Wall Street’s Secret Meeting to Test Digital Cash

Blockchain is the automatic, digital transfer of funds from one bank and country to another bank and country. Although electronic exchanges such as wire transfers have existed for many years, the actual exchange took place some days later, with the transfer being a basic message of intention to transfer.

Blockchain is the actual, real time transfer of assets, and eliminates the problem of different currencies since everything is translated into digital values..

On a recent Monday in April, more than 100 executives from some of the world’s largest financial institutions gathered for a private meeting at the Times Square office of Nasdaq Inc. They weren’t there to just talk about blockchain, the new technology some predict will transform finance, but to build and experiment with the software.

By the end of the day, they had seen something revolutionary: U.S. dollars transformed into pure digital assets, able to be used to execute and settle a trade instantly. That’s the promise of a blockchain, where the cumbersome and error-prone system that takes days to move money across town or around the world is replaced with almost instant certainty.

The event — announced in a statement this Monday — marked a key moment in the evolution of blockchain, notable both for what was achieved, as well as how many firms were involved. The technology’s potential has captivated Wall Street executives because it offers a way to free up billions of dollars by speeding transactions that currently can take days, tying up capital. But a huge piece of that puzzle is transforming cash into a digital form. And while some firms have conducted experiments, the Chain event showed a large number of them are now looking jointly at a potential solution.

“We created a digital dollar” to show the group at Nasdaq an instant debit and credit on a blockchain, said Marc West, chief technology officer at Fiserv, a transaction and payments company with more than 13,000 clients across the financial industry. “This is the first time the money has moved.”

While cash in a bank account moves electronically all the time today, there’s a distinction between that system and what it means to say money is digital. Electronic payments are really just messages that cash needs to move from one account to another, and this reconciliation is what adds time to the payments process. For customers, moving money between accounts can take days as banks wait for confirmations. Digital dollars, however, are pre-loaded into a system like a blockchain. From there, they can be swapped immediately for an asset.

“Instead of a record or message being moved, it’s the actual asset,” Ludwin said. “The payment and the settlement become the same thing.”

Ludwin said blockchain has been validated on Wall Street, and now it’s time to focus on creating solutions.

“Putting it all together is no small amount of work, nor is re-engineering business processes within large organizations,” he said. “This isn’t ‘financial engineering.’ This is software engineering that is going to reshape financial services.”

While the financial community may see this as a tremendous step forward, there are many who view it’s capacity for abuse and control. Sovereignty, dictated by individual currencies, is diminished, and a “one world economy” becomes much more feasible. There is also greater potential for currency manipulation if it is purely a digital function, and putting the world economy into the hands of a few technocrats suggests many potential risks. And finally, as we progress towards a completely unified economic model, there are religionists that see this as simply another warning sign that we are in the final days.

But there is no doubt that the unimaginable amount of money involved means that this new economic system will move forward quickly, and that all of the ramifications are impossible to envision at the present time.

Source: bloomberg.com