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Sir Richard Branson, the founder of Virgin Group, spoke with the President of Argentina on a variety of topics, including drug control, space flight and Bitcoin. According to President Mauricio, the British entrepreneur expressed interest in investing in Argentina. According to the president’s Facebook page, the president “was very interested in the talk as Branson, […]

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Bitcoin price found support at the base of the previous advance and surged to the upside during Sunday trade. This analysis is provided by xbt.social with a 3-hour delay. Read the full analysis here. Not a member? Join now and receive a $29 discount using the code CCN29. Bitcoin Price Analysis Time of analysis: 14h00 […]

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11 top investment banks have used blockchain technology to do mock trades with each other, signalling a big step towards adopting the technology first developed for bitcoin into mainstream finance.

R3, an industry-wide consortium of 42 investment banks looking at the technology, announced in an email that banks "simulated exchanging value, represented by tokenized assets on the distributed ledger without the need for a centralized third party."

In plain English: banks traded toy money and tokens representing shares and commodities with each other over this new, decentralized network that meant they didn't need to go through third party settlement or clearing house. The trades were carried out in R3's lab environment — a safe sandbox for them to experiment in.

'A major step forward'

R3 CEO David Rutter says in an emailed statement: "This is a very exciting development, both for R3 and our member banks, as well as the global financial services industry as a whole."

The 11 banks involved in the proof of concept were: Barclays, BMO Financial Group, Credit Suisse, Commonwealth Bank of Australia, HSBC, Natixis, Royal Bank of Scotland, TD Bank, UBS, UniCredit, and Wells Fargo.

R3 says the "transition from vision to execution" represents "a major step forward for the application of distributed ledger technology across the entire industry."

Distributed ledger technology is a more general name for blockchain technology. The blockchain was developed as part of cryptocurrency bitcoin as a way for it to circumvent central banks. The technology uses complex cryptography and the wisdom of the "crowd" to verify transactions, rather than a traditional middle man. Records are shared across multiple servers and must be checked against each other, rather than a central ledger.

It essentially allows cash transactions on the web — rather than telling your bank to put money in your friends bank account, you just deal directly with your friend.

Ironically, while bitcoin was developed by anarcho-libertarian developers who wanted to circumvent traditional finance, big investment banks are now going crazy for the technology.

Just like people, banks still have to go through "trusted middlemen" when dealing with each other. Settlement and clearing houses make sure everyone gets paid the right amount and no one is screwed over.

But blockchain's technology and its inbuilt security and trust checks mean they can cut out this process and deal directly. This, in turn, cuts down costs. Santander estimated last year that the technology could save banks as much as $20 billion.

UBS says in a white paper released this week:

When money is transferred between banks, each institution needs to engage in a labor-intensive process of ledger reconciliation to confirm that the correct sums have been processed. A blockchain system, by eliminating the need for such a process, could allow banks to cut middle-skill administrative labor.

The technology also has the potential to make everything a lot quicker. UBS' whitepaper says transactions processing times could be cut from as much as 4 days to as little as 15 seconds. That frees up for capacity to do other things.

Not just a 'talking shop'

We've known for a while that banks were excited about blockchain, or distributed ledger technology. But the speed of this proof of concept is a bit of a shock.

R3 only just closed its doors to new members in mid-December and last week the CEO of a European blockchain startup told me he thought R3 would just be a "talking shop" where banks engage in blue-sky thinking about how to use the technology. Clearly they're prioritizing actions over words.

But while banks are quick off the mark when it comes to experiments, real world adoption is likely still a long way off. Banks face two big hurdles: the sheer size and complexity of their networks; and regulation. Stephen Pair, CEO of BitPay, told BI last year he thinks it will take banks at least 5 years to adopt blockchain technology.

R3's "sandbox" environment used Ethereum technology, an open source blockchain that's an alternative to bitcoin's blockchain, and was hosted on Microsoft's cloud platform Azure.

The trading proof of concept is just "the first in a series of projects" looking at uses for blockchain technology, R3 says.

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Financial technology — commonly known as fintech — is not only transforming the way consumers operate, is also a huge threat to the traditional banking industry.

Think about TransferWise, one of the few British tech unicorns (private companies worth over $1 billion), and PayPal when it comes to payments and peer-to-peer matching services. Or how about the blockchain — the technology that underpins bitcoin. Or online-only banks?

All in all, the way we bank and pay for things are completely different from 20 years ago.

But the biggest shift in banking industry during the tech revolution is the switch from complacency to collaboration, said Richard Lumb, the CEO of Accenture’s financial services business to Business Insider on the sidelines of the World Economic Forum in Davos, Switzerland.

Lumb is very well placed to make this assumption. He has spent over 28 years developing strategies and business models for banks, brokers and other financials but at the same time helps run the annual FinTech Innovation Lab London, which is a mentoring programme for startups.

"What I have found interesting is how opinions have changed from Davos two years ago," said Lumb in an interview.

"Before financials would look at fintech as something that wasn't as big of a deal, something new and something that wasn't going to make a difference to their customer bases. But now they realise there's customer disintermediation and it's not just one company that's eating at their customer base, it's like a shoal of piranha fishes nibbling away.

"The only way forward is to collaborate not compete."

It is true. Take a look at blockchain for example.

Blockchain is a name for a protocol underpinning bitcoin that uses complex cryptography and distributed ledgers, or copies of records in multiple places, to regulate, record, and enable transactions using bitcoin.

Right now, if you pay someone in pounds, one bank will have to get in touch with the other and tell it to update the balance. Then at the end of the day bulk transactions are moved among banks, via an intermediary, to make sure everyone has the right amount of cash.

With the blockchain, all that hassle is wiped out — you just pay another person directly into a digital wallet. It's blockchain's novel approach to security that makes this possible.

Banks are hoping they can adapt this technology to let them deal directly with one another, making things faster, cheaper, and easier. This would involve either using bitcoin's blockchain or, more likely, building a replica system — a private blockchain.

R3, a startup experimenting with blockchain in banking, announced Wednesday that 11 top investment banks had carried out trades on a blockchain built on Ethereum, an open-source alternative to bitcoin's blockchain.

But at the same time, while the evolution in fintech is exciting and is being taken up rapidly by consumers, Lumb told us about why he thinks collaboration between the fintechs and banks will actually be beneficial to both parties.

"Collaboration is the only way forward. Both segments need each other," said Lumb.

"Fintech doesn't necessarily be regulated like a traditional financial and banks don't want to disintermediate their customers. A lot of this new technology and the companies that built them are still in their infancy so banks can help smaller companies in building a business too," said Lumb.

"I think why people like blockchain technology is because of the security element. But I guess it's still in its infancy and we'll see how it develops over the next few years. This year we'll just see pilot applications and it'll be small scale.

"Regulators must be constantly watching right now (the development in bitcoin and blockchain) but it's got to come."

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In releasing its source code to developers, Zcash is hoping to make its software more secure so that it can achieve its goal of being a truly anonymous cryptocurrency for the global marketplace. The source code’s release, reported by CCN, marks a developmental step in the effort to create a more private cryptocurrency. Some see it as the […]

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