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EXCLUSIVE – In conversation with Sophie Gilder, Head of Blockchain at the Commonwealth Bank of Australia

EXCLUSIVE - In conversation with Sophie Gilder

Blockchain or Distributed Ledger Technology (DLT) has the potential to radically reshape the financial services industry. The industry has been at the forefront of experimenting with the technology, initiating projects in cross-border payments, trade finance, clearing and settlement and many more areas.

The Commonwealth Bank of Australia (CBA), one of the “big four banks” in Australia, has been involved in several pioneering Blockchain initiatives since last year. In October 2016, CBA, Wells Fargo and Brighann Cotton undertook the first global trade transaction between two independent banks, combining the technologies of Blockchain, smart contracts and Internet of Things. The transaction involved a shipment of cotton from Texas, USA to Qingdao, China. In January 2017, it was announced that CBA and the Queensland Treasury Corporation (QTC) had created the first government bond using Blockchain.

OpenGov had the opportunity to interview Sophie Gilder, Head of Blockchain for the Global Innovation Labs within Commonwealth Bank Institutional Banking & Markets. Ms. Gilder joined CBA in 2014 in the Bank’s Debt Capital Markets and Securitisation team, and has first-hand experience working with clients, investors and ratings agencies in advisory, structuring and execution of transactions in corporate, financial and asset-backed markets. Prior to Commonwealth Bank, Ms. Gilder held a number of roles in investment banking and capital markets in Australia and in Europe.

Could you tell us about your role as Head of Blockchain for the Global Innovation Labs at the Commonwealth Bank of Australia (CBA)?

As Head of Blockchain for the CBA’s global Innovation Labs, I am responsible for the portfolio of Blockchain driven projects we are currently undertaking, exploring the benefits and limitations of Blockchain technology.  We collaborate with clients and business units across the bank group to address real business problems, and have a specialist team of Blockchain developers with deep technical expertise who build prototypes.  We also work closely with other market stakeholders such as government, regulators, universities and industry bodies to share what we’ve learnt and benefit from their input.

Can you provide an overview of the current landscape of Blockchain development in Australia? 

Blockchain development in Australia is niche but active, with some great creative ideas being developed.  There is a community of start-ups, larger financial services providers, law firms, corporates, universities and government entities who are actively researching, experimenting and collaborating with the technology. These participants are currently working towards the first enterprise grade Blockchain solutions.

What applications of Blockchain are currently being explored at CBA? Can you tell us about any ongoing or planned Blockchain-based projects?

We are interested in all areas where Blockchain technology can transform the way we provide products and services to our customers.  Areas of interest include management of digital identity, bringing greater efficiency to capital markets and corporate lending, reducing the cost and friction of transacting in supply chains and international trade, building feature rich, efficient and convenient payment mechanisms, and addressing regulatory and compliance obligations in a more efficient and transparent manner.

What is the role of startups and established banks in the development of Blockchain? How is CBA partnering with other banks or FinTech startups?

CBA is actively partnering with other banks and startups on various experiments. We benefit from the nimble approach and creativity of startups and can help them by providing expertise in legal, regulatory, compliance and risk issues, as well as being able to leverage our existing scale, data and client base. We partner with forward looking banks internationally, in order to share views and undertake experiments for mutual benefit.

CBA and Queensland Treasury Corporation created the first government bond using Blockchain earlier this year. Can you tell us about the project? What opportunities do you see for collaboration between government and the financial sector for the usage of Blockchain?

QTC was willing to be an innovation catalyst by collaborating with us on the development of a bond issuance platform powered by Blockchain. We built a platform that enables issuers looking to raise capital to design a bond issue through drop down menus and create a smart contract that reflects these by parameters on the Blockchain, at the push of a button. Once created, that bond can be offered for sale direct to bond investors on the Blockchain platform, who submit their bids direct to the shared Blockchain ledger. Allocation, pricing and settlement can be done instantaneously through a single seamless transaction which transfers payment and title to the bond in the same transaction. The coupons on the bond are then automatically paid by the smart contract through to maturity.

The Australian regulators appear to be taking multiple initiatives for the development of FinTech industry in Australia. There were several FinTech related announcements in the budget also. What role are the regulators playing or can play in the area of Blockchain?

Australian regulators are engaged and actively researching Blockchain, in order to be well informed and think through the consequences. There is significant potential to create RegTech tools powered by Blockchain which provide regulators with greater transparency, timely and accurate market information and enable them to be more efficient in their role. They are aware of this potential and willing to engage with market counterparties to facilitate Blockchain development.

In your view, what are the biggest challenges, technical, regulatory or otherwise in the development of Blockchain applications and bringing them to market?

The biggest challenges that we face today are addressing technical issues regarding scaling and reliability, getting agreement on suitable governance structures and fitting within existing legal, regulatory and compliance frameworks.

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