Blockchain revolution

www.infosys.com
THE BLOCKCHAIN REVOLUTION
HOW BLOCKCHAIN AND DISTRIBUTED LEDGER TECHNOLOGY
WILL TRANSFORM FINANCIAL SERVICES

Foreword
Executive summary
Introduction
How blockchain works
Cryptocurrencies and the blockchain
Applications of blockchain in financial
Services and banking
Capital Markets
Insurance
Asset Management
Other services
Start-ups with new services
The benefits of blockchain
The barriers to blockchain adoption
The way forward
CONTENT
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External Document © 2018 Infosys Limited
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Infosys is pleased to be publishing this in-depth report on
blockchain, one of the key strategic and technology issues
facing financial services firms today. This is the second in a
series of reports, in which we will look at critical topics, with
a focus on case examples from the industry to highlight the
wide range of developments that are taking place. Infosys
is ideally placed to contribute to the debate as it works with
clients across the world in financial services, helping to deal
with their challenges and solve real problems.
The report highlights the acceleration in the deployment
of blockchain technology across the financial services
industry. Leading banks, insurers and asset managers are
joining industry consortia, working on multiple projects,
and investing in related start-ups. In the short term,
blockchain applications can deliver real cost savings. In the
longterm,thetechnologycanhaveamoreprofoundimpact
on the industry - so having a clear vision of how blockchain
technology can benefit an organisation is critical.
FOREWORD
MohitJoshi
President–InfosysLimited
Infosys

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Blockchain technology has evolved significantly from the
original concept of Bitcoin which was established in 2009.
While Bitcoin and other cryptocurrencies get many of the
headlines, the application of blockchain across financial
services is now advancing steadily.
It has taken a while for the industry to get organised. The
first major banking consortium set up to explore blockchain
applications was R3 in 2015. R3 began with nine members
and now has more than 100 members including trade
associations and technology firms as well as industry
participants. In the insurance industry, it was in 2016 when
the B3i consortium was set up by a group of leading insurers.
Investment in blockchain start-ups, including by banks and
insurers, began to take off in 2014 and, after plateauing
to some extent in 2016, picked up again in 2017 reaching
approximately US$1bn. Traditional equity financing of new
ventures has also been supplemented by a massive surge
of investment in initial coin offerings (ICOs) from blockchain
start-ups. It is essential for established industry players to
work with start-ups in the blockchain space because of the
range of innovations taking place across the ecosystem.
Media focus on cryptocurrencies has become intense with
nearly 1,500 cryptocurrencies in existence (many related
to specific ICOs) and with the market value of Bitcoin in
circulation reaching over US$200bn at the end of 2017.
Central banks have started to research and show interest in
the idea of issuing a central bank digital currency although
at present they remain cautious about the idea except for
use in settlement activities between banks.
The technology underlying cryptocurrencies, i.e. blockchain
or distributed ledger, has evolved rapidly in the past
two years to make it enterprise ready. The requirements
of financial institutions for privacy and transparency,
performance and scalability, and a controlled governance
environment, has made this evolution necessary.
Organisations like the Enterprise Ethereum Alliance have
been set up to work on making blockchain applications
enterprise ready (in this case applications based on the
Ethereum blockchain protocol).
In this report we have set out twelve real case examples
from across banking, capital markets, insurance and asset
management. Most of these are either live applications or
will go live in 2018. The range of use cases is significant and
illustrates how the technology will impact many processes
in the industry and all participants.
The primary reason that implementation is starting to move
soquicklyisthatthecostsavingsarerelativelyhigh.Industry
participants are reporting cost savings of around 30% when
EXECUTIVE SUMMARY

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blockchain is applied to existing processes, whether that is
the clearing and settlement of a credit default swap, or the
setting up of a trade finance contract. Reduction of risk and
fraud are also reported as being very important benefits.
Barriers to adoption remain. Management understanding
and buy-in are critical. The need for multiple participants
in most projects can slow down development. Technology-
related issues such as performance and scalability, while
being resolved, are still important factors.
Financial services firms should be in no doubt that
blockchain technology is going to have a significant impact
across the industry, so they must be prepared and actively
engaged in the range of developments taking place.
SomeKeyTakeaways
Blockchain applications are
proliferating across
financial services
Rapid technology developments
are taking place to meet
enterprise requirements
The key benefit of cost
saving is being proven by
multiple pilots
Industry participants
are being forced to work
together and with start-ups
Central banks are becoming
interested in digital currencies but
nothing imminent

6

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Two months after the collapse of Lehman Brothers in October 2008, an event which triggered the global financial crisis, a
whitepaper was released by Satoshi Nakomoto explaining the concept for a new type of electronic cash. It is worthwhile
reminding ourselves of what this concept was. According to the Bitcoin whitepaperi
:
This was a simple concept which relied on complex mathematics and behavioural dynamics to make it work. Less than 10
years later, the Bitcoin currency had grown to a market valuation of over US$200bn (as of the end of 2017); the technology
and concept behind Bitcoin, given the name‘blockchain’, has become one of the most important technological developments
since the establishment of the Internet. The term‘distributed ledger technology’is also sometimes used instead of blockchain.
Industries of all kinds are finding applications for blockchain, but the impact on financial services is likely to be particularly
high. According to Deutsche Bank Wealth Managementii
:
“A purely peer-to-peer version of electronic cash would allow online payments to be sent
directly from one party to another without going through a financial institution. Digital
signatures provide part of the solution, but the main benefits are lost if a trusted third party
is still required to prevent double-spending. We propose a solution to the double-spending
problem using a peer-to-peer network. The network time stamps transactions by hashing
them into an ongoing chain of hash-based proof-of-work, forming a record that cannot be
changed without redoing the proof-of-work.”
“Blockchains and connected cryptocurrencies are probably the inventions
with the most disruptive character for the finance sector and the public since
the invention of the internet. Blockchain has the potential to revolutionize
industries from the bottom-up and also to create new business models...”
INTRODUCTION

