The world’s largest blockchain consortium is set to expand its membership to include a host of global regulators.
The news, revealed in interview with CoinDesk, follows R3’s recent announcement that the State of Illinois had become the first US regulator to join the distributed ledger consortium.
Yet, shortly after that announcement, R3 CEO David Rutter teased broader plans to build a network of global regulators he called ‘RegNet’.
After months of traveling the globe and meeting dozens of financial regulators, Rutter said it became apparent to his team that this group needed an easier way to communicate and collaborate on the technology.
In conversation with CoinDesk, Rutter explained how the RegNet participants would meet in parallel with the banking membership.
“Ultimately, our goal is to have the regulators involved from the start, right from the design through the experiment and the pilot, and the prototyping.”
While distributed ledger technology has been touted for its potential to facilitate more efficient global transactions, the transparency it can provide won’t be fully empowered until regulators learn how to access the data in near-real time.
As part of that learning curve, the Illinois Department of Financial and Professional Regulation became the latest regulator to be granted a free membership to the consortium, following regulators from Canada, Hong Kong, Singapore and the UK.
And that’s just the beginning, according to Rutter. As more blockchain and distributed ledger prototypes begin to support live transactions, he expects regulators will have to follow suit – or in the case of early adopters, take the lead.
And the wheels are already in motion to spur action.
As distributed ledger applications, such as the one launched last month by R3 member Northern Trust, appear at an increasing rate, R3 chief council and RegNet lead Isabelle Corbett said those regulators have been devoting more resources to working with her firm.
In addition to overseeing R3’s legal operations, Corbett has spent a large chunk of the past year flying to “over 100” financial regulators around the world.
With the promise of real-time compliance reporting, fund transparency and improved trade reporting, regulators stand to not only get more data to do their jobs, but, with a bit of work, an easier task of regulating, she said.
Rutter went on to explain how creating “regulatory nodes” powered by artificial intelligence will make it easier for regulators to track down illegal activity in the “reams” of date they will receive.
“We’re not talking about landing a rocket ship on a platform in the middle of the ocean,” he said.
Corbett further elaborated on the potential benefits that regulators working together via a distributed ledgers could experience by being able to more easily look at the full context of a transaction.
“We are in a system that is absolutely global and it is not one regulator per transaction,” she said.” So we are building this ecosystem of regulators to figure out how we can make their job easier.”
It just so happens that the most recent regulator to join R3 also helps oversee the first private equities fund powered by a blockchain.
In February, Illinois-chartered Northern Trust moved a portion of its private equities business to a blockchain powered by IBM Blockchain, the tech giant’s newly revealed commercial application of Hyperledger Fabric.
Now that the State of Illinois has joined R3 and unveiled a sweeping set of blockchain measures, the state regulator is looking for ways to further support Northern Trust and other financial institutions considering joining the consortium.
As part of that effort, however, the deputy director of the Illinois Department of Financial and Professional Regulation, Cab Morris, said his state also looking to join other blockchain and distributed ledger consortia.
Morris told CoinDesk the decision to expand into other consortia was based on the desire to make it as easy as possible for the banks his agency oversees to build distributed ledger solutions shoulder to shoulder with his agency.
Going forward, he predicted that an increasing number of US regulators will take the same course of action.
“You will start to see other regulators not just participating, but wanting to participate, because they see the value for them, and they see the value for the industry writ large.”
Image via Michael del Castillo for CoinDesk