In an announcement today, Japan-based Mizuho Bank Ltd., and technology firm Fujitsu Labs Ltd., have revealed the successful operation trial of blockchain technology that saw tamper-proof results and same-day settlements of securities transactions.
The two companies, following the announcement of a successful blockchain trail, revealed that they will develop an “exceptionally convenient financial system” that will see risks like price fluctuations negated from cross-border securities transactions.
The 3-month trial between Dec 2015 and Feb 2016 saw Mizuho Bank, a leading custodian bank with an expertise in post-trade processes partner with Fujitsu, a leading Japanese IT giant with revenues of $40 billion in the last fiscal year.
In a joint statement via a press release, the two blockchain adopters revealed:
[We] have jointly conducted an operational trial using blockchain technology, which makes it practically impossible to tamper with transaction histories, to shorten processing time for cross-border securities transactions, from the current three days to same-day settlement.
The two companies cited current complexities of cross-border securities transactions which routinely take three days from trade execution to final settlement. Noting that this intervening period is one which could be fraught with inconsistencies, blockchain technology is seen as the solution to shorten the settlement processes. Decentralization is key, the banking giant and its tech counterpart confirmed.
“Previously, there have been attempts to reduce the number of days required for settlement by eliminating this sort of complicated instruction checking process and sharing through centralized management,” the release added, revealing attempts toward centralized solutions.
However, issues such as the large cost of system operations management made the initiative impractical.
The Blockchain Trial’s Tech
The joint trial’s success saw the efforts of Mizuho bank providing its expertise with securities settlement combining with Fujitsu’s development and evaluation of the trial system before the latter undertook the 3-month trial.
In making use of the Open Assets Protocol, a blockchain-forming system was built in Fujitsu’s cloud environment to record the information from a confirmation as one linked block. The confirmation included the matched trade information such as securities’ name and quantity, currency code, the amount, country of settlement and the type and date of settlement.
In a nod to the tamper-proof qualities of the distributed ledger, continuously generated blocks containing the information were linked chronologically. The information was tested and could notably be shared between multiple companies, resulting in quicker post-trade settlements.
Following the announcement of the successful trial, the three companies including the Open Assets Protocol also revealed that the foray into building practical applications of blockchain technology for cross-border securities transactions will begin this month, March 2016.
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