Executives leading the charge for the adoption of cutting-edge blockchain technology in the banking sector concede that the Covid-19 pandemic has thrown a spanner in their works, one they hope will be temporary.

David Rutter, chief executive of R3, a blockchain developer working for a number of big banks, said “the velocity of the work is going to be impacted by this, like almost everything else”. But he sees a silver lining in the capacity of crises to “drive the type of radical change that we’re trying to promote”.

Blockchain, a software system originally developed to underpin the bitcoin cryptocurrency, consists of a networked ledger equally and anonymously accessible by all its users. Its proponents in the banking sector believe it can also underpin established markets such as trade finance, and bring significant cost-savings and efficiencies.

R3, launched in 2015 as a consortium of banks, is one of the most successful blockchain start-ups. In March 2019, R3 began working with Six, operator of the Swiss stock exchange, to develop its digital-asset exchange. In December, a start-up named HQLAX and Deutsche Börse, the stock exchange group, launched a blockchain platform underpinned by R3’s blockchain, Corda, to facilitate collateral swaps in the securities lending market.

But wider take-up of the still-nascent technology is unlikely while markets are in crisis, executives fear.

Fnality, another start-up that hopes to speed payments in wholesale banking markets using its “utility settlement token”, discussed the potential for a slowdown in blockchain adoption at an all-hands meeting yesterday, according to its chief commercial officer, Olaf Ransome.

Ransome told Financial News the pandemic is best characterised as “a minor speed bump”.

He said: “These types of things are always a distraction as banks work to organise themselves. Inevitably, anything discretionary will always take a hit in these kinds of moments.” The virus does not change Fnality’s mission to create a global collateral pool using blockchain, Ransome added.

A report published in 2017 by Accenture, the consultancy, found that investment banks could save as much as $12bn a year through the adoption of blockchain. R3’s Rutter is hopeful that demand for such cost-savings will soar once the coronavirus crisis passes.

He said: “When you have these kind of disruptions, it really causes you to think, ‘Okay, what portion of my cost base, what portion of my operations are not proprietary? Could I share these expenses or syndicate certain amounts of my operations with, even my competitors, using this technology?’ And that’s what we’re trying to do, we’re trying to solve some of these expensive issues.”

Not all banks are pausing their projects. Mariana Gómez de la Villa, program director of distributed ledger technology at ING, the Dutch bank, said: “We continue to be committed to our blockchain projects and are moving ahead with our plans. We haven’t slowed down our ambitions in this area and we are accustomed to working remotely. As a team we have also been distributed across various locations. This is the time where we are proving the resilience of blockchain and also in terms of operational and information risk management.

“Now that the whole world has gone online, this is when our solutions are being battle tested. A lot of solutions never get to do this live test, so it’s a unique opportunity. The world will emerge from this and will remain digital, so this is a once in a lifetime opportunity for technology to rise to the occasion; we believe it can.”

To contact the author of this story with feedback or news, email Ryan Weeks



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