The Bank of Tokyo-Mitsubishi, in collaboration with Hitachi, have begun a proof of concept testing period for the use of blockchain technology to digitization checks. In a press release, Hitachi stated:
“Hitachi and BTMU communally developed a system in which blockchain infrastructure [is] used for issuing, transferring and collecting electronic checks. Using the system, BTMU issues and settles checks and some of Hitachi Group companies in Singapore receive the electronic check and deposit the funds.”
As this is at a proof of concept stage, the testing period will focus on addressing any problems that may arise in the use of blockchain technology for the clearing of checks, including any security issues as well as any potential legal concerns that regulators may have.
The testing period is seemingly in close collaboration with the Monetary Authority of Singapore which, like UK’s Financial Conducts Authority, is proposing guidelines for a regulatory sandbox during testing stages to facilitate fintech innovation. During this period, many of the usual financial rules – save for criminal law – do not apply with regulators, in certain instances, being able to grant a non-enforcement letter – in effect throwing out the rule book during the testing stage as long as the participants are acting responsibly and in close collaboration with the financial authorities.
Hitachi and BTMU stated they “will increase efforts towards putting blockchain technology into practical use,” due to its many benefits:
“The digitalization of checks makes it possible to automate the workloads of intermediaries for checks in financial institutions, to avoid tampering and to speed up settling checks. In addition, it is expected that similar approaches can be applied to payment and supply chain finance in non-financial sectors in the future.”
This is the second major announcement of a proof of concept blockchain implementation. It follows last week’s news that four global banks are implementing a Universal Settlement Coin proof of concept testing period for settlement with market ready use estimates in two years.
The combined announcements point to the beginning of a new stage in blockchain adoption – from consideration of what is blockchain technology and whether it has anything to offer – to real life testing with the aim of market ready production.