Investments  

Changing finance with blockchain

Other notable industry figures include:

  • R3: A consortium of over 200 companies that researches and develops distributed ledger-based solutions for the financial services.
  • Ripple Labs: A private company headquartered in California that develops a real-time gross settlement system, currency exchange and remittance network.
  • JPMorgan Chase: The well-known financial services company recently launched its JPM Coin, a blockchain-based token enabling the transfer of payments between institutional accounts. The token is what is known as a 'stable coin', a form of cryptocurrency that aims to minimise its price volatility by pegging its value to a 'real-world' asset.  In the case of JPM Coin, each token represents a USD held in designated accounts of the company and therefore should always have a value of approximately $1.

So the financial services industry has recognised the value of a new, decentralised system for the transfer of value. 

This is by no means limited to money. If we think of value in its broadest sense, we might think of personal data, or real-world fixed assets such as real estate. This is where blockchain gets really interesting. 

The financial services industry is seeing an explosion in the level of innovation and investment in blockchain-based solutions that address the transfer of value more broadly. This is partly borne out of necessity. 

 "Financial services, particularly here in the UK, are under attack from all directions. Customers are demanding more digital and personalised experiences; regulators are demanding increased transparency and data security; and new technology is disrupting the ways in which consumers gain access to products," says Phil Fortio, chief executive and co-founder of Tokenblocks, a London-based start-up that has built a platform upon which the investors can communicate directly with asset managers.

Regulators are also getting in on the action and, in some instances, are actually leading in terms of innovation. 

Richard Teng, chief executive of the Financial Services Regulatory Authority at Abu Dhabi Global Market, states that: "ADGM was the first regulator in the [Middle East and North African] region to launch a regulatory sandbox and still leads by adopting a highly agile and robust approach to regulation." 

ADGM has launched an electronic know-your-client project, by which it has better understood the utility of blockchain technology to create a platform through which multiple parties can share information in a manner that "prevents tampering and provides a robust audit trail", says Mr Teng. 

Key points

  • Banks and other financial institutions are investing in blockchain
  • Blockchain technology could make financial transactions between banks more efficient
  • Regulators need a clear policy on blockchain technology

Regulators and other public sector bodies should have a clearly articulated strategy and policy in respect of emerging technologies such as blockchain and should seek to provide unambiguous guidance and direction to market participants in order to create an environment that encourages innovation and investment.

The financial services industry continues to invest in emerging technologies such as blockchain and, as their focus broadens from the core maintenance of currency ledgers, a vast array of internal and customer-facing processes are ripe for disruption and innovation.

Tom Grogan is an associate at Mishcon de Reya and Kieran Brown is senior managing consultant at Berkeley Research Group