The Bank of New York Mellon Corporation (BNY) has launched a Digital Asset Data Insights product that publishes on- and off-chain data to blockchains. This innocuous sounding product is rather important. And while not rocket science, it is groundbreaking. The world’s largest global custodian will be feeding data about the assets it is administrating directly to public blockchains. In some ways, that’s better than an audit, because it’s up to date and directly from source.
In the recent past there has been a lot of debate about so-called ‘proof of reserves’, which in some cases are prone to manipulation. Proof for real world asset (RWA) tokenization is even more important because the token is often a digital twin that represents an asset held outside a blockchain. In the case of a money market fund, the assets often involve Treasuries.
So far the best we’ve seen in terms of proof is a pdf downloaded from a fund accounting system and posted to the internet. If someone wanted to commit fraud, it would be incredibly easy to automatically tweak and upload fraudulent data. The Circle stablecoin is somewhat better because its reserves are mostly managed by BlackRock, which posts the assets in the fund to its website on a daily basis.
BNY’s solution is even better. Firstly, the data is direct from source – the actual custodian. Secondly, it is on-chain, enabling it to be signed and verified. Plus, the data can be used in an automated fashion in other smart contracts.
“Accessing transparent data is critical to our clients’ success in today’s market,” said Caroline Butler, Global Head of Digital Assets at BNY. “Our platform’s support of Digital Asset Data Insights underscores our commitment to servicing the end-to-end asset lifecycle via distributed ledger technology, while maintaining data integrity from a trusted source.”
BlackRock’s BUIDL goes first
BNY is the custodian of BlackRock’s BUIDL on-chain money market fund, which is the first product it will be providing data for (on Ethereum). BUIDL’s market capitalization is approaching $2 billion and has ballooned threefold in the past month. That’s because BUIDL is used as collateral for Ethena’s new USDtb stablecoin, which has added $1.3 billion in BUIDL holdings during the same period.
The bank was the first large global custodian to enter the digital asset custody arena when it invested in Fireblocks four years ago. While it has engaged in various DLT activities, its progress on custody was blocked by the SEC’s SAB 121 crypto accounting rule that made it prohibitively expensive for banks to provide crypto custody. However, BNY was the first to be granted an exception by the SEC, with the rule recently rescinded by the new SEC Acting Chair, expanding the opportunities for the bank.
