- Consensus achieved on the need for industry standards to simplify the implementations of smart contracts and distributed ledger technology
- Support for trade associations to lead the work on defining industry standards for smart contracts
The Third R3 Smart Contract Templates Summit was held on June 13 in London and New York, as a follow-on to the successful first two summits held in 2016. A broad spectrum of financial industry participants were brought together to share the latest thinking on smart contracts and distributed ledgers. Over 100 representatives from banks, market infrastructure firms, trade associations, law firms and academia attended in person, with a further 50 representatives participating remotely. The aim was to drive progress through open innovation and open collaboration.
There were presentations from R3, three banks (Barclays, Credit Suisse, and Royal Bank of Scotland), five law firms (Norton Rose Fulbright, Baker McKenzie, Allen & Overy, Holland & Knight, and Hogan Lovells), trade association ISDA, software company Monax, and University College London. The event was hosted at the Barclays Rise open innovation hubs in London and New York simultaneously, connected via live video screens.
There was consensus on the need for industry standards to simplify the implementations of smart contracts and distributed ledger technology. This included support for trade associations to lead the work on defining industry standards for smart contracts, such as ISDA’s bold new initiative to standardise data and processes for derivatives smart contracts via a common domain model. There was also discussion on the potential impacts of specific legislation, recent advances in machines learning, the semantics of smart legal agreements, agreement formation and legal enforceability, and even the possibility of leveraging distributed ledger technology’s consensus mechanism during the process of coming to agreement on standard models for smart contracts.
The presentations for The Third R3 Smart Contract Templates Summit are publicly available online: https://corda.net/blog/on-distributed-databases-and-distributed-ledgers/
Todd McDonald, Co-Founder and Head of Ecosystem Development at R3, comments: “Smart contracts present Corda users with an opportunity to significantly improve the efficiency of their financial and legal transactions. As a member of ISDA, we fully support its efforts to lead the work on industry standards for smart contracts. Interoperability was a key consideration when developing Corda with our large member base of banks and other financial institutions, and ISDA’s work will help facilitate a world of frictionless commerce for smart contract users around the world.”
Lee Braine, Investment Bank CTO Office at Barclays, comments: “Many banks are looking to rationalise and simplify their operating platforms. Smart contracts can potentially support this aim, with the support of common industry standards covering legal agreements, data structures, and processes. We are therefore collaborating via trade associations, such as ISDA, in the development of such industry standards with the expectation that they will provide a solid base upon which FinTech innovation could thrive.”
Clive Ansell, Head of Market Infrastructure and Technology at ISDA, comments: “The industry recognises there is a need for change, because the current approach is unsustainable and not scalable. We are at a critical juncture, driven in part by the emergence of new technologies. ISDA is committed to working with its members and the broader industry to deliver the necessary foundational components to facilitate the required transformation. We all need to be bold to ensure the future efficiency and vitality of this market.”
Emmanuel Aidoo, head of the distributed ledger and blockchain effort at Credit Suisse, comments: “The challenge is to leverage the consistency and lineage strengths of distributed ledger and smart contract platforms, while avoiding unsuitable past designs. Success will be underpinned by our ability to design for maximum coverage with minimum code, capitalising on underlying similarities across products and functions rather than the fragmentation that currently exists.”
Daniel Franks, a derivatives partner at global law firm, Norton Rose Fulbright, comments: “The types of legal issues that arise in this context are just as varied as the number of DLT/derivatives use-cases. The single legal aspect that is consistent across all use-cases, though, is the need for the technology to work with the documentation. The immediate focus is to identify which aspects of the industry documentation can suitably be coded, and to ensure that the technology works with those aspects of the documentation. In time, as the technology becomes more established, the focus will shift to determining whether other aspects of the industry standard documents can be adapted, without losing their commercial rationale, so that they are even better suited to the capabilities of the technology.”