A Systemic Risk to Core Liquidity Deposits
The High Cost of Capital Flight
In large and sensitive transactions, escrow and other similar services protect capital and assets, but they also require their owners to move vast amounts of it — collectively hundreds of billions in liquidity globally — for days, weeks or months (and in some instances, years) at a time to the custody of third parties
Unless these third parties happen to hold their accounts within the same bank, this capital exits the source bank entirely — typically to accounts held with another competitor bank (predominantly consolidated within a handful of dominant global transaction banks)
Balance Sheet Weakness & Systemic Inefficiencies
The systemic flight of security capital from the source bank represents a forced displacement of its core funding base, directly impacting and weakening its Liquidity Coverage Ratio (LCR), Net Stable Funding Ratio (NSFR) — and, through the loss of deployable balance sheet capacity, forcing a reduction of its Net Interest Margin (NIM)
In short, by losing custody of this security capital, the source bank is also losing the ability to leverage it for its own lending and growth and eroding the foundational metrics that drive its profitability and institutional valuation
The LCR Cliff: The Hidden Cost of Segregation
Critically, in the eyes of a regulator, not all cash is equal. Even where security capital remains within a bank but is transferred to the custody of an escrow agent, legal trust, or other third parties such as law firms — the shift into a non-operational ‘segregated’ account often triggers regulatory reclassification
In most instances, this transition from a core operational deposit to a non-operational account reduces the capital’s optimal LCR and NSFR treatment
Anatomy of a Regulatory Deposit Reclassification
Under Basel III rules, for example, this type of deposit reclassification typically causes a ‘run-off’ spike, where the presumed outflow rate can jump from ~25% to as high as 100% (the higher the run-off rate, the more cash a bank is forced to set aside in reserve, rather than lending it out or investing it)
This in turn forces the bank to offset the deposit by holding additional High-Quality Liquid Assets (HQLA) — thus reducing its deployable liquidity and, through balance sheet constraints, compressing its NIM — effectively transforming a previously efficient funding source into a more expensive regulatory burden
Summary
This overall cost of safeguarding capital and assets through traditional means therefore is often magnified and compounded by this massive hidden ‘opportunity cost’ for both their owners (learn more) and the source bank, for which this manifests in three critical areas:
Deposit Erosion: Liquidity outflows to other competitor banks
NIM & AUM Compression: Loss of yield-generating liquidity during this period
Balance Sheet Weakening: Displacement or reclassification of stable, low-cost core deposits into expensive regulatory burdens
XON is a strategic solution to this systemic risk
ANY BANK. ANYWHERE
An XON Secured bank account is a standard bank account that any bank in the world can provide to its business, corporate or retail customers
The account operates, with minor calibrations, under the bank's standard processes, core systems and operational workflows and doesn't require additional technical development or regulatory adjustments
To assure the account holder’s counterparties - the bank confirms on its website that payments and transfers cannot be made from any XON Secured account without a specific process managed by XON
The Role of XON
While a bank can provide this account, it can’t provide the arm’s-length independence and neutrality required to provide effective security and confidence to all transaction counterparties. This is not because of trust, technology or capabilities — it’s simply because a bank cannot legally be independent of itself
This is where XON’s proprietary infrastructure is required. By applying a trustless, mathematical protocol to the account (operating with the bank’s existing authorisation workflow), XON provides the necessary independence, neutrality and security — without the capital ever leaving the bank or being under XON’s custody. In other words, it remains under the custody of the account holder but in a secured state
Opening and Operating An XON Secured Bank Account
Opening an XON Secured account is exactly the same as opening a normal account with a bank (it can be near-instant for a bank’s existing customers). Once an account is opened, it gives the account holder the freedom and flexibility to carry out transactions of any amount or complexity at speed whenever they need to — paying XON’s flat 1% per annum pro‑rata service fee only when they use it
They can move money into their XON Secured account from their other accounts held with the same or other banks whenever they need to (anyone can deposit funds into the account as well). The account will continue to earn a yield for the account holder while funds are in the account
XON Secured account holders can make payments from their account or transfer money out of it based on agreements with their transaction counterparties, which are managed through the XON platform
Non-Cash Assets
XON's secured account protocol extends beyond cash. Stocks, shares, bonds and other similar assets held within a standard brokerage or custody account can be locked in exactly the same way as money in a bank — without being transferred, rehypothecated or placed under third-party control
The account holder retains ownership and continues to receive any yield, dividends or coupon payments generated during the locked period, while counterparties receive the same hard-coded, sovereign-grade certainty they would expect from a cash lock. Whether the underlying asset is currency, equity or fixed income, the principle is identical: security without displacement
Helix
Just as dual DNA strands support each other to form a stable structure, any bank customer can have XON Secured accounts alongside their other bank or asset management accounts to form a stable financial structure → enabling them to carry out transactions without losing yield, speed or control. As this also fundamentally benefits the bank as well, this dual-benefit process is known within XON’s ecosystem as Helix
RETAIN DEPOSITS
ANCHOR LIQUIDITY
PROTECT NIM & AUM
XON Secured Accounts solve a number of systemic problems for a bank and gives it the flexibility to:
1. Retain Its Core Liquidity Deposits → Money that would have left to a competitor stays with them and on their balance sheet
2. Protect Its LCR and NSFR → Avoids the regulatory ‘LCR cliff’ from segregated accounts
3. Defend Its NIM → Can continue lending and investing against these deposits
4. Increase Its Revenues → Can offer XON Secured Accounts as a premium product tier, charging set‑up, usage or management fees (separate from XON’s fees) or bundling them with treasury or other services. Multiply this with potentially millions of corporate and retail account holders
5. Provide a Powerful Differentiation → ”We’re the bank where your money stays yours and still earns yield, during your M&A, retention, bond or other security/guarantee holds"
6. Attract New Deposits → Customers (individuals, SMEs, corporates, governments) who bank with competitors that do not offer XON Secured Accounts will open these accounts here instead — bringing new, stable (and potentially significant volumes of) liquidity to the bank
NO DELAYS
NO ESCROWS
NO LOST YIELDS
Instead of waiting for traditional escrow agents or other third parties to confirm receipt of funds and paying their fees, an XON Secured account holder simply moves funds instantly from their other accounts, credit cards, etc. These funds are effectively ‘locked’ by XON’s protocol, providing the counterparty with immediate, irrevocable proof of funds and payment certainty. Here are a few typical real-world use cases:
Individuals
Buying a car, house, art, etc → funds stay in your own yield‑bearing account until the deal closes. No sending money to an escrow agent. No lost income. No waiting
SMEs
Paying an overseas supplier or putting down a deposit to win a contract → instantly prove you have the money ‘locked’ without handing it over. Your cash stays in your account, earning its yield and backing your credit line, until the deal is completed
Large Corporates
Multi-million or billion M&A, major infrastructure project, etc → keep the millions or billions on your balance sheet instead of moving them to a low-yield escrow account. Protect your liquidity ratios, keep earning yield, satisfy global legal and regulatory requirements and provide hard-coded, sovereign-grade certainty to your counterparties – all without handing control to third parties or slowing deal velocity
Sovereign / Government
Cross‑government fund transfers, tendering national projects, funding international activities, etc → provide neutral, trustless security for state‑to‑state or domestic payments. Ring‑fence project funds within your own banking system, ensuring total transparency and systemic stability – no need to use another nation’s bank or custodian
