Application of Blackchain
According to industry sources, 10 South Korean securities firms, including Mirae Asset Daewoo, NH Investment & Securities and Yuanta Securities, are planning to test their blockchain-based authentication platform late this month.
The Korea Financial Investment Association, 26 securities and futures trading firms and five blockchain-related tech firms formed a consortium in November last year and have worked since then on a common and standardized authentication service based on blockchain technology.
Once the common authentication service is introduced, each investor can finish his or her authentication process simply by receiving a certificate just once and typing in a six-digit password that is applied to every firm and product. In addition, the new certificate can be used for up to three years without update whereas the previous certificate not based on blockchain technology has to be updated each year. The securities firms are planning to share their new authentication service with banks and insurers down the road so that transactions between financial institutions do not have to rely on the previous certificate.
The new authentication method is expected to result in cost reduction on the part of the securities firms. At present, they are using external authentication service providers such as the Korea Financial Telecommunications & Clearings Institute and KOSCOM while paying 3 billion won (US$2.7 million) to 4 billion won (US$3.6 million) a year in cost related to certificates. This cost can be reduced to zero with the blockchain-based system.
The firms are also planning to expand their use of the blockchain technology next year so that it can cover automated clearings and settlement, personal information leakage prevention, information sharing regarding suspicious transactions and non-repudiation of documents. The technology is scheduled to be applied to OTC derivatives and bond trading in 2020, too.