Case Study

How Nonco Uses Stellar Assets to Collateralize a Financial Derivative

Location

United States

Use cases

Stellar for Asset Tokenization

Tokenization

About

Meet Nonco

Nonco is a leading institutional crypto trading firm, processing over $5 billion in monthly trading volume. Founded in 2023, Nonco provides noncustodial liquidity solutions to major asset managers and financial institutions, including some of the U.S. BTC and ETH ETF issuers.

Challenge

Promoting Accountability and Liquidity

Derivatives – financial contracts between two parties that rely on underlying assets to secure the deal terms – require efficient collateral management to function properly. This vast global market, valued at an estimated $203 trillion, faces ongoing challenges with collateralization.

Traditional methods of collateral management are fragmented, slow, and costly, relying on wire transfers and lacking real-time transparency. Many institutions are unable to hold digital assets and must navigate complex networks of custodians and counterparties¹. These conditions introduce risks to participating parties and the broader global market.

In over-the-counter (OTC) derivatives, where Nonco operates, these inefficiencies can be even more pronounced. Transactions often require large collateral positions that can be locked up for extended periods of time, restricting capital flexibility and opportunity costs for idle funds. This limits firms' ability to respond quickly to market shifts and prevents them from deploying capital more efficiently to capture potential returns.

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Solution

Bridging Global Markets with Transparency and Trust

To combat the inefficiencies in traditional collateral management, Nonco turned to tokenized assets on the Stellar network. They used Franklin Templeton’s BENJI token in an industry-first derivatives transaction with SwapGlobal, facilitated by Franklin Templeton’s peer-to-peer tokenized treasury transfer functionality.

BENJI is a digital representation of the FOBXX US Government money market fund, with daily yield earnings recorded onchain through the Stellar network. These earnings can help offset capital costs for holders, offering a yield-bearing solution that enhances collateral efficiency.

By using the Stellar network, Nonco provided SwapGlobal with a public and immutable transaction record. Upon confirming receipt, SwapGlobal completed their portion of the deal within minutes. The Stellar network settled the transaction in seconds, optimizing liquidity for both parties and the broader market.

Using the BENJI token as collateral, we were able to seamlessly continue to maximize our treasury operations without lowering our collateral efficiency or introducing additional accounting processes to enter into this transaction.

Jeffrey Howard, Partner and Head of North America at Nonco

Benefits

A New Frontier for Tokenized Collateral

The complexity, capital requirements, and short-term nature of derivatives underscore the need for digital ledger technology in global finance. With its speed, efficiency, and transparency, the Stellar network provides a reliable solution for institutions of all sizes executing tokenized collateral transactions like this one.

Access to institutional-grade assets

Leverage high-quality, regulated assets like Franklin Templeton’s BENJI token to promote transaction stability.

Fast & low cost transactions

Network transactions are confirmed in seconds and at a fraction of a U.S. penny, with 24/7 operations ensuring round-the-clock access.

Immutable & transparent ledger

Rely on an immutable, publicly traceable ledger that ensures full transparency and auditability.

Expanded liquidity

Multinational companies can benefit from greater liquidity for treasury management with the ability to trade and move collateral 24/7 between markets outside of traditional trading hours.

Innovation

Leveraging Digital Ledgers

As an early innovator in this space, Nonco demonstrates how firms can leverage tokenized assets to overcome traditional market barriers. With major institutions increasingly exploring ways to leverage digital ledger technology and tokenized assets in derivatives markets, Nonco’s success with Stellar sets a clear path forward for institutions seeking greater efficiency, increased liquidity, and reduced operational risks.