Just in time for the implementation of stringent new regulatory requirements, some of the largest banks in the world have revealed a pilot designed to simplify compliance using ethereum.

Described internally as the Massive Autonomous Distributed Reconciliation platform, or Madrec for short, the project led by Swiss banking giant UBS, with help from Barclays, Credit Suisse, KBC, SIX and Thomson Reuters, is designed to make it easier for banks to reconcile a wide range of data about their counterparties.

Traditionally, regulated firms use what are called "legal entity identifiers" that are stored in a global data system to execute transactions on behalf of clients, even if those clients themselves don't have one of the codes. But as part of a sweeping regulatory change called the Markets in Financial Instruments Directive (MiFID) II, scheduled to go live in the EU on Jan. 3, 2018, all eligible legal entities will be required to have and use these codes.

Instead of mandating that each of these institutions perform these checks independently, though, the banks built Madrec to mutualize much of the effort in a potentially industry-wide reconciliation process hosted in the Microsoft Azure cloud.

In an exclusive interview with CoinDesk, the head of UBS' blockchain research and development efforts, Peter Stephens, explained how the blockchain infrastructure was designed to help users save money, without sacrificing their competitive edge.

Stephens said:

As part of the build-up to the launch, Stephens took CoinDesk on a tour of the UBS lab in which Madrec was conceived, and described in detail how the blockchain platform could help ease the regulatory demands, even before they begin.

Built over a six-month period, the platform evolved into a smart contract-powered network designed to integrate with identifiers endorsed by The Legal Entity Identifier Regulatory Oversight Committee (LEI ROC) and others. The reconciliation of the LEI reference data includes industry classification and information from the European Securities and Markets Authority (ESMA).

Instead of each company checking the information independently, and reconciling the results periodically, the blockchain smart contracts will ensure accuracy in almost real-time.

Since every eligible entity will be held to those same standards, Stephens argues that helping one another ensure the accuracy of their work will only positively impact their respective bottom lines, leaving room for competition elsewhere.

"It's public reference data, it's not a competitive differentiator," he said, adding:

Originally referred to internally as Project Conrad, the Massive Autonomous Distributed Reconciliation platform was largely incubated in London, at UBS' off-site blockchain research and development lab.

Housed in offices at the Level 39 fintech workspace in London's Canary Wharf, the laboratory is intended to be a "neutral space" where contributors from multiple partners are currently working on six blockchain projects slated to go live next year.

Perhaps most notably, the location is the same site where UBS initiated the Utility Settlement Coin project, also being undertaken by a group of financial institutions.

Image via Michael del Castillo for CoinDesk