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Banking giants UBS, Barclays, others collaborate on Ethereum-based MiFID II data reconciliation solution
Leading banks have teamed up for a project that aims to improve the quality of counterparty reference data using Ethereum smart contracts.
Initiated by UBS, the project stemmed out of the need to improve data quality ahead of the implementation of MiFID II/MiFIR regulation, to be effective from January 3, 2018. Under the new framework, each institution is expected to have an individual Legal Entity Identifier (LEI) – a 20-character identifier that identifies distinct legal entities that engage in financial transactions.
The project aims to harness Ethereum smart contracts for the reconciliation of reference data in order to streamline the process for all participants. Running on a permissioned blockchain on the Microsoft Azure cloud platform, it seeks to improve the way in which participants can baseline their LEI reference data against the industry consensus.
"Traditionally, a firm such as ours quality checks data against multiple sources but we do not have a quality baseline against peers”, said Christophe Tummers, Head of Data at UBS. "Through using blockchain-inspired smart contracts, the reconciliation of data can happen in almost real-time for all participants, anonymously."
Barclays, Credit Suisse, KBC, SIX, and Thomson Reuters have joined UBS in this initiative.
The project involves concealing the specific reference data for each Legal Entity cryptographically at each institution using a process called “hashing.” The source data remains with the participating institution and only the hashed data is anonymously submitted to an Ethereum private blockchain powered by Microsoft Azure. The Ethereum smart contracts then reconcile the data against the consensus and provide each participant the ability to search and view their own specific data in real-time.
The process will enable users to quickly view where the anomalies lie in the data set and work to resolve those.
Currently, the project is in a pilot phase – a mock-live environment using 22,000 non-sensitive LEI reference attributes for cash equity issuers. According to the official release, the pilot is expected to be complete by the end of January 2018, with further, staged rollout dependent on the findings.