Banks all over the world have shown a great interest in distributed ledger technology. Implementing this technology proves to be a bit problematic, though. Members of the Swift cooperative have noticed the concept holds true, but a working solution will not come to market soon. A disappointing outcome, but it is evident there is still a lot more work to be done.

It remains unclear what the future holds for distributed ledger technology. On paper, it is one of the most revolutionary technologies the banking sector has ever seen. Turning that promise into a working solution is a different matter altogether. Even though 34 banks joined Swift’s DLT sandbox to determine the viability of this technology, the end result is not what expected. All parties successfully completed the proof-of-concept for Nostro reconciliation.

The Future of Distributed Ledger Technology

At the same time, there is no plan to turn this into a real-world product as of right now. A proof-of-concept merely validates the idea of using this technology. So far, the results are promising, but the research stage is far from over. The underlying Hyperledger Fabric distributed ledger technology holds up quite well in this regard. By using a private confidential ledger, all participants could record Nostro-related transactions accordingly.

Swift head of R&D Damien Vanderveken comments:

“The PoC went extremely well, proving the fantastic progress that has been made with DLT and the Hyperledger fabric in particular. The DLT sandbox enabled us to control access, to define and enforce user privileges, to physically segregate confidential data and store it only with the relevant parties while supporting a strong identity framework by linking all participants to their BIC, and having all keys signed by a Swift certification authority.”

A workable product based on this distributed ledger technology requires a lot of work. So much even that all account services need to migrate to real-time liquidity reporting and processing. Back office applications need to be re-engineered as well to benefit fully from this new technology. It is evident this is not feasible under the current conditions, as the costs and efforts are quite steep. Additionally, the technology needs to progress further as well.

Header image courtesy of Shutterstock


About Author

JP Buntinx is a 30-year old FinTech and Bitcoin enthusiast living in Belgium. His passion for finance and technology made him one of the world's leading freelance Bitcoin writers, and he is working to achieve the same level of respect in the FinTech sector.

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