Cloud

10/17/2017
05:45 PM
Connect Directly
Twitter
Twitter
RSS
E-Mail
50%
50%

Banks Start Broad Use of Blockchain, as JP Morgan, IBM Lead Way

Two major players announced cross-border payment networks built on blockchain technologies Monday, and more financial services will follow soon, despite opinions about Bitcoin.

The distributed ledger technology that underpins cryptocurrency like Bitcoin is rapidly going mainstream. Blockchain is building a tremendous amount of buzz as technology and financial industry heavyweights and startups race to apply the technology in innovative new applications for the banking sector. Their efforts are starting to bear fruit in the area of cross-border payments, as three separate announcements from IBM, J.P. Morgan, and Bank of Canada highlighted this week. 

Each company announced their own flavor of payment network solutions built on blockchain technology. Working in conjunction with technology partners Stellar.org and KlickExGroup and over a dozen financial institutions, IBM rolled out a banking product that leverages its IBM Blockchain platform. The project, announced Monday, is designed to clear and settle financial transactions worldwide in near-real-time.

The ultimate goal is to provide a secure, speedy and transparent financial platform between global markets that may have found it difficult to do business with one another due to the bureaucratic pitfalls of legacy international payment networks.

That's a similar goal shared by J.P. Morgan, which together with partners Royal Bank of Canada and Australia and New Zealand Banking Group Limited also Monday launched the Interbank Information Network (IIN). It's a cross-border payment network built upon Quorum, J.P. Morgan's internally developed blockchain technology. According to J.P. Morgan, its first two banking partners are just the start for IIN and other correspondent banks are expected to join soon.

Tuesday, the Bank of Canada, Payments Canada and TMX Group Ltd, operator of the Toronto Stock Exchange, announced that they will get together to test the use of blockchain for automating securities settlement.

J.P. Morgan's commitment to Quorum and blockchain capabilities are interesting considering its CEO Jamie Dimon's well-documented dismissal of Bitcoin as a "stupid" idea. Clearly, his bank isn't one for throwing the baby out with the bathwater.

The developments this week underline that banking executives are increasingly seeing the upside of combining distributed ledgers with solid cryptographic applications for new means of facilitating payments, trades, contracts, and transactions of all stripes.

"The technology is particularly useful when you combine a distributed ledger together with a cryptotoken,” wrote MIT Sloan Assistant Professor Christian Catalini in an explainer piece from MIT earlier this year. “Suddenly you can bootstrap an entire network that can achieve internet-level consensus about the state and authenticity of a block’s contents in a decentralized way. Every node that participates in the network can verify the true state of the ledger and transact on it at a very low cost. This is one step away from a distributed marketplace, and will enable new types of digital platforms.” 

For security and risk professionals, blockchain stands as an especially appealing option because it is a technology that's essentially security native; its fundamental design from day one has kept security top of mind.

"Blockchain is designed with security in mind and can help optimize processes," says Bob West, a former banking CISO and current CEO of consultancy Echelon One. Moving beyond announcements like the ones Monday, other examples of optimized processes would be the settlement of stock trades. "The settlement of stock trades could become close to real-time if blockchain were used throughout the trading supply chain."

The trick will be convincing senior executives it can add value to the business, West says, eplaining that he believes it will be three to five years before the financial sector adopts blockchain broadly.

[Bob West will discuss "Creating and Managing User Identities in the Real World" at the upcoming INsecurity Conference, Nov. 29-30 in the D.C. area. See the full agenda at https://insecurity.com.]

Others agree it's going to take time including Brian Conneen, CIO and CTO of Marlette Funding, an online lending company. He says his team is "keeping a close eye on blockchain" as they look for ways to put it to use in their business. 

"The biggest challenge today to leveraging blockchain is that many large players have not yet bought into the nascent technology, most likely due to unfamiliarity or in some cases lack of central control," Conneen says.  "We are still a few years from reaching critical mass, but once a few major players leverage blockchain in a way that is core to their business, the acceleration to adoption will be exponential."

Related content:

 

Join Dark Reading LIVE for two days of practical cyber defense discussions. Learn from the industry’s most knowledgeable IT security experts. Check out the INsecurity agenda here.

Ericka Chickowski specializes in coverage of information technology and business innovation. She has focused on information security for the better part of a decade and regularly writes about the security industry as a contributor to Dark Reading.  View Full Bio

Comment  | 
Print  | 
More Insights
Comments
Newest First  |  Oldest First  |  Threaded View
Basic BlackT927
50%
50%
Basic BlackT927,
User Rank: Apprentice
10/29/2017 | 8:36:02 PM
Great Article
Thanks for the well written article, great read!  I am a business owner and have had my own issues with merchant services and the ourtragious fees they have.  But, I understand the importance of moving into the direction of automation with security.
It Takes an Average of 3 to 6 Months to Fill a Cybersecurity Job
Kelly Jackson Higgins, Executive Editor at Dark Reading,  3/12/2019
Box Mistakes Leave Enterprise Data Exposed
Dark Reading Staff 3/12/2019
How the Best DevSecOps Teams Make Risk Visible to Developers
Ericka Chickowski, Contributing Writer, Dark Reading,  3/12/2019
Register for Dark Reading Newsletters
White Papers
Video
Cartoon Contest
Write a Caption, Win a Starbucks Card! Click Here
Latest Comment: LOL  Hope this one wins
Current Issue
5 Emerging Cyber Threats to Watch for in 2019
Online attackers are constantly developing new, innovative ways to break into the enterprise. This Dark Reading Tech Digest gives an in-depth look at five emerging attack trends and exploits your security team should look out for, along with helpful recommendations on how you can prevent your organization from falling victim.
Flash Poll
The State of Cyber Security Incident Response
The State of Cyber Security Incident Response
Organizations are responding to new threats with new processes for detecting and mitigating them. Here's a look at how the discipline of incident response is evolving.
Twitter Feed
Dark Reading - Bug Report
Bug Report
Enterprise Vulnerabilities
From DHS/US-CERT's National Vulnerability Database
CVE-2019-6149
PUBLISHED: 2019-03-18
An unquoted search path vulnerability was identified in Lenovo Dynamic Power Reduction Utility prior to version 2.2.2.0 that could allow a malicious user with local access to execute code with administrative privileges.
CVE-2018-15509
PUBLISHED: 2019-03-18
Five9 Agent Desktop Plus 10.0.70 has Incorrect Access Control (issue 2 of 2).
CVE-2018-20806
PUBLISHED: 2019-03-17
Phamm (aka PHP LDAP Virtual Hosting Manager) 0.6.8 allows XSS via the login page (the /public/main.php action parameter).
CVE-2019-5616
PUBLISHED: 2019-03-15
CircuitWerkes Sicon-8, a hardware device used for managing electrical devices, ships with a web-based front-end controller and implements an authentication mechanism in JavaScript that is run in the context of a user's web browser.
CVE-2018-17882
PUBLISHED: 2019-03-15
An Integer overflow vulnerability exists in the batchTransfer function of a smart contract implementation for CryptoBotsBattle (CBTB), an Ethereum token. This vulnerability could be used by an attacker to create an arbitrary amount of tokens for any user.