Goldman Sachs Patents Blockchain Technology for Securities

Securities settlement is a rather cumbersome process, a holdover from the days when securities were still physical, paper instruments. The whole process still takes a few days to complete (between one and three), generating credit risk for the duration.

Streamlining this process matters not only from an efficiency standpoint, but also from a credit risk perspective. If delivery versus payment is processed immediately, it optimizes processing costs and reduces credit risk at the same time.

This is why Goldman Sachs invested effort and resources into the matter, leading to a recently validated patent.

The idea is to create a new currency called SETLcoin, which would represent any kind of security (referred to as a PIC in the patent). These new coins would be exchanged against other coins, like bitcoin.

The patent describes a coordinator that ensures the simultaneous completion of both legs of the transaction — money against securities.

This reinforces a view BNP Securities shared in a research paper earlier this year: the securities industry is set to be severely impacted by blockchain technology. In that paper, BNP lays out two possible scenarios — a complete disruption, where market participants trade directly with no central body, or a more conservative one, where established players embrace blockchain technology themselves.

This patent was filed roughly a year before being granted, which shows how much interest established players already have in this technology.

Goldman has since confirmed its forecast for the disruption blockchain will bring; this post also gives a sense of the remarkable investment blockchain technologies have attracted.