DLT Not Ready for Prime Time, Claims New Study

Blockchain, FinTech, Innovation, Investing, News | May 2, 2017 By:

A new position paper from interbank messaging network SWIFT and technology consultant Accenture claims distributed ledger technology is not quite ready to be applied at the scale required by the financial industry.

“While there are promising developments in each of these reqruiements, significant extra R&D work is needed in all these domains before DLT can be applied at the scale required by the financial industry,” the paper claimed.

Earlier this year, SWIFT was testing the use of blockchain technology for cross-border payments and settlements by banks.  The initiative was designed to explore the streamlining of interbank payments, which SWIFT currently dominates. Banks using its current methodology can only monitor the progress of a transaction by accessing overseas accounts via end-of-day statements and credit and debit reports, while blockchain promises near real-time reports. SWIFT has been targeted by a number of cyber-attacks, including the Bangladesh state bank heist allegedly engineered by North Korean hackers.

SWIFT and Accenture claimed it conducted an assessment of existing DLTs in order to contrast the current technologies with the requirements that apply to any new solution that seeks to be broadly adopted by the finance industry, including such issues as security, reliability, resilience, legacy integration and standardization. The investigation focused on operational matters and not legal implications, and mostly covered inter-institutional use cases where SWIFT is being used.

Clearly, DLTs have the capacity to open up considerable opportunities for the financial industry,” the paper conceded.  “However, DLTs emerged from the consumer-to-consumer (C2C) market with the exchange of cryptocurrencies as a decentralized method of value transfer without third-party intermediaries. Evidently, the wider financial industry has an altogether different set of requirements than the application of individual consumers seeking alternative methods of value transfer.”

The paper said the DLT industry needed stronger governance, better data controls, more compliance with regulatory requirements, better standardization, interoperability and backward compatibility, and identity framework, more ability to resist cyber attacks, and better reliability and scalability.