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GlobalEquityInvestmentinBlockchainStart-Ups(US$m)
It took a while for the industry to get organised. In 2015,
nine of the largest banks in the world formed a consortium,
called R3, with the objective of developing advanced
distributed ledger technologies specifically for the financial
services industry. The aim of the project was to develop
commercial applications and to establish consistent
standards and protocols, in order to achieve greater
adoption and create a network effect. This highlights one
of the challenges for the wide adoption of blockchain –
the need to have a network of users for an application and
hence the need for industry participants to work together.
In the insurance industry, the B3i consortium was formed in
2016 with five members initially.
The equity investment in blockchain start-ups has also
taken off in the last few years. According to CB Insights,
investment was just US$98m in 2013 but has risen to
approximately US$1bn in 2017. This is traditional equity
financing but in the blockchain space the concept of an
initial coin offering (ICO) emerged in 2016 and 2017 (see
box). In 2017, there were hundreds of ICOs with a notional
value of over US$5bn.
98
2013 2014 2015 2016 2017est
357
525 545
1,000
Source: CB Insightsiii

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It is essential for established industry players to work with
start-ups in the blockchain space because of the range of
innovations taking place across the ecosystem. Some banks
have been active investors in blockchain start-ups as they
seek to learn how to benefit from the new technologies.
Citi has been the most active investor. It has invested
in companies with which it is also working on specific
projects. Citi’s investments indicate a particular interest in
capital markets and payments solutions:
R3: Originally set up as a consortium of banks, R3 is now
an independent company with investment from many of its
members. It now describes itself as an enterprise software
firm which is developing Corda, a distributed ledger
platform designed specifically for financial services.
Digital Asset: A group which describes itself as
the leading provider of distributed ledger technology
to regulated financial institutions and is the owner of
Hyperledger. A key project is the implementation of
blockchain with the Australian Stock Exchange for post-
trade settlement.
Axoni: Product offerings include distributed ledger
technology deployments, bespoke smart contract
development and analytics tools. Axoni has completed
a successful pilot for the management of equity
swap contracts with banks like Citi, JP Morgan and
Goldman Sachs.
The impact of blockchain on financial services is likely to be
significant although the timing of that impact is somewhat
uncertain. According to Dan Tapscottiv
, in an interview
with the McKinsey Quarterly in 2016, “the blockchain is
the biggest innovation in computer science…and the
financial services industry is up for serious disruption or
transformation, depending on how it approaches this issue.”
However, Marco Iansiti and Karim R. Lakhani, writing in
the Harvard Business Reviewv
, argued that blockchain
is a “foundational” and not a “disruptive” technology
and that blockchain-led transformation of business is
still many years way. According to Iansiti and Lakhani,
“The process of adoption will be gradual and steady, not
sudden, as waves of technological and institutional change
gain momentum.”
What is an initial coin offering?
An initial coin offering (ICO) involves the issuance of a new coin or token in exchange for fiat currency
or other coins, in order to finance a new venture. It is a form of crowdfunding but rather than receiving
shares in the company the investors receive coins. On completion of the ICO, the coins will most likely
be tradeable on cryptocurrency exchanges. Typically, the new coins will have some economic rights
attached such as a share in the revenues of the business once it is operational. ICOs do not have the same
regulatory requirements as a normal issuance of shares to investors, although regulators are considering
how they should be controlled. In some jurisdictions they have already been banned. Another advantage
for the issuer is that no fees are required to be paid to intermediaries for raising capital.
Cobalt: Offers a private peer-to-peer network that
significantlyreducespost-tradecostsandriskforinstitutions
operating in the FX markets. The system is being tested by
several banks and traders in the UK, including Citi.
Chain: A technology company that partners with
organizations to build, deploy, and operate blockchain
networks. Developer of the open source Chain Protocol,
which powers the Chain Core blockchain platform.
Working with Visa on a system for high value payments
for corporates.

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In this report we will describe how blockchain works, and
some of the different technological developments which
are taking place to make blockchain applications possible
in the financial services industry. We will then explain some
of the developments in cryptocurrencies and how this
might impact the industry as central banks become more
involved in potential digital currency opportunities.
There have been a large number of pilot developments of
blockchain applications in the last two years. We will review
a number of the use cases across banking, capital markets,
insurance and asset management industries, focusing on
applications which have gone live or are likely to go live in
the near future. Our report will also set out the main benefits
of blockchain for the industry and the main challenges for
implementing blockchain applications.
Source: Innovation in Retail Banking 2017, Efma-Infosys Finaclevi
1.0 2.0 3.0 4.0 5.0 6.0 7.0
3.5
4.8
5.2
5.5
Cyberand
InformationSecurity
Advanced
Analytics/BigData
OpenBankingAPIs
Blockchain
ImportanceofTechnologiesBasedonLevelofCurrentInvestment
(Onascaleof1-7where1isverylowand7isveryhigh)
The views of bankers remain somewhat mixed. Research
for the Efma-Infosys Finacle report, Innovation in Retail
Banking 2017, found that blockchain was much less
important in investment terms currently than for example
advanced analytics/big data or open banking APIs (see
chart). The study also found that 64% of bankers do not
expect the impact of blockchain on their organisations to
be significant for three or more years.

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HOW BLOCKCHAIN WORKS
The term blockchain has been adopted to describe a
network platform which is based on a distributed ledger,
uses cryptography to secure the ledger and the transactions
in it, and relies on the consensus between participants in
the network to validate transactions before they are entered
In the Bitcoin blockchain, proposed transactions are
communicated across the network and, if approved by
consensus, are added to a block of transactions. The block
is then secured by one of the so-called “miners” on the
network solving a mathematical puzzle, for which they are
rewarded in Bitcoin. The reward provides the incentive for
the participants on the network to continue working on
verifying transactions and securing the blocks. As part of
the securing mechanism, each new block is linked to the
previous block in a way that cannot be tampered with. The
in the ledger. The ledger is designed to be append only
and cannot be amended. A permissionless network is one
where anyone can join the network, whereas a so-called
permissioned network is one which limits participation to
selected parties.
secured block is added to the distributed ledger. Hence, a
chain of blocks, or blockchain, is created.
The Bitcoin cryptocurrency was the first blockchain
developed. As described earlier it was set up as a peer-to-
peer network for electronic cash. Bitcoin was followed by
the second most significant development in blockchain
technology, called Ethereum. This is also a decentralized
blockchain platform and was launched in 2015 by the
Ethereum Foundation. The key difference of the Bitcoin
Distributed
Ledger
ConsensusCryptography
Blockchain is a database
that is shared and
synchronized across
multiple parties on
a network without
using a central party
and proliferates across
financial services
Techniques for secure
communication,
preventing third parties
from altering the blocks
in a blockchain once the
block has been secured.
A mechanism for parties
on a network to agree
on appending new
transactions and blocks to
the distributed ledger.

