First Live Securities Trade on Blockchain Platform
ING and Credit Suisse have successfully carried out a transaction worth USD 25 million with the use of the collateral lending application of fintech HQLAX on R3’s Corda distributed ledger platform.
The two European banks performed “the first-ever live securities trade on a blockchain platform,” ING said in a statement.
Ivar Wiersma, the head of Wholesale Banking Innovation at ING, said that the use of blockchain technology in banking “gives the regulator the opportunity to get direct access to the ledger and see the entire digital history of the transaction, from where it originated to its ownership and attributes. In the over-the-counter environment, which is traditionally not that transparent, it could make the entire financial system more resilient.”
R3, a developer of Corda, a blockchain platform designed specifically for businesses, said in a statement that, during “the transaction, Credit Suisse and ING agreed to transfer legal ownership of Dutch and German government securities on the platform using HQLAX Digital Collateral Records (DCRs)”. At the same time, the underlying securities remained static within unique DCR-linked custody accounts held by Credit Suisse and ING at Credit Suisse.
ING says its blockchain/distributed ledger technology team developed the technology behind the HQLAX collateral lending platform. Last January, the bank used its Easy Trading Connect platform to complete the first blockchain trade of agricultural commodities.
The Amsterdam-based financial group claims that the “transaction shows yet again how blockchain can make financial services faster, easier and more efficient.”
The potential of blockchain has been praised by the banking industry over the past couple of years, however banks are still cautious towards blockchain-based cryptocurrencies
For example, JPMorgan Chase in its 2017 annual report to the US Securities and Exchange Commission (SEC) classified cryptocurrencies as a potential risk factor to the existing financial sector.
In the report, the bank states that “both financial institutions and their non-banking competitors face the risk that payment processing and other services could be disrupted by technologies, such as cryptocurrencies, that require no intermediation.”
“New technologies have required and could require JPMorgan Chase to spend more to modify or adapt its products to attract and retain clients and customers or to match products and services offered by its competitors, including technology companies,” according to the US bank.