Home Blockchain Provenance Blockchain Foundation Announces $50 Million Grant Program – Forbes

Provenance Blockchain Foundation Announces $50 Million Grant Program – Forbes

Provenance Blockchain Foundation Announces $50 Million Grant Program – Forbes

Morgan McKenney and Jeff Gapusan discuss the Foundation’s $50 million development grant program and commitment to building blockchain applications for regulated financial services sector in the face of uncertainty.

The closures of Silvergate Bank and Silicon Valley Bank catalyzed one of the most volatile weeks in financial markets since the Global Financial Crisis. The weekend after that eventful 48 hours, Signature Bank
, a solvent (at the time) financial institution was closed by its chartering authority, New York State’s Department of Financial Services (NYDFS).

Theories about a concerted effort to stifle fintech (specifically cryptoasset) innovation, writ large, swirled. Signature Bank board member, former Democratic U.S. congressman and co-author of the Dodd-Frank Act, Barney Frank intimated that actions against the bank were partly spurred by the desire of regulators who, “wanted to send a very strong anti-crypto message,”

While fintwit smolders and Rome burns, innovators at the Provenance Blockchain Foundation focus on investing in and building the future of finance. Last week, the Foundation announced the launch of a $50 million development grant program to build core services and experiences on the Provenance Blockchain.

Provenance Blockchain

The Provenance Blockchain was founded in 2018 by June Ou and Mike Cagney, CEO of Figure Technologies. Provenance Blockchain and Figure were founded independently and operate with a recognition that legacy financial institutions would need a blockchain specifically designed for the heavily regulated industry. Previously a permissioned blockchain, Provenance is now a public, open-source, decentralized layer-1 blockchain.

According to Morgan McKenney, CEO of the Provenance Blockchain Foundation, what distinguishes Provenance from other layer-1 blockchains is its focus, “solely on serving regulated financial institutions all day every day.”

Today, the Provenance Blockchain is leveraged by over 60 financial institutions and fintech companies, including asset managers (Apollo, Hamilton Lane, Neuberger Berman), mortgage originators (Guaranteed Rate, Homepoint, Movement Mortgage) and banks (Webster Bank
, and New York Community Bank).

The network has supported over $12B in financial transactions ranging in a number of first-use cases from mortgage loan (first and second) origination and trading and the tokenization of private securities. Recently, Figure Technologies announced it would work with the Provenance Blockchain in another first, the tokenization of public equity.

Provenance Blockchain Foundation

The Provenance Blockchain Foundation was established in March 2022, when Ms. McKenney took the reins, to support institutional and fintech adoption of and development on the Provenance Blockchain.

She is well-positioned to address industry challenges as she brings a wealth of banking and blockchain experience. An ex-Citigroup
executive of nearly 20 years, she served as COO of Citi’s largest division, Global Consumer Banking. Prior to taking her current role, Ms. McKenney worked as a Special Advisor to Centre, a consortium founded by Circle and Coinbase to provide standards and governance for USD Coin (USDC
) and other fiat-backed stablecoins.

With respect to the Foundation’s mission, Ms. McKenney remarked, “We’re building out a unique ecosystem to enable the new digital factory of finance—the digitization of the financial system infrastructure.”

The Foundation places a heavy focus on fragmented and legacy applications in banking, capital markets, asset management, insurance, lending, trade finance, and payments verticals, as well as the back-office functions undertaken by custodians, administrators.

Adding network participants in a highly regulated industry doesn’t happen overnight. While the technology is deeply transformational, Ms. McKenney concedes it’s not going to be everything everywhere all at once.

“As we add asset classes, we add other participants to the ecosystem. We have private funds live On-Chain that bring accredited investors. We have a lot of lending, mortgage and HELOCs, which brings bank and credit union buyers, and mortgage providers white-labeling their services through Figure Technologies. Infrastructure lending brings in insurance companies and pensions.”

Provenance Blockchain Foundation Development Grants

“The grant program is so important because it brings developers to support the asset lifecycle.” Ms. McKenney’s banking background shines as she discusses concepts that are integral to a well-functioning financial services industry—KYC/AML, identity credentialing, and the perfection of security interest to name a few. “Our team has deep financial services knowledge as well as an amazing engineering team that’s trying to develop the protocol in ways that are competitively advantaged.”

Balancing the importance of core banking concepts, the grant program underscores the Foundation’s belief in the power of open innovation. “We are enabling the crowdsourcing of the future of finance.”