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platform is that Ethereum allows for smart contracts (see
box) to be implemented on the distributed ledger.
Ethereum is also set up so that applications can be built
on top of it. These apps (referred to as DApps) run on the
Ethereum blockchain and include anything from games to
job platforms. Examples of financial services apps built on
Ethereum are Smartex (for transacting in digital currencies)
and Melonport (a portal for asset management).
The problems for financial services companies with the
public blockchains of Bitcoin and Ethereum have been
identified primarily as:
• Permission and governance
• Privacy and transparency
• Performance and throughput
The Bitcoin and Ethereum blockchains are described as
permissionless, meaning that any participant can join the
network, and then has access to the whole distributed
ledger and the transactions taking place. It is clear that for
an application like Real-Time Gross Settlement (RTGS) in
the financial system (see the example from Singapore on
Page 16), the central bank needs to provide a governance
framework for the participants even if it no longer has to act
as the infrastructure operator.
On a public blockchain, the identities of transactors are
protected by the use of public key encryption (PKI) but
this is not a sufficient level of privacy for many business
applications. The fact that certain transactions are taking
place can be identified. Again, private or “permissioned”
blockchainis neededinmanyfinancialservicesapplications.
At the same time, regulators may need transparency over
the transactions.
Both Bitcoin and Ethereum networks consume significant
amounts of power to operate. According to one sourcevii
,
in January 2018, the Bitcoin network was consuming
more power than New Zealand, and Ethereum was not
far behind. Developers are working on solutions to this
problem because the current situation is not sustainable as
the blockchain grows exponentially.
Performance is one of the other big issues for business.
According to Vitalik Buterin, the founder of Ethereum,
who wrote in January 2018: “The Ethereum community,
key developers and researchers and others have always
recognized scalability as perhaps the single most
important key technical challenge that needs to be solved
for blockchain applications to reach mass adoption.
Blockchain scalability is difficult primarily because a typical
blockchain design requires every node in the network to
process every transaction, which limits the transaction
processing capacity of the entire system to the capacity of
a single node.”
Consequently, developments have taken place, either
building on Ethereum or with new blockchain protocols, to
create solutions which are more applicable in the industry.
These include, amongst others, Quorum, Hyperledger
Fabric, Corda and xCurrent (see table below). Each of these
will have pros and cons for specific types of applications.
One of the objectives of the RTGS pilot in Singapore was
to make comparisons between different blockchainsix
. The
evaluation covered privacy, scalability and performance,
resiliency and finality.
What is a smart contract?
The term smart contract was coined by computer scientist Nick Szabo in 1994, who defined it as a set
of promises, specified in digital form, including protocols within which the parties deliver on these
promises. In the context of blockchain, smart contracts are written into the blockchain as a transaction
between parties and are immutable. The Ethereum blockchain, amongst others, has been designed
to allow the use of smart contracts and defines them as“applications that run exactly as programmed
without any possibility of downtime, censorship, fraud or third-party interference”viii

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“Ethereum’s intrinsically trusted system is the most promising solution for
enterprise blockchain adoption, given its maturity and multi-purpose design.
Privacy and performance improvements will be mandatory to achieve enterprise-
ready status and will be the focus of Enterprise Ethereum’s roadmap.”
ExamplesofDevelopmentsinBlockchainTechnologyfortheFinancialServicesIndustry
One of the current challenges facing the development
of multiple blockchains is that of interoperability. COMIT
(Cryptographically-secure Off-chain Multi-asset Instant
Transaction network) is an example of a solution to the
problem. COMIT enables instant transactions using
Quorum
(JPMorganetal)
Corda(R3)
HyperledgerFabric
(Hyperledger)
xCurrent(Ripple)
Quorum is a distributed ledger protocol for the financial services industry which allows for the privacy of transactions and
contracts. It is based on the Ethereum blockchain and is described as a‘minimalistic fork’. Hence it leverages the substantial work
of the Ethereum developer community but is an enterprise-focused version of Ethereum. It is ideal for any application requiring
high speed and high throughput processing of private transactions within a permissioned group of known participants.
Hyperledger is an open source solution which was developed for use in multiple industries.The Linux Foundation
hosts Hyperledger as a Collaborative Project. Hyperledger Fabric is one of the Hyperledger projects hosted byThe Linux
Foundation.The objective was to create solutions incorporating smart contracts, using a modular architecture, so that these
solutions could be‘plug-and-play’.
Ripple describes itself as an enterprise blockchain company which is specifically focused on the global payments industry.
xCurrent is Ripple’s enterprise software solution and makes possible instant settlement of cross-border payments. Using xCurrent,
banks can use real-time messages to confirm payment details and then initiate and settle transactions. xCurrent is based on a
rulebook which was developed with the support of the RippleNet Advisory Board (a network of banks and payment providers).
Corda is an enterprise-grade distributed ledger technology solution. It can be built on by third party providers who can then
operate applications (CorDapps) using the platform’s common code and protocols to ensure interoperability. Corda has been
developed by R3.The network of companies working with R3 to develop CorDapps has grown to over 60 and represent many
different industries and regions.
off-chain smart contracts which solves the problem of
double spending attacks. The system depends on liquidity
providers who act as payment hubs and nodes, and as
market-makersxi
Another important development has been the
establishment of the Enterprise Ethereum Alliance (EEA).
The EEA connects large companies, start-ups, academics
and technology vendors to learn from, and build on, the
Ethereum blockchain, and to define enterprise-grade
software capable of handling complex, demanding
business applications. According to the EEA,x

