Cryptocurrency Startup PV01 Solving Long-Term Debt Market Problems with Blockchain!

According to reports, crypto startup PV01 plans to use blockchain technology to solve long-term problems in the debt capital market. The first product the company plans to issue is to tokenize one month US Treasury bonds. （Coindesk）

PV01 launches a tokenized on chain version of one month US Treasury bills

As the world of finance develops, the capital market industry and trading assets through it have become severely complex. Capital markets bring together the parties who act as borrowers or sellers, and the parties who act as creditors or buyers. Consequently, the markets have become highly fragmented, causing communication problems, distrust, and financial losses. However, reports indicate that crypto startup PV01 is stepping in to solve long-term problems in the debt capital market by employing blockchain technology.

Introduction

PV01, a New-York-based fintech firm, will leverage blockchain technology to bring efficiency to the trade life-cycle of buying and selling bonds in the debt market. The move should solve the problems brought about by the current manual processing of trading activities in capital markets. The firm has promised to offer a transparent trading venue that will ensure trust, efficiency and reduce market opacity.

The Current State of The Debt Capital Markets

The debt capital market is integral in facilitating the movement of credit from lenders to borrowers. Such credit may take any form from commercial papers, bonds, notes, or securitized debt. Despite the importance of the capital markets, the process of issuing bonds is filled with inefficiencies such as time lags to authenticate trades, fragmented markets, and intermediaries who charge unnecessarily exorbitant fees. Moreover, because the market is highly fragmented, lack of transparency leads to unnecessary risks, and the cost is attributed to multiple intermediaries until the deal is closed.

PV01’s Blockchain Solution for the Debt Capital Market

PV01 sees problems in the current systems that create hypersensitivity to liquidity and often leads to inefficiencies within the market. The solution lies in harnessing blockchain technology to make the market more transparent, trustworthy and cost-effective. The firm aims to issue a new product for the industry, tokenized one month US Treasury bonds, with collateral that eliminates intermediaries and contributes to efficient auto-execution.
PV01’s solution leverages blockchain technology, which reduces third-party intermediaries’ instances, decreases trade settlement times, and increases liquidity, while also reducing counterparty risks. Interestingly, the technology solves these problems through the use of smart contracts, which are computer algorithms that execute automatically once they fulfill pre-specified criteria giving credence to a tamper-proof trading process.

The Implementation Process of The Blockchain Solution

Implementing the proposed solution in the debt capital market will require a concerted effort by all parties. The process of bringing a complex solution like blockchain into the current system requires extensive knowledge, resources, and experience in the financial market. PV01 will work to bring significant banks into a new blockchain-based platform that enables bond issuance for one month US Treasury bonds backed by collateral.

Benefits of PV01’s Blockchain Solution

The adoption of PV01’s blockchain solution will bring numerous benefits to the debt capital market. First, while the market is currently fragmented, trade execution will be more efficient because blockchain technology ensures near-instant settlement. Second, there is reduced third-party interference, which directly translates to reduced fees incurred by borrowers and lenders. Third, because blockchain technology is tamper-proof, traders and investors exist in a more transparent market, which safeguards against fraud and enhances trust in the market.

Conclusion

PV01’s move to adopt blockchain technology and bring efficiency to the trade-life-cycle of buying and selling bonds in the debt capital market is welcomed. With smart contracts, transparency, and trust, the market’s fragmentation caused by mistrust, delayed trades, unintended data leakage will be solved. These developments will significantly boost the growth of the debt capital market.

FAQ

1. Is blockchain the future of the financial market?
Blockchain technology promises better transparency and trust in the financial market, hence likely to grow in use in the future.
2. What challenges will PV01’s blockchain solution solve in the debt capital market?
PV01’s blockchain solution will solve the market fragmentation by improving transparency, ensuring prompt settlement, and reducing third-party interference.
3. What is the benefit of PV01’s blockchain solution to borrowers and lenders?
PV01’s solution will eliminate intermediaries, thus reducing the fees incurred by both borrowers and lenders.