With many new regulations and requirements set to be introduced into the world of cryptocurrencies and blockchain, a number of the biggest banks in the globe have announced an interesting platform that has been created with the goal of simplifying the compliance process when it comes to Ethereum.
It has been labeled as a Massive Autonomous Distributed Reconciliation platform (Madrec), and it has been spearheaded by the giant of banking, the Swiss-based UBS.
They have also received aid in the project from the likes of KBC, Thomson Reuters, SIX, Credit Suisse and Barclays. The goal is to have the reconciliation of differing types of data related to their counterparties to be made much easier for the banks.
In the past, firms would have utilized legal entity identifiers which are housed within a worldwide data system in order to execute certain transactions that are desired by their clients.
There was no need for the clients to have these codes but new rules are introduced on January 3, 2018, named Markets in Financial Instruments Directive II (MiFID II) which means that the legal entities will need to possess and use those codes.
It was proposed that these major entities use a process that was industry-wide and utilized the likes of Microsoft Azure cloud to do so.
The platform UBS have developed will allow them and the other banks involved to easily comply with these regulations before they have even been introduced.
They took six months to build this platform, and it is powered by smart contracts networks which have integrated those endorsed identifiers by the Legal Entity Regulatory Oversight Committee.
Some examples of these reconciliations of the relevant data are the classification of industries, as well as information that has been sent by the folks at European Securities and Markets Authority.
This means that all of the information will not have to be independently checked and periodically reconciled. Instead, the smart contracts in the blockchain can complete these checks with great accuracy nearly in real-time.
The manner in which this is achieved is by using the Ethereum blockchain to hash the anonymized reference data, at the same time as allowing the source data to stay in the institution. The data will then be reconciled by the smart contracts, which will enable users to find any anomalies easily and subsequently reconcile them.
The reasons these banks have been working together is because this is something which is going to affect all of their bottom lines in the same manner. Therefore, they can pitch their resources together and develop a comprehensive solution that benefits all concerned parties.
The project itself first began in the blockchain R&D lab of UBS that is off-site in London. It is set out as being a neutral space in which workers from different partners are collaborating on a number of various projects at any one time.
The proactive approach will undoubtedly ensure that many of the major banks will adhere to the new regulatory standards, will not catch them off-guard and create more work than is necessary.