Blockchain in Banking Bucharest Meetup C1 “The fourth industrial revolution will be built upon a Machine-to-Machine economy with autonomous vehicles, 3D printer, robots, drones and IoT.

1. 12 July 2016
Blockchain in Banking
Bucharest Meetup
C1
“The fourth industrial revolution will be built upon a Machine-to-Machine economy with
autonomous vehicles, 3D printer, robots, drones and IoT. We believe that blockchains will be the
'lubricant' for asset sharing and secure transactions between both people and machines. Having a
corporate blockchain strategy is a must for financial and non-financial players.”
Dr. Carsten Stöcker, Innovation Programme Manager, Blockchain Competence Team, RWE
Innovation Hub

2. |
Blockchain in banking – Business Intelligence
DATE 12/07/2016 P.2
C1 |
What is Bitcoin?
• Digital currency within a network of miners (nodes) which check that
blocks are correctly constructed & embedded transactions are valid
What is Blockchain?
• Append-only data structure – a new block can only be added to the end
of the chain - Immutable
• Many copies - Shared & duplicated database (=ledger)
• Built by Consensus – a new block is added only if consensus is reached
among miners (very inefficient with respect to relational databases..)
• Miners are compensated for their honest proof-of-work
• Emergence of Trust in a permissionless network - the longest chain is
authoritative – Designed to be tolerant to faulty nodes
What’s new? Smart contracts (Ethereum) // RegTech

3. |
Blockchain in banking – Business Intelligence
DATE 12/07/2016 P.3
C1 |
Blockchain = emphatic buzz (too much?) + attracting VC + banks funding
2 Blockchain // Ethereum MeetUp groups in town

4. |DATE 12/07/2016 P.4
C1 |
Blockchain = emphatic buzz (too much?) + attracting VC + banks funding
1Bn USD invested so far in Bitcoin related start-ups
18 Mln USD in Ethereum framework (Vitalik Buterin & co)
Blockchain in banking – Business Intelligence

5. |DATE 12/07/2016 P.5
C1 |
Blockchain = emphatic buzz (too much?), attracting VC + banks funding
2 Blockchain // Ethereum MeetUp groups in town
Blockchain in banking – Business Intelligence

6. |DATE 12/07/2016 P.6
C1 |
Business Intelligence : Blockchain Techno in Post-Trading
Few examples :
• R3CEV (Bank Corsortium - Corda – PoC, April 2016)
• Hyperledger (Accenture, CME, Deutsche Borse, DTCC, IBM, JP Morgan,
Cisco, CLS..)
• AXONI
>>> with banks and DTCC on CDS - PoC, April 2016
>>> with ICAP/Traiana on FX - PoC, March 2016
• SWIFT : Interbank messaging – pillar of international banking landscape
recently hacked ($81 million from Bangladesh's central bank )
Why such a generalized interest for BlockChain?
>> could reduce the UNIT COST of a trade
>> could reduce mutualized costs, improve security & reliability of Back
Offices
BUT, what most fail to realize is that the original blockchain structure
is superfluous in a trusted environement
Blockchain in banking – Business Intelligence

7. |DATE 12/07/2016 P.7
C1 |
Life Cycle of a trade (in a nutshell)
Blockchain in banking – Post-Trading

8. |DATE 12/07/2016 P.8
C1 |
Complete Clearing by ClearingHouse (=CCP)
Margins: initial margin and daily variation margins (=collaterals)
Initial margins as a provision for counterparty default
Blockchain in banking – Post-trading in a decentralized (OTC) market

9. |DATE 21/06/2016 P.9
C1 |
Clearing workflow in practice – how matching platforms intervene
Necessary for (data)
harmonization between B.O of
different institutions
Blockchain in banking – Clearing in details

10. |DATE 12/07/2016 P.10
C1 |
PoC on FX spot/fwd – March 2016
Blockchain in banking – Reverse-engineering Traiana/Axoni PoC

11. |DATE 12/07/2016 P.11
C1 |
Post-trade events could be automatically handled by Blockchain as
orchestrator/ trusted notary with smart contracts
1. Trade notices, confirmation and allocation
2. Collateral management (=margin calls) + funding
3. Corporate actions (dividend, interest,stock split, merger, name change, redemption, tax reclaim..)
4. Regulatory reports
5. SWIFT messaging
6. Final settlement procedure..
Blockchain in banking – Reverse-engineering of Traiana/Axoni PoC

12. |DATE 12/07/2016 P.12
C1 |
Transparency/Confidentiality : what is acceptable ? End-user trade flow,
aggregation at D level..?
Blockchain in banking – Right level of transparency ?