Swiss Consortium Solves Banking Secrecy With Ethereum Encryption
In a press release from January 26, 2017, the OTC Swiss Blockchain Consortium announced a new Ethereum-based “encryption module” for their blockchain-based transaction platform for securities that are traded over-the-counter (OTC).
ETHNews reached out to project manager Dr. Mathias Bucher and asked: Why Ethereum?
“Ethereum is a global chain, with all the benefits of the largest Blockchain 2.0 network. Eventually, private chains will be part (and subsets) of the global chain, and profit from economies of scale (especially around blockchain-based digital IDs). Ethereum has a large, highly talented and constructive pool of developers. The community has shown a constructive attitude when facing adverse conditions (examples of recent attacks), which makes me bullish on the technology. And the development priorities driven by the foundation are the right ones.”
The OTC Swiss Blockchain Consortium is a Swiss finance industry group that formed last summer. Supported by the Commission for Technology and Innovation (CTI), the consortium consists of the Institute of Financial Services Zug IFZ of the Lucerne University of Applied Sciences and Arts, and Swiss companies InCore Bank, Inventx, SIX, Swisscom, ti&m, and Zürcher Kantonalbank. Initially formed to research blockchain-based solutions for OTC Swiss equities, the group states that the blockchain increases mutual trust, and smart contracts increase the efficiency of interaction between participants due to automated interaction terms. However, the consortium had fallen into the same problem other consortia face regarding blockchain adoption in the financial sector: the question of privacy. How could the privacy of business participants be protected while still allowing a more scalable blockchain system?
“The use of crypto-addresses for identity is problematic: no bank likes providing its competitors with precise information about its transactions. Also, the banking secrecy must be kept by law.”
The Swiss consortium found a solution to their problem through an Ethereum encryption module where all identities and content is protected through “Strong Encryption.” This allows better scalability through a distributed, encrypted database that will ensure that participants only see the information that corresponds to their role and confidentiality is conserved, while still allowing the necessary authorities access to investigate specific cases of financial crime and identities behind those illicit transactions.
In the coming weeks, the team plans to tackle the legacy systems of connected banks and integrate their blockchain solution with the aid of the Swiss exchange SIX. They also plan to address legislators to explain the blockchain technology and the benefits it provides to the financial ecosystem. Bucher told ETHNews:
“We will reach out to the Swiss regulator FINMA as the first step.”
Also, in response to ETHNews’ inquiry if the consortium had any other plans to implement the Ethereum encryption module in other sectors, Bucher responded:
“We are definitely considering rolling out the technology/platform to other products apart from OTC Swiss equities.”