February 20th, 2018 by jja_fr

Executive Summary

This study provides an empirical overview of the current state of both enterprise and public sector use of blockchain and distributed ledger technology (DLT). The study gathered data from over 200 enterprise DLT start-ups, established corporations, central banks and other public sector institutions, including non-public data obtained through confidential online surveys.

The study details the emergence and evolution of the DLT ecosystem, explores its actors and their business models, and examines the current state of the industry in terms of use cases, network/application deployments, and key challenges to broad DLT adoption.

The study also explains the concept of ‘blockchain’ and DLT, highlights the different DLT architectures, and dives into governance-related issues. Finally, an entire section is dedicated to investigating how the public sector is approaching DLT.

Blockchain

Key Highlights Of The Report

  • Significant growth of the enterprise DLT ecosystem: at least 115 DLT start-ups employing more than 2,000 people are active in the ecosystem, in addition to large established corporations that increasingly set up entire business units and research labs exclusively dedicated to DLT
  • The protocol layer is slowly maturing: several dozen start-ups and established corporations are building and improving the core infrastructure (protocol frameworks,
    core building blocks), but ‘immature technology’ is still considered one of the key challenges to broader DLT adoption
  • Only limited network and application deployment to date: the vast majority of users are experimenting with small-scale, isolated networks; live applications are mostly built as ‘permissioned layers’ on public blockchains
  • Majority of use cases focus on financial services: the majority of enterprise DLT companies are targeting financial and insurance-related use cases and actors, but increasing attention is being given to non-monetary applications (e.g., identity, supply chain, intellectual property)
  • Trend towards opening core infrastructure platforms: an increasing number of companies are open-sourcing their codebases, shifting monetisation of the platforms to higher stack levels (e.g., consulting, application development, support)

  • Key challenges to broader DLT adoption remain: unclear regulatory environment and legal risks are most often mentioned as key challenges; study participants consider privacy and confidentiality to be more of an issue than scalability and performance concerns
  • Interoperability still in its infancy: the current landscape is fragmented and comprised of incompatible protocols, but there is an increasing focus on developing common standards via the joint development of enterprise DLT frameworks by a variety of consortia
  • Significant public sector DLT activity observed: local, regional, national and multilateral institutions are all engaged in DLT-related activities; 77% of countries represented in the study have multiple institutions showing an interest in DLT
  • Public sector institutions are experimenting with a variety of DLT protocols: 63% of central banks and 69% of other public sector institutions (‘OPSIs’) have already been involved in proofs of concept and/or running trials; OPSIs are generally further ahead than central banks
  • Ethereum has been widely tested at central banks: 57% of central banks are experimenting with either the public Ethereum network or a permissioned version
  • Existing DLT deployment plans: 15% of OPSIs plan to deploy DLT-based applications this year, and another 23% plan to do so within the next two years; the timetable for central banks is more conservative than for OPSIs

Read more: Access to Full Report

Posted in Blockchain, Report, Technology Tagged with: , , , ,

December 21st, 2017 by jja_fr

Which control principles are essential for blockchain adoption on a global scale?

Since its mention by Satoshi Nakamoto in the 2008 white paper ‘Bitcoin: A Peer-to-Peer Electronic Cash System’, blockchain technology, also called Distributed Ledger Technology (DLT), has attracted significant attention among the global financial services community. Researchers and investors are increasingly interested in the transformative and disruptive ability of this technology to:

  • Facilitate an exchange of value
  • Enable the safe storage of value
  • Achieve operational efficiencies
  • Secure cost savings
  • Increase industry transparency
  • Enhance customer experiences

In this paper, we consider three macro factors which we consider essential to the widespread adoption of private DLTs within the financial community in the long term. These macro factors are:

  1. Governance
  2. Legal and Regulation
  3. Standards

Although this paper discusses each factor in isolation, financial institutions should view all three as interdependent and complementary when considering DLT adoption.

When introducing DLT into the enterprise, it is essential that the DLT system is capable of integrating and interoperating with other systems, including other blockchain solutions or technologies. Even within individual DLT implementations, the blockchain component is likely to be a single part of a larger whole, with additional data stores, messaging systems, interfaces and touch points to both internal and external systems. Institutions therefore need to ensure that all systems are capable of interconnecting and communicating with one another.

Read more: Access to Full Report

Posted in Deloitte, Report Tagged with: , , , , , , , ,

May 11th, 2017 by jja_fr

Introduction

We are committed to fostering innovation that advances our objectives. Innovation can arise from diverse sources, such as start-ups, technology providers as well as regulated firms, including large financial institutions. They all have the potential to challenge existing business models, products and methodologies to benefit consumers and markets as a whole.

New technology plays a fundamental and increasingly pivotal role in delivering innovative products and services. These new products and services can improve on those currently available, offering consumers easier access to, and better, financial services. Equally, some products may not be suitable for certain consumers. Our objectives as a regulator mean that we need to strike a balance between supporting innovation and ensuring consumers are adequately protected.

