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UBS And Others Working On Blockchain Pilot To Meet The Requirements Of New EU Banking Rules

UBS And Others Working On Blockchain Pilot To Meet The Requirements Of New EU Banking Rules
A block chain platform that would be able to address the impeding trade data standards that the European Union wants to bring in next year is being tested by multiple financial companies are is being led by Swiss bank UBS.
Essentially a shared and incontrovertible database that is maintained through an internet based network of computers is the underlying technology that has driven cryptocurrencies like bitcoin.
The Markets in Financial Instruments Directive II that the EU wants to enforce is aimed and enhancement of transparency of the financial market and the stricter rules are part of that plan.
“The project is getting market participants to collaborate using blockchain to improve regulatory reporting,” Peter Stephens, head of blockchain at UBS, said.
Examination of data accuracy and consensus in an Ethereum blockchain is being tested by financial companies like the Swiss stock exchange SIX, Credit Suisse, KBC and Barclays.
Vitalik Buterin, a 23-year old programmer, was the inventor of Ethereum which is blockchain type which can be put to use for creation of distributed applications. The attempt to make it easier to use Ethereum by a number of large companies and industry consortia is being made to make it easier to rationalize some of their procedures.
“The point is to allow us to come to a consensus for this noncompetitive reference data which is essential for trade reporting purposes,” Stephens said.
Stephens said that a platform for financial firms would be made available by this attempt which would run a “quality check” of their own data in comparison to data from others and will eliminate the need of replacement of the processes that is followed by blockchain. Not only detection of anomalies but also resolving them could be the next aim of the pilot phase, said UBS Head of Data Christophe Tummers.
Information that would be able to identify clients, issuers and counterparties of trades would need to be obtained by banks under the new EU rules, set to come into force on Jan. 3, 2018, in addition to the financial institutions requiring to disclose more data to regulators.
Financial institutions, for example, would need to collect the Legal Entity Identifier (LEI), which is an exclusive code of 20-digits that essentially is able link some crucial data related to a company or legitimate entity like the name, its location, the industry it is operational in and the regulatory data, from clients before they can make any forms of businesses that would need regulatory reporting. This one of the crucial elements of the new banking rules of the EU.
With the block chain technology, companies would be able to use the private blockchain to anonymously provide data which can then be checked for any irregularities when compared to other such submissions in the same LEI, in this way companies would be able to apprise or homogenize its own submissions.
“This use of blockchain to solve real-world regulatory requirements in a cost effective way is very appealing,” Credit Suisse’s head of blockchain strategy, Emmanuel Aidoo, said.

Christopher J. Mitchell

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