Blockchain is no longer just a buzzword discussed by corporate strategists at big banks and technology companies. A recent breakout session at the Virginia Credit Union League’s annual meeting, and a visit to the Digital Chamber of Commerce in Washington, D.C. offered insight into how financial institutions of all sizes are exploring the technology, its applications, and even its regulation.
At the Virginia Credit Union League annual conference last week in Roanoke, Virginia, I presented on blockchain technology and how it is changing the payments space. Payments are the most tested area of blockchain. This makes sense because bitcoin, for which blockchain was created, is itself a medium of payment. While some blockchain companies build off the bitcoin infrastructure to provide person-to-person and retail payment platforms, other companies have expanded their vision for blockchain and created innovative applications for a range of uses.
The presentation cited some interesting real world applications of the technology — for example, BNP Paribas' completion of a live cross-border payments transaction in December 2016, and the recent success of Ripple in Japan.
BNP Paribas settled cross-border payments between two large corporate clients, in multiple currencies, with banks in the Netherlands, Germany, and the U.K. A process that could normally take days, or even weeks, was completed in minutes using blockchain.
Ripple, on the other hand, has proven itself a viable third-party payments processor. It completed a test of its technology between 47 banks in Japan that used the system for both domestic and international payments. The success of this test has led to a full rollout planned for later this year and new banks joining, bringing the total to around 40% of all Japanese banks participating in the network.
Credit union representatives in attendance were interested in learning exactly how a blockchain system works and what it would take to set up such a network. We discussed basic concepts like security, interoperability, and cost. While many larger institutions have explored creating their blockchain solutions internally, those in the room at the VACUL meeting seemed more interested in exploring a third-party option.
There is, in fact, a consortium of credit unions, operating under the CU Ledger project, exploring the use case for blockchain. At this point the participating institutions have been selected and nodes have been established as the experiment starts. A member of the CU Ledger project was in the audience and explained that the tests will focus on finding the right use for blockchain within the credit union industry, whatever it may be.
Last week also featured a meeting in Washington, D.C., at the Digital Chamber of Commerce. This non-profit trade association is aimed at promoting the acceptance and use of blockchain technologies. It was created by Perianne Boring, who had worked as a legislative analyst in the U.S. House of Representatives and saw a need to advocate on behalf of cryptocurrency- and blockchain-focused companies. Members include blockchain providers and large technology companies like IBM and Microsoft, as well as financial, consulting, and legal firms.
This group is industry and application agnostic, meaning it promotes all uses of blockchain. It educates law makers, regulators, government officials, and others about why and how blockchain solutions can solve a range of problems we face today.
The Digital Chamber of Commerce uses working groups to explore issues like creating best practices, helping law enforcement to combat criminal activity, protecting intellectual property, and implanting real world uses like smart contracts.
Blockchain is new, and while small-scale tests and proof-of-concept projects have been completed, its application is untested on a wide scale. While some have called the technology a passing fad, the interest from smaller institutions, like credit unions, and the establishment of trade groups like the Digital Chamber of Commerce point to a strong future for the implementation and use of blockchain technology.