South Korea’s Largest Financial and Tech Institutions Join R3
On May 30, LG, one of the largest electronics company in South Korea behind Samsung, officially announced its partnership with R3CEV as a part of a larger vision to target the South Korean fintech and finance industries with distributed ledger technology.
Over the past few years, many leading financial institutions and banks in the world have joined R3CEV, including South Korea’s KEB Hana Bank and Shinhan Bank. By market cap and nationwide survey on customer satisfaction and market penetration, Shinhan is the largest and most influential bank in the country, along with KEB Hana Bank.
LG is the first electronics and information technology conglomerate in South Korea to join the R3 Consortium and focus on developing blockchain technology-based financial applications.
Kim Hong-keun, an executive director at LG CNS’s Financial Business Division, stated at a press conference held in Seoul:
“We will provide various financial services using a global blockchain platform with this agreement as a beginning. We are planning to expand our blockchain service to other industries as a whole in the future.”
Hong-keun’s statement was rather ambiguous considering the previous announcement of R3CEV and its exit from the blockchain industry. In February, R3CEV claimed that the company has never marketed itself as a blockchain consortium. Its executives also stated that the R3 Corda, R3CEV’s main technology, is not based on the blockchain.
However, many critics including bitcoin investor and economist Saifdean Ammous criticized the intent of R3CEV to deceive the industry and the community after revealing that the company had consistently described itself as a blockchain consortium and company in the past.
Ultimately, as controversy intensified, R3CEV CEO David Rutter clarified in an official blog post that R3 is not a blockchain consortium nor is it developing technologies based on the blockchain.
“While we were almost certainly guilty of slipping into this semantics trap now and again, we’ve said from the beginning that Corda is a distributed ledger platform, not a traditional blockchain platform. It was never designed to be one,” wrote Rutter.
In consideration of R3’s past in dealing with its association with the blockchain and its denial of developing blockchain-based applications, LG’s statement that the company is partnering with R3 to develop blockchain-based financial applications remains unclear. The company is likely building applications on top of the platforms and technologies developed by the R3, but it is not developing blockchain-based applications.
A group of banks left R3CEV earlier this year to focus on the development of blockchain technology. Banks like JPMorgan left the consortium and invested in other consortiums and organizations such as Axoni that strictly focus on blockchain development.
Martha Bennett, an analyst with Forrester, explained that the members of R3CEV are constantly changing due to the company’s complex structure. It houses a large number of banks and conglomerates and it is difficult for a single organization to shift the vision and the strategy of R3 to its benefit.
“Most importantly, with the participants at the time, it was actually possible to see how they might converge on a set of use cases that would be relevant to most, if not all. Even then, it would have been a challenge to get all members aligned around the governance principles and common processes, etc, that are a prerequisite of a successful blockchain deployment,” said Bennett.
LG and other organizations such as Hana Bank and Shinhan Bank intend to collaborate with R3 in the upcoming months to utilize its technologies to build next-generation fintech applications for the South Korean market.