FINANCIAL SERVICES

Blockchain technology: The new infrastructure of financial services

Why should financial services firms care about blockchain?

Blockchain adoption is gaining momentum in the financial services industry. 

Global banks, governments, and central banks acknowledge its potential to address existing pain points and inefficiencies. 

Recent years have seen numerous notable collaborations demonstrating its viability.

Blockchain and its impact on Capital Markets

Distributed Ledger Technology (DLT) is a system maintained by a network of nodes (computers), each of which holds a record of the ledger. DLT leverages a shared database, resulting in several benefits, including transparency, reduced costs, and minimized risks. It is uniquely designed for facilitating the exchange and settlement of value.

In the context of Capital Markets, market participants include banks, brokers, exchanges, custodians, and asset managers.  Each of these parties fulfill critical roles related to securities issuance, settlement, trading, and servicing. Blockchain has the potential to transform the entire ecosystem by expanding the boundaries of efficiency and effectiveness.

Here are two key points to consider:

  1. Blockchain’s Immutable Nature:

    • Transactions recorded on the shared ledger are tamper-proof, and fraudulent activities are prevented through a sequential audit trail.

    • This inherent security feature makes blockchain particularly appealing for financial transactions, where data integrity is paramount.

  2. Industry Acceleration and Collaboration:

    • The industry is rapidly advancing with proof-of-concept projects. Traditional financial institutions, governments, and web3 companies will collaborate to build the future financial infrastructure.

    • As DLT matures, more experiments will transition into production systems.

    • Increased collaboration will foster common standards, streamlined workflows and lead to innovation in how Capital Markets operate.

In summary, DLT, with blockchain at its core, is reshaping the financial landscape. Its transparency, security, and collaborative potential promise a more efficient and robust Capital Markets ecosystem.