The buzz around tokenised securities seems to have taken over the DLT space, and now, commercial papers have jumped on the bandwagon. Decentralised finance (DeFi) platform Prontoblock has announced a partnership with US-based Mercantile Bank with the aim to offer USD250 million in “high grade”, unsecured, short-term corporate debt by Q2 2024.
The commercial papers will be a part of the USD1 billion in assets that Prontoblock intends to tokenise. According to a statement on the firm’s Linkedin profile, the outstanding value of US commercial paper exceeded USD1.25 trillion at the end of 2022.
Testing boundaries
Prontoblock and Mercantile Bank could be dipping their toes into dangerous waters. In an article about the partnership, Ledger Insights points out that all DLT activities in the US require approval from the Federal Reserve of the Office of the Comptroller of the Currency (OCC). In addition, the US Securities and Exchange Commission (SEC) launched a high-profile crackdown on securities in the digital space earlier this year.
However, the Ledger Insights piece also confirms that while Mercantile Bank is an American bank, Prontoblock is based in Puerto Rico and under the thumb of Puerto Rico Office of the Commissioner of Financial Institutions. A commercial paper also doesn’t have to be registered with SEC if its maturity is less than nine months, among other exemptions.