#TomorrowsEurope
October 3, 2018 / 11:18 AM / 11 days ago

A new operating system for the planet

Blockchain has been hailed as a “new operating system for the planet” by the Vice Chairman of Barclays Corporate Banking, and it’s certainly been a pivotal part of the hype surrounding our digital revolution over the past few years. However, far from a buzzword, it now has tangible potential in the form of business applications.

Twenty-two countries have signed a European Blockchain Partnership – aiming to create an enabling environment for blockchain-based services across Europe. With the European Commission also investing heavily, what does the future hold for European businesses? Host Paul Henley is joined by James Carlyle, Chief Engineer at R3, and Lee Braine from Barclays’ Investment Bank CTO Office.

Blockchain is on the cusp of revolutionising not only the back office, but global supply chains and the entire way we do business across the world. With use cases from diamond trade to healthcare, insurance to capital markets, to name but a few, distributed ledger technology (of which blockchain is a type) is an ostensibly mundane application with phenomenally exciting, game-changing qualities. The saying ‘being on the same page’ has never been more appropriate.

“Each entity – small firm or large institution – contains its own records and points of truth. Whenever there is a business process lifecycle event, each party separately updates its records to reflect that. Then errors can creep in, for many different reasons, so we have to keep reconciling. When there are differences, we adjust,” says Lee Braine, from the Chief Technology Office at Barclays. “Imagine a world in which we no longer had that opportunity for those variances. You are guaranteeing that you have the same references, the same point of truth – it gets stamped. We have the same shared view of the world. Effectively you’re then saying that for businesses that just want to become more efficient, there is an opportunity to remove perhaps 75% of all the infrastructure around reconciling,” he adds.

As part of Barclays’ Chief Technology Office, Lee Braine – a representative on numerous industry blockchain consortia – is involved in three key aspects of tech for the bank: to develop and review technology, to set standards, and to foster innovation, including partnering with FinTech start-ups. In many ways, the office is an innovation hub in its own right, with its unveiling in 2016 of how blockchain tech may be used to trade derivatives.

“We came up with an original vision, and I pitched to put an internal team through the Barclays Accelerator where we decided to prototype a blockchain solution. For those three months, we formed a small team, took off our suits and operated similar to a FinTech start-up, separate from the head office,” remembers Braine. He adds: “We knew it would take years for the vision to be adopted, but the Common Domain Model (CDM) is what flowed from that. The International Swaps and Derivative Association (ISDA) has produced that standard for the industry. As momentum builds, we hope it’s not just banks that are excited to do this, but the market infrastructures themselves. It won’t work unless all the players adopt this.”

In September 2018, Barclays put the standard to the test in an industry hackathon in London and New York. 30 FinTech teams had to apply the ISDA CDM to distributed ledger technology, and find the best blockchain solutions to increase the efficiency of derivatives contracts processing. By fostering this kind of innovation, Barclays hopes that this will help encourage industry bodies in other domains – such as trade finance – to adopt similar standardisation approaches. Barclays has been liaising with governments, regulators, central banks, peer banks and FinTechs to explore the benefits DLT can provide, as well as the need for collaboration when encouraging broad adoption of industry standards.

“There is an exciting opportunity for disruption. But we need to confirm what makes technical sense, what passes various controls such as data privacy and, also, is there a business case for it,” muses Braine.

As this technology progresses, so does the ability of whole ecosystems of transactional reporting to be radically simplified. As industry leaders, Barclays understands its powerful potential to transform operating systems “across the planet”.

The Reuters editorial and news staff had no role in the production of this content. It was created by Reuters Plus, part of the commercial advertising group. To work with Reuters Plus, contact us here.

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