IBS Journal December 2015


Chip off the old blockchain


Has the financial industry ever seen as a big a buzzword as blockchain? Not since the internet’s infancy have so many been so excited about an emerging technology and its implications for the banking world. So what’s all the fuss about?


Emerging from behind its cryptocurrency cousin bitcoin, blockchain is being taken with an increasing seriousness by the industry. From governments to Wall Street banks, everyone is looking to grab a slice of the blockchain pie. Is it just the flavour of the month, a


fad that will die out if given enough time? That remains to be seen. For now, though, there has been a flurry of activity over the system, from investment to discussion to dismissal.


Investments Investment in blockchain starts right at the top. The UK’s government is putting plans into motion which will see £10 million pumped into research on blockchain and distributed ledger technology. Economic Secretary to the Treasury,


Harriett Baldwin, announced the initiative in a speech held at the British Library. In it, she stressed the importance of


backing skills, research and development as well as blockchain start-up companies. The Alan Turing Institute, Research


Councils and technology accelerator Digital Catapult will also be joining forces with Lon- don’s fintech industry to explore the possi- bilities of distributed ledger technology. Efforts to set up new regulatory


schemes for digital currencies in the UK are already bearing fruit, says Baldwin, who reiterated Chancellor George Osbourne’s goal of turning the UK into the world’s leading fintech centre. Financial technology services already


employs some 135,000 people, she adds, and has pumped more than £20 billion into the UK’s GDP. Across the Atlantic R3CEV, a New York- based blockchain start-up, has received the backing of 30 major banking institutions.


36 The group of investors include JP Mor-


gan Chase, Royal Bank of Scotland (RBS), BNP Paribas, Wells Fargo, UBS and Credit Suisse, many of which are already actively looking at ways to use distributed ledger technology in their systems. The investment in R3CEV is said to be


part of a prototyping and proofing process in which the investors and start-up will pool their resources to improve the banks’ internal investigations. Director of design at Royal Bank of


Scotland, Kevin Hanley, reckons that the way that banks are spending their money on investigating blockchain has been scat- tergun. According to Hanley, it lacks a ‘stra- tegic, coordinated vision [that is] so critical to success’. Christopher Murphy, global co-head of


FX at UBS, agrees, adding that the R3CEV initiative allows multiple participants to work to the same patterns and standards, increasing the likelihood of improvement and eventual adoption. The investors aim to establish a work- ing set of standards and protocols whilst working collaboratively on research, exper- imentation and design. Results will be col- lated and ‘networked’ between the group. In return R3CEV will be backed with seed capital amounting to ‘several million dol- lars’ according to the Financial Times. Another host of investors, including


Visa, Nasdaq and Fiserv, have funnelled $30 million into blockchain start-up Chain. This latest series of B round funding


is believed to have brought the value of Chain, which is based in San Francisco, up to almost £150 million. Among the rest of the backers is tele-


coms company Orange, which suggests the French company might looking at a way to integrate the bitcoin/blockchain technolo-


© IBS Intelligence 2015 www.ibsintelligence.com


gy into its mobile offerings. Chain is already working with Nasdaq


on a pilot programme designed to test whether shares in private companies can be traded using distributed ledger tech- nology. Adam Ludwin, CEO of Chain, says that


‘when applied intelligently’ blockchain networks would be able to ‘fundamen- tally improve’ how different assets move between parties. Ludwin believes that Chain, and block- chain in general, needs to have the ‘right partners’ to ensure that it gets off the ground. The system will need broad agree- ment across the sector before proponents can think about widespread usage. Visa Europe is putting its weight


behind distributed ledger firm Epiphyte as part of a proof of concept venture designed to investigate the uses of bitcoin and blockchain technology in remittances. Visa Europe Collab, the company’s


innovation hub set up earlier this year, has said that traditional payment methods aren’t the best solution for remittance. On the back of that it is looking to blockchain, a technology that its proponents say ena- bles cheap and simple payments across borders.


Epiphyte, a former Swift Innotribe win-


ner, which provides blockchain powered Software-as-a-Service (SaaS) solutions for financial trades and settlements, is under- stood to have been approached directly by Visa Europe for the project. Not to be outdone by Visa, Mastercard


and American Express (Amex) have made their first forays into the world of crypto- currency by backing a set of bitcoin com- panies. The former has joined a number of other investors backing bitcoin incuba-


analysis: blockchain


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