The Depository Trust and Clearance Corporation, DTCC, has announced plans to apply the blockchain technology to facilitate credit fault swaps while wo
The Depository Trust and Clearance Corporation, DTCC, has announced plans to apply the blockchain technology to facilitate credit fault swaps while working in collaboration with big-name corporations like IBM, R3CEV, and Axoni. R3CEV and Axoni are competitors in the blockchain industry, and both firms are backed by multi-billion dollar funding from reputable financial institutions. Axoni has been on the radar of Goldman Sachs and JP Morgan since December 2016, and the firm has also received another $18 million funding from other organizations which includes the likes of Wells Fargo and ICAP. R3CEV and Axoni will link up to develop DTCC’s credit fault swap system in conjunction with IBM.
In the partnership, IBM will provide a platform which the two startups will use to develop the planned system. Michael Bodson, the CEO and president of DTCC, said that some tests had been conducted to determine the efficiency of the blockchain system when it comes to processing large volumes of credit swap. Mr. Bodson offered emphasis that blockchain system can help to reduce DTCC’s costs of handling complex processes significantly. Thompson Reuters, a member of the R3 consortium, disclosed in one of its recent publications that DTTC has been working with several finance institutions to conduct tests using the existing blockchain technologies.
Optimistic test results have convinced Mr. Bodson and the project’s development team about the effectiveness of the blockchain technology. He said that the tests proved that distributed ledger technology can handle various applications needed for credit default swaps, and also showed that the processes could be done at significantly lower costs using the existing infrastructure. After implementation, the credit default swap based on blockchain technology will process figures up to $11 trillion on a yearly basis. The news means that the system will be the biggest ever in the history of the blockchain technology.
The project is being seen as a platform through which Axon can prove its financial worth to many potential investors. Meanwhile, WSJ analysts have raised concerns on Digital Asset, a firm founded by JP Morgan executive, Blythe Masters. The analysts say that Blythe and her firm were the first to have a view of the blockchain technology and its application to credit default swapping. WSJ further revealed Digital Asset was axed out by Axoni for the bid to win DTCC’s contract and collaboration with R3CEV. The project marks a significant step in realizing the full potential of the blockchain technology, and it will only be a few years before the blockchain technology takes over other business fields.