February 3, 2016
A single blockchain startup has recently gained massive attention in the form of more than $60 million from major financial institutions and tech companies among which are Goldman Sachs, JPMorgan, Citi, BNP Paribas, Santander InnoVentures, IBM and others. Digital Asset Holdings, a developer of distributed ledger technology for the financial services industry, recently closed a funding round with supporters from a broad range of leading firms from all corners of the international financial ecosystem.
Blythe Masters, CEO of Digital Asset, commented in the official press release, These investments represent a tremendous endorsement of Digital Asset from banks, exchanges, settlement and clearing firms, central securities depositories, and market infrastructure and professional services providers. Our strategic investors have come together from across the financial services industry to help drive global adoption of transformative solutions which enhance the vital services that they provide.
Digital Asset has been involved with major players before. The company is already working with Australian exchange operator ASX on a new post-trade system that could provide clearing and settlement for the cash equities market.
ASX is among 12 other global financial services leaders and has made a minority investment in Digital Asset. ASX has paid AUS $14.9 million to acquire a 5% equity interest in Digital Asset, fund an initial phase of development, and acquire a warrant that will give ASX the right to purchase further equity and appoint a director to the board. In February 2015, ASX announced that it would replace or upgrade all of its main trading and post-trade platforms.
Some sources also say that Digital Asset is also helping JPMorgan to test the use of blockchain technology in its loan trading operations.
Goldman Sachs is a particularly interesting case among other investors as the bank is actively exploring opportunities with distributed ledger technology and cryptocurrencies. In December 2015, the bank introduced its own cryptocurrency SETLcoin and filed a patent on securities settlement. Moreover, Goldman Sachs has been involved in a cryptocurrency-related venture over the course of 2015 (funding of a bitcoin startup Circle) and published a report on blockchain where Robert D. Boroujerdi, an Analyst at Goldman Sachs and the author of the report, commented, Blockchain has the potential to redefine transactions and the back-office of a multitude of different industries. From banking and payments to notaries to voting systems to vehicle registrations to wire fees to gun checks to academic records to trade settlement to cataloging ownership of works of art, a distributed shared ledger has the potential to make interactions quicker, less-expensive and safer.
As for the case with Digital Asset, Paul Walker, Global Co-Head of Technology at Goldman Sachs shared in the official press release, "We have long held the view at Goldman Sachs that by embracing innovation and technology, we can better serve our clients, further improve our risk-management capabilities, and enhance operational efficiency. We believe that distributed ledger technology will play a transformative role in the way financial institutions transact globally and we look forward to working with Digital Asset and the broader financial and technical community to engage this emerging technology."
What is it about the Digital Asset?
The company was launched in 2015 with the mission to improve efficiency, security, compliance and settlement speed while reducing costs through the implementation of blockchain technology. The products Digital Asset creates for financial institutions create tailored business logic applications using privately permissioned networks that employ a cryptographically secure and shared infrastructure, according to the company.
The attractive part for all investors is that the Digital Asset software has the potential to significantly improve post-trade processing efficiency and security, while reducing cost, latency, errors, risk and capital requirements. To be tightly involved in exploring opportunities the company offers, some of the investors will be represented on the company’s board of directors. The board will be stretched by nine more people from BNP Paribas, JPMorgan and other companies.
We are proud to be a lead investor in this round of financing, said Mr. Viswanathan of JP Morgan, Distributed Ledger Technology has the potential to transform the way our industry does business, and we believe Digital Asset has the right talent and technology to make it a reality.
BNP Paribas has high expectation for the partnership as the global bank look(s) forward to working together to explore how this technology can help shape the future for financial services, said Olivier Osty, Global Head of Sales & Trading, Global Markets at BNP Paribas.
Deutsche Börse Group is also looking to utilize distributed ledger technology to bring effective solutions to its clients.
Interestingly, Digital Asset was launched and run by a former JPMorgan executive Blythe Masters. The company has been under the light in the blockchain space since the launch as it had acquired interesting startups such as Hyperledger, Bits of Proof and Blockstack.io. Moreover, Digital Asset wasn’t cheap-hiring some high-profile people from the banking industry.