Private blockchains are making their way into the financial sector. Mizuho Financial Group and IBM are working on using this technology for settlement through virtual currency.
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The name Mizuho Financial Group is becoming synonymous with blockchain in the financial sector these days. In February of 2016, the financial institution partnered with Cognizant to explore record keeping on the blockchain. On June 22nd, the enterprise announced a partnership with IBM for virtual currency settlement.
Mizuho is Actively Testing the Blockchain
Mizuho Financial Group wants to see if they can establish instantaneous swaps of virtual currency through this new partnership. IBM’s role in this test comes in the form of their open source code contributed to the Hyperledger Project.
Delivering more efficient customer services is something that is direly needed in the financial industry. Mizuho Financial Group is actively testing blockchain, Watson, and other undisclosed technologies to achieve that goal. Digitizing the banking system requires centralized systems these institutions can control at any given time.
IBM Bluemix Garage, which recently opened its doors in Tokyo, is aiding the financial institution in this regard. Combining IBM blockchain services with experience in settlements may result in the development of new blockchain applications. IBM wants to play a role in the digital transformation pursued by banks all over the world.
Masao Sanbe, Managing Director, Industry Sales, IBM Japan stated:
Mizuho Financial Group is a leading financial institution known for adopting advanced technologies such as IBM Watson. IBM understands how to use blockchain and IBM Cloud as the technology foundation to transform the way businesses interact with their ecosystem of trading partners. IBM is proud to continue to support Mizuho Financial Group’s important initiatives.
The focus on using virtual currency is interesting to take note of. Do not confuse this approach with using Bitcoin or Ethereum, though. A virtual currency is issued and controlled by a bank at any given time. In the case of Mizuho Financial Group, it is not unlikely they will issue their very own virtual currency moving forward.
Central Banks For Centralized Blockchains
As these efforts between Mizuho Financial Group and IBM are underway, it becomes clear this will be another private blockchain solution to be deployed. The main reason why banks do not use Bitcoin technology is that they cannot exert control over it. A centralized solution, on the other hand, allows them to issue their own virtual currency, which seems to be the primary objective of this partnership.
At the same time, this begs the question as to why this should be labeled as ‘innovation.’ The majority of banking transactions are in digital format already. All this does is use a different underlying technology, but that is no novelty. In fact, this seems to be a bank ploy to jump on the blockchain hype wagon. But that does not mean bankers suddenly understand how this technology works.
What are your thoughts on this partnership? Let us know in the comments below!
Images courtesy of IBM, Mizuho Financial Group, bloomberg.com