Blockchain reaction

China, at least for the moment, has banned cybercurrencies including bitcoin. JP Morgan chief executive Jamie Dimon famously called bitcoin a fraud. But then The International Monetary Fund has urged serious consideration of virtual currencies.

But whether pro or con such currencies, no one has banned or dismissed as a scam the distributed ledger technology – often called blockchain – which underpins these currencies. And for more and more this is where the interest lies.

In essence, a distributed ledger (DLT) replaces a chain of verification and authorisation – usually via the banking or other centrally trusted system – which a network of encrypted computers. With the network, the vital information is ‘known’ by everyone and hence can’t be tampered with.

"DLTs promise to replace something essential to all: trust.”

Traditionally, such vital information is only known by certain trusted institutions which typically charge for verification and authorisation – and take time to do it.

Bitcoin, with its enigmatic, comic-book-like creator Satoshi Nakamoto – who may or may not even exist – has always been the headline grabber but it is blockchain that has more rapidly been embraced by mainstream society. And not just financial services.


UBS chairman Axel Weber envisaged blockchain as underpinning investment in the international art market.

He believes blockchains should make volatile and often subjective assets such as art, luxury cards or precious gems more ‘bankable’ by maintaining a secure record of provenance – often crucial to such assets.

“Art collectors could be trading Van Goghs for Monets on the blockchain,” Weber argued.

Healthcare is another new frontier where blockchain is boldly going and it’s unlikely to be the final one.

According to analysis from CB Insights, health and pharmaceuticals are seeing blockchain initiatives in medical record interoperability; data security; patient or supplier reimbursement; and pharmaceutical supply chain management.

IBM Watson has entered into an agreement with the US Food and Drug Administration to see if there is a role for blockchain in providing more secure patient data, including oncology data in the form of electronic medical records, clinical trials, genomic data and health data from mobile devices, wearables and the Internet of Things.

The application of blockchain appears limited only by imagination – particularly if you’re pitching to venture capitalists.

CB Insights recently published a report “Banking Is Only The Beginning: 30 Big Industries Blockchain Could Transform” spanning everything from cybersecurity to voting – indeed there is growing concern about the security of online voting mechanisms.

“Law enforcement, ride hailing, and many other sectors could also have blockchain in their future,” the intelligence firm argued.

“Blockchain is essentially a global public ledger capable of automatically recording and verifying a high volume of digital transactions, regardless of location.

“Entrepreneurs have come to believe blockchain could transform many more industries. Ultimately, the use cases for a transparent, verifiable register of transaction data are practically endless — especially since blockchain operates through a decentralised platform requiring no central supervision, while still remaining resistant to fraud.”


Financial services continues to be the most explored realm, particularly inter-bank payments and information exchange. Singapore is particularly advanced with distributed ledgers and virtual currencies.

The Monetary Authority of Singapore (MAS) and The Association of Banks in Singapore (ABS) recently announced a consortium which they are leading has successfully developed software prototypes of three different models for decentralised inter-bank payment and settlements with liquidity savings mechanisms.

Here at ANZ, the bank is involved in at least half a dozen projects. In partnership with US bank Wells Fargo there was an initiative to streamline cross-border payments – the results of which have been handed to SWIFT for the benefit of all banks; with Westpac, IBM and property manager Scentre Group a solution to replace paper-based bank guarantees for commercial lease holders; an interesting opportunity in New Zealand to increase efficiencies in data across Insurance; and with another American Bank a proposal to share information related to cross-border payments.

Some of these are already in train, others are being piloted or are at proof of concept stage.

According to ANZ’s head of wholesale digital transformation Leigh Mahoney, as blockchain understanding has deepened and more projects tested, three key attributes have emerged as critical for success:

• The issue to be solved has to be clearly articulated;

• Those issues should be narrow and deep not shallow and broad (in other words – avoiding the temptation to ‘boil the ocean’); and

• There is a need to broker trusted transactions between independent parties.

Mahoney says while there is a path to commercialisation and revenue generation for many ventures, the immediate opportunity is productivity and transparency.

“Banking in Australia is nearly 200 years old and some of the processes ripe for disruption are pretty much that old as well,” he says.

Mahoney’s view is widely shared in financial services, both among bankers and regulators.

One of the most frequent regulatory commentators has been Carl-Ludwig Thiele, a member of the executive board of the Deutsche Bundesbank, Germany’s central bank.


In a recent roundtable with the Official Monetary and Financial Institutions Forum he noted “for us, Bitcoin’s most important contribution is the underlying blockchain technology or, to put it more broadly, distributed ledger technology (DLT)”.

He too had had three key points:

• First, the Bundesbank develops and runs major payment and settlement systems, often in conjunction with other central banks, and in this context we explore innovative technical capabilities which can contribute to their stability and efficiency.

• Second, the Bundesbank acts as a catalyst to forge improvements in payment operations and settlement structures. The better the Bundesbank grasps the practical implications of technologies or processes, the more forcefully it will be able to present its arguments, which always aim to preserve the stability and enhance the efficiency of payment and settlement systems.

• Third, the Bundesbank monitors the stability of systems and tools used in the field of payments and settlement. Being able to gauge the relative merits of state-of-the-art technology is a key skill in this regard. That is why the Bundesbank – much like other central banks worldwide – has been putting a great deal of thought into DLT, even though this technology is still very much in its infancy.

Thiele too emphasised blockchain is a double-edged sword. Not simply because it is new but because it could potentially destroy the business of incumbents as much as improve their efficiency.

“Potentially, distributed data storage means that DLT can simplify reconciliation processes associated with complex work-sharing value added chains,” he said. “DLT is seen as having disruptive potential since it generally allows transactions to be carried out directly – that is, without intermediaries.”

If that scares financial institutions – at least into being more aware and willing to explore the opportunities – it’s little consolation to other industries.

Whether its retail loyalty programs – run by relatively few incumbents – or government and public record keeps – labour intensive and heavily compartmentalised - DLTs promise to replace something essential to all: trust.

In the past, it was the institution and its ability to credibly protect information, financial or other, that justified the revenue it earned for being an intermediary. Maybe a blockchain can do the same thing for almost nothing…

Andrew Cornell is managing editor at bluenotes

The views and opinions expressed in this communication are those of the author and may not necessarily state or reflect those of ANZ.

editor's picks

05 Sep 2017

Tech-tock, the tech clock is ticking

Andrew Cornell | Past Managing Editor, bluenotes

For financial services, those who own the customer will have the highest margins.

18 Sep 2017

Agility is the new workplace currency

Anouk De Blieck | General Manager, Human Resources, ANZ

The workplace of the future won’t be fixed - it will be virtual and flexible – and workers will need to adapt.