2019-10-09 Meeting notes

Date

09 Oct 2019

Attendees

• Vipin Bharathan

• @Natalia Garcia

• Manju Reddy
• Muralisr
• Kelly Cooper

Goals

Discussion items

Recordings

audio_only.m4a

video_0.mp4

Action items

Research and explore digital cash obstacles

Create smart contracts as examples

Meeting Minutes

Banks - smart contracts - what about cash? Biggest problem for Muralisr - transactions have to resolve themselves in cash.

Vipin - Interactions with money today, is in digital form, through digital accounts, or some form of plastic money. Cash may be a smaller percentage of transactions; however, it's sitting in many different systems as an account. For banks, amounts sitting inside accounts in, for example, the Fed in the US. Dematerialized cash has been around for a long time. That cash, now, needs to be accessible for settlement if securities are issued on the blockchain, they need to be accessible on the blockchain in a secure manner.

Securities can flow across regions and denominations. Hard to make cash flow like that. Why we have so many intermediaries who handle cash for us. To democratize? Need cash in some form. How to work from one currency to another? What does it mean to say cash is on the ledger? Do we have one standard cash or keep fiat of regions? Once that problem is solved in some form it will open a lot of use cases. 

Papers on projects, taxonomies, obstacles in slow progress. 

One obstacle, absence of a standard for digitalized currency. To flow across jurisdictions or systems. Networks, repos, etc. If you want to use money transacted in one of the use cases to do something somewhere else, you need the interoperability of cash. 

Common Standards - holy grail - some notion of local standards with the ability to bridge them with some interOp. We do have in standard legacy processing. Intermediate legacy systems handle it for now. If we have blockchain, local blockchain, how do we park between blockchains. What about the middleman? How does it work with current systems? How do we get from where we are today to what we intend?

How do we get assets into the blockchain, in the first place? If in digitized form, easy. Those not digitized, not easy. The scramble to digitize actual cash (JP Morgan) to have cash on the ledger. 

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Some updates made in the taxonomy document and others. 

On regulatory side, what are interactions with regulatory side?

China working on it. Different than approach of Libra, which must be across jurisdictions. Regulators are against Libra because they recognize there is a problem today and they do not want a private association to solve the problem. The Chinese contrasted their digital currency efforts to Libra; they said, the exchange can happen on the edges. This means, instead of exchange happening inside a centrally connected blockchain, what if you have a phone and your counterpart has a phone, you're not connected to the network, how can you exchange? With physical cash you do not need access to anything. The Chinese said their digital currency will allow this kind of exchange; I can touch my phone to yours and exchange takes place without connection. Eventually will take place on a ledger. 

BIS Document on Digital Currencies: https://www.bis.org/cpmi/publ/d174.htm

Common Data Model - derivHack in NYC, London, Singapore. Their model allows for processes and events modeling. They want to extend to post trade settlement for every type of security, not just swaps and derivatives. As part of that, there is a support provided by Digital Assets and R3 to translate between CDM and their own representation of contracts. Vipin will see if they have standards forms that may be relevant for Capital Markets SIG. We could sketch out what we know, ie Issuance. That is a pattern. Can be used as a model and develop a smart contract. Subsequently, for trading or post-trade settlement. Can take simple products which are not complex. 

Kelly showed Burrow smart contract examples.

Provenance - trade finance - securitization - possible use case/smart contract. 

Manju - use cases related to KYC or AML and trade tiering. Looking at why is the focus on this and not other aspects of Capital Markets. Counter parties involved, especially in compliance. Example: insider trading - individuals who trade on their behalf. How can this use case benefit the overall market. 

Muralisr - making insider training more transparent, is this a problem that can be best solved with bc? 

Manju - bc will perhaps not solve the problem but may be a value part in solving - trust. All parties involved in insider training, in different organizations, within trusted parties. Banks or different organizations such as accounting firms. Large players. Lack of transparency. Regulatory, hard to track. When a particular event happened, who was involved. 

Who will be the right person to push, with enough people benefiting. Also awareness, middle office and back office functions to huge benefit.