After keeping its projects to itself in 2015, 2016 may have been Barclays’s year – at least, when it came to blockchain tech. 

According to industry analysts, there’s a strong case the bank is at the forefront of the increasingly large group of incumbents seeking to harness the “technology behind bitcoin” heading into 2017.

As noted by Patricia Hines, a senior analyst with Celent’s banking practice, a key distinction is that, while other banks may have primarily sought PR pickup, Barclays was able to use its blockchain efforts in 2016 as a competitive differentiator.

From performing the first live trade finance transaction with real customers to expanding smart contract templates, Barclays seems keen on the future of blockchain, she said. It has even been enthusiastic about bitcoin, electing to bank Circle Internet Financial in April.

To some, however, Barclays has only been the most transparent in terms of what it’s working on with distributed ledger technology.

Simon Taylor, director of blockchain at 11:FS, who until six months ago headed the bank’s blockchain R&D, told CoinDesk:

“That’s the strategy with Barclays, if there’s something to show they’ll show it. Others do more stuff under the hood.”

The narrative that Barclays burst onto the scene this year, though, has only some truth, as members of the bank’s blockchain group indicate 2016 was the product of early interest.

“In 2015, there was a lot of activity in the public space and a lot of people wondered why we weren’t doing anything yet,” said Anthony Macey, head of blockchain research at Barclays. “But we were just playing with toys then.”

Today, the bank continues to experiment – most recently running an equity swaps test organized by Axoni with five other banks in October.

But its chief contribution may be that it has showed the industry some real-world applications for distributed ledger tech.

Cutting costs on trade finance

Probably the most tangible project Barclays completed this year was its trade finance test with blockchain startup Wave.

A member of its own incubator program, Barclays teamed up with the startup to use a blockchain to transfer trade documentation between Oruna, an Irish food co-operative, and Seychelles Trading Company, a product distributor based in Seychelles, an island off the African Coast.

The blockchain platform was able to save Barclays time and money on the transaction, but Macey said, it was easier since the transaction was done in house. Barclays UK sent the payment and Barclays Africa received it.

The live customer test was all about digitizing documentation to produce a unique representation that could be sent far quicker than the 10 days it typically takes to move a physical piece of paper for a trade finance transaction, Macey said.

“That took us four hours with blockchain,” he said. “And removes a lot of vulnerabilities like loss and fraud.”

And really, the platform could have worked much faster had it not been for Seychelles unstable Internet infrastructure, he continued.

Heading into 2017, Barclays wants to expand its blockchain trade finance work, scaling the system by educating stakeholders, even carriers, customs officials and port authorities.

“All these delays, we understand the reasons why banks should adopt [blockchain] as it reduces time and cost. There’s all these little things we can actually tag monetary gains too,” Macey said. “But for port authorities and other government officials, that might not be the case.”

Going forward, the bank will need them on board to take full advantage of blockchain’s potential.

Sticking it out with R3

Speaking of collaboration, Barclays also remained a part of enterprise blockchain consortium R3CEV, staying in the union after at least two banks bailed on the project and the startup’s newest funding round.

Barclays was one of nine founding members of R3 and, according to Macey, the bank is still “strategically aligned” with the startup.

To date, Barclays seems most interested in developing smart contract templates as it relates to their work with R3, and advancing this learning that is expected to form a large part of its plans in the year ahead.

Looking at The DAO debacle for instance, Macey is optimistic that the bank’s work can harness the same technology that enabled it, while infusing it with added stability.

“It speaks to the reasons we’re very cautious and protective over the infrastructure we utilize for these things. We can’t work with ‘code is law,'” Macey said, adding:

“That might work online but at some point we’re going to need a lawyer and a structure around these standard contracts that you can codify.”

Banking bitcoin

But while Barclays is moving away from the open-source projects that bootstrapped the blockchain movement, it’s not leaving them behind.

For instance, Barclays decided to offer Circle Internet Financial a bank account in 2016, a move that was heralded as progressive even though the startup has scaled back its work with bitcoin a bit.

“One of the things we’ve worked very hard to try and do is figure out where we have acceptable amounts of risk in providing accounts to new clients,” Macey said.

And that risk is more about money services businesses (MSB) in general than the use of bitcoin, he noted.

“The narrative gets lost in the bitcoin community which is why they had problems getting bank accounts early on,” Macey said. “If you’re an MSB, it doesn’t matter if it’s bitcoin or not; it’s the same requirements and a very high bar for those that want to play in that space.”

Circle had the controls and governance Barclays needed to see, he said.

Poker face

Yet, it remains to be seen if Barclays can keep up with the pack.

Taylor thinks what’s going on behind the scenes at banks like UBS, Citibank and Goldman Sachs might be even more impressive than what he saw at his old firm.

“Not all banks are chasing the same piece of the pie … so it’s apples and oranges to say someone won blockchain this year,” he said. “Some of these banks could have great poker hands but they’re not showing it.”

Although, Barclays will stay in the limelight for some time because of its openness with the press, next year, more banks are expected to go live with blockchain products, and real-world tests are ahead.

Already, the DTCC today unveiled how it could move a $11tn derivatives processing workflow to a distributed ledger system.

Barclays with its willingness to test the waters was a standout in 2016, but that might be enough to fend off potentially eager competition.

Shedding light on challenges ahead, Taylor concluded:

“There’s a huge gulf to cross with using the service once and then scaling it. Getting a service to scale especially in banking is incredibly hard.”

Barclays image via Shutterstock