Turning Point for Blockchain in Global Finance, Demonstrating Technology Can Drive $30 Billion in Savings Across $3 Trillion Annual Securitization Market
Figure Technologies announced that it has achieved a breakthrough in issuing the first ever securitization backed by loans originated, serviced, financed and sold on blockchain. The collective benefit of blockchain to the parties over the lifecycle of the loans totaled over 100 basis points. This represents potential savings of over $30 billion to the $3 trillion annual securitization market. Parties in the transaction included Figure (the originator), Jefferies Group (structuring agent, lead underwriter, and warehouse provider), Nomura Securities International, Inc. (lead underwriter), Tilden Park Capital (loan contributor and subordinate note buyer) and a large asset manager (senior note buyer).
“Provenance is leading the way toward creating a more accessible securitization market, one where smaller issuers may securitize assets at a lower cost than the traditional model.”
“Blockchain has an almost incalculable potential for unlocking value for the world’s financial markets and we’re spearheading that transformation by taking on the big challenges like securitization,” said Mike Cagney, CEO of Figure. “Until now, the industry has been slow to move past white papers and proof of concept projects. But this first ever production-level blockchain ABS achievement importantly underscores that the times are changing.”
Unlike today’s manual, paper-intensive process required for securitization, Provenance offers benefits that can lower costs, improve security and mitigate risk. Provenance stores data in a distributed immutable ledger that can never be altered, only amended, reducing the risk that the failure of a single entity could cause catastrophic damage to the financial system. This has obvious benefits for data integrity and auditability, which are critical for financial transactions. Several data on Provenance are digitally signed from source and validated by smart contracts, reducing the need for parties to repetitively verify data in order to detect errors or fraud.
“We are happy to partner with Provenance to bring to market a deal that meets the needs of our clients utilizing their innovative technology,” said Brian McGrath, Managing Director, Jefferies LLC.
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Provenance enables the automation of manual processes, reducing the cost of back-office functions and traditional intermediaries. Reducing the cost of securitization can increase access to financing and make smaller deals economical. The combination of increased transparency and reduced friction with the ability to handle sophisticated transaction logic has the potential to democratize access to capital markets, removing existing cost and barriers to entry that stifle innovation.
“Nomura is proud to have been a lead underwriter on Figure’s inaugural securitization on Provenance,” said Sanil Patel, Managing Director of Nomura Securities International, Inc. “Provenance is leading the way toward creating a more accessible securitization market, one where smaller issuers may securitize assets at a lower cost than the traditional model.”
With the completion of the first-ever asset-backed securitization leveraging blockchain, Figure has made significant strides in quantifying the benefits of this new technology for the financial services market. It has proven the feasibility of packaging assets that are originated, serviced, financed and sold on blockchain into a new financial structure (i.e., the securitization trust and resulting bonds). And, it has successfully engaged established industry players, proving that blockchain can be integrated into existing business models.
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