This time last year, industry experts begin dolling out their predictions for 2017. Deloitte, itself an investor in the technology, predicted ongoing creation of blockchain consortia as more innovators, FinTechs and large institutions collaborate to explore use-cases and begin to create working solutions based on distributed ledger technology — and it wasn't alone.
“Industry consortia will be critical to unlocking mass-scale value and keeping blockchain relevant in 2017,” said Deloitte managing director David Schatsky in an interview with PYMNTS last year. “With more than 20 consortia in place already, we are on our way to success.”
It's almost 2018, but the consortia train hasn't slowed down yet.
In this week's Blockchain Tracker, PYMNTS takes a look at the latest collaboration formations, plus more of the latest news from major financial institutions (FIs) backing the technology, blockchain startups landing funding and national governments dipping their toes into blockchain regulation.
The biggest news in blockchain consortia comes from Barclays, Standard Chartered and BNP Paribas, which announced this week they are planning pilots in 2018 that use blockchain for supply chain management and finance. Reports in Global Trade Review said the FIs — along with Sainsbury's, Sappi and Unilever — are collaborating on the pilots, which will use Etherum and explore how distributed ledger technology can help banks and their corporate clients obtain more reliable, updated data about their supply chains. The partners are using the Etherum solutions created by Provenance and smart contract FinTech company Halotrade in their initiative.
Separately, Reuters reported that Swiss FI UBS is leading an initiative to test blockchain for the purpose of helping financial services firms comply with upcoming data management rules. Alongside Barclays, Credit Suisse, KBC, Swiss stock exchange SIX and Thomson Reuters, the group is testing Etherum to ensure data accuracy as the financial services space readies for upcoming EU standards for trade data under the Markets in Financial Instruments Directive II legislation. In an interview with Reuters, Peter Stephens, UBS head of blockchain, said the project aims “to allow us to come to a consensus for this noncompetitive reference data which is essential for trade reporting purposes.”
A separate consortium, R3 Blockchain, saw its membership grow this week as reports in Coin Telegraph said South Korea's NH Bank joined the group. A statement from the FI noted it “will acquire technology by joining the consortium and apply it to various sectors of NH Nonghyup Bank, such as the financial and economic sectors.”
The Latest Funding
U.S.-based BitGo announced $42.5 million in Series B funding this week. The company provides businesses with a way to use digital currencies without running afoul of regulations, and said it will use the funding to focus on growth outside the U.S., according to Business Insider reports. Valor Equity Partners and DRW led the funding. While the investment round is certainly good news for BitGo, the way the firm raised the money could have broader implications: CEO Mike Belshe told the publication the company raised the funds in approximately two weeks and described the process as “one of the easiest fundraising processes ever.” Reports said the commentary reflects the surging value of cryptocurrencies and how eager investors are to take part in the industry.
Meanwhile, cybersecurity startup NuCypher raised $4.3 million via a token presale, reports in Coin Journal said. Thirteen cryptofunds and venture capital funds participated in the investment, which was led by Polychain Capital. The company provides cybersecurity and encryption solutions for systems built on distributed ledger, including blockchain.
Other Traditional FIs Get Involved
Reports in Coin Desk this week noted Christian Nolting, Deutsche Bank's global head of wealth, and Marcus Muller, global head of its CIO office, gave a recent presentation exploring future opportunities for blockchain. The presentation signals Deutsche Bank's clear backing of the technology, according to Coin Desk, declaring the “opportunities associated with blockchain technology are huge.” The bank predicted approximately 10 percent of the global gross domestic product will likely be tracked or regulated with blockchain by 2027. Cryptocurrencies moving via blockchain are another matter, however, with Deutsche Bank noting that the lack of backing from a central bank and lack of intrinsic value have led the FI to classify cryptocurrencies as “highly speculative.”
Investment advisor Vanguard Group now wants to use blockchain to manage the index data that underlays mutual funds, the company said this week. It holds nearly $5 trillion under management, according to Reuters reports, and has already successfully tested the use of blockchain to automate data updates like share prices and names. Reports said the initiative is an “important sign of confidence for the new financial technology.”
Sberbank, Russia's largest bank by assets, is piloting money transfers via IBM's blockchain technology, CryptoCoins News noted this week. The FI is looking to use blockchain to facilitate real-time money transfers through its solution, which is linked to a web application and allows bank clients to track the progress of the transaction. The bank's managing director, Stella Kudachkina, said the project makes it the first Russian bank to use blockchain for such a service.
More Government Action
This week, Australia revealed plans to become home to the world's first global stock exchange to use distributed ledger technology, but that doesn't necessarily mean Australia backs blockchain, according to reports in Forbes, especially considering the Australian Securities Exchange never actually used the word “blockchain” in its announcement. Still, the ASX said it would be using distributed ledger technology to facilitate clearing and settlement, and has analysts across the globe assuming the exchange's embrace of blockchain — even if it didn't technically say the word.
France said it would allow the trading of unlisted securities via blockchain, according to Reuters reports, after the government adopted new rules allowing banks and FinTechs to create platforms to facilitate such trading via distributed ledgers. Finance Minister Bruno Le Maire said in a statement that blockchain would enable “faster, cheaper, more transparent and safer” trading of unlisted securities.
The British territory of Gibraltar may be small, but it made a big move this week when it amended its Financial Services (Investment and Fiduciary Services) Act to “extend measures for the protection of investors to the customers of licensees carrying on controlled activities which are not investment services.” According to Coin Desk, the amendment was a step towards regulating blockchain and follows earlier efforts by the government to legally define the technology. Gibraltar's Minister of Commerce, Albert Isola, said the move makes the county “one of the first jurisdictions in the world to introduce a regulatory framework” addressing distributed ledger technology.