Distributed ledger technology (DLT) is an example of rapidly developing technology which offers exciting potential to support the needs of consumers and the market. DLT may also present new challenges and potential risks. For example, how regulated firms allocate responsibilities for systems shared among them.

We generally take a ‘technology neutral’ approach to regulating financial services and are interested in considering whether there is anything distinctive about DLT which would require us to take a different approach.

We use this Discussion Paper (DP) to start a dialogue on the potential for future development of DLT in the markets we regulate. We are particularly interested to explore where the balance of risk and opportunities may lie in relation to DLT. Following this DP, we look forward to further engagement through public events, supervisory work and the various channels we have to interact with the Fintech industry.

Read more: Access to Full Report

Posted in Blockchain, Fintech, Report Tagged with: , , ,

April 5th, 2017 by jja_fr

How can blockchain and smart contracts benefit securitization?

We will explore in detail how potential benefits could play out at the different stages of the securitization lifecycle, but for now, here are some common themes to keep in mind:

One version of the truth. Blockchain enables a single, consistent source of information for all participants in the network. In an industry that currently faces inefficiencies around the storage, reconciliation, transfer, and transparency of data across multiple independent entities, this feature could be highly beneficial.

A complete, immutable, and traceable audit trail. From loan origination to primary issuance, servicing, and changes in ownership in the secondary market, blockchain can create a chronological and immutable audit trail of all transactions. With this capability, regulators and auditors could finally get a systemic view of the ownership of the underlying securitized assets. An issue that troubled the industry during the global financial crisis—determining who owned the title to some underlying assets—could be more easily resolved.

Better valuation and price discovery. The transparency facilitated by blockchain could reduce the information asymmetry and network disadvantages that some entities, especially smaller ones, currently face in the securitization industry. The resulting market efficiency could raise the investment appeal of securitized assets and deepen the potential pool of investors.

Speed and certainty. Blockchain, through its disintermediation and simultaneous recording of information across the system, can virtually eliminate time lags in information and payment flows throughout the securitization process, including in the secondary market. This increase in speed and certainty could significantly reduce counterparty risk, release capital, and reduce the return thresholds that investors demand.

Security. Blockchain’s capacity to increase the security of transactions and data, and mitigate fraud could be appealing to the securitization industry, where integrity of data is paramount. Blockchain’s immutable audit trail, for example, could permit every asset (and every transaction involving that asset) to be linked to a particular security, facilitating asset perfection and eliminating the risk of double-pledging assets.

The combined impact of all the above advantages—greater efficiency, speed, transparency, and safety for data and transactions—could lower risks in the securitization market as a whole and lead to greater investor interest. This in turn could improve prices, volume, and spreads. With better and more transparent information, regulatory compliance could also be simplified and market failures could become less likely.

With these general points in mind, we will now take a more detailed look at the specific places where blockchain could impact the securitization process, ranging from loan origination and loan servicing through the structuring, review, and initial sale of the security, to the servicing of the security, ongoing ratings monitoring, and secondary market trading. At each stage, we will look at some inefficiencies in the current process, then explore how blockchain is likely to change how the industry handles certain questions around its core functions and obligations, including data recording and dissemination, transaction execution, receiving and making payments, and regulatory compliance.

We will also look at why, despite the likely advantages, implementing a blockchain in the securitization industry may be challenging. We will conclude with a vision of a possible future state and with ideas about possible next steps.

Read more: Access to Full Report

Posted in Blockchain, Fintech, Report, Technology Tagged with: , , , , ,

blockchain
September 8th, 2016 by jja_fr

Distributed ledger technology (DLT), more commonly called “blockchain”, has captured the imaginations, and wallets, of the financial services ecosystem. DLT provides transaction immutability, which is a key requirement for eliminating the need for an enforcer of trust in the ecosystem. Tamper-proof distributed data enables an environment in which trust is not an issue and allows counterparties to operate with a single version of the truth.

Current state

  • Traditionally, asset and transaction information was stored within physical books to independently reference previous actionsinternally and externally. As technologies advanced, physical books were translated into digital ledgers.
  • Today, every FI maintains its own digital “book of record” repository.
  • As a result, central intermediaries proliferate in the industry, providing unbiased reconciliation services to facilitate transactions between counterparties without requiring them to trust each other. For transactions executed internal to the organization, reconciliation is performed within lines of businesses.

WEF The future of financial infrastructure

DLT transformative potential

  • At its core, DLT is a growing repository of transactions organized in chronological blocks where the technology intrinsically makes changes to previous transactions functionally impossible.
  • DLT has been designed to replicate data among participating nodes in real time, ensuring all parties operate off of a single version of the truth at all times.

Financial services implications

  • Challenges information silos between market participants and eliminates the need for inter-firm reconciliation.
  • Disintermediates central intermediaries and reduces the fear of arbitrage within the ecosystem.
  • Enables audit trailsto be established for assets and transactions with a significant reduction in disputes.

Read more: Access to Full Report

Posted in Fintech, Strategy, Technology Tagged with: , , , ,