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Corda Blockchain Trade Finance Platform Marco Polo Sees First Transactions

Industrial trades leveraged the blockchain-based platform, with goods changing hands between Germany and China.

Blockchain consortium R3’s trade finance platform Marco Polo has completed its first real transactions, a press release from Commerzbank, one of the participants, confirmed on March 28.

Marco Polo, which is built on R3 enterprise blockchain platform Corda, successfully facilitated a trade between Germany and China, involving two German firms.

Tech group Voith and pump manufacturer KSB SE were the initiators of the transactions, which constituted a pilot scheme for Marco Polo.

One transaction saw couplings delivered from Germany to China, while a second was based on hydraulic pumps delivered solely within Germany.

The banks facilitating the operation were German banking giants Commerzbank and Landesbank Baden-Wuettemburg, while the financing operation closed on Marco Polo, with Corda mapping the flow of information.

“The transaction shows that blockchain technology can offer our customers payment protection and financing using the most modern methods for both cross-border and domestic trade,” Commerzbank divisional board member for trade finance and cash management, Nikolaus Giesbert, commented in the press release, adding:

“Here we see a valuable opportunity to develop innovative trade finance solutions together and introduce them to the market.”

Commerzbank and the other entities involved in the pilot stated that they will move forward with experimentation, aiming to carry out entire transaction processes using Marco Polo.

Marco Polo has been slower to market than its major competitors, with offerings such as IBM-powered making their commercial debut last year.

Last month, Sumitomo Mitsui Banking Corporation, another of the platform’s future partners and Japan’s second-largest bank by assets, said it hoped to commercialize it in the first half of 2019.

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Deutsche Boerse, Commerzbank Complete Blockchain PoC for Legally Binding Repo Transaction

German financial services firm Commerzbank and securities marketplace Deutsche Boerse have completed a PoC for a legally binding repo transaction using blockchain tech.

German financial services company Commerzbank and securities marketplace Deutsche Boerse have completed a proof-of-concept (PoC) for a legally binding repo transaction using distributed ledger technology (DLT). The news was reported by Cointelegraph auf Deutsch on March 6.

A repo transaction is commonly used for short-term borrowing, and allows dealers to sell securities to investors — often for as short a time as overnight —  and repurchase them the following day, or as otherwise determined. For the party selling the security, the process is termed a repo, whereas for the counterparty, it is known as a reverse repurchase agreement.

For the DLT-enabled PoC, the repo transaction was based on a 10 million euro ($11.3 million) bond issued by KfW Bankengruppe, for a term of seven days at a negative interest rate of -0.5%.

As Cointelegraph Deutschland reports, to settle the transaction, Commerzbank and Deutsche Boerse generated digital tokens for both commercial bank money and securities. These were then simultaneously exchanged using a Commerzbank-operated DLT platform.

While Commerzbank’s R&D unit “Main Incubator” developed the DLT platform, the full scope of the technology used for the DLT-powered repo transaction PoC — as well as its underlying legal concept — was reportedly developed jointly by the two partners.

As a Commerzbank press release notes, the use of DLT to enable the legally compliant, efficient and transparent settlement of tokenized securities and cash tokens offers distinct advantages over existing legacy systems. These include real-time monitoring, a shortened settlement period, reduced counterparty risk, and a corresponding reduction in operational costs.

Michael F. Spitz, CEO of Commerzbank’s R&D unit, has given a statement on the significance of the PoC, noting that:

“In past [DLT] pilots we have focused on new issue projects; with the transaction between Deutsche Boerse and Commerzbank we were now for the first time able to convert existing securities into digital tokens.”

As the press release outlines, banks often use repo transactions as secured money market instruments in order to cover their “short-term liquidity needs by depositing securities.”

As Cointelegraph has reported, Deutsche Boerse recently revealed that it is making significant progress with its blockchain-powered securities lending platform, co-developed with Luxembourg-based blockchain liquidity management platform, HQLAx. To date, six banks have reportedly confirmed their plan to join the platform, which uses enterprise blockchain consortium R3’s Corda platform as its base.

Last month, Commerbank conducted a pilot for money market security transaction using a Corda-based platform, in partnership with major technology firms Continental and Siemens.

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How Commerzbank Is Throwing Out the Business Blockchain Playbook

With a plethora of business blockchains vying for prominence, banks are under increasing pressure to pick a winner – after all, without network effects, surely the benefits would be lost?

While that might be conventional wisdom, Commerzbank AG, one of Germany’s largest financial institutions, is taking a different tack. Rather than choose one protocol on which to build proofs-of-concept, it’s chosen five.

It started out a few years ago building on MultiChain, before adding BigChainDB to its development process. Since then it has joined three consortia: Hyperledger, R3 and, as the company revealed this week, the Enterprise Ethereum Alliance (EEA).

But the strategy is not about building a broad base of knowledge or “hedging one’s bets.” Nor is it about employing a scattershot approach in the assumption that, the more platforms you work on, the more likely it is that you pick the “right” one.

Rather, according to the company, it’s about a firmly-held belief that the future of blockchains is interconnectivity.

As Paul Kammerer, co-founder of Commerzbank’s blockchain lab, told CoinDesk:

“We strongly believe that there will be not one blockchain solution, there will be a lot of blockchains – the big challenge is that these blockchains talk to each other.”

The advantages of this pluralist approach are likely to become more apparent, given the increasingly interconnected use cases of supply chains, cross-border payments and others, especially as the technology evolves and trials become more collaborative.

For instance, Commerzbank, as one of the largest trade finance houses in Europe, has participated in the development of two trade finance-focused blockchain proofs-of-concept – the Batavia platform based on Hyperledger Fabric and Marco Polo, which is based on R3’s Corda.

