Goldman and Microsoft to Test Blockchain’s Future in Financial Services

Several firms are banding together to leverage blockchain — and distributed ledger technology — to transform financial markets.

The roster includes Goldman Sachs Group Inc, Microsoft Corp, Deloitte and others, who announced in an announcement that they would launch the Canton Network and start testing new features in July.

In the Tuesday (May 9) announcement, the firms said that the network would provide “a decentralized infrastructure “that connects independent applications built with Daml, Digital Asset’s smart-contract language. The end result, as the companies said, is to create a “network of networks” that link a range of firms and financial activities.

Per the release, Canton will help financial markets “to interoperate with the appropriate governance, privacy, permissioning and controls required for highly regulated industries” with “a safer and reconciliation-free environment where assets, data, and cash can synchronize freely across applications.”

Payments Without the Risk?

In one use case detailed Tuesday, as the Canton Network takes shape, the participants noted that a digital bond and a digital payment can be composed across two separate applications into “a single atomic transaction, guaranteeing simultaneous exchange without operational risk.”

That simultaneous exchange, we note, and the interoperability hint at the blockchain’s appeal within finance. Among the Canton participants is the Digital Dollar Project, the nonprofit that is centered on exploring the development and use of a U.S. central bank digital currency (CBDC). Various efforts have been underway in exploring CBDC constructs that use blockchain, illustrated by the Federal Reserve Bank of Boston’s collaboration with the Massachusetts Institute of Technology.

As reported here in a Blockchain Tracker last year, we found that, in fact, more than 37% of businesses said they are currently using blockchain for cross-border transactions.

It may be that it’s the “rails,” the infrastructure that underpins the flows of digital data and assets that outlasts any debate over whether cryptos, digital dollars or stablecoins — and even tokenized deposits — should be those payments’ form factors.

Some High Profile Shutterings

There’s some evidence, too, that certain areas of financial services may be improved by blockchain — though high-profile blockchain projects have been shuttered in the recent past as development times stretched amid significant investment.

Trade finance stands out here, where trade finance platform Marco Polo went insolvent in Ireland earlier this year. In the U.S., Symbiont, a blockchain FinTech, went bankrupt at the end of last year. And as reported by Financial Times at the end of last year, the Australian Stock Exchange scrapped a platform last November that was seven years in the making to upgrade the clearing and settlement of shares to a blockchain-based platform. We.trade, a consortium of 12 banks embracing blockchain for trade finance, declared insolvency last June.

Earlier this year, the IMF wrote that though “crypto assets have been more of a disappointment than a revolution for many users,” the technology behind crypto (which would include the blockchain), platforms could allow banks and other regulated financial institutions to trade central bank reserves (and conduct financial activities) more easily across borders. “Thanks to the single ledger and programmability, currencies could be exchanged simultaneously, so one party does not bear the risk of the other walking away.”