SWIFT Institute Offers a New Grant for Blockchain Securities Research

The SWIFT Institute was founded in 2012 with the goal to explore key areas of transactional banking, including payments, clearing and settlement, cash management, trade finance, and securities.

“In the securities transaction lifecycle, post-trade clearing and settlement is slow and expensive, involving many actors including global and local / sub custodians, central counterparties (CCPs) and central securities depositories (CSDs),” read the SWIFT Institute announcement.

“Settlement of a securities transaction typically takes two days, often longer, to complete. Blockchain and the distributed ledger have the ability to securely and transparently move securities in seconds or minutes, with automatic clearing and settlement upon trade execution.”
— – The SWIFT Institute

According to the SWIFT Institute, while “the theory sounds impressive and desirable” it is unclear whether it is practical. The institute also touched on what the securities transaction lifecycle would look like on the blockchain, and how a blockchain-based security would affect participants in the transaction process, from the investment manager through to central securities depository (CSD). SWIFT is also interested in whether parts of the process could be done on the blockchain and what exactly the benefits of a blockchain-based system would be.

The announcement was made on the same day Bitcoin Core developer Peter Todd, along with distributed ledger consulting firm R3CEV, issued a paper raising concerns about the Ripple protocol, which focuses on blockchain based financial transfers. The company behind the protocol, Ripple Labs, has announced pilots or discussions with several financial institutions, including three major Australian banks, Western Union, Fidor Bank.

The paper, while critical of Ripple, made sure to mention that many of their criticisms were not unique to the protocol, and are applicable to a range of distributed ledgers. "When taken as a whole, the risks and indirect incentives discussed in this and the companion paper have the potential to position Ripple Labs as a new trusted third party within the global payments landscape," R3CEV researcher Jo Lang wrote.

This is one of the many aspects the SWIFT Institute are also interested in, given that distributed ledgers are still a brand new technology. With the exception of Bitcoin, the technology has had very few real world applications that can show how capable it is.

“Are existing blockchain implementations robust enough or will they need to be re-engineered to cater for global securities transaction processing? […] What technology requirements would need to be in place to accommodate securities transaction processing? How would this impact the potential cost savings of moving to a distributed ledger?”
— – The SWIFT Institute

Besides the institute, SWIFT has already been involved in the blockchain industry. Several bitcoin and blockchain startups have moved on to the finals of an annual competition, to find the future of the banking and finance industry, the Innotribe Fintech Challenge. Last year, blockchain-based solution provider for banks, Epiphyte, won the competition, taking home the $50,000 grand prize and the ability to tap into the SWIFT network.

Those interested in applying for the new grant should provide a cover letter, resume, and a lengthy description of their your proposal that covers its objective, timeframe and methods you intend to you. The deadline for proposals is August 7.