The majority of banks plan to use blockchain in the next three years
The majority of banks plan on using blockchain technology in the next three years, adopting it "dramatically faster than expected", but regulation was named as the biggest barrier by global institutions.
Nearly two thirds expect to have blockchain solutions by 2019, while 15 per cent of the 200 banks surveyed by IBM and the Economist Intelligence Unit expect to have something up and running as soon as next year.
The big banks, and in particular retail banks, are surprisingly leading the way, where typically they have been slow to adapt to new technologies, citing the potential to create new business models and access to new markets as the biggest attractions to the new technology.
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However, the barriers were seen as regulatory constraint (56 per cent), the immaturity of the technology (54 per cent) and a lack of evidence of return on investment (52 per cent).
"There are many advantages to being an early adopter of blockchain technology,” said Likhit Wagle, head of IBM's banking and financial markets.
“To start, first movers are setting business standards and creating new models that will be used by future adopters of blockchain technology. We’re also finding that these early adopters are better able to anticipate disruption, fighting off new competitors along the way.”
IBM yesterday announced that its working on blockchain technology with CLS, the forex settlement service, for post trade settlements.
Blockchain will help reduce the risk around settling currencies which it traditionally doesn't support such as Chinese renminbi and Russian ruble, as well as the ones it does but are traded outside CLS across the FX market with the new payment netting service. It will support FX spot, forwards, NDFs, swaps, tomorrow/next day and same-day trades.
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There are 14 banks on board with the project, including Goldman Sachs, HSBC, JP Morgan, Morgan Stanley, Citibank and Bank of America and it will be based on Hyperledger, an open source project set up by IBM and Linux and now with several members across the technology and finance world.
“This is an important development for the post-trade landscape. CLS Netting will not only reduce risk in the FX market, but also optimise liquidity and operational practices which are fundamental to success in the current FX market,” said Goldman's global head of currency operations John Blythe.