The race for blockchain adoption is accelerating in speed and intensifying with every other project, trial, regional and industry alliance. Since the end of May, we were looking at blockchain pilots and open-source blockchain projects, but activities continue to pile up and another set of blockchain-related initiatives has been launched in a recent month along with various regional and industry-specific blockchain consortiums formed.
BNY Mellon, Deutsche Bank, ICAP and Santander join UBS and Clearmatics to advance the Utility Settlement Coin concept
At the end of August, the alliance of financial institutions was reported to be launching its own commercial-grade blockchain system by 2018. As reported by the New York Business Journal, the system will enable financial markets to make payments and settle transactions quickly using blockchain technology.
The USC concept will be developed through a series of short iterative phases and platform deployments. At each stage, the aim is to increase the number of market participants, broadening engagement, connectivity and network effect.
UBS and Clearmatics launched the concept in September 2015 to validate the potential benefits of USC for capital efficiency, settlement and systemic risk reduction in global financial markets. The project was initially incubated as part of the UBS Crypto 2.0 Pathfinder Program, UBS's initiative for research and experimentation on the blockchain. The successful conclusion of this first phase paved the way for the introduction of additional partners: BNY Mellon, Deutsche Bank, ICAP and Santander now join UBS and Clearmatics.
The group of financial institutions will focus on the financial structuring of the USC and its implications in the broader market. Alongside they will remain engaged in discussions with central banks and regulators to ensure a regulation compliant and efficient framework within which the USC can be implemented.
This Tuesday, Howard Lee, Senior Executive Director at HKMA, published a letter announcing that the FinTech Facilitation Office (FFO) of the Hong Kong Monetary Authority (HKMA) – in collaboration with the Hong Kong Applied Science and Technology Research Institute (ASTRI) – will launch the “HKMA-ASTRI FinTech Innovation Hub” (“the Hub”) – a new facility to support research and adoption of FinTech by the industry.
With this initiative, Hong Kong's de facto central bank intends to launch an innovation hub that will test blockchain and distributed ledger solutions. According to Mr. Norman T L Chan, Chief Executive of the Hong Kong Monetary Authority, The Hub “will be equipped with all necessary system and support resources to enable players of the banking and payment industry to conduct proof of concept trials of products and services through the use of new technologies, and do it safely – as this controlled environment is separated from their internal systems.
"Also, the FinTech Innovation Hub allows regulators to provide early inputs to the trial works before the actual implementation. While some of the largest banks have built their own laboratories, this new FinTech Innovation Hub will cater for the big and small institutions alike such that the industry as a whole would be able to adopt new technologies more speedily and in a more collaborative manner.”
Hitachi and BTMU start PoC testing for utilizing blockchain technology for check digitalization in Singapore
At the end of August, Hitachi and the Bank of Tokyo-Mitsubishi UFJ (BTMU) announced that they have started Proof of Concept (PoC) testing for using blockchain technology for digitalization of checks in the Republic of Singapore. In this PoC testing, Hitachi and BTMU communally developed a system in which blockchain infrastructure are used for issuing, transferring and collecting electronic checks.
Using the system, BTMU issues and settles checks and some of Hitachi Group companies in Singapore receive the electronic check and deposit the funds. Through the PoC testing, Hitachi and BTMU will be able to identify issues from various perspectives such as technology, security, operation and legal perspectives, and aim to realize new FinTech services including digitalization of checks.
Based on this PoC testing, Hitachi and BTMU will increase efforts towards putting blockchain technology into practical use, and will contribute towards the global expansion and evolution of financial services.
At the first day of September, Visa Europe Collab announced that it is looking for partners to join a new pilot the company has begun with blockchain specialist BTL Group. This particular Proof of Concept (PoC) will use BTL’s interbank settlement platform Interbit to explore the ways in which a blockchain-based settlement solution can reduce the friction of domestic and cross-border transfers between banks – reducing cost, settlement time, credit risk, and leveraging smart contracts to streamline and automate many of the regulation and compliance requirements of domestic and international transfers.
As Hendrik Kleinsmiede, Co-founder and Innovation Partner at Visa Europe Collab, Visa Europe’s innovation hub, said in the announcement, “Participating banks will be able to connect to the network and send funds to other banks in the network across multiple currencies. We’ll work closely together on the development and implementation of the PoC, ensuring that all participants come away with new knowledge and insight into the role that the blockchain could play in interbank settlements in the future.”
At the beginning of August, Bank of America Merrill Lynch, HSBC and the Infocomm Development Authority of Singapore (IDA) announced that they have jointly developed a prototype solution built on blockchain technology that could change the way businesses around the world trade with each other. The consortium utilized the Linux Foundation open-source Hyperledger Project blockchain fabric; its development was supported by IBM Research and IBM Global Business Services.
The application mirrors a paper-intensive Letter of Credit (LC) transaction by sharing information between exporters, importers and their respective banks on a private distributed ledger. This then enables them to execute a trade deal automatically through a series of digital smart contracts.
With this concept, each of the four parties involved in an LC transaction – the exporter, importer and both of their banks – can visualize data in real time on a tablet and see the next actions to be performed. Each action in the workflow is captured in a permissioned distributed ledger, giving transparency to authorized participants whilst encrypting confidential data.
The Department of Economic Development of the Isle of Man has teamed up with Credits startup to test how the technology behind bitcoin can improve the safety of IoT objects
At the beginning of August, CoinSpeaker reported that the Isle of Man government has started testing whether the blockchain technology could be used to ensure the safety of IoT devices. The experimental blockchain solution has been developed in cooperation with the UK-based Credits startup. Under the project, physical items of the Internet of Things will be assigned unique identification numbers.
The collaborative effort plans on using a distributed ledger to enhance new IoT applications and devices. Credits claims its services enable a broad range of scalable and interoperable applications. As the firm’s CEO and Co-founder Nick Williamson commented, “Largely speaking, the idea behind [the experiment] is that Internet of Things has a promise of assigning a unique, non-forgeable identity to physical items and what the blockchain provides is the way of managing and maintaining an identity.”
As reported by Coindesk, BNY Mellon has developed a test system that leverages blockchain technology to create a backup record of its brokerage transactions. According to the edition, the new system, which operates alongside BNY's existing transaction records system, aims to provide an operational buffer in the event that the first layer of transaction records becomes unavailable.
The bank suggests that institutions, perhaps uneasy about switching wholesale to a new kind of infrastructure, may want to test the waters by running blockchain solutions in the background, thus providing an avenue for gathering data and experience with the technology.
At the beginning of August, R3 reported that over 15 of its consortium member banks have successfully completed two prototypes that demonstrate how distributed ledger technology can address the key challenges facing the $45 billion global trade finance industry.
The banks designed and utilized self-executing transaction agreements (smart contracts), on R3’s Corda distributed ledger platform to process accounts receivable (AR) purchase transactions, also known as invoice financing or factoring, and letter of credit (LOC) transactions. Both AR and LOC transactions are widely used methods of trade financing in global financial markets.
R3’s prototypes validate distributed and shared ledger technology as a digital alternative to trade financing that is significantly faster, more reliable and cost-effective. Estimates suggest that such technology has the scope to reduce operational and compliance costs of paper-based trade financing by 10 to 15% and provide a platform for banks to grow revenues by as much as 15%.
Over 15 R3 consortium members were involved in the trials including Barclays, BBVA, BNP Paribas, Commonwealth Bank of Australia, Danske Bank, ING Bank, Intesa Sanpaolo, Natixis, Nordea, Scotiabank, UBS, UniCredit, U.S. Bank and Wells Fargo.