President of NTRS: Blockchain technology could become future trends in the financial industry
【Published by Ni Wei(倪伟), edit by Angelina | China Security Journal】
Peter Cherecwich is an Executive Vice President and a member of Northern Trust’s Management Group in Chicago. Pete currently serves as the President of Corporate & Institutional Services business unit.
An industry veteran, Peter brings over 25 years experience in working in a global organization and managing extremely large and complex client relationships. Pete originally joined Northern Trust in July 2007 as Head of Institutional Product and Strategy. Prior to joining Northern Trust, Pete served in various executive and lead operational roles at State Street Bank.
Northern Trust (Nasdaq: NTRS), in collaboration with IBM and other key stakeholders, has launched the first commercial deployment of blockchain technology for the private equity market. In response to the impact of blockchain technology on the financial industry and its development trend, China Securities Journal reporter recently interviewed Peter Cherecwich, who said that blockchain technology has brought significant optimization to the financial industry, but currently faces financial support and districts. Blockchain compatibility, security, and industry regulation and legislation. He believes that in the next 10 years, the financial industry will have a great opportunity to integrate blockchain technology, and the Asian market will become the most potential place.
Financial industry embraces blockchain technology revolution
Northern Trust is a world-renowned custodian bank with a history of 129 years. Its headquarters is located in Chicago, USA. In September 2018, its custody assets were nearly $10.8 trillion. Since 2005, a representative office has been established in Beijing. Until today, Northern Trust has been in China for 13 years.
Northern Trust is certainly no stranger to the blockchain. Back in early 2017, the company teamed up with IBM to release what was called the first commercially deployed blockchain-based financial solution. Regarding the reasons for building the platform, Peter told the journalist that: “Current legal and administrative processes that support private equity are time consuming and expensive,” said Peter Cherecwich, president of Corporate & Institutional Services at Northern Trust. “A lack of transparency and efficient market practices leads to lengthy, duplicative and fragmented investment and administration processes. Northern Trust’s solution is designed to deliver a significantly enhanced and efficient approach to private equity administration.”. The sharing of data enables the various parts of the process to be carried out simultaneously, which saves a lot of time for the customer and allows the funds to invest more quickly. On average, the initiation of a private equity fund needs six months of processing time, the cost of the fund’s life cycle can be as high as 10% of the fund’s total value, while the blockchain can be traded without the need for an intermediary, and the time and cost have been greatly reduced.” .
At the same time, “the private equity industry does not need to test the high-frequency transactions of blockchain capacity expansion. Mainly it involved a small number of parties in the investment field. Only the chain side that grants permission can share transaction data and details, and can limit the range of data that can be involved, so it is easier to control than paper transactions in terms of information security. ”
Blockchain technology is applicable to any industry. For the financial industry, blockchain can achieve direct connection between parties, effectively remove the intermediate links, and accelerate data sharing and simplify the cumbersome process. Therefore, for the future development trend, Peter said, “There are already some large financial institutions that have begun to use blockchain technology, and I believe that in the next 10 years, blockchain technology will become increase more than 50% of the development trend of the financial industry. If the government can provide strong support in funding, regulation and even law, the opportunity will be even greater.”
Industry revolution still needs to improve environment
As a new technology, the market has already experienced the advantages it brings. However, Peter said that in order to make the blockchain technology completely become the development trend of the financial industry, there are still some aspects to be improved in the market environment:
First of all, getting funds support. The development of blockchain requires large financial support, which is a very large expense for many small and medium-sized financial institutions. Peter said that if you rely solely on the financial institutions’ own funds, I believe many institutions will be discouraged. Therefore, the popularity of blockchain technology is inseparable from the strong support of state and government funds.
Second, it is the compatibility aspect of the blockchain. It is obviously unrealistic to use the same blockchain for each trading platform. Therefore, it’s like multiple participants using different social software, how to make them connect with each other and form some form of compatibility, dialogue and even share some data between different blockchains, which is a problem that needs to be solved in the development of the blockchain technology. At the same time, how to improve the capacity expansion of a single blockchain and the tolerance of high-frequency transactions is also a technical problem.
Third, Peter said that the involvement of regulators, including the gaps in relevant legislation, needs to be taken seriously. As far as the Northern Trust is concerned, the current blockchain-driven private equity fund chain nodes include not only investment managers, general partners, limited partners, fund managers, but also auditors and regulators. The private equity blockchain currently launched by Northern Trust is regulated by the Guernsey Financial Services Commission, which has the authority to extensively access relevant transaction data and content. In the future, for the financial industry which introduction the blockchain technology, will have to considered whether the regulator needs to be included in the supervision of other countries in the trading side.
In addition, Peter also proposed that the innovative spirit of Chinese entrepreneurs is admirable. Peter pointed out that Chinese market has a very high degree of tolerance and support. These will make the market split in a higher speed. He believes that in the future Asian will be the most potential market.
■ Source & reference: Bishijie, Northern Trust
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