Blockchain consortium raises record $100m

A consortium of banks looking to build blockchains for modern finance has completed the largest fundraising to date for the emerging technology, raising more than $100m from about half its membership as well as technology group Intel.

R3, the New York group, said on Tuesday it had secured $107m to develop a blockchain platform from 43 financial institutions, as well as Temasek, the Singaporean state investment company, and Intel Capital, the US tech group’s venture capital arm.

The technology — an electronic ledger with records stored in “blocks” — aims to automate the complex networks of trust and verification on which modern finance sits, potentially cutting tens of billions of dollars of costs from the financial sector.

But the seven-month fundraising has been marked by tensions among big banks assessing which blockchain projects they should back, as the two-year-old consortium’s membership swelled from an original nine to more than 80.

Some early members, such as Goldman Sachs, JPMorgan and Morgan Stanley balked at being asked to invest and are planning to withdraw from the venture. Some have backed rival blockchain projects such as Digital Asset Holdings and Axoni.

However, many others, including Barclays, Bank of America Merrill Lynch, Credit Suisse, UBS and HSBC participated in the fundraising.

The capital raising took place in three stages, with the first two open to members of the R3 consortium only, plus a dispensation for Intel to participate. A final tranche, also open to non-members, will begin this year. Although R3 did not put a figure on it, a person involved in the financing said it would be around $50m.

The R3 capital raising comes as rival operators prepare to test their own blockchains on the critical record keeping in the foreign exchange, equity and credit derivatives markets.

Although best known for links with bitcoin assets, banks are exploring blockchain use as a way to cut costly back office systems, unify their disparate data platforms and meet tougher regulatory demands on trade reporting and customers’ portfolio valuations.

But many have found the blockchain technology difficult to put into practice and are turning increasingly to independent infrastructure operators, many of which already maintain the plumbing behind billions of dollars of deals.

R3 plans to use the funds to hire more software engineers to help develop Corda, its own blockchain platform.

“This investment is unprecedented,” said David Rutter, chief executive of R3 and a former executive at ICAP, the interdealer broker. “Many of the world’s largest financial firms have come together not just with capital support, but with a robust commitment to work with R3. We’ve got unparalleled momentum.”

R3 has grown to a staff of more than 100 people and describes itself as the “de facto centre of gravity” for blockchain technology in the wholesale financial markets.

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