Blockchain Leaps Forward
R3, the distributed ledger consortium, has made its platform open source while CME Group, the US exchange operator, is developing a blockchain platform for trading gold which highlights the digitization of wholesale financial services.
R3, a group of more than 70 financial institutions, said in a statement that it has made its Corda distributed ledger platform open source to allow regulated financial institutions to benefit from the sharing of information within blockchain systems.
“Crucially, Corda restricts access to data within an agreement to only those who need to validate it,” added R3. “Financial agreements on Corda take the form of smart contracts, linking business logic and data to associated legal prose in order to ensure that the financial agreements on the platform are rooted firmly in law.”
Richard Gendal Brown, chief technology officer of R3, spoke at the Disruptive Technologies Forum 2016 in London yesterday hosted by DTCC, the US post-trade market infrastructure, and CSFI, the Centre for the Study of Financial Innovation. He said: “This is the only distributed ledger that was designed by and for financial institutions.”
Goldman Sachs and Banco Santander have reportedly left the R3 consortium but Gendal Brown said the group is working well and new members are joining.
There are other distributed ledger technologies being developed for business such as the Hyperledger Project hosted by the independent Linux Foundation, which today said it had reached 100 active members.
Jim Zemlin, executive director of The Linux Foundation, said in a statement: “The project’s ‘umbrella’ vision which welcomes collaboration and hosts many open source distributed ledger technologies encourages developers to find opportunities to work on common code without a top-down single architecture approach and will serve to benefit many industries and applications.”
A blockchain from the Hyperledger project is being used by Deutsche Bundesbank, the German central bank, and Deutsche Börse, the German exchange operator, in a prototype for the settlement of securities.
Dirk Schrade, deputy director general of the payments & settlements systems at Deutsche Bundesbank, said at the forum yesterday: “We entered into the pilot to make a practical contribution to assess the potential of blockchain. In the new technology is successful in wholesale markets, then it could be used to issue central bank money.”
The prototype is purely a conceptual study to look at blockchain-based payments and securities transfers as well as the settlement of securities transactions against both instant and delayed payment; maintenance of confidentiality/access rights in blockchain-based concepts on the basis of a flexible and adaptable rights framework and the potential to simplify reconciliation processes and regulatory reporting.
In another blockchain initiative, CME Group and the Royal Mint, the 1,000-year old arm of the UK government which makes and distributes physical currencies, announced a partnership to allow gold trading on a blockchain next year.
David Janczewski, director of new Business at The Royal Mint, said in a media call that gold has been traded in the same way for thousands of years and it is a difficult and expensive process. Next year the firm will launch Royal Mint Gold with the CME, which will record ownership of the physical gold in its vaults on a blockchain so that the digitized tokens can be traded electronically.
The new trading platform will operate 24 hours a day, 365 days a year. Janczewski said: “Ownership is recorded on the blockchain which will be updated in real-time and there will be zero management and storage fees.”
He added that The Royal Mint and CME will be holding discussions with a number of market intermediaries. The initial amount of RMG at launch could be up to $1bn worth of gold and will be offered through investment providers.
Sandra Ro, digitization lead at CME Group, said on the media call that the new platform will be complementary to the exchange’s current products.
She said: “It will be a permissioned network for known actors and there will be a validator to validate transactions.”
More on blockchain:
Crypto-focused firms are expected to use their high valuations to buy TradFi firms.
The shared private ledger from Baton Systems enhances settlement speed and efficiency.
Customers can have accelerated treatment of financial transactions, exchange and storage of data.
Project Jura explored cross-border settlement of tokenised assets on a DLT platform.
Committee is holding a hearing on Understanding the Challenges and Benefits of Financial Innovation in the US.