A diversified Swiss consortium from the worlds of research, finance, ICT and telecommunications is developing a blockchain solution for conducting financial transactions.
The goal is to produce a decentralised, encrypted platform that will enable small companies to more efficiently raise funds by selling shares outside of stock exchanges. Switzerland is home to a growing ‘CryptoValley’ of blockchain innovators, including Ethereum, which which will provide the blockchain platform.
This is by no means the only such project currently being developed around the world. UBS is among a number of global banks testing blockchain technology to improve the speed and cost of transacting shares, securities and other assets.
Blockchain is a digital platform that stores and distributes a range of encrypted assets from cash to land registers. It runs on a decentralised consensus basis, allowing the community to see and approve all transactions, thus bypassing the need for third party facilitators such as clearing houses.
The current project is being led by Mathias Bucher of the Lucerne University of Applied Sciences and Arts. The consortium also includes state-owned telecommunications firm Swisscom, the Swiss stock exchange, Zurich Cantonal Bank and other players.
The consortium is testing its system on over-the-counter (or off-stock exchange) company shares in Switzerland as these are relatively simple assets with low volumes. In a year’s time the group hopes to have a system that could be expanded to a range of globally transacted financial products.
To make this work, it will have to overcome a range of regulatory, security and technical challenges. Bucher hopes that the solutions will provide a blueprint for the seemingly inevitable progession of financial trading onto blockchain technology.
“The potential of blockchain technology for financial institutions is huge. Instead of passively waiting for a global standard to emerge, we prefer working towards a pragmatic solution for the Swiss financial centre now”, he told swissinfo.ch.
“There are a couple of interesting challenges we need to overcome in order to make a blockchain-based system workable in practice; regulatory requirements, security aspects, and of course user friendliness. We are all very excited to find creative solutions for these.”
Switzerland is among a number of countries vying to make a mark in the rapidly evolving digital financial landscape. Bucher believes that being at the forefront of blockchain technology will be an important element in keeping Switzerland competitive on a global scale.
“Blockchain technology offers tremendous opportunities. It can give the Swiss financial centre a unique chance to raise its profile as a global fintech leader, and improve its competitiveness,” he said.