FW: How would you define the ways in which financial services companies, for example in banking, financial markets, asset management and insurance, are experimenting with blockchain projects? What are the gains in terms of efficiency, transparency and security?
Sales: Although at a very early stage, financial institutions in Spain have already implemented several projects using this technology. In April 2018, BBVA became the first global bank to use blockchain technology to perform a € 75 million bilateral financing operation. Blockchain technology has been used in the whole process, from the beginning of the negotiations to the execution of the documentation. In November 2018, BBVA took another step by closing a syndicated loan transaction of € 150 million. As in the previous one, the process of negotiating the entire structure was closed using the blockchain network, making the whole process faster and ensuring monitoring of documentation and transparency. Some of the major banks in Spain, such as Bankia and CaixaBank, have launched a consortium to improve the Know Your Customer (KYC) process so that customers can be identified more easily and quickly, which is a general concern for everyone. financial entities. Banco Santander recently experimented with a blockchain technology project for the exchange of funds between financial institutions. The technology is similar to that used in Bitcoin. UBS, BNY Mellon and Deutsche Bank are some of the other banks involved in this project, which aims to save on costs of around 20 billion euros.
Haas: In Germany, I think all banks are watching it very intensely, but they are approaching it very carefully. Much of the focus is on improving internal processes, but this year brought the first pair of customer transactions. Commerzbank used blockchain technology in an exchange transaction with Thyssen Krupp, and also in a commercial paper problem that was done in parallel using blockchain and conventional means. Unicredit completed its first commercial finance operations on the "we.trade" platform that it developed with other banks. These transactions certainly indicate a turning point, but if you look at the news in the financial community related to the use of blockchain technology, I would say that there are even more announcements of banks that adhere to a certain platform or that adhere to a certain protocol with respect to versions on transactions actually performed on these platforms or using these protocols. However, I think it will change rapidly in the next few months. Banks and insurers are major venture capital investors in the FinTech sector and want to ensure they have access to new winning technologies and put them into practice. They are now distributing customers and transactions for the first application and will therefore be able to distribute the technology more widely.
Prentice: In early 2018, the Bank of England published a report on its recent proof-of-concept (POC) with companies operating in the DLT or blockchain, such as Baton Systems, Clearmatics Technologies lTD, R3 and token. This report concluded that the DLTs are not yet mature enough to provide the core for the next generation of real-time gross settlement services (RTGS) and therefore the Bank of England has sought to explore and understand the feasibility of connecting the blockchain companies to the RTGs renewed in order to support the regulation in the systems operating on innovative payment technologies, such as the DLT, and to facilitate the payment infrastructures in the access to the central bank. According to Mark Carney, Governor of the Bank of England, the renewal of RTGS should play an important role in the opening of access to central bank money and the Bank of England is continuing to explore the request to introduce a synchronized agreement with the renewed RTGS service. In the United Kingdom, the experiment went beyond the banking sector. In the insurance industry, fraudulent claims, fragmented data sources and slow manual processes, along with legacy subscription models, are some of the industry's biggest challenges. Blockchain offers control, transparency and traceability for each complaint and could eventually lead to automatic payments. Blockchain can also be used to record the origin and properties of ships, cars, homes and other assets, helping to reduce fraudulent demands and improve risk modeling for the insurance industry. Monaco, AXA, Allianz, Zurich and Aegon, among many other insurers, have already launched the Blockchain Insurance Industry Initiative, known as B3i, to explore the potential for the use of DLT in the insurance and reinsurance sector for the benefit of all stakeholders in the chain value, including end customers. As the platform would provide an overview of all markets, regulators have the opportunity to become aware of systemic risks that allow for appropriate action at the policy level. Recently, Maersk, the largest shipping company in the world, has partnered with IBM to launch a new blockchain platform to facilitate the digitization of the supply chain process by tracking shipments around the world. He announced that the cost of global trade is estimated at 1.8 trillion dollars a year with potential savings from more efficient processes of around 10%. The new platform aims to reduce global trade barriers and increase efficiency through international supply chains, bringing to market a commercial containerized shipping platform that connects the entire supply chain ecosystem. In September 2017, Maersk completed a 20-week blockchain-based marine insurance trial and worked with EY, Microsoft and several insurance companies to try to securely share shipping data on a blockchain. IBM has initiated the aforementioned collaboration in order to connect ports, terminals, customs authorities, shipping lines and land transport and so on. Since the partnership began, several parties have piloted the platform, including Tetra Pak, Port Houston, the Netherlands customs administration, US customers and border protection and DuPont. To date, General Motors, Procter and Gamble, Walmart, Clients of Singapore, Nestle, Unilever and Peruvian Customs have all expressed interest in IBM's blockchain capabilities and are exploring ways to use the platform in other areas, including food security, food monitoring and globalization trade, in order to, similarly to the financial and insurance industry, bring greater efficiency, transparency and control to these sectors.
