with each company dipping their hands in the crypto space.