1. Blockchain on Wall St
FT article: Banks and exchanges turn to blockchain (with the oddly salacious subtitle 'Wall St lured by efficiency promise of the technology behind bitcoin'):
For now many start-ups accept they cannot go around the system. “It’s very important to work with existing market participants,” says Adam Ludwin, chief executive of Chain. “The mantra of Silicon Valley is: ‘Move fast, break things’. That mantra doesn’t apply in financial services.”
Head of Citi Innovations Ken Moore also highlights his group's internal experimentation with blockchains:
Citi has been exploring payments in a cross border capacity, as well as the regulatory environments across various jurisdictions, with a view to how transactions that have taken days can be done in seconds in a very transparent way. "Because we are a global network, a global bank, we can look for opportunities to use this technology to move money from country to country - country A to country B, across our network."
Finally, here is a very interesting run thru RBS's plans for technology transformation, which includes some mention of their experimentation with Ripple. Some figures popped out at me that highlight just how complex these bank infrastructures can be ('Further rationalisation (50%) of Top 500 applications' and 'rationalising the number of payments systems and gateways (80 to 10)' and 'Over 500 Nostros removed from UK & EMEA network'...which implies there are quite a few still in place!)
2. Blockchain and Regulators
MAS Managing Director Ravi Menon name drops blockchain a few times in a recent keynote (thanks to Anju Patwardhan for the head's up). He does such a good job of giving an overview that I have quoted him liberally below:
Whether digital currencies will take off in a big way remains to be seen. But it is a phenomenon that many central banks are watching closely, including MAS. And if they do take off, one cannot rule out central banks themselves issuing digital currencies some day!
But the bigger impact on financial services, and the broader economy, is likely to come from the technology behind Bitcoins – namely the block-chain or, more generally, the distributed ledger system.
The potential benefits of such a distributed ledger system include:
- faster and more efficient processing;
- lower cost of operation; and
- greater resilience against system failure.
There are many potential applications of distributed ledger systems in the financial sector [and] could potentially allow regulators to plug into the network to conduct surveillance of risks and to track transactions to detect money laundering or terrorist financing. In fact - and this would be of interest to the lawyers gathered here - distributed ledger systems could potentially be applied in any area which involves contracts or transactions that currently rely on trusted third parties for verification.
Some examples of FSTI-supported institution-level projects that are ongoing include:
- a decentralised record-keeping system based on block chain technology to prevent duplicate invoicing in trade finance;
- a shared infrastructure for a know-your-client utility
3. Cryptonerd Corner
As follow up to last week's post, Blockchain University has posted the full video of Tim Swanson's presentation on the distributed ledger landscape.
And finally, Ian Grigg has a great short post on simplifying the explanation of the Bitcoin blockchain:
The blockchain is a shared ledger where each new block of transactions - the 10 minutes thing - is signed with a Nakamoto signature.
What's a Nakamoto signature? Note: it is not this...