PBF CEO, Morgan McKenney on blockchain, DeFi and tokenization

As CEO of the Provenance Blockchain Foundation, Morgan McKenney leads the expansion of the Provenance Blockchain ecosystem to enable financial institutions globally to realize the benefits of blockchain.

She joined the foundation in March 2022 from her previous role at Citi, where she held a number of key, senior operating roles, most recently as CEO of Citi’s largest division, Global Consumer Banking.

McKenney’s career at Citi saw her primarily focused on institutional and consumer payments innovation and digital transformation in Asia, Europe, the Middle East and Africa and North America.

As a blockchain practitioner, she is passionate about enabling the digital economy, harnessing new technologies for business value and democratizing access to financial services to support economic growth.

We caught up with her to find out more.

Tell us about the Provenance Blockchain Foundation and its core purpose

Provenance Blockchain is purpose-built to transform financial services, by enabling institutions and fintechs to seamlessly and securely issue, transact and service the end-to-end lifecycle of a financial asset in a digital native format, at scale on a public blockchain.

Provenance Blockchain was built in 2018, and is today the leading public blockchain for financial services. The blockchain has supported over $12B in transactions, and is actively leveraged by over 60 financial institutions, including Apollo, Hamilton Lane, Guaranteed Rate, Figure, Movement Mortgage and others.

Herkomst Blockchain has enabled several innovations for the financial industry, including:

• First, to enable a lender to provide loans on the chain
• First to tokenize an asset-backed on-chain securitization
• First to activate a mortgage REIT on the chain
• First, to perform a mortgage transaction to transfer ownership on the chain
• First, to enable a securitization of a bundle of HELOCs all the way down the chain
• First issued a digital native 1940 Act registered fund on the chain

What sets it apart from other blockchain operators?

Unlike many other public blockchains that are built to be used across various industries, the Provenance Blockchain is purpose-built for financial services. What that means is that Provenance Blockchain offers built-in on-chain features and tools required by regulated financial institutions and fintechs. Provenance Blockchain ensures data control so that no personally identifiable information is placed on the blockchain, which is essential to support financial transactions and to support regulatory standards. What is placed on the chain is a unique digital fingerprint that requires access to private keys to read the underlying private data.

Authorized parties such as counterparties, auditors and regulators can be given access to the private key to access the private information.

We hear a lot about the private vs public blockchain. Which space looks most promising for traditional asset tokenization – and why?

Provenance Blockchain is proudly public. This means we take advantage of an open innovation platform to enable rapid innovation and diverse participation from developers and users, while requiring governing votes from our community for any software and smart contract changes.

It is our view that public chains will ultimately be the platform of choice for traditional financial assets given the differentiated ability to support open access for users, open engagement for developers for open innovation, with continued advancements in privacy features. As we move into the future, there will be certain private and permissioned environments that are required for the feasibility of regulations, especially when it comes to digital money and tokenized bank deposits.

Regulated financial institutions are already actively participating on the Provenance Blockchain today, especially in private assets and lending, ensuring they comply with their existing regulatory frameworks while leveraging blockchain as the infrastructure to create increased value for their business and their customers.

What are the benefits to be gained from real estate and mortgage tokenization? And how do you do it?

The benefits are many, for example placing mortgages on blockchain technology reduces the time it takes, from application to issuance, from 45 days to five days. This reduction in time and processing saves over 100 bps over the entire mortgage lifecycle from origination, servicing, financing and securitization, meaning the issuer can offer the consumer a lower interest rate while increasing the net margin of the mortgage originator.

For home equity loans, it is now possible to submit an application and receive approval in 5 minutes, and to receive funding in your bank account in as few as five days, significantly reducing time and expense. Blockchain reduces the cost of HELOCs by $200-$300 and makes the loan easier to distribute to other loan buyers by completely digitizing the credit file.

A solution called DART, Digital Asset Registry Technologies, runs on the Provenance Blockchain and offers a secure and streamlined mortgage registry to help loan owners perfect their security. The solution works instead of the more expensive and less effective MERS. With DART, lenders can reduce the time they have a new asset on their books from 100 days to two days before they securitize and sell the asset, which more quickly frees up a significant amount of credit for new loan applications.

We are in a crypto winter. What implications does this have for the growing NFT market?

We focus on digitally native real-world financial assets, and NFTs have a practical application in real-world financial assets such as a house. NFTs create the ability to uniquely identify an asset, to create a non-manipulable record of relevant and associated data, to provide a mechanism for the asset to be exchanged, and to transparently record ownership. These practical use cases that leverage blockchain technology enable tangible value for businesses and consumers, and the use of these use cases is not tied to the speculative nature of cryptocurrency.

FTX has beaten market confidence. How can better trust be established within the digital asset and crypto space?

Crypto needs a new narrative. We need to shift from the current focus on speculative trading and lending of tokens and shift the focus to creating real business value with blockchain and decentralized networks.

Real business value on public decentralized blockchain is happening now. By 2022, specific financial services sectors have made notable strides in core business adoption, expanding their participation in blockchain technology beyond prototypes to a range of real financial assets issued and managed in a digital native format. For example, Provenance Blockchain saw major institutional firms, such as Apollo and Hamilton Lane, launch digitally native funds on the chain. Hamilton Lane introduced the first digitally native 1940 Act Registered fund, leveraging Figure Digital Fund Services and Provenance Blockchain. On the lending side, leading US-based lenders Homepoint and Movement Mortgage are beginning to leverage Provenance Blockchain and Figure’s white-label HELOC solution to originate HELOCs leveraging blockchain technology.

Looking ahead to 2023/4, what are your market predictions?

When we come out of 2022, it is clearer why the way forward is decentralized. Looking ahead to 2023, the adoption curve for real-world assets issued on-chain will accelerate on decentralized infrastructure.

We expect further scaling across lending and private assets, with additional new high-friction asset classes continuing down the chain, including infrastructure lending, receivables and distressed assets for increased liquidity, availability and operational efficiency.

Finally, and very importantly, we believe that there will be greater regulatory clarity around stablecoins, enabling banks to issue tokenized bank deposits on blockchain, which will be a further catalyst for regulated financial services to move forward on blockchain .