Blockchain system tested by State Street Corp, hoping that can be applied to integrate the securities lending process as the financial business expedites efforts to accept the developing technology. Hu Liang, senior managing director of the Emerging Technologies Center at State Street said “this year, the software was tested over the course of seven months, could be selected as one of the firm’s blockchain projects to be implemented in 2017”.
State Street is one of the largest custodian banks and securities lending providers worldwide. The blockchain system that it tested would revolutionize the collateral posted by an investor to lend securities from State Street’s consumers into a virtual token that could be used for other transactions. This would create a digital, immutable record of how the collateral had been used and would make it easier and quicker for State Street to return the collateral to the lender’s account once their lending position had been uncut. Liang further mentions “the aim is to enhance the operational aspect of securities lending and iIn a lot of cases there is no automated linkage to say which account it (the collateral) should go back to. The system would reduce manual intervention involved with the process, make it faster, and create a better record for regulatory reporting purposes”.
The test is one of several blockchain experiments State Street and other financial institutions have been working on over the past year as Wall Street grows increasingly hopeful that the technology, first developed to run cryptocurrency bitcoin, can help them increase efficiency and cut costs. Blockchain is a distributed data of transactions that is systematically restored and maintained by a network of mainframes on the internet, without the need of a trusted third party. Banks and other financial firms have grown convinced that it can be accustomed to carry out processes such as the clearing and settlement of securities. The experiment of State Street Corp comes as financial firms prepare to bring more blockchain systems out of testing and achieving in the new year.