Davis: In the United Arab Emirates, the largest bank in Dubai, Emirates NBD, has chosen a different area to apply the technology. It was successfully launched in April 2018 with "Check Chain", based on blockchain technology and focused on reducing check-in fraud. It includes various technologies that enhance security to strengthen the authenticity of control. This result is obtained through a quick response code printed on each page of the new checkbooks. The code records every check on the bank's blockchain to ensure that after the receipt of the check and the authorization, the bank's employees are able to validate the authenticity of the control and have access to the source in any moment. On November 26, 2018, Al Hilal Bank of Abu Dhabi completed the first issue of sukuk in the world using blockchain technology. This led to the use of technology to sell and settle secondary markets, a small part of a $ 500 million five-year sukuk issued in September. This is a prime example of how the blockchain is integrated into the banking infrastructure and how it should rationalize the issuance and trading.
FW: How could the blockchain solve some inefficiencies and loopholes in the financial system, such as the growing complexity of distribution, the disparate regulations that cover international transactions and the delays in sharing transaction details?
Sales: Blockchain technology can be used to simplify processes and reduce the time required to execute transactions. In 2017, the Spanish Stock Exchange Authority (Comisión Nacional del Mercado de Valores (CNMV)), together with a group of financial institutions integrated, among others, by Banco Santander, BBVA, BNP Paribas, CaixaBank, Commerzbank and Société Générale, have worked together in a project called Fast Track Listing (FTL), which uses blockchain technology to record securities issues. FTL has successfully tested the registration of a warrants issue. This test showed that it is possible to run the emission process in 48 hours instead of in an average time of more than a week. This was possible thanks to the interconnection of the systems, the automatic validation of the requirements and the transparency for all the parties involved. The inefficiencies within the current stock exchange system had already been addressed in the United States. In May 2017, Citigroup and Nasdaq announced the launch of a new tool to enable payments using blockchain technology. Spain could follow a similar model. Furthermore, as regards the issues arising from delays in registering and reconciling stock exchange transactions, it should be noted that blockchain technology solves them by continuously monitoring the transaction in all registries. Third parties or intermediaries may no longer be necessary.
Haas: I think that distributed ledger technology can add the maximum value where the transactions require a frequent exchange of information or where certain events determine the adoption of successive measures by subjects who are not able to confirm the event which must occur first. The first is why the syndicated loan has attracted the attention of IT developers, and the second because international trade finance is an area where people look at blockchain-based solutions. In both areas, the nature of transactions allows significant efficiency gains. These efficiency gains, in my opinion, are the key factors for this technology. Regulatory loopholes, or disparate regulation, will not be significant drivers of longer-term development. While this is a factor in structuring initial coin offerings (ICOs), these are a niche phenomenon. The market for commercial use is in the service of traditional actors, ie regulated financial institutions, which integrate blockchain technology into their service offerings. To the extent that they rely on independent third-party providers for this, these suppliers will legitimately find places where regulators do not make it difficult for them to operate, but whatever they do, they still need to be done in a way that works for regulated entities such as contracting parties. direct. In the end, much of the financial sector is based on trust and no technology changes it.
Prentice: The current system used by the banks of a single centralized ledger requires each participant to synchronize their systems used to track and manage the life cycles of their financial transactions, through a process known as reconciliation, which involves groups of people in every bank that they control with counterparts in other banks to make sure everything matches. A common solution to this is through the use of a decentralized ledger, in which the participants share the single centralized ledger. But centralized utilities are also expensive and their data and processing must be integrated with the systems of each participant. Distributed logs synchronize thousands of computers in a network distributed over the Internet. If your computer recognizes that its user was the owner of a certain amount of, for example, Bitcoin, the other computer on the network must also do so. By applying this to the banking system, all banking systems would be able to synchronize without requiring an extended workforce to reconcile and solve the problems that are present in the current system.
Davis: The Society for Worldwide Interbank Financial Telecommunication (SWIFT) defines itself as "the global provider of secure financial messaging services". SWIFT provides messaging, standards and services to connect banks to their counterparts globally to securely transact transactions, reduce costs and risks in securities and transactions in foreign currencies and provide greater security for businesses. The SWIFT inter-bank messaging platform has been exploited in some respects to perpetrate fraud and this has led to delays or cancellations of many transactions. As a result, many experts have requested the implementation of end-to-end processes via blockchain using multiple simultaneous authentication points to try to address this risk. Regarding the disparity of regulations, I do not see the blockchain in front and the center in dealing with these problems. It can help to connect disparate data; however, it seems unlikely that it will help to examine the nuances of the regulations in order to contribute to benchmarking or harmonization.
