Two of the world's largest multinational investment banks, Goldman Sachs and Citigroup, recently conducted a successful transaction using blockchain technology. Both giants made the first share swap of their kind, but 13 more are waiting to be fulfilled as well. According to informed Forbes, Citigroup and Goldman Sachs completed the successful transaction on January 28.
What makes this stock exchange different is the platform used called the Axcore blockchain, which came from startup-backed distributed ledger company Axoni. Similar to the Ethereum network, Axcore also enables the deployment of smart contracts. Distributed ledger technology (blockchain) provides an inordinate amount of profit, which was helpful during the equity exchange transaction. It allows each counterparty on each exchange to see and use the same data, unlike traditional equity swaps.
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According to Greg Schvey, co-founder and CEO of Axoni, blockchain technology can disrupt the financial sector, and this is a great first step:
“The ability to have synchronous peer-to-peer data processing and have databases that talk to each other natively is just a great first step toward the future that I think a lot of people have been looking for in capital markets infrastructure.”.
For these big companies that we are working with, and then I would say probably for most of the world, this is a pretty substantial step down that path. It is worth noting that in 2017, Citigroup He participated in Axoni's Series A funding round, which raised more than $ 20 million. Previously, Wells Fargo, NEX Group, and F-Prime Capital were among the other major companies that invested in the blockchain-based startup, now Goldman Sachs.
How does Blockchain improve capital exchanges?
Traditional equity swaps must be constantly updated for countless variables. These include different interest rates, corporate actions such as dividend payments and stock splits, and market prices at the end of the day. The institutions Financiers must employ numerous people to verify the process until the completion of the exchange, which in some rare cases can take months.
Furthermore, disagreements occur regularly as each counterparty in a trade operates their records. Therefore, the time required to complete a transaction requires a lot of human resources and hours, according to a report recently published by the International Swaps and Derivatives Association (ISDA). It concludes that if there are 2% disagreements, it could generate losses of up to $ 2 million per transaction.
Schvey believes that technology Your company's blockchain can provide the necessary instrument to solve these costly and time-consuming problems. Also speaking on the subject was Puneet Singhvi, head of financial market infrastructure and blockchain leader at Citi. He noted that technology is replacing the unnecessary hours and costs of running manual verification processes.
