blockchain in banking bucharest meetup

12 July 2016

Blockchain in Banking Bucharest Meetup

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“The fourth industrial revolution will be built upon a Machine-to-Machine economy with autonomous vehicles, 3D printer, robots, drones and IoT. We believe that blockchains will be the 'lubricant' for asset sharing and secure transactions between both people and machines. Having a corporate blockchain strategy is a must for financial and non-financial players.”

Dr. Carsten Stöcker, Innovation Programme Manager, Blockchain Competence Team, RWE Innovation Hub

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Blockchain in banking – Business Intelligence

DATE 12/07/2016 P.2C1 |

What is Bitcoin?

•Digital currency within a network of miners (nodes) which check that blocks are correctly constructed & embedded transactions are valid

What is Blockchain?

•Append-only data structure – a new block can only be added to the end of the chain - Immutable

•Many copies - Shared & duplicated database (=ledger)•Built by Consensus – a new block is added only if consensus is

reached among miners (very inefficient with respect to relational databases..)

•Miners are compensated for their honest proof-of-work•Emergence of Trust in a permissionless network - the longest chain is

authoritative – Designed to be tolerant to faulty nodes

What’s new? Smart contracts (Ethereum) // RegTech

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DATE 12/07/2016 P.3C1 |

Blockchain = emphatic buzz (too much?) + attracting VC + banks funding

2 Blockchain // Ethereum MeetUp groups in town

|DATE 12/07/2016 P.4C1 |

Blockchain = emphatic buzz (too much?) + attracting VC + banks funding 1Bn USD invested so far in Bitcoin related start-ups18 Mln USD in Ethereum framework (Vitalik Buterin & co)


|DATE 12/07/2016 P.5C1 |

Blockchain = emphatic buzz (too much?), attracting VC + banks funding

2 Blockchain // Ethereum MeetUp groups in town


|DATE 12/07/2016 P.6C1 |

Business Intelligence : Blockchain Techno in Post-TradingFew examples :

•R3CEV (Bank Corsortium - Corda – PoC, April 2016) •Hyperledger (Accenture, CME, Deutsche Borse, DTCC, IBM, JP

Morgan, Cisco, CLS..) •AXONI

>>> with banks and DTCC on CDS - PoC, April 2016>>> with ICAP/Traiana on FX - PoC, March 2016

•SWIFT : Interbank messaging – pillar of international banking landscape recently hacked ($81 million from Bangladesh's central bank )

Why such a generalized interest for BlockChain? >> could reduce the UNIT COST of a trade >> could reduce mutualized costs, improve security & reliability of Back

Offices

BUT, what most fail to realize is that the original blockchain structure is superfluous in a trusted environement


|DATE 12/07/2016 P.7C1 |

Life Cycle of a trade (in a nutshell)

Blockchain in banking – Post-Trading

|DATE 12/07/2016 P.8C1 |

Complete Clearing by ClearingHouse (=CCP)

Margins: initial margin and daily variation margins (=collaterals)Initial margins as a provision for counterparty default

Blockchain in banking – Post-trading in a decentralized (OTC) market

|DATE 21/06/2016 P.9C1 |

Clearing workflow in practice – how matching platforms intervene

Necessary for (data) harmonization between B.O of

different institutions

Blockchain in banking – Clearing in details

|DATE 12/07/2016 P.10C1 |

PoC on FX spot/fwd – March 2016

Blockchain in banking – Reverse-engineering Traiana/Axoni PoC

|DATE 12/07/2016 P.11C1 |

Post-trade events could be automatically handled by Blockchain as orchestrator/ trusted notary with smart contracts

1.Trade notices, confirmation and allocation2.Collateral management (=margin calls) + funding3.Corporate actions (dividend, interest,stock split, merger, name change, redemption, tax

reclaim..)4.Regulatory reports5.SWIFT messaging6.Final settlement procedure..

Blockchain in banking – Reverse-engineering of Traiana/Axoni PoC

|DATE 12/07/2016 P.12C1 |

Transparency/Confidentiality : what is acceptable ? End-user trade flow, aggregation at D level..?

Blockchain in banking – Right level of transparency ?

blockchain in banking bucharest meetup

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