Four banks are teaming up to bring a blockchain inspired clearance and settlement system for worldwide transactions.
BNY Mellon, Deutsche Bank, Santander and UBS believe they can launch a commercial blockchain by 2018. The banks work with a blockchain startup called Clearmatics. The Financial Times‘ Martin Arnold reports:
“The utility settlement coin, based on a solution developed by Clearmatics Technologies, aims to let financial institutions pay for securities, such as bonds and equities, without waiting for traditional money transfers to be completed. Instead, they would use digital coins that are directly convertible into cash at central banks, cutting the time and cost of post-trade settlement and clearing.”
The banks have partnered in a larger blockchain project in the form of R3, which brings the world’s largest financial institutions together to discuss distributed finance.
BNY Mellow believes the blockchain has the potential to “dramatically enhance the payments experience.” The bank believes the blockchain could remake finance.
“The blockchain’s transparency could effectively allow the number of participants that need to be involved in the transaction process to be drastically reduced, cutting down the number of stages involved in a payment and thereby significantly enhancing efficiency,” the bank states on its website. “A number of banks are exploring ways in which blockchain technology could be used to streamline the current correspondent banking process (which requires payments to go through a number of banks), with the belief that, eventually, the blockchain may supersede this traditional transaction model. Indeed, non-bank institution Earthport, for instance, already has a solution for low-value cross-border payments using a distributed ledger network.”
Deutsche Bank believes that blockchain has “great potential” and “could transform” the business model of many segments of the financial services industry and other industries.
“It could also change the role of service providers by requiring them to review how products are delivered today,” the bank stated. “However, the adoption of blockchain will vary according to geographies, regulatory frameworks and the complexity of assets and their implementation, including the cost implications when new and existing technology co-exist for a period of time.”
Deutsche Bank is running a portfolio of activities for blockchain / distributed ledger technology across the Bank.
“Some of these innovative activities are driven internally and facilitated by the Deutsche Bank Innovation Labs. In other areas where we cannot – or would not – look to test on our own we collaborate with industry partners such as the market consortium DLG R3.”
Deutsche Bank adds: “We also collaborate with peers in driving market infrastructure projects. We are in constant dialogue with clients, central banks and regulators to make sure their requirements are addressed when defining industry standards with other market participants. This forms a crucial part of our strategy and is key for addressing questions around a broad range of issues, including standards and interoperability of different ledgers.”
Santander representatives regularly attend not only blockchain conferences, but, also, Bitcoin conferences – other banks generally are not seen at such conferences. Santander was the first UK bank to use Blockchain technology to transfer live international payments. As the bank summarizes on its website:
- Payments of between £10 and £10,000 can be made, around the clock at any time of the day
- The long wait for international payments to be processed is over, funds will appear in the recipients account the next working day
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