Mizuho Bank and Fujitsu have announced a successful trial of blockchain for cross-border securities transaction settlements and are ready to implement the new method.

Distributed ledger will greatly simplify the whole process and reduce the time necessary to complete the settlement, claim the companies in a joint press release. Originally, the procedure took three days. Now the whole thing can be completed on the same day, from initiating the trade at a securities exchange to the actual settlement.

The reason why cross-border transaction settlements took such a long time is that a lot of information had to be verified. “A great deal of time is spent checking the settlement instructions and transaction content for inconsistencies,” reads the press release.

The situation was made even more complicated because typically a cross-border securities settlement transaction involves which many parties at once. With a blockchain network that interconnects most of the participants, they receive information simultaneously.

An important feature of the new method is, of course, that information streamed via blockchain can’t be tampered with. This gives a guarantee from fraud.

Reducing the transaction settlement time is extremely vital because during the three days the conventional settlement takes much may happen. “The asset manager is exposed to such risks as price fluctuations if the counterparty goes bankrupt during the period between executing the trade and completion of the settlement,” claims the press release.

Fujitsu is the leading Japanese information and communication company and the world's fifth-largest IT services provider. Mizuho Bank has one of the largest customer bases in Japan and a network of branches within the country and overseas. Mizuho used to hold accounts of the collapsed bitcoin exchange Mt. Gox and even took part in the lawsuit as a witness for the defence. In October 2015, Mizuho joined R3, the global consortium of banks developing blockchain framework for markets.

The joint effort of Fujitsu and Mizuho to explore blockchain gives further evidence that blockchain is gaining popularity in Japan. Previously, ORIX Corporation, ORIX Bank Corporation, The Shizuoka Bank, NTT DATA Corporation and NTT DOCOMO Ventures announced a joint research programme to investigate the implications of the blockchain technology.

Andrew Levich