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Distributed
Ledger
Source: CoinMarketCap
* Bitcoin Cash is a split from the original Bitcoin currency, allowing a larger block size with the objective of speeding up
transactions. The split is described as a‘hard fork’.
Number of Bitcoin Transactions Per Day Source: CoinMarketCap
Cryptocurrencies with the Highest MarketValue as of 12th February 2018
CRYPTOCURRENCIES AND THE BLOCKCHAIN
The Bitcoin cryptocurrency was the first blockchain
application to have been developed. As of the end of 2017,
there were over 1,400 cryptocurrencies in circulation, with
a total market value, in US dollar terms, of over US$500bn.
The currencies with the highest total market value, as of
February 2018, are shown in the table below but note that
these values are extremely volatile.
Bitcoin was set up in 2009, and at the end of 2009 there
were around 150 Bitcoin transactions per day. In December
2017, the average number of transactions per day was
over 300,000 and the market value of Bitcoin in circulation
reached over US$200bn.
TotalMarketValue
($bn)
Bitcoin 148 708,000
Ripple 43 290,000
Cardano 10 32,000
Ethereum 85 263,000
BitcoinCash 22 57,000
TransactionsPerDay
(Approximate)

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Why so many coin types and what are they used for? Some
ofthecoins,likeBitcoin,areintendedtobedigitalcurrencies
that can be used for exchanging values in transactions
between parties, just like normal currency. Two examples
of this type are Dash and Litecoin. Another example is
IOTA which has been issued as a currency for use in trading
across the Internet of Things but also has technological
characteristics which make it viable for micropayments
(see box). Other coins have been issued in what is called an
‘initial coin offering’, related to the start-up of a particular
business. These coins or tokens are purchased by investors
but have limited rights and their value is based on what the
coins or tokens trade at.
Source: CoinMarketCap
A good example of this is Filecoin, which was the largest
initial coin offering in 2017, raising the equivalent of
US$250m from investors. Filecoin as a company has created
a decentralized market for storage, based on blockchain.
According to the company: “The Filecoin network achieves
staggering economies of scale by allowing anyone
worldwidetoparticipateasstorageproviders”xii
.Participants
on the network earn Filecoin by contributing storage to the
network. Filecoin can then be used to purchase storage
elsewhere on the network or can be traded with other
currencies through an exchange.
NumberofBitcoinTransactionsPerDay

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IOTA and the Internet of Things
IOTA is described as a cryptocurrency for the Internet of Things (IoT) industry. IOTA enables micropayment
transactions at virtually no cost, and hence opens up a range of potential new applications. The main
feature of this cryptocurrency is the tangle, a directed acyclic graph (DAG) for storing transactions. The
tangle differs from a blockchain structure and offers features that are required to establish a machine-to-
machine micropayment system. At its core, the tangle has the same underlying principles as blockchain:
it is still a distributed database on a peer-to-peer network, and it too relies on a consensus and validation
mechanism. However, in IOTA there are no‘blocks’in the classical sense.
There were around 800 ICOs in 2017, raising approximately
US$5bn. This was far more than was invested in blockchain
start-ups using traditional investment structures.
Regulators have become very concerned about ICOs and
in some countries they are now banned. Experienced and
successful investors are highly sceptical of the value of
any cryptocurrency. Speaking on CNBC in January 2018,
Warren Buffet said:“In terms of cryptocurrencies, generally,
I can say with almost certainty that they will come to a bad
ending. When it happens or how or anything else, I don’t
know. If I could buy a five-year put on every one of the
cryptocurrencies, I’d be glad to do it.”
There is a risk that a collapse in the value of cryptocurrencies
might disrupt the blockchain ecosystem. This could
happen if the development community is impacted
and if start-ups which are funded by ICOs are unable to
operate normally. However, we expect any disruption to be
temporary, and the work on the underlying blockchain and
distributed technologies for use in enterprise applications
will continue.
We are some way from seeing cryptocurrencies being
widely used, instead of normal currencies, for
buying everyday products and services. This is possible
in some situations with currencies like Bitcoin, but
adoption has been limited. Companies such as
Expedia and Microsoft accept payment in Bitcoin
for selected services. In Switzerland, the national
railway and some local municipalities accept payment
in Bitcoin.
Central banks, including the Bank of England and the
Bank of Canada, have considered the possibility of issuing
a digital currency for general use. However, there are no
immediate plans to do so for a range of reasons. According
to the Bank of England: “A Central Bank Digital Currency
(CBDC) may introduce additional risks to stability by making
it easier for customers of commercial banks to switch from
deposits – even those protected by the Financial Services
Compensation Scheme – to an asset that is perceived
to be completely risk-free (money at the central bank).
Consequently, if a significant proportion of consumers
moved to a CBDC, this may reduce the liquidity, funding
and credit provision of commercial banks. These potential
impacts, which could fundamentally change the structure
of the financial system, must be weighed against any
benefits for financial stability.”xiii
This is not to be confused with the use of a central bank
digital currency for real-time gross settlement (RTGS),
something which the Monetary Authority of Singapore
has been experimenting with. In November 2017, the
MAS announced the results of a pilot programme which
involved testing the use of a digital currency for RTGS on
three different blockchain platforms: Corda, Hyperledger
Fabric and Quorum. This has provided the most significant
comparison to date of the different technologies, and the
implications for a core activity like RTGS in the financial
system. The pilot was considered a success in terms of
learning. However, no immediate plans were announced to
take this pilot forward in Singapore.

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The range of applications of blockchain in financial services
is growing all the time. Across banking, capital markets,
insurance and asset management there are numerous
APPLICATIONS OF BLOCKCHAIN IN
FINANCIAL SERVICES
pilots in progress and more and more solutions going live.
Some of the services which are already in operation, or are
planned to launch in 2018, are highlighted in the box below.
SomeoftheBlockchainSolutionsLiveorGoingLivein2018
Payments
Credit Default Swaps
Investment Funds
Reinsurance
Ripple and three banks went live in 2017 with a
cross-border payments service for corporate payments
and retail remittances.
The B3i consortium will go live in 2018 with a
blockchain solution for Property Catastrophe Excess of
Loss reinsurance contracts.
The Depository Trust and Clearing Corporation will
implement a blockchain solution for credit default
swap settlement in 2018.
The IZNES blockchain platform for fund
administration, developed by SETL and four asset
management firms, went live in January 2018.

