Australian Bank Embraces the Blockchain

News and Analysis

A working group from the Commonwealth Bank of Australia, which has launched an innovation lab, has announced a test run of an internal blockchain to demonstrate its practical value and capabilities to broad public, including its customers, employees, and, most importantly, the representatives of local regulators.

The dummy blockchain consists of five computers acting as nodes thereof, with a 1 gigabyte worth of ledger-related content and keys. The development of the demonstration blockchain took the bank’s coders around a fortnight to write the code. The bank states that, should the system work, it will be implemented on a broader scale in order to reduce expenses in a vast variety of applications including cross-border transactions and exchange trading.

The Australian experiments join those of other major banks and other heavyweight financial institutions. For instance, Goldman Sachs has stated that the blockchain technology is one of the most promising ideas capable of reshaping the future of international finance, and has filed a patent for a stock settlement system on a blockchain basis. Meanwhile, UBS is running trades on the blockchain in testing mode, while Nasdaq has launched a private market for shares. Also, there are over 30 international banks that have joined a blockchain research consortium under the auspices of a blockchain startup dubbed R3.

The news follows recent embroilment in Australia, where more than a half of local bitcoin businesses had been cut off their accounts by their partner banks without any explaination. Many experts and players in the industry suggested the banks were acting in order to get rid of potential competitors in advance. The instance resulted in a government investigation, which has not returned any reports or results so far.

However, it should be noted that prior to broader implementation of the blockchain, the Commonwealth Bank of Australia, just like any other bank, will have to obtain approval from local regulators. One of the purposes of establishing a demonstration blockchain is to show the regulators that the technology is safe, efficient, and trustworthy.

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