Over the course of my professional career in financial markets, from the front lines of investment banking to leading CLS through a period of great change as the CEO, I’ve seen how technology can provide important solutions and simultaneously create new challenges of its own. Yes, technology can provide powerful tools aimed at solving a host of real-world problems, yet the current mosaic of different systems and legacy infrastructure has created massive complexity, introducing new risks and costs as a result.
For the past several years, I’ve watched with great interest as blockchain technology has emerged as a potential solution to many of these challenges. What began as a passing curiosity for me has, over time, developed into a deep and abiding interest. This was in part fostered by my work with a very strong group of professionals at CLS who, at an early date, recognized the power and potential of business applications using this exciting new technology. Blockchain presents a unique opportunity to develop holistic systems that can both replace some of the current complexity and provide a link with other existing infrastructures to significantly reduce friction across markets.
Take, for example, R3’s recently announced work with SIX’s new SIX Digital Exchange (SDX). Through the use of R3’s Corda blockchain platform, SDX will provide a fully integrated, end-to-end trading platform linking trade, settlement and custody services for digital assets. It is hard to overstate what a giant leap forward this will be for the operations of market infrastructure providers around the world.
Blockchain also opens up the intriguing prospect of creating new liquidity in previously untradeable asset types, as well as new asset classes yet to be conceived. Through tokenization of assets such as real estate, fine art or illiquid corporate bonds, blockchain can create brand new markets and opportunities. It can also provide a conduit for billions of informal transactions currently taking place in emerging and frontier markets to become formalized, traceable and transparent.
That said, not all blockchains are created equal. While a number of different models have surfaced in the market, it is becoming increasingly clear that the private, permissioned model, such as that offered by Corda, is favored by enterprise platforms and is the right one for market infrastructures. This view has been validated through the work of CLS, an R3 investor and board observer member. CLS remains engaged with the development of enterprise blockchain solutions and continues to investigate uses for the technology with post trade applications.
Corda focuses on maintaining the highest levels of security, governance control, scalability, and ease of integration with current systems. It powerfully demonstrated its ability to handle the vast flows of confidential information in the markets through DTCC’s US equities market trial late last year.
Given Corda’s particular suitability for financial markets, it is no surprise that we have seen so many of the key infrastructure blockchain projects utilizing the Corda platform, from HQLAx in the collateral management space to Fusion LenderComm in syndicated loans. These companies, and others like them, are literally rewriting the rules of how markets operate and how infrastructure must be designed for the future.
R3’s overall approach, which has included robust regulatory engagement from the start, has been another significant asset to the Corda platform; demonstrating the firm’s maturity in grappling with the unique challenges of highly complex industries and paving the way for ambitious projects with regulated infrastructure providers like SIX. Having worked extensively with the regulatory community and with market infrastructures, I am naturally drawn to the work being undertaken by R3.
I have had the opportunity to work closely with R3 over the past year and, to a greater extent, over the past several months. When CEO David Rutter recently asked if I would devote some of my time to the company as a Strategic Adviser, I enthusiastically agreed. I am excited to work alongside an outstanding group of professionals who are transforming business using Corda’s enterprise blockchain technology.
It is an especially exciting time for R3, as it is for me personally. I am looking forward to getting more involved with the organization and with the team.