Treasury Today Country Profiles in association with Citi

Building a bridge to the blockchain

Ants building a bridge

Citi and NASDAQ work together to build a solution that sees the existing world meet the new. We speak to Morgan McKenney, Head of Core Cash Management, Asia Pacific, Treasury and Trade Solutions at Citi to find out more.

A payments solution launched late last month by Citi, in partnership with its client Nasdaq, facilitates straight through processing and automated reconciliation by using a distributed ledger to record and transmit payment instructions.

As Morgan McKenney, Head of Core Cash Management, Asia Pacific, Treasury and Trade Solutions at Citi summarises: “The solution tightly integrates Citi’s core financial infrastructure with a blockchain system, Nasdaq’s Linq in this instance. The result is greater operational efficiency in Nasdaq’s private securities business.”

Linking it up

The pioneering solution was created following engagements between Citi and Nasdaq at IDEO Co-Lab in San Francisco in which the American exchange shared their work and objectives in the blockchain space.

In the months prior to this, Nasdaq had already applied the distributed ledger to create their Linq platform for private markets securities. And whilst this enabled a more transparent and efficient transfer of stock certificates, there remained a dislocation between the new and old world, especially in regard to how the blockchain interacted with financial systems to initiate and receive payments based on these transactions.

To solve this, Citi set about working internally, and with Nasdaq, to build a bridge connecting Nasdaq’s Linq blockchain and Citi’s traditional financial capabilities to help power Linq’s transactions. CitiConnect® for Blockchain is the result and it tightly integrates distributed ledger technology with Citi’s global financial network.

For example, if an investor buys a private market security through Linq Platform, funds deposited in Nasdaq’s account will be auto-reconciled and reflected on Linq’s digital subledger through the CitiConnect® for Blockchain connectivity channel.

Multiple benefits

For Nasdaq, the solution will bring a number of potential benefits. Firstly, because it offers direct access to global payments from Nasdaq’s Linq platform using CitiConnect for Blockchain, there can be a seamless end-to-end transactional process for sales of private company securities.

“For private market securities purchases,” says McKenney, “the solution helps match exactly who has bought the security with their payment, enabling auto-reconciliation for Nasdaq. This operational efficiency helps support their growth objectives for this part of their business”

More to come

For corporate treasury professionals, talk of distributed ledger technology can be a bit overwhelming at times. However, what is clear with solutions such as this is that the distributed ledger is slowly becoming an increasingly viable mainstream solution.

McKenney is keen to stress though that the world will not change overnight. “The financial industry is at the very early stages of successfully adopting blockchain,” she says. “But this new connectivity that we’ve built between Nasdaq’s blockchain system and our global financial capabilities creates the opportunity for many other companies to explore this technology and see how it can impact and ultimately improve their business.”

Reader Comments 

Please login or register to submit your own comment
  1. Corporate treasurers should not overwhelmed and they should not be considering the concept of a distributed ledger as being anything new. Distributed ledger technology has certainly advanced, having been able to benefit from new protocols, primarily Blockchain. At its simplest, the blockchain is effectively just a framework of rules (consensus mechanism) for assuring the integrity of a ledger when it needs to distributed across a network. While it has similarities with the blockchain protocol that we more readily associate with "cryptocurrencies" such as Bitcoin and Ethereum. each protocol is now evolving very differently. The example that we see here, along with others now being demonstrated in the "Fintech" space, is the result of a formal collaboration that seeks to make managing financial transactions amongst trusted parties more secure and efficient, whereas the opportunities that we might see linked to cryptocurrencies are targeted at opening up a new opportunities and services in a decentralised "Internet of things" where lack of trust is an issue.
    @ChisoliTS's Gravatar

    @ChisoliTS 2017-06-22 14:33:01