Blockchain Consortium Looks To Woo Sri Lanka's Central Bank, Regulator

Josh O'Neill

30 March 2017

The firm spearheading an international blockchain consortium comprised of various banking behemoths, regulators and financial technology companies has reportedly asked Sri Lanka's central bank to join the syndicate.

New York-based start-up R3's consortium currently has more than 80 fee-paying members, including Singapore's financial regulator, one of Hong Kong's watchdogs and South Korea's central bank.

Now, according to media reports, the firm has invited Sri Lanka's central bank to join it and the consortium's members on creating blockchain-based solutions that seek to streamline certain elements of financial services operations.

“The meeting with Sri Lanka's central bank was about developments in blockchain technology, what R3 is doing, and we also extended an invitation to the central bank if they would like to join,” Niki Ariyasinghe, project strategy director at R3, reportedly said. “From a regulatory perspective, there are no charges or anything like that because we want them involved.

“We had a very positive discussion with the central bank governor and we will follow up in the coming weeks.”

Blockchain technology, a virtual distributed ledger of transactions shared peer-to-peer, can record ownership across a public network of computers rendered tamper-proof by advanced cryptography. It is already known as the platform for the controversial digital currency bitcoin, even though this is only one of several hundred applications that use blockchain technology.

The technology is causing a stir within the financial services sector as its supporters believe it could reduce hidden expenses in the financial system by ousting inefficiencies across areas such as payments, syndicated loans and equity clearing.

But last November, a raft of big banks that included Goldman Sachs, Morgan Stanley, Santander and National Australia Bank abandoned R3's consortium before the first round of funding commenced.

R3 lowered the initial amount it aimed to raise through its first round of equity funding from $200 million to $150 million. The firm planned to give members a 60 per cent equity stake in exchange for the capital.

Last year, a source close to the process at Goldman Sachs told this publication the group quickly became “saturated” as new members poured in, which resulted in a lack of headway and the project's prospects eventually became “unrealistic”. The bank baulked at being asked to contribute to funding alongside a plethora of other investors and was subsequently exploring other blockchain models, this publication understood.

Santander, the Spanish lender, also dropped out for similar reasons, as the firm was testing “more relevant and more attractive” blockchain technology projects and proposals, which included internal models, a source close to the matter told this publication.

Still, R3 is not the only blockchain consortium that has piqued banks' interest.

Earlier this month, a wave of banking giants including JP Morgan, UBS and Credit Suisse, along with more than two dozen other companies, formed a new blockchain syndicate in a push by financial services firms to make use of the nascent technology.

Ethereum, founded in 2013 by cryptocurrency researcher Vitalik Buterin, is a blockchain-based software platform that allows developers to build decentralised applications. While the bitcoin blockchain is used to track ownership of digital currency, the Ethereum blockchain focuses on running the programming codes of decentralised applications.

The Enterprise Ethereum Alliance will work to enhance the privacy, security and scalability of the Ethereum blockchain with the goal of making it better suited to business applications, according to media reports, citing the founding companies as sources.

Members of the 30-strong syndicate also include Accenture, BP, Thomson Reuters, Microsoft and Intel.

This publication will continue to monitor advancements within the blockchain sector and will update coverage accordingly.