Sir, Patrick Jenkins is right to point out that blockchain offers banks the opportunity to save money in the form of reducing their costs and making capital allocation more efficient (“Blockchain offers banks the chance to rehabilitate their image”, Instant Insight,, August 25).

The most recent example of banks joining together to use digital currencies for the settlement of the cash leg of transactions is a key step in the journey towards establishing the infrastructure that will enable blockchain technology to deliver useful applications in clearing and settlement systems.

There is clearly intense interest in the potential application of blockchain technology to clearing and settlement arrangements, with multiple prizes at stake, including better and more consistent capture and dissemination of transaction data, simplified transaction reporting and, potentially, faster settlement cycles for securities trades and reduction of counterparty risk.

But clearing is complex. If title to an asset is to be transferred using a blockchain system, it is also important to have a system for the transfer of any corresponding cash payment for that asset; otherwise any benefits in reducing counterparty risk from the blockchain will be imperfectly realised.

Understanding the complexities involved is paramount to ensuring that innovation and the quest for cost efficiency go hand in hand with the banks’ efforts to reduce risks and preserve financial stability. Your paper’s coverage of these issues is essential in this regard.

Michael Thomas


Hogan Lovells,

London EC1, UK

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