The Chamber of Digital Commerce, the world’s largest trade association representing the blockchain industry, and the Structured Finance Industry Group (SFIG) have formed a strategic partnership focused on advancing the use of blockchain technology in securitization markets.
The new partnership kicked off at a meeting in Las Vegas accompanied by the publication of a white paper, “Applying Blockchain in Securitization: Opportunities for Reinvention,” and a series of educational activities.
Blockchain is an open-source software that can be used to facilitate financial operations and transaction processing. Blockchain uses a public ledger of all Bitcoin transactions. It is constantly growing as “completed” blocks are added to it — in a linear, chronological order — with a new set of recordings.
The white paper detailed five benefits of blockchain technology, including:
- It provides a single, consistent information source to anyone in its network.
- It delivers a chronological audit trail that cannot be changed. This is especially beneficial for loan origination to primary issuance, servicing, and changes in ownership in the secondary market.
- It provides improved valuation and price discovery since it is transparent. This reduces information asymmetry and network disadvantages that some smaller entities encounter in the securitization business.
- It provides simultaneous recording of information across the system. This eliminates time delays in the flow of information and payments in the securitization process, including in the secondary market.
- It is secure and can mitigate fraud to preserve data quality.
Perianne Boring, founder and president of the Chamber of Digital Commerce, said the securitization process “is an ideal candidate for the efficiencies of distributed ledger technology.”
“Blockchain platforms enable the market to more efficiently comply with regulations, while at the same time allowing automation to create significant efficiencies for the role of the regulator itself. Our partnership with SFIG is an opportunity to accelerate the understanding and adoption of blockchain technology in this sector,” Boring said.
According to the group, financial institutions worldwide have invested more than a billion dollars in blockchain, and most big banks will have begun blockchain projects by the end of 2017. “There are already hundreds of use cases, ranging from international payments to securities processing, and major technology ﬁrms are offering a host of blockchain services aimed at the ﬁnancial industry,” the group said.