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There are two types of solutions which are coming into
operation and we have set out examples from across
the industry below. The first type is the application of
blockchain by existing industry participants to re-engineer
an existing service or process, such as cross-border
payments. The second is the launch by new competitors in
the market of services based on blockchain solutions, often
funded by an initial coin offering and linked to the use of
cryptocurrencies.
The re-engineering of existing services or processes is
mostly being done by consortia of industry participants:
banks, insurers or asset managers. Examples from the
banking and insurance industry are the R3 and B3i
consortia. R3 was formed in September 2015, with an
initial with nine members. By the end of 2016 there
were over 70 members and by the end of 2017 there
were over 100 members including regulators, trade
associations, professional services firms and technology
companies. R3 and B3i are formal consortia which are set
up as independent companies and, in the case of R3, now
financed by an equity issue. Other groups, such as the asset
managers working with SETL on the fund administration
platform IZNES (see below) are informally working together
on specific solutions.
Banking
Payments
Ripple
In November 2017, Standard Chartered, Axis Bank and
RAKBANK, announced the commercial launch of a cross-
border payments service using RippleNet. The banks will
use Ripple’s blockchain solution: for real-time, on-demand
corporate payments from Standard Chartered to Axis
Bank; and for retail remittance payments from RAKBANK
to Axis Bank beneficiaries. According to Gautam Jain,
global head of digitisation and client access, transaction
banking at Standard Chartered: “The successful launch
of our commercial cross-border payment service marks a
significant milestone in the financial industry’s progress in
applying distributed ledger technology for corporates.”xiv
Tradefinance
FinacleTrade Connect
The Infosys subsidiary, EdgeVerve Systems, announced
the launch of Finacle Trade Connect in November 2017
following testing with Emirates NBD and ICICI Bank. There
were 11 banks on the network at launch. The solution is
based on the EdgeVerve Blockchain Framework, which
is a permissioned distributed ledger that makes it easier
and quicker for banks to implement blockchain solutions.
The framework is ledger agnostic, so it can work with
leading blockchain platforms such as Bitcoin, Hyperledger,
Ethereum and Corda. According to Infosys: “The solution
allows for a single source of truth, increases trust and
provides a shared picture of granular trades enabling
efficient risk management. It enables higher automation
and increases transparency with real-time availability
of data.xv
Clearingandsettlement
Clearmatics
The Utility Settlement Coin (USC) project began as a joint
enterprise between UBS and Clearmatics Technologies in
late 2015. The USC is described by Clearmatics as an asset-
backed digital cash instrument using distributed ledger
technology and is designed for settlement activities in
global institutional financial markets. The USC is in fact a
series of cash assets, one for each major currency, each of
which can be converted at parity with a bank deposit in the
corresponding currency. The USC is fully backed by cash
which is held at a central bank. Several other major banks
joined the project in the second and third phases including
Santander, Deutsche Bank, Barclays and MUFG, among
others. The third phase is expected to be completed in
2018, following which the operations will go live.

19
CapitalMarkets
Clearingandsettlement
R3/IBM/Axoni
The Depositary Trust and Clearing Corporation (DTCC)
started work with IBM, Axoni and R3, aiming to go live by
the end of 2018 with a blockchain solution for the post-
trade processing of derivatives such as credit default
swaps. The solution will reduce the cost of derivatives
processing across the industry by removing disjointed and
redundant processing capabilities. It has been developed
with the support of various market participants and market
infrastructure providers. According to the DTCC: “The
solution will be deployed in phases, with an end-state vision
to establish a permissioned distributed ledger network for
derivatives, governed by industry-owned DTCC, with peer
nodes at participating firms.”xvi
Trading
Commodity Trading Consortium
A new independent entity, Commodity Trading
Consortium, which is backed by ING, ABN Amro, Société
Générale and various oil businesses, will go live by the end
of 2018 with a blockchain commodity trading solution.
The new blockchain platform will manage physical energy
transactions from end-to-end. This will mean digitising
the process and moving away from paper processes. The
solution is based on an experiment carried out in 2016 and
2017 by ING and others. In the experiment, the average
time for the bank in a transaction went from three hours
to 25 minutesxvii
. The efficiency of traders went up by 33%
and user experience evaluations were much higher than
expected. The risks throughout the process were also
reportedly much reduced.
Syndicatedlending
R3 (Fusion LenderComm)
R3 is developing a blockchain powered marketplace for
syndicated loans with seven global banks including BNP
Paribas, HSBC, ING, BNY Mellon and State Street. A pilot
has already been successfully completed and the platform
will cover 10% of the syndicated loan market when it goes
live next year. The objective of the new platform is to drive
transparency and efficiency in the syndicated loan market
by improving the way data is shared between agents and
lenders. According to ING: “The initial focus is to automate
the predominantly manual process of information sharing
andtoofferbetterinsightindealdata.Furtheralongtheline,
Fusion LenderComm will ensure an increase in speed and
cost reductions which may lead to smaller participations
in syndicated deals and new investment opportunities for
our clients.”xviii
Insurance
Reinsurance
B3i
In September 2017, B3i launched the market beta-testing of
a reinsurance blockchain prototype. The prototype covered
the core functionalities required to enable a distributed
smart contract management system for Property Cat XoL
(Property Catastrophe Excess of Loss) contracts. The plan
is for a first deployment into production in late 2018. The
market testing phase was carried out in October 2017
with 38 participants, each one able to act as an insurer,
broker or reinsurer on the network. A total of 885 contracts
were created and tested against 288 loss events, with 338
claims. The network was run on Hyperledger Fabric as its
distributed ledger technology platform and was deployed
across nine virtual machines on a cloud environment.

