"Blockchain" technology enters Wall Street, 2 million banking jobs will evaporate in ten years

     Banks such as JPMorgan Chase and Citigroup have successfully applied the blockchain technology behind Bitcoin to the credit default swap (CDS) market. This progress will enable blockchain technology to gain a foothold in the mainstream financial field and help banks save personnel costs. A Citigroup report even stated that the introduction of automation by banks will result in 2 million fewer banking jobs in the next decade.

The Wall Street Journal reported that such swaps are essentially financial contracts that creditors use to avoid debtors' debts. The tracking process is a burden for banks, which have to match buyers and sellers, transmit trades based on information from financial data provider Markit, and pass records to Wall Street's central bookkeeper, the Treasury Depository and Clearing Corporation.

New test results show that blockchain can serve as that record-keeping tool, allowing each party to view a common ledger much like multiple users working on a shared computer file. The Treasury Depository and Clearing Corporation will discuss whether the technology can be used for real-time trading or in the multi-trillion dollar credit default swap market.

The report pointed out that large banks are now investing a lot of talent and millions of dollars to find ways to use blockchain technology to replace intermediaries to save money. Barclays has cooperated with Bitcoin startup Circle Internet Financial to allow the digital currency startup's mobile application to send and receive pounds and exchange them for US dollars.

The use of blockchain technology can save one-third of settlement transaction costs, about $16 billion a year, and save $120 billion in funding needs. A Citi research report stated that automation, including blockchain, can reduce 2 million banking jobs in the next decade, most of which are process work.

The new test replicated a month of the single-name credit default swap market, which has a book value of $6.7 trillion, without accounting for offsetting trades, and replaced electronic credit default swaps on individual servers with a shared blockchain network. The test involved Bank of America, Credit Suisse, JPMorgan Chase, Citigroup, Markit and Axoni, a venture capital firm focused on the application of bitcoin technology in the financial industry.

Markit has six blockchain projects, but the credit default swap test is the most realistic proof of concept, which can improve efficiency and save costs. However, it may take several years for blockchain to be actually applied in default transactions. The next step for the Treasury Depository and Clearing Corporation is to test the interest of other banks and regulators in blockchain, because some banks may be reluctant to adopt technology that threatens their market share or increases the complexity of existing systems.

The Treasury Depository and Clearing Corporation, which is composed of banks, is an important promoter, with the daily settlement amount reaching hundreds of trillions of dollars. The report pointed out that the Treasury Depository and Clearing Corporation has begun to study whether short-term loan agreements between traders can be operated using blockchain with Digital Asset Holdings, a new startup founded by former Morgan Stanley CEO Blythe Masters.