Goldman Sachs withdrew from the R3 blockchain group. The investment bank was one of the nine original members of R3, founded in 2014 to explore the use of distributed database technology in Wall Street infrastructure.
The technology, best known for supporting the system that trades the virtual currency bitcoin, has drawn increasing attention as a way banks can save billions of dollars and make traditional processes faster and more efficient.
But not all blockchain companies are created equal, as different banks back different companies to exploit the technology. As of October 31, Goldman has let its membership in R3, one of the higher-profile efforts, lapse, but the firm will continue to work with blockchain technology, a spokeswoman for the investment bank said.
The online distributed ledger is best known for supporting the bitcoin digital currency, but banks want to use it to speed up transactions, reduce transaction costs, and better protect banking and other infrastructure. Blockchain is said to provide an immutable record of transactions and identities. This could eliminate intermediaries performing these services on the existing financial infrastructure.
A rotation is expected, an R3 spokesperson said. “Developing a technology like this requires significant dedication and resources, and our diverse group of members have different skills and capabilities that naturally change over time,” he said in an email.
As R3 builds blockchain pilots, the group is also seeking equity investment from members in exchange for a share of the profits from future technology and products, according to a person familiar with the matter. R3’s 70 members include Bank of America JP Morgan Chase and State Street.
In April, R3 revealed a key early product called Corda, which is a distributed ledger for managing financial contracts. The group has also conducted a number of blockchain pilots with subsets of its members, including one in which 11 banks exchanged electronic security tokens between offices in North America, Europe, and Asia to simulate financial transactions over a five-year period. days. In November, 10 R3 members tested a Know-Your-Customer system that allows a blockchain ledger to manage and verify party identities.
Goldman has made a commitment to blockchain through investment and internal development. In 2015, the bank was one of two lead investors in a $50 million funding round for bitcoin startup Circle Internet Financial Ltd. Goldman is also seeking patents for two blockchain-related inventions, for currency trading and the digital currency.
Blockchain has yet to be widely deployed for commercial use, partly because the legalities are unclear. The regulators have not made any statements about the requirements that blockchain-based systems must meet. Nasdaq’s Linq exchange for trading shares in private companies is one of the only blockchain-based financial systems in use.