Provenance Blockchain is part of the Cosmos
ecosystem, enabling its partners and clients the ability to leverage a codebase developed by thousands of Cosmos developers. Additionally, Cosmos’ multi-chain capabilities allow for the movement of assets across multiple compatible chains.

The Unbundling of Finance

In February 2014, JPMorgan Chase’s
CEO, Jamie Dimon, warned bank investors of the coming encroachment of hallowed bank ground by technology companies. “When I go to Silicon Valley…they all want to eat our lunch. Every single one of them is going to try,” By the end of that year, Lending Club and OnDeck led a boom of fintech investment. Fintech upstarts touted their efficiency and ease of use versus their stodgy, regulated counterparts.

Since then, almost every facet of bank and finance operations has been examined to extract efficiencies through technology. Processes from account onboarding, loan origination, payments, and beyond have been under attack.

Blockchain and Distributed Ledger Technology are critical to the next stage of this unbundling of finance. In a 2019 interview with Yahoo Finance, Jamie Dimon reiterated his earlier warning with specific reference toward blockchain. “I tell our people, don’t guess, you know they’re there, you know they’re coming, you know they want to eat our lunch. Assume it.”

Mc. McKenney expands on the this phase of development saying, “Innovation in finance the last decade has really been at the consumer app layer. Fintech companies have glossed up the front, but they still ride on bank rails. We’ve never been able to get at the infrastructure layer the way we can now using blockchain.”

Banks and Blockchains

Ms. McKenney acknowledges the bulk of the work on the Providence Blockchain currently involves assets beyond bank reach. While many large banks have established digital asset teams to work on core business use cases, the regulatory framework under which they operate constrains their speed of development. “[The banks] have to walk step-by-step, especially in the US.”

On the same day as our conversation, Federal Reserve Board Governor Michelle Bowman addressed modernizing traditional banking at the Independent Community Bankers Association (ICBA) Live 2023 Conference. As Silvergate Bank, Silicon Valley Bank, and Signature Bank liquidated or were closed by their regulators, special attention was made with respect to bank involvement in cryptoassets and blockchain development projects.

While emphasizing a need for clear statutory and regulatory parameters, Governor Bowman cited requirements for firms to, “develop adequate systems, risk management, and controls to conduct these activities in a safe and sound manner.”

This aligns with Ms. McKenney’’s belief that development of On-Chain financial products and services must be done by regulated players or under regulated domains for true mainstream adoption. “We have a unique opportunity to lead and collaborate with industry to make that future real.

Digital Deposits

According to Ms. McKenney, “The number one application for banks that the Foundation is working to enable is bank-minted tokenized deposits. It’s our very strong view that in order for finance to operate successfully, a digitized form of money to buy digital assets need to be issued natively On-Chain.”

With over 70% of the deposits in the world held by banks, the Foundation feels that banks need the ability to mint deposits deposits in order to be part of the new On-Chain digital economy. “Regulated entities that can issue digital currency that can be minted on demand and is fungible for the currency in one’s bank account are a necessity. We just can’t have private issuers of money. [It’s] too big and sensitive of an asset class,” she asserts.

The Foundation supports the development of USDF on the Provenance Blockchain. Development occurs in coordination with the USDF Consortium, a membership-based association of FDIC-insured banks, technology providers, and investors. Because of the US regulatory environment and the focus on public blockchains USDF operates on a private, permissioned zone of the Provenance Blockchain. As of today, Consortium members continue testing and working on regulatory approval.

The Future is Bright

In spite of a development backdrop clouded by the macro environment, there continue to be a number of opportunities on the horizon. Through the course of our conversation, Ms. McKenney alluded to several projects that increase liquidity, open access to new investors and open new revenue streams.

Infrastructure lending, for example, is a $93 trillion market which suffers from a $15-$20 trillion funding gap. Banks have traditionally underwritten these deals because of their size, long duration, and complexity. Blockchain enables infrastructure lenders to tokenize these assets for subsequent fractionalization, opening the asset class to pension funds and insurance companies with similar long duration needs.

Ms. McKenney believes that we are experiencing finance’s 1998 moment. “Provenance Blockchain Foundation is building the future of finance asset class by asset class as proof points are demonstrated. The transformation will occur as proof points are demonstrated asset class by asset class.”

It’s clear that Ms. McKenney and the Foundation are deliberate in their focus on financial services applications of blockchain while threading the regulatory needle. “Financial services are the killer [blockchain] app. It’s highly gated, expensive and involves a number of permissioned entities. We don’t want to fight the march of technology—its [benefits] are unassailable.”

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