Things are moving very quickly in the enterprise blockchain space. Recently, several of the largest banks announced their participation in key blockchain initiatives. A massive $20 million bond was issued on the public Ethereum network and one of the biggest blockchain companies, ConsenSys, launched a special initiative that aims to bring Decentralized Finance (DeFi) closer to enterprises. In addition, excitement has peaked in “bitcoin land” because, in mere days, the first physically delivered bitcoin contracts will launch on a federally regulated exchange.
JPMorgan’s Interbank Information Network (IIN) was joined by Deutsche Bank and Oversea-Chinese Banking Corporation
JPMorgan’s IIN, built on Quorum (a private version of Ethereum) was launched with the goal of eliminating information inefficiencies, thereby providing a real-time flow of information. As of now, 344 banks have signed Letter of Intent (LOIs), creating what is probably the largest blockchain-based banking consortia. Last week, Deutsche Bank, the 17th largest in the world and the fourth largest in Europe by total assets, joined the network to tap into the information pool. Additionally, the Oversea-Chinese Banking Corporation (OCBC), the second-largest bank in Southeast Asia, joined the IIN blockchain consortia. Both news items are significant because of the sheer size of the banks involved and also because of the ensuing growth of the IIN blockchain. In the enterprise blockchain space, IIN is probably the most significant effort in terms of shaping the industry with its outcome.
Santander launched the first end-to-end bond on a public blockchain network
Banco Santander, the largest Spanish bank, has issued a $20 million blockchain-based bond with a quarterly coupon of 1.98%. This is noteworthy primarily because of the bank’s use of the public Ethereum network, on which the investor wallet, the issuer wallet, and the issuer smart contracts reside. (Not many large banks are even considering the use of a public blockchain network.) The effort involved tokenized cash that was exchanged for bond tokens worth $20 million via an atomic delivery-versus-payment (DvP) transaction.
ConsenSys launched Codefi, aimed at businesses
ConsenSys, the largest Ethereum-focused development shop, just launched a new “mesh” that focuses on bringing Decentralized Finance (DeFi) to larger companies and businesses. DeFi-type products and services are currently used mainly by enthusiasts and cryptocurrency-focused traders. ConsenSys wants to change this and expand the scope of instruments and markets existing only in the decentralized space. The current DeFi offering creates certain inefficiencies (like overcollateralization) and introduces the systematic risk of using an unproven smart contracts. For example, nobody on the Ethereum trading market has a clear view of the overall risk exposure in terms of money and technical liabilities. Codefi wants to change this by providing a framework for assessing the complex risk in permissionless lending (which is one the aims of this new project).
Bakkt is ready to launch its bitcoin futures
Bakkt, in partnership with ICE Futures US and ICE Clear US, will launch physically delivered bitcoin futures contracts along with custody approved by the New York State Department of Financial Services. In dealing with digital assets, the Intercontinental Exchange (ICE), which owns and operates the New York Stock Exchange (NYSE), is getting into uncharted waters. This comes just two weeks after the announcement that Bakkt Warehouse, the safe gatekeeper for bitcoin, is accepting deposits and withdrawals. On Monday 9/23, we will see how the market reacts to this launch, though the bitcoin sentiment is highly optimistic. The belief is that the move with further bitcoin adoption among institutional players like endowment funds and brokerage firms. It might also help make the case for bitcoin ETF once we have a stable and reliable physically delivered bitcoin futures market.
Wells Fargo launched an internal settlement service using R3 Corda
It has become very popular for banks to look into stablecoins as a potential settlement mechanism. Already, several public efforts, like JPMorgan’s JPMC and Utility Settlement Coin, serve similar functions. Now Wells Fargo has joined the ranks of blockchain-enabled institutions. The company is aiming to settle internal transactions much faster and more cheaply than it would if it went with the SWIFT network. Internally, dollar transactions will be pegged to a stablecoin so as to facilitate these transactions. This is a strong justification for R3’s Corda network protocol, which has received a lot of traction lately. Corda is not technically a blockchain per se, but instead uses a transaction-based proprietary distributed ledger technology (DLT).
All these events are momentous for the enterprise blockchain space, as the influx of large enterprises is hastening the pace of blockchain adoption. While they are investing people and money into this adoption, these enterprises are also building much-needed services like custody, risk management, and infrastructure to properly run and operate blockchain networks.