20
Marineinsurance
EY/Guardtime
In September 2017, EY and Guardtime announced the
launch of a blockchain platform for the marine insurance
sector. The platform was launched, after a proof of concept,
with A.P. Møller-Maersk A/S, ACORD, Microsoft, MS Amlin,
Willis Towers Watson and XL Catlin. According to EY: “The
platform can create and maintain asset data from multiple
parties; can link data to policy contracts; to receive and
act upon information that results in a pricing or a business
process change; to connect client assets, transactions and
payments; and to capture and validate up-to-date first
notification of data loss.”xix
The application runs on the KSI
(Keyless Signature Infrastructure) blockchain developed
by Guardtime.
Coverageverification
RiskBlock Alliance
The Institutes RiskBlock Alliance is an industry consortium
of insurance companies in the United States. In December
2017, RiskBlock announced the launch of a blockchain
solution for auto insurance coverage verification with
Nationwide, a leading insurer. The RiskBlock framework
uses blockchain to provide insurers with real-time
verification that insurance coverage is accurate and allows
law enforcement officers to verify proof of insurance
confidently and efficiently, without relying on paper forms.
It also provides insurers with a more efficient, cost-effective
way to offer proof of insurance. In due course, insurers
will be able to share trusted, third-party verified proof of
insurance with their mobile phones.
AssetManagement
Funddistribution
Fundsquare/InTech/KPMG
Fundsquare (a subsidiary of the Luxembourg Stock
Exchange), InTech (a subsidiary of POST Group) and KPMG
Luxembourg have collaborated to form FundsDLT. The
FundsDLT blockchain platform will allow asset managers to
sell funds through a new distribution channel, and at the
same time significantly reduce administration costs and
processing times. The platform can be applied to a wide
range of funds across different jurisdictions. According to
Natixis, one of the asset managers involved in the project:
“The successful execution means that, for the first time in
the fund industry, investors are using a blockchain based
platform to purchase real funds’shares with real cash.”xx
Marketdata
Symbiont
In December 2017, Vanguard announced the success of
an initial pilot for index data distribution using blockchain.
Vanguard worked with the Center for Research in Security
Prices and technology provider Symbiont for the pilot. In
the project, index data moved between index providers
and market participants over a decentralized database
instantaneously. Index data transmission is essential to
many operations for market participants but relies on
multiple parties and distribution channels. According to
Vanguard, by using the blockchain platform, “investment
managers will be able to instantly distribute, receive, and
process index data, resulting in better benchmark tracking
and significant cost savings”.xxi

21
Fundadministration
SETL
SETL, a UK based blockchain start-up, and four asset
management firms launched the IZNES platform in
September 2017 and went live in January 2018. The
platform developed by SETL is a proprietary, permissioned
blockchain called OpenCSD. It gives easy and quick access
to fund units for investors, asset managers, distributors and
wealth management advisers. The platform can manage
KYC processes, deal with subscriptions and redemptions,
settle transactions and record positions. According to SETL:
“Compatible with all distribution channels, IZNES reduces
transaction costs, increases transparency, and optimises
operational workflow. It will also enable new value-added
services to be developed.“xxii
OtherServices
Identitymanagement
Secure Key
Secure Key is building a digital identity and attribute
sharing network in Canada, backed by Canada’s major
banks (including CIBC, BMO, RBC, Scotiabank, Toronto
Dominion, National Bank and Desjardins). When
Verified.me is launched, customers will be able to use the
service via a mobile app, which will leverage the
trusted digital credentials they have with the bank
or any other partner of their choice. Other parties include
telecommunications companies, healthcare companies,
government et al-all working together in a collaborative
way to deliver a valuable digital identity service for
Canadians. The network is based on IBM’s blockchain
service, which itself uses Linux Foundation’s open source
Hyperledger Fabric.
KYC/AML
IMDA
In October 2017, three major banks and the Infocomm
Media Development Authority of Singapore (IMDA)
finished a successful pilot project for KYC using a blockchain
platform. The platform enables KYC information to be
recorded, accessed and shared on a distributed ledger and
it enables banks to collect, validate and share customer
information (with the customer’s consent) accurately,
efficiently and in a secure manner. The benefits include
reducing duplication of information and manual checks,
whilst also improving the quality of information being
stored. Information is encrypted on the distributed ledger
and can be easily validated by referring to government
registries, tax authorities and credit bureaus. Banks can
also store secured digital records of the validation process
on the shared KYC platform to streamline auditing and
regulatory reporting.xxiii
Start-upswithNewServices
Payments
TenX
TenX, a Singapore based company, is developing a debit
card and mobile wallet which allows users to pay with
cryptocurrencies, making the conversion to fiat currencies
at the point of transaction. The company graduated from
PayPal’s incubator in Singapore and has arrangements
with major card processing companies worldwide. Initially
limited to Bitcoin, Ether and Dash, the intention is to allow a
wide range of cryptocurrencies to be used on the platform.
To fund the development, an ICO was completed in June
2017 raising around US$80m. As of January 2018, the
PAY token which was issued in the ICO had a total market
value of around US$400m. Owners of the PAY tokens will
get a share of transaction revenue from TenX in exchange
for their investment. The interoperability of TenX across
cryptocurrencies is done by connecting blockchains,
leveraging on the COMIT network.

22
Financialinclusion
Stellar
Stellar Development Foundation’s (SDF) vision is an open
and affordable financial system where people of all income
levels can access simple-to-use, secure, and low cost
financial services. SDF also aims to empower developers
with useful technology to create financial products and
services for their communities. SDF — also known as
Stellar.org — was incorporated in 2014 as a non-stock, non-
profit corporation in the United States. SDF has no stock,
no profits given to individuals, and no private inurement.
Stellar’s solution is described by the company as: “A
distributed, hybrid blockchain that is fully open-source. It is
infrastructure that exists to facilitate cross-asset transfers of
value, including payments.”xxiv
Digitalbanking
BABB
BABB (Bank Account Based Blockchain) is building a new
bank in the UK based on blockchain technology. The
company launched an ICO in January 2018 to raise US$20m
in a first phase of fund raising. The ambition of BABB is to
offer a UK bank account to anyone in the world in order
to increase financial inclusion. It will be managed via a
mobile app, with access to a payment card. BABB is already
authorised by the FCA as an Authorised Payment Institution
(API) and will be applying for a UK banking licence in 2018.
Smart contracts will be used to operate BABB accounts.
The blockchain is used to store the ledger containing bank
account balances and related transactions. Any fiat funds
will be represented as a token in the blockchain.

