BLOCKCHAIN'S IMMUTABLE TRUTH: How To Fundamentally Change Global Financial System In Four Ways?

[TheWorldNewsOrg]

Blockchain -- the Distributed Ledger Technology -- is on the lips and in the good books of most large financial institutions at present from Goldman Sachs to JP Morgan; from UBS to Credit Suisse; from Barclays to Royal Bank of Scotland; from BBVA to Commonwealth Bank of Australia; and State Street. Together they were the founding members of a Blockchain technology standardisation consortium called R3-CEV* in New York.

Whether one is in New York or London, Frankfurt or Zurich, Dubai or Mumbai, Hong Kong or Tokyo, there's no denying the immutable truth in regard to Blockchain technology's imminent impact.

Blockchain is about to fundamentally change our global markets and financial systems forever, and probably for the better in four different ways. Why? Blockchain acts as a decentralised register of all transactions and each transaction is immutably recorded within a Blockchain.

There are four ways** in which Blockchain technology could potentially transform capital markets:

1. Blockchain is going to improve the speed and efficiency of transactions. At present, when investors buy and sell debt and equity securities or transact derivatives, they generally rely on settlement and registration systems that take sometimes several days to settle trades. It can take even longer, sometimes, where the trade involves cross-border parties. Blockchain makes it possible to automate this whole process.

2. Blockchain's second benefit is the potential disintermediation of transactions. How? Blockchain automates trust; it eliminates the need for 'trusted' third-party intermediaries. In the traditional market, buyers and sellers can't automatically trust each other, so they use intermediaries to help give them the comfort they need. With blockchain, the decentralised immutable ledger offers this trust. Investors can deal with each other and with issuers in private markets directly.

3. Blockchain also reduces transaction costs. By eliminating the need to use settlement and registration systems and other intermediaries, there is significant potential to reduce transaction costs for investors and issuers. A mid 2015 report backed by Santander InnoVentures, the Spanish bank’s fintech investment fund, estimated that Blockchain could save lenders up to $20 billion annually in settlement, regulatory, and crossborder payment costs.

4. Finally, Blockchain could improve market access. Given the global nature of Blockchain-based standardisation, global markets have the potential to become even more easily accessible to investors and issuers; therefore making it easier for investors and for issuers to invest in and issue debt and equity securities. Blockchain potentially has profound implications for our global financial markets and for how we regulate.

[ENDS]

*The R3 consortium started on September 15, 2015 with 9 financial institutions: Barclays, BBVA, Commonwealth Bank of Australia, Credit Suisse, Goldman Sachs, JP Morgan, Royal Bank of Scotland, State Street, and UBS.

On September 29, 2015 an additional 13 financial insititutions joined: Bank of America, BNY Mellon, Citi, Commerzbank, Deutsche Bank, HSBC, Mitsubishi UFJ Financial Group, Morgan Stanley, National Australia Bank, Royal Bank of Canada, Skandinaviska Enskilda Banken, Société Générale and Toronto-Dominion Bank.

On October 28, 2015 an additional 3 financial companies joined: Mizuho Bank, Nordea, and UniCredit.

On November 19, 2015 an additional 5 financial companies joined: BNP Paribas, Wells Fargo, ING, Macquarie Group and the Canadian Imperial Bank of Commerce.

On December 17, 2015, an additional 12 financial companies joined: BMO Financial Group, Danske Bank, Intesa Sanpaolo, Natixis, Nomura, Northern Trust, OP Financial Group, Banco Santander, Scotiabank, Sumitomo Mitsui Banking Corporation, US Bancorp and Westpac Banking Corporation.

** According to the Australian Securities and Investments Commission (ASIC)

What are your thoughts, observations and views?

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