Barclays blockchain technology trials demonstrate how traditional financial institutions are beginning to explore potential applications for the technology underlying Bitcoin. The bank is collaborating with UK-based bitcoin exchange Safello to investigate how blockchain technology could be used within financial services.
The initiative reflects a broader change in how banks view Bitcoin and distributed ledger technology. While financial institutions may remain cautious about Bitcoin itself, the ability to transfer and record value without relying on a traditional intermediary could have applications extending well beyond digital currency and payments.
Following the lead of other leading banks, Barclays announced that it would be collaborating with UK-based bitcoin exchange Safello in order to “explore how blockchain technologies could bolster the financial services sector.” Coindesk reports:
Speaking to CoinDesk, Safello CEO Frank Schuil said Barclays’ decision reflected a wider change in traditional finance:
“If a Tier I bank signing a proof-of-concept with a bitcoin company isn’t a sign of the times then I don’t know what is … their attitude is changing and it is changing fast.”
The announcement, made at the Barclays Accelerator demo session in London today, comes as an increasing number of banks are trialling distributed ledgers such as Ripple.
Banks Look Beyond Bitcoin to Blockchain Applications
In a recently published report “Understanding Bitcoin: Blockchain Applications Beyond Payments,” I laid out why bankers’ attitudes to Bitcoin have gone from dismissal to begrudging interest. Bitcoin’s key innovation is its distributed ledger or blockchain technology which allows two strangers to exchange value across the internet without the need for a trusted third party (who may impose additional costs or delays). As I point out in my report, this has implications far beyond payments, encompassing such diverse applications as stock trading, land titling, identity management and self-executing ‘smart contracts’.
The growing interest in distributed ledgers suggests that financial institutions are beginning to separate Bitcoin from the underlying technology that makes it possible. Potential applications in securities trading, identity management, property records, smart contracts, and other areas could give banks reasons to experiment with blockchain even if they remain cautious about digital currencies themselves.
Barclays blockchain technology trials with Safello illustrate this changing attitude. As banks conduct proof-of-concept projects and explore distributed ledger platforms, the financial services industry will have an opportunity to determine whether blockchain can reduce costs, eliminate delays, or support entirely new types of transactions.
Overview by Nikhil Joseph, Analyst, Emerging Technologies Advisory Service at Mercator Advisory Service