23
THE BENEFITS OF BLOCKCHAIN
The biggest immediate benefit from adopting blockchain
technology is a reduction in operating costs. Some studies
have suggested cost savings of up to 30% are possible in
certain processesxxvi
.This may be ambitious but many of the
pilot projects that have been completed have announced
that significant savings are being achieved, for example:
Blockchain technology has wide application across the financial services industry as we have seen from the case examples in
the preceding section. Typically, the benefits will be greatest where there is a need forxxv
:
The DTCC project for the
settlement of credit default
swaps has reported savings
of 20-30%
The B3i project for
reinsurance contracts has
reported productivity gains
of up to 30%
The Commodity Trading
Consortium project
reported that efficiency
went up 33% for traders
Reconciliation of data across
multiple market participants
Reducing duplication where
businesses retain the same records
Auditability of records for
regulatory purposes or otherwise
Authentication of
counterparties and verification
of transaction origination

24
Comments from A.P. Møller-Maersk on the marine
insurance application illustrate some of the benefits for the
insurance industry:“Insurance transactions are currently far
too tedious and frictional. The distance between risk and
capital is simply too far. Insurers can use this blockchain
platform to improve their capital and gain efficiencies, with
increased transparency and reduced manual data entry or
reconciliation and administration costs.”xxvii
The potential for cost reduction in a typical financial
transaction, such as in micropayments, also opens up the
possibility of completely new business models. We have
seen this in the example of IOTA and the use of blockchain
to conduct transactions across the Internet of Things. Some
applications of blockchain also make it feasible to capture
and use vast amounts of new data.
After cost reduction, the next most important benefit
of blockchain is probably risk and fraud reduction. For
example, the Monetary Authority of Singapore (MAS)
test of distributed ledger technology for real time gross
settlement(RTGS)highlightedthebenefitsofdecentralising
keyfunctionstomitigatetheriskofacentralisedsystem,and
the benefits of cryptographic security and the immutability
of transactions and contracts. However, decentralisation
comes with challenges. According to the MAS: “To achieve
round-the-clock operations and manage multiple nodes
in a cloud environment, rigorous governance, policies and
operating models need to be put in place.”xxviii
Inabroadersense,theapplicationofblockchaintechnology
allows for the digitisation of more processes which has
bigger and longer-term implications for businesses of
all kinds.
Thebarrierstoblockchainadoption
As we have already shown, it took some time, from the
launch of Bitcoin in 2009 to the start of industry efforts
to experiment with blockchain technology in 2015 and
2016. Progress since then has been steady but slow as
most applications have needed to multiple participants to
co-operate and needed to be tested extensively before
going live. The principal barriers to the adoption of
blockchain technology in the financial services industry are:
• Management buy-in and understanding: Like most
innovations which can have a significant impact on a
business, buy-in and support from senior management is
critical for adoption. In the case of blockchain this can be
hampered by a lack of understanding of the technology,
and also perhaps a general distrust of cryptocurrencies
like Bitcoin.
• Need for multiple participants: As we have shown in
all of the use cases set out earlier, the implementation
of blockchain applications is mostly being done by
groups of financial services companies, working with
technology providers. Setting up and managing these
projects is a difficult challenge.
• Technology related issues: We have already highlighted
some of the challenges that the financial services
industry has with the core blockchain technology
as originally developed for Bitcoin and Ethereum –
including privacy, transparency, speed, scalability,
interoperability, etc. These challenges
are being tackled by a range of industry and
company initiatives.
• Return on investment uncertain: While we have
highlighted the early successes in achieving cost
reduction, no-one is yet being transparent about the
cost of development and implementation for blockchain
applications so the return on investment for these
projects is unclear. However, the fact that many pilots are
now going into live mode suggests that a positive return
is expected.
In some applications there are also regulatory challenges.
However, regulators are now fully engaged with
blockchain developments, so we would expect any
obstacles to be gradually be resolved.
In a broader sense, the adoption of blockchain technologies
and cryptocurrencies will be affected in different countries
and regions by a range of factorsxxix
. These include social,
cultural and economic factors. Some countries are showing
more willingness to experiment (e.g. Singapore or Israel).
In other countries there are driving factors like the benefits
of financial inclusion which can play a part in more rapid
adoption. However, there are also governments and
regulators who may find it difficult to accept the concept
of decentralization and peer-to-peer networks which could
slow down development.

25
While there may be some differences of opinion about
how disruptive blockchain technology might be for the
financial services industry, there is no doubt that the impact
will be significant, probably starting in 2018. The range of
applications being implemented illustrate the fact that
most facets of the industry will be affected.
Leading banks, insurers and asset managers have already
participated in multiple pilot projects, joined industry
consortia, and invested in blockchain start-ups. From
a strategic perspective, when you cannot forecast with
certainty, it is important to experiment and keep your
options open.
For financial services companies of all sizes, we
recommend the following steps:
• Make sure you are staying abreast of developments in
blockchain, both in terms of technology and in terms of
real world applications
• Ensure that senior management are fully up-to-speed on
developments and strategic issues, and carefully monitor
the potential for disruption in your business
• Study your business processes to understand which ones
are likely to be impacted by blockchain applications
and prioritise the areas in which you might want to start
working on pilot projects
• Explore partnerships with other financial services
companies, technology providers or start-ups in areas of
interest. If you have not done so already, start some
pilot projects
• Develop a broad range of internal capabilities around
blockchain technology and complement these with your
external relationships
If you do not already have a strategy for blockchain, you
need to develop one now, 2018 will see a wide range
of applications going live in financial services, across all
regions and business segments. With continuing pressure
on operating costs, blockchain applications present an
opportunity for near term cost savings, as well as longer
term benefits from process redesign and digitisation.
THE WAY FORWARD

