Blockchain technology continues to make headlines in 2017, with buzz building on new collaborations between financial institutions and blockchain companies, and progress updates on blockchain projects moving pass pilot testing stages. This week, Fidelity Investments announced that its R&D unit – Fidelity Labs – joined the Initiative for Cryptocurrencies and Contracts (IC3), a blockchain technology development group based in New York City that plans to offer blockchain, smart contract and cryptocurrency technology-based solutions to financial institutions.
Fidelity is the first financial services firm to join IC3, illustrating the firm’s forward-thinking mentality. IC3 is a joint initiative between faculty members at Cornell University, Cornell Tech, UC Berkeley, University of Illinois Urbana-Champaign and the Technion, and it also counts among its members IBM, Intel and Digital Asset Holdings.
In this latest collaboration, Fidelity Labs and IC3 plan to develop blockchain-based programs aimed at making financial systems more transparent, efficient and secure. In an interview with Reuters, Hadley Stern, senior vice president at Fidelity Labs, stated that a potential application of interest is the settlement of repurchase agreements, a space Digital Asset Holdings and DTCC have been working on since last year.
This is not the first time, however, that Fidelity has shown interest in blockchain technology or bitcoin. Here, we mention some instances where Fidelity embraced blockchain technology and bitcoin:
- In November 2015, the firm’s public charity arm, Fidelity Charitable, began accepting bitcoin donations to the Giving Account, a donor-advised fund. Fidelity partnered with Coinbase to convert bitcoin donations into U.S. dollars. Fidelity Charitable announced last year that it had received $7 million in bitcoin contributions.
- In May 2016, blockchain technology company Chain publicized that Fidelity was among the financial services firms that contributed to its Chain Open Standard technology, which can be used for various financial applications, such as payment processing.
- This past February, Fidelity filed a patent for SOCOACT, a blockchain-based application with multiple use cases, including for voting systems. In the context of voting systems, for instance, this blockchain application can be beneficial in places where advanced voting systems are not available, and thus the probability of voting fraud is high. Notably, Broadridge Financial Solutions, Inc., J.P. Morgan, Northern Trust and Banco Santander are working on a blockchain-based solution for proxy voting and announced this week their completion of a related pilot test.
Fidelity’s recent collaboration continues the financial services industry’s foray into this nascent technology to help improve inefficiencies in today’s financial processes. In our latest syndicated report, Blockchain Solutions and the Future of Finance, we take a non-technical approach to discussing blockchain and explore projects that have emerged from similar collaborations. Since the report was published in February, we have already seen projects moving closer towards completion, like the Euroclear and Paxos project focused on the London bullion market and the DTCC and Digital Asset Holdings project focused on clearing and settling of repo transactions. In the short and long term, we expect to see these partnerships yield real-world solutions that positively impact the financial services industry.