Leading-edge US-based financial services holding company State Street is getting ready to implement technology that will enable them to move their internal operations and some external business transactions onto the blockchain.
In October 2016, the Winklevoss brothers invited State Street to support their application to the SEC for a Bitcoin ETF. It's not surprising that the Winklevoss Brother's turned to State Street. The multi-billion dollar firm has been in business since the 1700s; they invented ETFs in 1993. And now it seems like they are ready to take some more innovative steps in 2017.
Head of regional client management EMEA at State Street, Akbar Sheriff, explained to Markets Media how the firm had continued this mindset of innovation into the 21st century. A few years ago, they established an 'Emerging Technologies Center.' The group’s job was to identify what the future might look like, and how the firm can prepare for the long horizon:
“We pulled together our strongest out-of-the-box thinkers from across the organization – ‘the crazies’ we called them. Their mandate was to go out over a two month period and talk to technologists, venture capitalists, start-ups, and come back with a plan to disrupt us.”
70 percent of the approved ideas from those 'crazies' are blockchain technology-based. Hu Liang, senior managing director of the Emerging Technologies Center at State Street, revealed they are now testing a real-world blockchain solution for securities lending.
Liang told Reuters:
"The aim is to enhance the operational aspect of securities lending. In a lot of cases there is no automated linkage to say which account it (the collateral) should go back to. The system would reduce manual intervention involved with the process, make it faster, and create a better record for regulatory reporting purposes."
The securities lending solution appears to be one of several blockchain-based financial services that State Street will move beyond the prototype stage in 2017. Head of Blockchain development at State Street, John Burnett, told Coindesk he thinks "that you’re going to see, certainly, internal applications of blockchain going forward in 2017."
The US finance giants were one of the founding members of Hyperledger, the ever expanding open-source blockchain platform project overseen by The Linux Foundation. They have already tested applications on ethereum and R3CEV's Corda, as well as Hyperledger's blockchain called Fabric. Burnett announced January 3 that for State Street, "the most basic implementations or 'blockchain-inspired' applications will be ready before the end of 2017," with as many as ten blockchain projects to help automate business functions. Of these ten, half have progressed from the prototype stage with the State Street representatives emphasizing none of this “is pure experimentation.”
Some of the proofs of concept the Emerging Technology Center plans to implement on the blockchain are either undisclosed to the public or only intended for internal systems. However, the amount of activity and the volume of capital involved is another sign that 2017 is set to be a big year for the acceptance and improved regulation of the technology that underpins Bitcoin.