But rather than see the multi-platform approach as a dilution of its efforts, the bank sees it as future-proofing the investment, as well as an expansion and strengthening of Commerzbank’s expertise as it applies to new technologies.

Keeping it close

But this ecumenical approach to blockchain networks isn’t the only way in which Commerzbank is further departing from standard enterprise blockchain practice.

In spite of the expense of working on several protocols at the same time, Commerzbank made the decision early on to keep platform development in-house.

Jörg Hessenmüller, head of development and strategy for Commerzbank, explained:

“It’s not enough that we have a bunch of consultants telling us what is the latest in blockchain – we need to have our own skin in the game.”

The company’s blockchain lab has 23 developers, up from five a few years ago, and is working on increasing that number, in part to be able to add new protocols to its portfolio.

According to Kammerer, the decision of which platforms to add will depend on the use case. And some of the criteria choose a protocol based on include: its permission restrictions, consensus mechanism, scalability, whether or not it can develop smart contracts, the degree of decentralization and the other players involved the specific use case, he said.

“There is not one silver bullet blockchain that is good for all future use cases,” he explained. “We think of a specific use case, and go for the best blockchain for that.”

Commerzbank normally aims to have 10 active use cases on the go at any given time, Hammerer continued, and the list of blockchains his team is working on reflects those needs.

“The biggest challenge,” he said, “is getting trained on the specific platforms of technology.”

To deepen its knowledge of Corda, for example, the company went as far as embedding developers in the open-source Corda team at R3.

A wider net

While Commerzbank may be a blockchain maverick among banks, it wants to make sure that the technologies it picks will connect it not only with other financial institutions but with enterprises in a variety of sectors someday.

This mission was reflected in its decision to join the EEA. A consortium comprised of more than 500 startups, financial institutions, large corporations, universities, public bodies and even central banks, the EEA was formed in early 2017 to develop standards and other tools for business applications of the ethereum protocol.

Rather than focus on applications for a specific sector, the EEA’s objective is to support development and interconnectivity of private versions of one particular blockchain across a wide range of sectors and use cases.

“While Corda, for example, was built to meet the requirements of the financial services industry, we needed to find further solutions more focused on cross-industry collaborations, like the Enterprise Ethereum Alliance,” Kammerer explained, adding:

“We joined to enhance our cross-industry cooperation.”

And that cooperation even extends into the concept of central bank cryptocurrencies – even though the possibility of disintermediation from this technology is generally seen as an existential threat to most commercial banks.

Hessenmüller, however, was candid about his, and more broadly Commerzbank’s, openness to the idea.

He believes that central bank money on a blockchain is not only a likely outcome, but a crucial missing ingredient for making blockchain applications more useful for everyone involved.

Speaking to that, Hessenmüller said, “We need to find a solution that includes money transfer in the ledger, backed and controlled by central banks. This will not happen tomorrow – but several central banks are seriously investigating this topic, and it could be one of the game changers.”

Commerzbank image via Shutterstock

The leader in blockchain news, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups.

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Commerzbank Conducts €500k FX Transaction Using R3's Corda

Germany’s Commerzbank and multinational conglomerate Thyssenkrupp successfully conducted a foreign exchange transaction on a blockchain platform, Reuters reported Thursday.

Thyssenkrupp transferred 500,000 euros using R3’s Corda platform through a EUR/PLN FX Forward deal, or a contract locking in an exchange rate between the euro and the Polish zloty at some point in the future. Because the blockchain used will store the entire transaction as a single immutable record, neither the corporation nor Commerzbank need to worry about transaction reconciliation, the news organization reported.

That is because confirmation of the deal was sent immediately to Thyssenkrupp, Reuters reported. Future deals conducted on a blockchain will similarly be confirmed immediately, which will cut down on both delays and manual errors caused by the current reconciliation process.

Commerzbank manager Nikolaus said in a statement that reconciliation is “a major issue for banks” when it comes to foreign exchange trading. He continued:

“Significant resources are dedicated to resolving the issues that occur during the matching process. This deal demonstrates how the use of distributed ledger (blockchain) can transform and digitalise the processes in this space.”

Despite the trial’s success, Commerzbank wants to continue studying the technology, according to Reuters. In particular, the “technical, regulatory and legal requirements need to be further developed” in order to fully realize the “efficiency benefits of using blockchain.”

Commerzbank image via Cineberg / Shutterstock

The leader in blockchain news, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups.

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New Banks Join UBS-Backed Blockchain Trade Finance Platform

Four major banks have joined a trade finance initiative launched late last year by Switzerland-based UBS and tech giant IBM.

Bank of Montreal (BMO), CaixaBank, Commerzbank and Erste Group are now taking part in the project, which is being built on top of the open-source Hyperledger Fabric framework. The platform, dubbed Batavia, was first unveiled in October at the Sibos banking conference in Geneva.

The idea behind the project is to build a system through which international trade transactions can be carried out from start to finish. Instead of paper-based letters of credit, trade finance transactions would be executed through smart contracts – self-executing pieces of code that trigger when certain conditions are met, instead.

Speaking last year to CoinDesk, Beat Bannwart, UBS’s head of product and market development for transaction banking, said that the primary intent was to link the parties involved over the course of a trade transaction more seamlessly.

“We looked at it from a transaction banking point of view, so we involved people from trade, from supply chain finance. But the aim was actually to combine all these different steps into one single solution, where the entire business flow is covered,” he said at the time.

Those behind the Batavia project are aiming to start a test phase involving customers sometime early next year. Though it’s not clear yet who those customers might be, IBM has previously worked with the government of Dubai and banks like Santander and Emirates NBD on research in the area.

UBS image via Shutterstock

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