SWIFT and Blockchain. Anand Bindumadhavan Head of Services & Support, APAC, SWIFT Japan Open Day - May 30, 2017

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Curtis Cross
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1 SWIFT and Blockchain Anand Bindumadhavan Head of Services & Support, APAC, SWIFT Japan Open Day - May 30, 2017

2 SWIFT and DLT in 2016

DLT@SWIFT - Vision Industry requirements SWIFT Vision Reliability Scalability Strong governance Data controls Compliance with regulatory requirements SWIFT s focus is on building technical,

3 - Vision Industry requirements SWIFT Vision Reliability Scalability Strong governance Data controls Compliance with regulatory requirements SWIFT s focus is on building technical, operational and business capabilities with a view to evolving our platform such that DLT-based services could be offered to our 11,000+ members, when the technology matures and firm business use cases emerge Security & cyber defence Standardisation SWIFT can complement the DLT technology benefits by leveraging its assets and skills to deliver a distinctive DLT platform offer for the benefit of its community.

2016 activities A number of DLT-related PoC have been developed in SWIFT labs covering the following topics: Plug SWIFT PKI and access control mechanisms to build a SWIFT permissioned ledger Build a

and asset servicing with FinTech starts up and SWIFT members. SWIFT is both a Founding Member & Board Member of this open source project aimed at advancing DLT.

4 2016 activities A number of DLT-related PoC have been developed in SWIFT labs covering the following topics: Plug SWIFT PKI and access control mechanisms to build a SWIFT permissioned ledger Build a SSI database for OTC markets Apply SWIFT standards expertise and ISO methodology to DLT context An industry challenge was organized in April 2016 to assess impact of a DLT solution on issuance and asset servicing with FinTech starts up and SWIFT members. SWIFT is both a Founding Member & Board Member of this open source project aimed at advancing DLT. The SWIFT Institute has published one academic research papers on DLTs in 2016 focusing on: The Impact and Potential of Blockchain on the Securities Transaction Lifecycle. SWIFT is engaging with its community to explore potential business use cases in payments (e.g. gpi vision group), Securities (e.g. ISSA blockchain working group) and Trade finance The SWIFT Standards team is investigating DLTs to understand how existing messaging and reference data standards can be reused in a DLT context.

5 What to expect in 2017?

6 2017 Key activities Explore with the community DLT sandbox Towards a product Value proposition Platform & software Thought leadership ISO More vocal!

7 A different paradigm: messaging versus DLT Messaging data is shared using point-to-point messages DLT data is shared using a shared ledger that all participants can consult

8 DLT for Gpi nostro/vostro reconciliation

9 Nostro Reconciliation How does it work today? MT 202 ref DEF 2 BANK A 3 [MT 900, 910, 92 partial coverage of transactions] CORRES- PONDENT $ reconciled? $ reconciled? Shadow Nostro Account of Bank A MT 90, 950 Real Nostro Account of Bank A -1000$ (ABC) $ (DEF) -50$ Charges etc +1000$ MT 950 Match? Line 60F -> opening balance Line 61 -> debit entry ( USD) (ref ABC) Line 61 -> debit entry ( USD) (ref DEF) Line 61 -> debit entry (- 50 USD charges) Line 61 -> credit entry ( USD) Line 62F -> closing balance (booked funds)

10 Real-time Nostro with DLT How could it work? Last MT 950 with Closing balance = Opening balance next day 1 MT BANK A $ (UETR1) Shadow Nostro Account of Bank A w Corr ,000 $ (Opening balance) $ (UETR2) 2 MT 103 ref UETR1 3 5 Real Nostro Account of Bank A -1000$ (UETR1) -50$ Charges etc + 10,000 $ (Opening balance) + 5,000 $ CORRES- PONDENT 5 3 ref UETR2 Shadow DLT Bank side One shared ledger, visible in real-time by both Account Servicer & Owner Shadow DLT Correspondent side Payment type Reference Status Balance Payment type Reference Status Balance 103 UETR1 10 Pending debit 1000 $ ,000 (Opening) Confirmed debit 1000 $ 9,000 Incoming credit UETR2 Confirmed incoming credit $ 1,000 Charge Internal reference Confirmed debit 50 $ 13, UETR1 Pending debit 1000 $ Confirmed debit 1000 $ 2 3 Charge 10 Internal reference Confirmed debit 50 $ 13, ,000 (Opening) 9,000 Incoming credit UETR2 Confirmed incoming credit 1, $ 1 3 5

11 comms SIBOS Timeline for PoC Q1 Q2 Q3 Q JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC Preparation, development and testing PoC Group Participates in testing phase of PoC Preparation and testing Validation Group ** PR to announce the gpi DLT PoC Indication of Interest deadline Selection + announcement PR to announce completion of PoC Sibos

12 SWIFT Executive Comittee - Alliance Access Integrity Alerting Demonstration 12

Interim Report gpi Nostro Proof of Concept

Interim Report gpi Nostro Proof of Concept Can Distributed Ledger Technology finally pave the way for real-time Nostro reconciliation and liquidity optimisation? Contents Executive summary 3 Introduction