The British bank for the first time tested smart contract for derivatives trading. Barclays used Corda — one of several blockchain systems being developed by R3.
The test conducted by Barclays demonstrates what a bank-regulated blockchain technology would look like. The financial giant believes the industry together shall develop a network of different interconnected ledgers based on shared standards.
“The industry assumption is that there should not be one ledger to rule them all, there will be different ledgers and we need to work together to make sure they interoperate, not just from banks,” Lee Braine from the Investment Bank CTO Office at Barclays told CNBC.
In the future, such smart contract can be prefilled according to the standards of the International Swaps and Derivatives Association (ISDA), which now controls the derivatives trading. According to Braine, ISDA itself can be an issuer of smart contracts.
Distributed ledger technology can help banks to introduce a new level of unification and centralisation into trading process since derivatives market still involves paper contracts and human intervention.
“If that is centralised in some way, then you can imagine the banks negotiating, finalising and signing off those and then being held centrally in one place, such as a web service. That would reduce the challenges the banks have with legal documentation,” said Braine.
R3 presented Corda, a new blockchain-like technology for financial institutions, in the beginning of April. Corda is aimed at helping financial institutions synchronise financial agreements and operate workflow between firms without a central controller. Transactions executed at Corda platform can be validated by parties without appealing to a broader pool of unrelated validators. Still, unlike blockchain, Corda is only partially decentralised, its users being free to choose whether to store the data on a distributed ledger or in a centralised depositary. Furthermore, Corda is not supporting any native cryptocurrency and is claimed to be easier to integrate within the existing business logic.
Nadya Krasnushkina
