Goldman and Microsoft are testing Blockchain’s future in financial services

More firms are joining forces to harness blockchain – and distributed ledger technology – to transform financial markets.

The list includes Goldman Sachs Group Inc, Microsoft Corp, Deloitte and others, which announced in an announcement that it would launch the Canton Network and begin testing new features in July.

IN announcement Tuesday (May 9), the firms said the network would provide “a decentralized infrastructure” that connects independent applications built with Daml, Digital Asset’s smart contract language. The end result, as the companies said, is to create a “network of networks” linking together a range of firms and financial activities.

According to the release, Canton will help financial markets “interact with the proper governance, privacy, permissions and controls required for highly regulated industries” with “a more secure and reconciliation-free environment where assets, data and cash can be freely synchronized across applications.”

Payments without risk?

In a use case described Tuesday as the Canton Network takes shape, participants noted that a digital bond and a digital payment can be assembled across two separate applications into “a single atomic transaction, guaranteeing simultaneous exchange without operational risk.”

The simultaneous exchange, we note, and the interoperability suggest blockchain’s appeal in finance. Among the Canton participants is the Digital Dollar Project, the non-profit organization centered on exploring the development and use of a US central bank digital currency (CBDC). Various efforts have been underway to explore CBDC constructions using blockchain, exemplified by the Federal Reserve Bank of Boston’s collaboration with the Massachusetts Institute of Technology.

As reported here in a Blockchain Tracker last year, we found that in fact more than 37% of businesses said they currently use blockchain for cross-border transactions.

It may be that it is the “rails,” the infrastructure underpinning the flows of digital data and assets that survive any debate over whether cryptos, digital dollars, or stablecoins—and even tokenized deposits—should be the form factors of these payments.

Some high profile blinders

There is also some evidence that certain areas of financial services can be improved by blockchain – although high-profile blockchain projects have been shut down in recent times as development time stretched due to significant investment.

Trade finance stands out here, with trade finance platform Marco Polo going bankrupt in Ireland earlier this year. In the US, Symbiont, a blockchain FinTech, went bankrupt at the end of last year. And as reported by the Financial Times at the end of last year, the Australian Stock Exchange scrapped a platform in November last year that was seven years in the making to upgrade the clearing and settlement of shares to a blockchain-based platform. We.trade, a consortium of 12 banks embracing blockchain for trade finance, declared insolvency last June.

Earlier this year, The IMF wrote that while “crypto-assets have been more of a disappointment than a revolution for many users,” the technology behind crypto (which would include the blockchain), platforms could allow banks and other regulated financial institutions to trade central bank reserves (and conduct economic activities) easier across borders. “Thanks to the simple ledger and programmability, currencies can be exchanged simultaneously, so that one party does not bear the risk of the other going away.”