Nine leading global banks have partnered with financial services consultancy R3 to develop a framework for utilizing blockchain technology in financial markets.
The participating banks are Barclays, BBVA, Commonwealth Bank of Australia, Credit Suisse, Goldman Sachs, JP Morgan, Royal Bank of Scotland, State Street and UBS.
After a year’s worth of consultations between banks and R3, the new project will be headed up by R3’s CEO David Rutter, the former electronic trading head of the world’s largest interdealer broker, ICAP Electronic Trading.
This partnership signals a significant commitment by the banks to collaboratively evaluate and apply this emerging technology to the global financial system. Our bank partners recognize the promise of distributed ledger technologies and their potential to transform financial market technology platforms where standards must be secure, scalable and adaptable.
Rutter told Reuters that that initially the project would work on determine an underlying architecture for shared ledger solutions that will meet banking requirements for security, reliability, performance, scalability, and audit. Whether that would be based on Bitcoin’s network, other blockchains like Ethereum, or an entirely new framework. The group will work within a collaborative lab environment or “sandbox” to test and validate distributed ledger prototypes and protocols and likely have a first milestone of releasing a commercial paper on the blockchain technology.
Kevin Hanley, Director of Design at Royal Bank of Scotland, noted:
The collaborative model we’ve established with R3 and the other banks is a very effective way to deliver robust shared ledger solutions to the financial services sector. Right now you’re seeing significant money and time being spent on exploration of these technologies in a fractured way that lacks the strategic, coordinated vision so critical to timely success. The R3 model is changing the game.
Hu Liang, Senior Vice President and head of Emerging Technologies at State Street, added:
These new technologies could transform how financial transactions are recorded, reconciled and reported – all with additional security, lower error rates and significant cost reductions. R3 has the people and approach to drive this effort and increase the likelihood of successfully advancing the new technology in the financial industry
It is evident that the world’s leading financial institutions have developed an understanding that the blockchain technologies present an opportunity to safely and securely store and share data in a consistent, effective ledger outside firewalls where it can be analyzed and matched against other counterparties.
A number of global regulators have asked banks how technologies such as cryptography and distributed ledgers can improve the way financial markets operate.
The approach taken by R3 and its bank partners reflects the high level of attention market participants, global regulators and standards bodies are now giving to blockchain technologies.