December 7, 2015
The head of research at R3 CEV announced that a development team in London is coding the fabric for an open-sourced, generic "shared ledger," which banks want to use to reduce reconciliation costs.
R3 is an innovation firm focused on building and empowering the next generation of global financial services technology.
"It is important not to overhype things, although it is too late on that," Mr. Swanson said ahead of a visit to Sydney this week. "At Sibos (the global payments conference held in Singapore last month), everyone was talking about blockchain. Now, deliveries have to be shown to the world in the next 12 months, or people will walk away thinking this is a load of bumf."
A team of Commonwealth Bank of Australia computer engineers has built a working "blockchain" In its Innovation Lab in Sydney which will be used to show regulators how blockchain might be used to reduce risk and costs of making international payments or other applications.
"Many banks feel they can reduce, or eliminate altogether, various costs, by adopting some sort of common shared ledger and let that proliferate through the industry," Mr. Swanson said on a Skype call from San Francisco last week.
"Just because you build some tech, it does not mean it will be used by financial institutions or will pass the smell test of regulators," Mr. Swanson said. "If neither of those bodies is okay with it, it won't be used. The best way is to start from scratch and build in (regulators') specific needs.
"The regulators I have interacted with in multiple countries have been very open-minded in thinking about how some of this tech might be used. Most regulators I have spoken to are "cautiously optimistic"; they want to take a rightfully conservative approach to make sure things are delivered."
Mr. Swanson said the technology could also assist regulatory monitoring for systemic risks in financial markets. "If we do our job right, what this tech can do is allow regulators to have a window into real-time data, which they can read and react to and create policy towards. If regulators have a window into what is going on, they can get a better idea of preventing systemic risks."
By definition, blockchain is a ledger of all transactions that have been executed and could be seen as a write-only platform, wherein transactions once executed cannot be modified later. This platform has been further divided into public and private blockchain. Is there a third one? A hybrid mode such as a "Consortium Blockchain" as represented by Vitalik Buterin, Founder of Ethereum, a decentralized Web 3.0 publishing platform.
The financial services industry is at the cusp of a major transformation and the aim is to enable transparent, secure and efficient financial services at a lower cost.
Nine banks collaborated (mid-September) to develop common standards of blockchain technology by backing a blockchain startup called R3 CEV. Thirteen more banks joined by the end of September. In October, three more banks joined the R3CEV collaboration, taking the total count to 25; in November, five more banks joined hands to make the total number of banks in the R3CEV collaboration to 30. Here are the 30 banks that are collaborating: Goldman Sachs, JP Morgan, Credit Suisse, Barclays, Commonwealth Bank of Australia, State Street, RBS, BBVA, UBS, BNY Mellon, Mitsubishi UFJ Financial Group, Citigroup, Commerzbank, National Australia Bank, Royal Bank of Canada, SEB, Societe Generale, Toronto-Dominion Bank, Bank of America, Deutsche Bank, Morgan Stanley, HSBC, BNP Paribas, Canadian Imperial Bank of Commerce, ING Bank, Macquarie Bank, Wells Fargo & Co, Mizuho Bank, Nordea Bank, and UniCredit.