“Among the many technologies that are driving digital innovation, blockchain has the potential to be truly transformative for financial services and markets. The Blockchain Observatory and Forum will monitor developments and also inform our policy making.”
Valdis DombrovskisEU Commission Vice-President for Financial Stability, Financial Services and Capital Markets Union
“I see blockchain as a game changer and I want Europe to be at the forefront of its development. We need to establish the right enabling environment – a Digital Single Market for blockchain so that all citizens can benefit, instead of a patchwork of initiatives.”
Mariya Gabriel EU Commissioner for The Digital Economy and Society
“Technologies like blockchain can help reduce costs while increasing trust, traceability and security. We want to build on Europe’s substantial talent base and excellent startups to become a leading world region that will develop and invest in the rollout of blockchain.”
Andrus Ansip Vice President of the Commission and Commissioner for Digital Single Market
Distributed Ledger Technology refers to a novel and fast-evolving approach to recording and sharing data across multiple data stores (or ledgers). This technology allows for transactions and data to be recorded, shared, and synchronized across a distributed network of different network participants. This network can be a publicly accessible database or may be restricted to a specified group of users. From a technical perspective it can be used, for example, to record transactions across different locations.
Blockchain: a particular type of distributed ledger
The technology that makes this possible is often referred to as “blockchain”, which refers to the technology that makes a shared ledger possible to run. Namely, all individual transactions are stored in groups, or blocks, which are attached to each other in chronological order to create a long chain. This long chain is put together using a mathematical formula – complex cryptography – which ensures the security and integrity of the data within a network in an immutable manner. This chain then forms a register of transactions that its users consider to be the official record.
Due to its potential to make the financial sector more efficient, resilient and reliable, the financial industry has showed great interest in Distributed Ledger Technology. Although discussions are still at a very early stage, DLT is considered able to substantially change the way financial markets are operating today, promising important cost savings and efficiency gains in particular in the post-trade space. Regulators and law makers around the world, concerned with the regulatory implications of the technology, are increasingly joining the debate.
EBF position on Distributed Ledger Technology
EBF believes that the DLT has the potential to contribute positively to citizens’ welfare and economic development. It has a considerable impact on banking industry infrastructures, roles and functions of financial intermediaries, back office related securities processes, communication, interoperability and competition.
DLT will also help to:
improve transparency over transactions
enable new and smart ways to exchange information between entities and supervisors
increase flexibility and efficiency for both industry and authorities
A multitude of industry initiatives are under way to develop use cases on DLT, among which several important collaborative cross-industry initiatives, including:
Hyperledger Project: The Hyperledger initiative was launched in December 2015. The project is led by the Linux Foundation and involves bothmajor financial institutions and large technology firms. The idea is to provide an environment to identify and address important features for a cross-industry open standard for distributed ledgers. Members include well-known blockchain start-ups such as the R3 Consortium (see below) and Digital Asset Holdings (DAH).
Alastria: (to add) World’s first nation-wide, multi-sectoral, enterprise grade, permissioned Blockchain network made in Spain.
Project Stella: a joint research effort by the Bank of Japan (BOJ) and the European Central Bank (ECB) on distributed ledger technology (DLT) for financial market infrastructures).
R3 Consortium: R3 is a New York based start-up which leads a consortium partnership with over 40 of the world’s largest banks. It aims to provide a forum for the creation of common standards for the use of DLT in finance and create blockchain applications. Unlike the other two initiatives, R3 is a commercial venture.
Post Trade Distributed Ledger group(PTDL): PTDL is a London-based industry group that aims to provide a forum where financial institutions can explore and share ideas about how DLT can transform the post-trade space. The membership is diverse and includes nearly 40 financial institutions and prominent market infrastructures.
A more detailed overview of industry initiatives is available here (financial news).
The European Blockchain Observatory – EU Commission
The European Commission has launched a EU Blockchain Observatory and Forum with the support of the European Parliament. The EU Blockchain Observatory and Forum will identify relevant existing and emerging blockchain initiatives, monitor and analyse blockchain developments and trends, as well as the potential opportunities and challenges for Europe as pillar of the Digital Single Market project. By bringing together Europe’s leading stakeholders, practitioners and experts, the Blockchain Forum will facilitate experience sharing and reflections, animate and lead debate engaging with blockchain technologists, innovators, citizens, industry and other organisations and stakeholders.
The Forum will be supported by two Working Groups:
Blockchain Policy and Framework Conditions: this Working Group should look particularly into cross-cutting issues in order to establish policy, legal and regulatory conditions needed to promote predictability and legal certainty, both necessary for larger-scale deployment of blockchain applications.
Use Cases and Transition Scenarios: this Working Group will focus on the most promising use cases, particularly with a public sector angle.
The EBF is the voice of the European banking sector, bringing together national banking associations from 45 countries. The EBF is committed to a thriving European economy that is underpinned by a stable, secure and inclusive financial ecosystem, and to a flourishing society where financing is available to fund the dreams of citizens, businesses and innovators everywhere.
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