Citigroup, Nasdaq Team Up -- WSJ
23 May 2017 - 5:02PM
Dow Jones News
Objective is to link bank's business payments with exchange's
platform.
By Telis Demos
Citigroup Inc. and Nasdaq Inc. are partnering to match up the
blockchain with real money.
The two companies said they have been working together, along
with technology startup Chain Inc., for months to link Citigroup's
business payments services to Nasdaq's blockchain platform that has
been used for activities such as buying and selling shares of
private companies.
For blockchain, the move represents a notable chapter in its
development. Blockchain is the peer-to-peer networking technology
first developed to transfer ownership of the virtual currency
bitcoin between people.
Bitcoin's value has soared this year, crossing over $2,000 in
recent days. But it still hasn't found widespread traction in
traditional banking. The recent WannaCry computer attack asked for
ransom payments in bitcoin.
With the partnership, details of which are expected to be
announced Monday, a blockchain is connecting to one of the largest
and most established bank money-transfer systems. And it gives big
banks a way to earn fees helping new networks facilitate business
payments if traditional settlement or invoice systems are
disrupted.
Overall, banks, exchanges, and other financial firms have poured
more than $1 billion into projects and startups using forms of the
underlying blockchain technology, according to Greenwich
Associates.
The aim, still mostly in the early stages, is to be able move
things like stocks, derivatives, and other assets between two
parties much more cheaply than with existing systems.
But without bitcoin or another digital currency, however, those
systems may be missing a crucial ingredient: Money. Efforts to
create digital versions of dollars and other government-backed
currencies are in their infancy.
Starting last year, Citigroup and Nasdaq began working together
to match up Nasdaq's Linq blockchain platform to Citigroup's
Treasury and Trade Solutions unit, which moves trillions of dollars
globally in business payments.
Both firms are investors in San Francisco-based Chain, and have
worked with the startup in their blockchain efforts. Citigroup
invested in Chain through its venture arm, Citi Ventures, which
worked with its treasury unit on the project.
The new system links CitiConnect, a tool that can be used to
manage large-sum payments across borders and across currencies, to
blockchains -- in this case Nasdaq's Linq. This speeds up a key
part of the usual multiday settlement process for trades.
The companies have already used the new system to make payments
on trades, they said. Citigroup would earn standard fees to
facilitate the payments just as it would for any
business-to-business transfer.
The new system is a pilot for Citigroup, which for now is
working with Nasdaq and Chain, but could develop it for other
clients as well, the bank said.
The new system "will lead to relatively greater maturity of
blockchain technology, and integrate it into our existing financial
infrastructure, " said Naveed Sultan, Citigroup's global head of
Treasury and Trade Solutions. "That may lead to greater adoption of
venues powered by blockchain."
Chain, led by Chief Executive Adam Ludwin, said last year it was
working with Visa Inc. on a blockchain network to connect
businesses with the credit-card network for cross-border
payments.
Write to Telis Demos at telis.demos@wsj.com
(END) Dow Jones Newswires
May 23, 2017 02:47 ET (06:47 GMT)
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