The use of blockchain technology as a way of tracing transactions in keeping with MiFID II regulations has been proven by Bank of Ireland and Deloitte.
David Tighe, head of innovation at Bank of Ireland, explained that the trial took place to show how blockchain technology can be used by financial institutions on top of traditional legacy systems.
Blockchain technology, which underpins emerging digital, virtual, or cryptocurrencies, consists of blocks that hold timestamped batches of recent valid transactions, which form a chain, with each block reinforcing those preceding it.
Tighe said full implementation would make it impossible to alter transaction histories and will meet EU regulations such as the Markets in Financial Instruments repealing Directive (MiFID II) which comes into place in 2018.
Tighe said that the purpose of the trial is to understand the technology and assess how it can fit with Bank of Ireland’s legacy systems as a layer on top.
“We see this as the start of a new concept, just like experimenting with TCP/IP in the early days of the internet. It may not end up like this but we see a strong technology that can help with transparency in transactions.
“Crucially, it has to meet regulatory requirements.
“It is the underlying technology that fascinates us and it could one day be an efficient way of transacting value between people and at the same time leave a transparent trail of information.”
Blockchain could enable banks to scale up transactions
Stephen Moran, innovation manager at Bank of Ireland, said that the proof-of-concept did not involve the transaction of actual money but data.
“The next obvious step is transmission of value and scalability.
“One of the biggest issues with cryptocurrencies is latency, which is seven transactions a second.
“But the underlying blockchain technology could be harnessed and scaled to 20,000 transactions a second by a bank.
“So, for now, this was more of a test of the data, how it can be tracked and logged and how it would work with a bank’s legacy systems, fulfillment and contact centres.
“While blockchain technology can be seen as disruptive, it can actually complement a bank’s existing legacy systems.”
The trial combined synthesised data from multiple systems across Bank of Ireland’s Global Markets division and associated functions to form an immutable, distributed, searchable repository of information across the full trade cycle.
Browser-based views were developed for clients, relationship managers and the regulator, to provide enhanced views of trade position with the ability to conduct near real-time auditing. Deloitte worked closely with Bank of Ireland throughout the project, providing expertise in blockchain solution design and development.
“The trial demonstrates the disruptive impact that blockchain can have on the financial services industry, and the positive results that this disruption can bring,” said David Dalton, partner and head of financial services at Deloitte.
“We are excited to have developed this proof of concept with Bank of Ireland, and believe that this can be built upon further to capitalise on the wealth of blockchain technology-based opportunities.”
Buy your tickets now!