Financial Institutions and IBM Form Partnership for Special Project

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IBM has teamed up with CLS and large banks to develop LedgerConnect, which will put several important services that banks routinely use on a distributed ledger.

IBM-Led Partnership With Banks to Develop LedgerConnect

IBM has announced a partnership with market infrastructure provider CLS and nine financial institutions that include Barclays and Citi to create a proof of concept for LedgerConnect. The LedgerConnect project that will make it possible for banks to access applications and services on a shared blockchain. The project also includes seven blockchain vendors who can assist with streamlining data.

The final product will theoretically look like a standard app store in which banks can find KYC processes, sanctions screening, collateral management, derivatives post-trade processing and reconciliation and market data.

Solving Inefficiencies in Banking Industry

The partners expect that this will help to solve inefficiencies in the banking industry better than “single-use” blockchain applications can, along with bootstrapping blockchain’s chief strength as a type of ledger that multiple entities can share both the costs and the benefits of maintaining. CLS chief strategy and development officer Alan Marquard said of the new project:

“LedgerConnect is part of CLS’s strategy to explore how we can provide safe and robust solutions that create efficiencies and reduce risk for a diverse range of firms operating in the financial markets.”

IBM will provide access to its Blockchain and Hyperledger Fabric technology over a private and permissioned network, which will make it possible to develop LedgerConnect as an enterprise-grade platform. Upon regulatory approval, IBM and CLS plan to make the platform available to regulated enterprises across multiple asset classes. The partners may develop additional features for LedgerConnect based on market demand and developments.

May Also Clear Up Misconceptions (Sorta)

The LedgerConnect project is also likely to clear up some misconceptions about blockchain in the banking world as they use this project as an experimental sandbox. A member of Barclay’s chief technology office, Lee Braine, said of Barclay’s participation:

“Barclays is participating in the LedgerConnect PoC so we can gain an understanding and experience of a new network for blockchain applications – and also test some candidate use cases on that network.”

However, this may not clear up the poor attitudes that many banks have toward the cryptocurrency and blockchain industry. The Swiss Financial Market Supervisory Authority (FINMA), for instance, recently met with Switzerland’s largest banks in an attempt to address the banking industry’s apparent refusal to serve cryptocurrency and blockchain firms that FINMA feared would cost Switzerland its competitive advantage in the fintech field. The Reserve Bank of India has also urged India’s supreme court to consider special regulations for cryptocurrency. So banks will not necessarily hesitate to attempt to stifle and straitjacket the cryptocurrency industry to the point where it has the potential to seriously impact cryptocurrency prices even as it picks what it thinks it can use out of the community of blockchain experts.

The LedgerConnect project is the latest in a string of blockchain projects spearheaded by IBM. It also recently partnered with members of the gold and diamond industry to develop blockchain to track diamonds and precious metals from the mine to the retailer. IBM is also assisting Walmart with the development of a food supply chain app that will be used by Walmart’s suppliers.

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