Nine of the world's biggest banks from both sides of the Atlantic and Asia Pacific have agreed to join a partnership to divine a set of common standards and practices towards constructing a shared digital ledger system for financial services.
Financial innovation startup R3, which is run by former ICAP Electronic Broking CEO David Rutter, announced yesterday (September 15) that it had formed a blockchain partnership which includes: Barclays, BBVA, Commonwealth Bank of Australia, Credit Suisse, Goldman Sachs, JP Morgan, State Street, Royal Bank of Scotland and UBS.
Charley Cooper, a founder member of R3, who has worked at State Street and Deutsche Bank, told IBTimes: "We can't name them yet but we have already signed two additional banks since the press release went out.
"And over the coming weeks we have a number of additional partners in the banking community that are already in end of state negotiations to sign on.
"This is a strong statement but also it's not an end point for the partnership but really a beginning for the partnership."
R3 includes within its arsenal of banking and technology heavyweights, blockchain luminaries such as Tim Swanson and Richard Gendal Brown of IBM.
Some 18 months ago R3 began looking at how exactly banks could use blockchain technology – the shared public ledger system used to broadcast and verify transactions in Bitcoin. Ultimately what is required for the financial services industry at this early stage is the adoption sort of common set of standards and best practices with a view to hammering out commercial applications.
Swanson told IBTimes: "I don't think there is any other startup in this whole space that has tried to go with our approach.
"There have been a few different startups trying to create basically their own blockchains with specific use cases. In our view we feel that kind of defeats the purpose of having a network itself because it just recreates silos.
"We want to create a shared ledger that's common and standardised among financial institutions. So basically industry wide use, industrial scale shared ledger.
"And we feel the correct approach is to engage all the financial institutions from the getgo, otherwise you just recreate all these different little silos that can't communicate with each other, defeating a lot of the utility that comes from having this network."
Cooper said a plethora of private equity firms, venture capital firms, unique investors etc., have added lots of money and hype to this space but so far there has been a fractured approach, where these various companies are going off on their own hoping to build something that they can turn around and then sell to the industry.
Swanson added: "The example I often use is - imagine if you had a bunch of startups building smartphones and they said your smart phone only allows you to speak with someone who also has our smartphone."
IBTimes asked if starts and other tech players will be invited to join the party as well as banks.
Swanson said: "We are open to partnerships. We have been contacted today and prior to today, last week, by several different companies that have made the news."
He said the strategy would be to work with R3's partners in the financial world to build specific protocols and standards, which will be open source to the community. In addition the group will be open to partnering with capable and competent teams.
"We want to make sure we don't have to reinvent the wheel - there is already some good usable tech; we are more than willing to talk to those people and work with them. So it's way too early to rule out any specific start-up for being down for the count.
"In our view we feel this is too important to be left to one particular institution. And the more eyeballs on code helps to remove bugs and so forth."
Cooper added: "Our mandate for the banks is very clear - they want us to help them experiment, research, design and build the best solution possible in this space. In order to achieve that we would be foolhardy if we were to right off the bat ignore potential solutions out there by various different small, medium or large companies that are already operating."
In terms of what banks are looking for from a shared ledger system, it's been well documented that scalability to meet large transaction volumes, legally identifiable and accountable participation based on a permissioned system, and squaring with existing regulatory framework, are deal breakers.
Swanson said: "Ultimately with all the financial institutions the biggest common theme with all of them is that they are regulated globally and there is a variety of regulations like KYC, and the easiest way to comply with that is having known validators - they can be tracked down - they are held legally accountable for their actions.
"Processors already exist; large banks already have these - I suspect those will just be transferred to whoever is running these validators in the future."
On the topic of plugging into existing systems at big banks, Swanson said "legacy is important in the sense that we have to be realistic in that whatever system we build it will end up touching on systems that already exist in some capacity.
"We can't assume that just because we build this that they are just going to throw away all the legacy systems tomorrow.
"They have teams that rely on different systems from different vendors to maintain mission-critical areas for trading and so forth. We have to be realistic and not just idealistic about what's going on."
In terms of timelines, Copper said the first set of steering committee meetings and working groups will take place over the next four to six weeks.
"It is in those meetings we will really start to nail down what those deliverables look like and what sort of time frame we expect them to be delivered within," he said.
Swanson, who is also an advisor for the likes of Clearmatics and Hyperledger, said: "With R3 we all have our own specific veiwpoints but we are going to talk to the banks to see how they have come along with different technology.
"You have UBS and Barclays who have come out and said, 'hey we have played around with Ethereum, we have looked at the idea of sidechains'.
"I don't think that anyone specifically has come out one way or another on what they actually want to use in September.
"I can't speak for everyone else, my own view is if there is utility that can benefit everyone I suspect those ideas and maybe even that code itself could be forked and used in whatever is created here with R3 and the partners."