26
References
i-“Bitcoin: A Peer-to-Peer Electronic Cash System”, Satoshi Nakomoto, November 2008: https://bitcoin.org/bitcoin.pdf
ii-“Cryptocurrencies and Blockchains”, Deutsche BankWealth Management, CIO Insights, December 2017: https://www.db.com/
newsroom_news/cio_insights_reflections_-_cryptocurrencies_and_blockchains_-_EMEA_-_client_ready.pdf
iii-“Blockchain Investment Trends in Review”, CB Insights, October 2017: https://www.cbinsights.com/research/report/
blockchain-trends-opportunities/
iv-“How Blockchains Could Change the World”, McKinsey Co, May 2016: https://www.mckinsey.com/industries/high-tech/
our-insights/how-blockchains-could-change-the-world
v-“The Truth About Blockchain”, Marco Iansiti and Karim R. Lakhani, Harvard Business Review, January-February 2017: https://
hbr.org/2017/01/the-truth-about-blockchain
vi-“Innovation in Retail Banking 2017”, Efma - Infosys Finacle, November 2017: http://explore.finacle.com/efma-2017
vii-Digiconomist, https://digiconomist.net/bitcoin-energy-consumption
viii-Ethereum website, https://www.ethereum.org/
ix-“Project Ubin Phase 2 Report”, Monetary Authority of Singapore/The Association of Banks in Singapore, November 2017:
http://www.mas.gov.sg/~/media/ProjectUbin/Project%20Ubin%20Phase%202%20Reimagining%20RTGS.pdf
x-Enterprise Ethereum Alliance website: https://entethalliance.org
xi-COMIT Whitepaper: http://www.comit.network/doc/COMIT%20white%20paper%20v1.0.2.pdf
xii-Filecoin website: https://filecoin.io
xiii-“Digital Future for Sterling: Assessing the Implications”, Bank of England, July 2017: https://www.bankofengland.co.uk/
article/2017/digital-future-for-sterling-assessing-the-implications---article-by-victoria-cleland
xiv-“Ripple-powered Instant Payment Services Now Live with Axis Bank, RAKBANK, and Standard Chartered”, Ripple Press
Release,November2017,Ripple-poweredInstantPaymentServicesNowLivewithAxisBank,RAKBANK,andStandardChartered
xv-“Infosys Finacle Launches Blockchain Based Trade Finance Solution”, Infosys Press Release, November 2017: https://www.
infosys.com/newsroom/press-releases/Pages/finacle-trade-connect-solution.aspx
xvi-“DTCC Selects IBM, AXONI and R3 to Develop DTCC’s Distributed Ledger Solution for Derivatives Processing”, DTCC Press
Release, January 2017: http://www.dtcc.com/news/2017/january/09/dtcc-selects-ibm-axoni-and-r3-to-develop-dtccs-
distributed-ledger-solution

27
xvii-“Easy Trading Connect on the verge of digitalising an age-old sector”, ING Press Release, February 2017: https://www.ing.
com/Newsroom/All-news/Easy-Trading-Connect-on-the-verge-of-digitalising-an-age-old-sector.htm
xviii-“Finastra, R3 and Seven Leading Banks to Create Distributed Ledger Technology Platform for Syndicated Lending
Community”, Finastra Press Release, October 2017: https://www.finastra.com/about/press-releases/finastra-r3-and-seven-
leading-banks-create-distributed-ledger-technology
xix-“EY, Guardtime and industry participants launch the world’s first marine insurance blockchain platform”, EY Press Release,
September 2017: http://www.ey.com/gl/en/newsroom/news-releases/news-ey-guardtime-and-industry-participants-launch-
the-worlds-first-marine-insurance-blockchain-platform
xx-“First Real Blockchain Transaction Completed in Fund Distribution”, Natixis Asset Management Press Release, July 2017:
http://www.nam.natixis.com/en-DE/p/Press/Press-releases/First-real-blockchain-transaction-completed-in-fund-distribution
xxi-“Vanguard Using Blockchain Technology To Improve Index Data Distribution”, Vanguard Press Release, December 2017:
https://pressroom.vanguard.com/news/Press-Release-Vanguard-Using-Blockchain-Technology-To-Improve-Index-Data-
Distribution-121217.html
xxii-“SETL and four asset management firms are launching IZNES, the pan-European fund record-keeping platform based on
blockchain technology”, SETL Press Release, September 2017: https://setl.io/
xxiii-“OCBC Bank, HSB and MUFG, Together with the Infocomm Media Development Authority, Complete Proof-of-Concept
on ASEAN’s First Industry Know Your Customer Blockchain”, OCBC Press Release, October 2017: https://www.ocbc.com/assets/
pdf/media/2017/october/media%20release%20-%20ocbc%20hsbc%20and%20mufg%20together%20with%20imda%20
complete%20proof%20of%20concept%20on%20aseans%20first%20industry%20kyc%20blockchain_web.pdf
xxiv-Stellar Website: https://www.stellar.org/
xxv-“Unblocking the Blockchain: A Global Legal and Regulatory Guide”, Norton Rose Fulbright, July 2016: http://www.
nortonrosefulbright.com/knowledge/publications/141573/unlocking-the-blockchain-a-global-legal-and-regulatory-guide-
chapter-1
xxvi-“Banking on Blockchain: A Value Analysis for Investment Banks”, Accenture/McClagan, January 2017: https://www.
accenture.com/us-en/_acnmedia/Accenture/Conversion-Assets/DotCom/Documents/Global/PDF/Consulting/Accenture-
Banking-on-Blockchain.pdf
xxvii-“EY, Guardtime and industry participants launch the world’s first marine insurance blockchain platform”, EY Press Release,
September 2017: http://www.ey.com/gl/en/newsroom/news-releases/news-ey-guardtime-and-industry-participants-launch-
the-worlds-first-marine-insurance-blockchain-platform
xxviii-“Project Ubin Phase 2 Report”, Monetary Authority of Singapore/The Association of Banks in Singapore, November
2017:http://www.mas.gov.sg/~/media/ProjectUbin/Project%20Ubin%20Phase%202%20Reimagining%20RTGS.pdf
xxix-“Breaking Barriers: Factors impacting large-scale blockchain adoption”, Infosys Viewpoint, October 2017: https://www.
infosys.com/blockchain/Documents/breaking-barriers.pdf

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