IBM's New Blockchain Bet Targets Next Wave of Financial Services

  • Forms experimental team with Japan bourse operator, JPX
  • Blockchain adoption could speed up financial transactions

Big Blue is betting big on blockchain.

Working with Japan Exchange Group Inc., International Business Machines Corp. next month will start testing the distributed ledger technology that underpins bitcoin. Blockchain simplifies global finance by creating a transparent and permanent record of transactions. The joint venture with the Japanese bourse operator could help IBM position itself as a force in the next generation of financial services.

While JPX and IBM plan to eventually implement the technology in financial transactions, JPX made clear in a statement that the two companies are in the experimentation phase and will first conduct proof-of-concept tests in markets with low transaction volume.

“There are issues to be resolved in the technology, and it will need to be continually verified and improved before actual application in financial business operations,” JPX said.

JPX and IBM will use technology from Linux Foundation’s Hyperledger Project, which is designing an open-source communications standard for potential blockchain users. IBM, London Stock Exchange Group Plc., JPMorgan Chase & Co. and blockchain startup R3 are among financial institutions and technology companies helping with the project.  

IBM, which says it has already contributed about 44,000 lines of code to the Hyperledger Project, wants to persuade software developers to use its cloud computing and hosting services to build distributed ledger systems on top of the open-source code. The company’s ultimate aim is to become the go-to blockchain service and software provider for financial institutions.

Companies around the world say blockchain technology could speed up global finance. Nasdaq Inc. in December used blockchain for a private securities transaction for the first time. ASX Ltd., Australia’s main exchange operator, last month agreed to invest in the technology. IBM has invested in Digital Asset Holdings, a firm started to adapt blockchain technology to financial markets.

“This technology has the potential to drive change across the industry, but will need to be developed in partnership with customers and industry participants under an open-source approach,” said Moiz Kohari, group head of technology innovation at LSE.

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