MUMBAI: In a boost to use of blockchain technology in banking, the RBI’s research arm has completed the first ever end-to-end test of the technology behind Bitcoin in a project involving regulators, banks, financial institutions and clearing houses. The RBI’s arm, Institute for Development and Research in Banking Technology (IDRBT), conducted the project using the technology behind Bitcoin in a trade application with banks and the National Payments Corporation of India (NPCI) participating too.

Blockchain is a public ledger that enables historical recording of all transactions that has occurred in a network in a way that it cannot be altered. Following the project, IDRBT last week released a white paper titled, ‘Applications of blockchain technology to banking and financial sector in India’. In a foreword to the white paper, RBI deputy governor R Gandhi said that the banking industry world over was looking at the technology, which has the potential to disrupt financial business applications. The white paper concluded that the overall proof of concept provided a good demonstration of the use-cases and helped broaden the understanding of the technology and its potential to other real-life applications.

The technology partner for the project was New York-based MonetaGo, which provided the actual platform for test cases including payments with its proprietary enhanced information payments system (EIPS) and trade finance. In an interview to TOI, Jesse Chenard, CEO, MonetaGo, said that the project was believed to be the first ever end-to-end test of blockchain using existing banking protocols, including regulators, banks, financial institutions and clearing houses.

In another pilot conducted last year, ICICI BankBSE 0.47 % demonstrated that trade finance deals can be concluded instantly as against days using the technology. Earlier this month, Yes BankBSE 1.00 % implemented a multi-nodal blockchain transaction to fully digitise vendor financing for Bajaj ElectricalsBSE 0.57 %. Last week, Axis BankBSE 0.86 % tied up with distributed financial technology company Ripple to offer cross-border payments solution through technology innovation.

According to Chenard, it is still too early for the network effect to kick in for use of BCT. “Most bank experiments to date have been either with single institutions or with only a couple of parties to a transaction. And then again, those have been in closed sandbox environments that were deployed simply for testing purposes,” he said.

Other than the public Bitcoin, blockchain and a few other similar projects, there still haven’t been any actual productionised platforms, he added….