There is no doubt that the existing capital markets infrastructure urgently needs a new lease of technology enabled life. Credible estimates set the potential for efficiency and elimination savings at somewhere between €30 and €50 billion annually. Either the industry itself, in its current configuration, will pursue and deliver those savings or, ‘outsiders’ will seize the impetus.
There is one certainty however: blockchain technology is starting to come of age. The confidence bestowed upon it by Bitcoin is translating daily into new initiatives and partnerships. These are creating advantages for the financial institutions at the forefront of blockchain innovation. The technology is not a panacea. Nor has it reached its final format. In particular, blockchain is vigorously rebutting the long-term charges against it that it does not scale and that it cannot satisfy complex and particular capital markets security requirements.
In this paper, written by members of the Capco Digital Blockchain Team, we look at historical examples of technology advancement and regulatory change impacting the market environment. We assess key blockchain architecture and protocol developments. We identify areas where blockchain has significant potential to bring about positive transformational change. And we identify some of the major barriers to adoption within the capital markets.
Blockchain used to be about possibilities and potential. Now the days of hype are coming to an end. We are entering a wave of opportunity, evolution and value delivery.