Subscribe / Unsubscribe Enewsletters | Login | Register

Pencil Banner

UBS CIO says blockchain 'will heavily impact' financial services

Clint Boulton | Aug. 19, 2015
Oliver Bussmann, CIO of UBS, says the blockchain technology underlying Bitcoin and other cryptocurrencies can pare transaction processing time from days to minutes. Under his leadership, UBS is building innovation centers where engineers work with startups to pinpoint viable mainstream blockchain solutions.

oliver bussman pic
Oliver Bussmann, CIO of Switzerland’s UBS:  'Blockchain, as the digital ledger, will heavily impact the way we do business in the financial services industry

Digital currencies such as Bitcoin threaten to shake up the financial services industry, enabling organizations to facilitate secure transactions more swiftly than today's asset exchanges. One global bank CIO is championing the technology as a key innovation that could be as disruptive as the Internet was 20 years ago. Now he’s exhorting other financial institutions to follow suit.

Oliver Bussmann, CIO of Switzerland’s UBS, says that Bitcoin's blockchain technology, a decentralized digital ledger that verifies transactions between parties, can process trades, bonds and others in record time, ultimately improving the client experience. That untapped potential is a big reason why UBS is building innovation labs to test cryptocurrencies, among other digital technologies, for future use at UBS.

"Blockchain, as the digital ledger, will heavily impact the way we do business in the financial services industry," Bussmann told CIO.com. He expects a trusted blockchain solution could emerge as soon as the middle of 2016.

Blockchain makes cryptocurrency legit for financial services

Bitcoin and its ilk have been shunned by banking executives because they lack the backing of a centralized bank and have been used to conduct illegal transactions, such as buying and selling drugs and weapons online. Yet banks such as UBS, Bank of New York Mellon and the Bank of England have warmed to cryptocurrencies as renowned technology experts have championed the blockchain for its potential to shake up the financial services sector.

Entrepreneur-turned-venture-capitalist Marc Andreessen, who cemented his status as a digital disruptor by co-creating the early Mosaic Web browser, called Bitcoin a "fundamental breakthrough in computer science" because the blockchain helps establish trust between unrelated parties over the Internet.

Bussmann agrees. Banks have over the last two decades reduced settlement of stocks, bonds and other assets, which involves communications and vetting from multiple parties, from five to two days. That time lag between transaction and settlement time courts financial risk, Bussmann says. For example, someone who has purchased a stock for $100 could see its value fall to $90 by the time the settlement clears a few days later (due to a profit warning or some other negative news that causes traders to turn bearish on the stock), costing the buyer $10 in value depreciation. But financial services firms using a blockchain to facilitate trades could complete transactions in record time, because the technology serves as an unimpeachable authority that doesn’t require vetting between multiple parties. With blockchain, the $100 stock trade would close at $100 and the buyer wouldn’t lose money.

 

1  2  Next Page 

Sign up for CIO Asia eNewsletters.