Goldman Sachs drops out of R3 research consortium but will not abandon blockchain

Global finance and investment firm Goldman Sachs has reportedly dropped out of the R3 blockchain consortium after choosing not to renew its membership on 31 October.

The firm was one of the founding members of R3 – a distributed ledger technology (DLT) venture that leads a group of over 70 major financial institutions in conducting research and development into how blockchain can be used to advance traditional banking.

Goldman Sachs will continue to work with and develop its own DLT technology, a spokesperson told The Wall Street Journal in a statement.

An R3 spokesperson said it was "always expected" the consortium would change, adding: "Developing technology like this requires dedication and significant resources, and our diverse pool of members all have different capacities and capabilities which naturally change over time."

Blockchain is the decentralised payment processing system behind the cryptocurrency Bitcoin and maintains a secure 'public ledger' of all existing transactions on a network.

Goldman Sachs was a lead investor in a $50m fundraising round for bitcoin start-up Circle Internet Financial in April 2015. As noted by the Journal, the financial giant is also in the process of seeking a number of patents for its own digital currency systems.

Indeed, on 18 October this year, BankingTechnology reported on the patent filings and indicated it was a becoming a contentious issue within the consortium – which is joint-developing an open-source DLT platform called Corda to handle complex financial transactions.

According to BankingTechnology, Kristian Gårder, a representative from Nordic R3 member SEB, said: "The R3 consortium has applied for a patent for Corda. But both Morgan Stanley and Goldman Sachs have applied for their own blockchain patents, and they are not alone in doing so.

"Members will obviously worry if some R3 members seek patents that we've discussed together. Now we are beginning to see alliances form. The risk is that Corda is not used by all the banks. If that happens its benefit will be severely limited. It's a huge challenge to get 65 banks to cooperate."

In any case, it remains unclear why Goldman Sachs chose not to renew its membership. Marc Kaufman, partner at Reed Smith who specialises in technology patent law, told IBTimesUK: "I have no reason to believe it is about patents. There possibly is a lot at play, including that Goldman is an investor in Digital Asset Holdings which is part of and R3 'competitor' Hyperledger."

According to Coindesk, another ongoing issue within the consortium is that R3 is currently seeking funding from its members – a move that has reportedly led to internal disagreements. Other members include Barclays, JP Morgan and the Royal Bank of Scotland (RBS).