Blockchain’s Transparency: Double-Edged Sword?


If Wall Street does not implement blockchain properly, the distributed ledger’s transparency quickly turns from a benefit to a problem, according to speakers at the Consensus 2016 blockchain conference in Midtown Manhattan.

The nascent architecture holds great potential as that the only other facility that provides the same level of trade transparency as Trade Information Warehouse operated by the Depository Trust & Clearing Corp. can provide, according to Greg Schvey, a partner at blockchain-platform vendor Axoni.

His company, along with the DTCC, Markit and four large banks, recently finished a trial credit default swap trade using a blockchain testbed.

“One thing that the test proved was that you could have validated data available to regulators queriable and at scale in real time,” he said during a panel discussion. “You can get down too the details of every single trade. And frankly, you can get down to the functions behind the actual processing of the trade.”

The industry can obtain a gold copies of trades, similar to the ones generated by the Trade Information Warehouse, without needing to build up a large organization around a blockchain, he added.

Jeremy Wilson, Barclays

Jeremy Wilson, Barclays

However, too much transparency could compound the legal issues around privacy, identity, and other legal issues that the industry still needs to address, according to Jeremy Wilson, the vice chairman of Barclays who also spoke at the conference.

“Never have we as an industry shared data on this scale before,” he said. “We are going to have to work together because one day someone will drop the ball and then the retribution by the custodians of society will be pretty vigorous.”

Jennifer Peve, co-head of blockchain strategy and research at DTCC, agreed that the industry needs to understand the full implications of distributed ledgers before implementing them.

“We are working with regulators and policy makers to ensure clients and the technology’s users respect existing regulations and laws, particularly related to data privacy, security and confidentiality,” she said. “Those are some big-ticket items that still need to be worked through. Where the technology or implementation would not meet exist regulations and requirements, we will highlight it and work with regulators and policy makers to identify and propose an appropriate solution.”

Feature image by Brian Jackson/Dollar Photo Club

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