DTCC calls for collaboration on blockchain use in post-trade services

By Jemima Kelly

LONDON, Jan 25 (Reuters) - The Depository Trust & Clearing Corporation, a provider of back-office services to the financial sector, called on Monday for industry-wide collaboration on blockchain technology, saying it could make post-trade processes faster and more efficient.

Blockchain technology - or distributed ledger technology, as the DTCC and other financiers prefers to call it - underpins bitcoin, a controversial web-based "cryptocurrency". It (Other OTC: ITGL - news) is a massive ledger of every bitcoin transaction made, which is verified and shared by a global network of computers.

But the data that can be secured by the blockchain need not be restricted to bitcoin transactions. Any two parties could use it to exchange information or assets, within minutes and with no need for a central authority to verify it.

The International Monetary Fund said in a research paper last week that blockchain technology could pose a serious challenge to the business models of established financial system, a view shared by the Bank for International Settlements [.

In a white paper published on Monday, the DTCC said the technology could "modernize, streamline and simplify the siloed design of the financial industry infrastructure and address certain limitations of the current post-trade process".

The DTCC, a financial services group controlled by investment banks, said blockchain technology could speed up and simplify trade and contract validation, the issuance of assets and securities, and settlement and clearing processes.

"The industry has a once-in-a-generation opportunity to re-imagine and modernize its infrastructure to resolve long-standing operational challenges," said DTCC CEO Michael Bodson.

The DTCC did, however, caution that the technology is still immature and, in its current form, has limited scale.

The group recently invested in Digital Asset Holdings LLC, a blockchain start-up aimed at the financial services industry and run by former JPMorgan (LSE: JPIU.L - news) banker Blythe Masters.

Last week New (KOSDAQ: 160550.KQ - news) -York based R3 CEV, which calls itself a "financial technology innovation company", said that 11 banks in a global consortium set up by R3 last year had successfully tested a blockchain-based trading system that could make trading much faster and cheaper. (Reporting By Jemima Kelly, editing by Larry King)