In a time of increased regulatory requirements, several large global banks presented the pilot project on the Ethereum created to simplify compliance.
Internal project name — Massive Autonomous Distributed Reconciliation platform (Madrec). The initiator of the project – banking giant UBS, working on it together with Barclays, Credit Suisse, KBC, SIX, and Thomson Reuters. Madrec goal is to facilitate banks compliance with the new regulations a broad range of data about their counterparties.
Traditionally, companies falling under the regulation of the use of the so-called «identifiers of legal entities», which are stored in the global data system to carry out transactions on behalf of clients even if these clients do not have one of the codes. However, in the framework of large-scale regulatory changes, called MiFID II, which will come into force in the EU on 3 January 2018, all eligible legal entity will have to possess these codes and use them.
Instead of having to deal with the problem on their own, banks have created a platform Madrec to combine efforts in the system-wide process to be implemented in the Microsoft Azure cloud.
The head of the research and development of the blockchain UBS Peter Stevens (Peter Stephens) told how he created the infrastructure of the blockchain, focused on savings to the users without losing competitive advantage.
«Do no harm»
In preparation for the launch of the project, Stevens had a tour of the laboratory of UBS, which was created by the Madrec, and talked about how bakchinova platform will help to cope with the regulatory challenges before the banks ran with them.
The project was developed in 6 months and turned into a network of smart contracts, is designed to integrate with the identifiers approved by the Committee for supervision of work of legal entities (LEI ROC) and other regulators. Approval of LEI reference data includes
industrial classification and information from the European administration to markets and securities (ESMA).
Instead of having to go the traditional route, when each company independently verified the information and periodically compare the results with other organizations, smart contracts on the blockchain will be to combine data from different banks and compare them practically in real-time.
This anonymous reference data is hashed in the blockchain of Ethereum, while the original data remain within the institution. Then smart contracts coordinate data, allowing users to quickly identify abnormalities and resolve them.
Since all project participants will adhere to the same standards, Stevens claims that it will improve the quality of work of each of them, leaving open the possibility for competition in other areas.
«This is a public reference data, it’s not a factor of competitiveness», — he said. «It’s kind of the motto «do no harm and improve the world.» For regulators it is very convenient, we include also the data providers, not trying to undermine their work and include other banks».
The development of the project
First called the Conrad Project, a Massive Autonomous Distributed Reconciliation platform were created mainly in the London office of UBS, in the laboratory for the study and development of the blockchain. The laboratory includes a «neutral zone», where at the moment several partners the Bank is working on six projects on the basis of the blockchain, which will be launched next year.
Madrec pilot project was developed where the new digital currency of the Bank UBS — «the practical settlement money» (UCS — utility settlement coin), which will be launched next year for operations in clearing and financing transactions.
The Madrec project is scheduled to run until the end of next month, and the subsequent, phased deployment depends on the results of the run. Whether the brain (Lee Braine) from the technological development Department Barclays Bank says:
«This project facilitates the understanding of the innovative cryptographic technology that allows each Bank to maintain the confidentiality of the data, and compare their own data with the basic information, supported by group consensus.»