If anyone believes the Blockchain world of Cryptocurrencies is too outlandish for commercial banking, think again.
Yesterday the Commonwealth Bank of Australia published on its main newsroom site an update about a blockchain project it has been running with the Queensland Treasury Corporation. In this prototype, the bank's internal blockchain development team configured their private blockchain platform to manage the transference of fixed income paper between issuer and investor, more information can be found here LINK.
This is a big deal in so many ways and should be seen as a real awakening call for those paying attention to disruptive market forces that originate from the distributed ledger crypto-currency corner. For a moment, let's read between the lines here and put this into perspective.
To put gravity on the first statement, the bank has not only established a full-time IT development team to construct blockchain solutions, they already have a blockchain environment in place that can be configured for different financial instruments.
I put it this way, if the CBA are doing it rather than just dreaming about doing it, whatever that is; it's going to eventually become mainstream.
Bond Issuance, pricing, coupon payments, title transference and the complexities of publishing bond indentures makes distributed ledger technology and smart contracts ideal candidates for improving the processes around debt capital issuance.
In respects to the CBA's crypto-currency bond, the bank seems to have used the entire arsenal of potential features that an Ethereum enabled technology solution could offer but being new to blockchain instruments is something the bank is not. The Commonwealth Bank has also hooked up with Wells Fargo to create a blockchain (blocktrade) solution for their merchant banking unit LINK.
Just like CBA's Crypto-Currency Bond, this new trade finance solution could potentially revolutionise a world of trade dominated by well established processes that are entrapped in the International Chamber of Commerce Uniform Customs & Practice guidance.
The CBA Experiment Explained | CBA [LINK]
Blockchain technology brings so many benefits to standard documentary collections processes, starting with the removal of manual paper that is laden with error and fraud. Being able to connect exported goods to smart contracts allows shipments to be tracked and monitored, it also supports triggering of smart contract payment clauses. This is incredible and perhaps one of the most exciting novel technological advancements I have seen in banking for a very long time. Bankers, regulators and logistics companies must pursue this technology with enthusiasm.
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