An Italian fintech initiative involving several public authorities with the prime ambition of tackling the problem of fraudulent banking guarantees has taken a step forward with the announcement of its public blockchain provider.
The ‘Fideiussioni Digitali’ (‘Digital Sureties’) initiative, which is backed by Banca d’Italia (Bank of Italy) and insurance regulator IVASS (Istituto per la vigilanza sulle assicurazioni), seeks to enable bank and insurance guarantees (sureties) to be issued on digital-ledger technologies (DLT), also known as blockchain.
CeTIF Advisory, a spin-off from the Catholic University of Milan’s Research Centre for Technology, Innovation and Financial Services (CeTIF), has been leading what has been a multi-year effort to develop a blockchain-based open platform to serve Italy’s banking and insurance markets. The public authorities have engaged with the project because of the system-wide benefits it is seen as having the potential to provide, particularly in boosting transparency and tackling fraud.
Algorand, a company headquartered in Massachusetts, has announced that it has been selected to be the platform’s sole public blockchain. Milan-headquartered payments company Nexi is providing infrastructure via a private blockchain. Further providers may join in the future.
The new platform is expected to become operational in ‘early’ 2023 and will be the first time a member of the 27-nation European Union (EU) has enabled blockchain’s use for bank and insurance guarantees, according to an Algorand-issued announcement.
Blockchain ‘ideally suited’
A ‘significant percentage’ of bank and insurance guarantees are ‘expected to’ leverage DLT as part of Italy’s National Recovery and Resilience Plan (NRRP) (Piano Nazionale di Ripresa e Resilienza), Algorand asserts.
The NRRP is the Italian government’s plan for spending the financial resources received through the EU’s high-profile ‘Next Generation EU – Covid-19 recovery package’. The EU allocated about €191.5 billion (about £169bn) to Italy to be used for co-grants and co-loans. The country was the hardest-hit EU member state during the pandemic’s first wave and is the biggest beneficiary of the EU’s €750 billion (about £660bn) overall economic stimulus package.
‘Blockchain is ideally suited to these types of programmes given the technology’s ability to provide fast, efficient, low-cost and scalable data transactions,’ Algorand states. ‘Even more importantly, digital-ledger technologies help protect against fraud — a known challenge with bank and insurance guarantees.’
“We selected Algorand because of its unparalleled level of innovation and security among permissionless DLTs, as well as because of its leadership in sustainability,” said CETIF chief executive Professor Federico Rajola. “Our goal is to help Italy not only recover from the economic impact of Covid-19, but also excel through innovation and leadership. Our ecosystemic projects are meant to help generate strategic platforms, such as the Digital Sureties platform supported by Algorand. We believe these platforms can and will dramatically contribute to the country’s competitive sustainability for the benefit of all.”
“We are proud and honoured to be the public blockchain chosen by the Digital Sureties platform of Italy,” said Algorand founder Silvio Micali, who is also a long-serving Massachusetts Institute of Technology (MIT) professor. “Through Algorand’s technology, we can help solve for many critical issues facing financial institutions and governments across the world today, bringing opportunity and inclusion to communities in need everywhere.”
Sandbox-tested initiative
Fideiussioni Digitali has been in development for more than three years and has a host of other private-sector companies involved beyond its blockchain suppliers, including at least 30 Italian financial institutions (banks).
The project has been developed through a sandbox (test-space for innovative technology) under the supervision of a scientific committee including representatives from Bank of Italy, IVASS, Guardia di Finanza (Italy’s finance police), CeTIF, Italy-headquartered technology firm Reply and Milan-headquartered payments technology firm SIA (now part of Nexi Group after a merger agreed in October 2020).
The municipal authorities of cities including Milan itself, capital Rome, and also the Adriatic port city of Bari are also among those taking part in the project, according to a Fideiussioni Digitali announcement made by SIA in April 2020.
A test phase of the platform ‘through uploading and management of real and legally valid sureties’ was scheduled to take place between July and October 2020, according to SIA’s announcement, which explained that, when fully operational, the platform ‘will provide guarantors and beneficiaries with greater efficiency, transparency and information certainty throughout the entire surety management process, with the primary objective of reducing potential frauds’.
Other significant Italian blockchain projects include ‘Spunta’, which is for interbank reconciliation, while similar initiatives outside Italy include the Thailand Blockchain Community Initiative.
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