Icap PTRI CEO: Standards Must Be Made to Usher In Smart Contracts

Knott was speaking at a breakfast briefing hosted by Icap and was joined by Greg Schvey, CEO of Axoni, and David Thompson, COO of Traiana.

"It is our job to be agnostic so that we can stay agnostic as an industry to the emerging technologies," Knott said. "It's too early to lock yourself into a bespoke language embedded in an underlying technology. We have to stay agnostic, and rather focus on a business process re-engineering."

Interoperability between systems, Knott said, is important so the industry does not become locked into one kind of technology. Organizations like the International Swaps and Derivatives Association (ISDA) and the Commodities Futures Trading Commission (CFTC) are working to create unification protocols before one type of technology is chosen by the majority in the industry.

With standards, the financial industry can push through with using smart contracts despite the fact that the technology underpinning those contracts vary.

Knott said a "complete re-engineering" is needed so the financial industry can move forward with technology that makes data better and more trustworthy. Data exchanged between parties has to be reconciled; proponents of smart contracts said the technology allows constant, and quick, validation so information is always correct.

Smart contracts, or digital contracts harnessed through a blockchain, contain all the data for a transaction. To create a smart contract, data between two banks must be constantly verified and reconciled through the blockchain.

"By taking a contract and digitalizing it, you have the ability to create a ‘golden record' between you and your counterparty," Knott said. "This is an example of what can be made smart about the workflow lifecycle management of that contract."

This golden record can be used by both parties or kept internally.

Icap is working with distributed ledger infrastructure firm Axoni on blockchain and smart contract projects, including a proof of concept using blockchain for foreign exchange (FX) trades. The proof of concept was completed in March.

Axoni is also working with other firms to test distributed-ledger technologies. It saw a 100 percent success rate across 85 blockchain and smart contracts proof of concepts.