Blockchain – the saviour of global finance?

Blockchain – the saviour of global finance?

Steve Grob

Director at Group Strategy, Fidessa

Views 893

Blockchain – the saviour of global finance?

27.07.2015 01:00 am

At a recent event I was asked to pick three technologies that could really upset the capital markets applecart. Blockchain, the distributed ledger technology that underpins Bitcoin, was one of those that I selected. The best way to think about Blockchain is that it solves for the trust problem when two parties wish to transact with each other. It achieves this by distributing the transaction record across multiple servers that are open to all. This was essential for Bitcoin as with no one ‘owning’ the cryptocurrency some mechanism was required to provide a record of who was spending what. The really big idea, however, is that Blockchain has the potential to remove the need for all the third parties – CSDs, custodians, clearing houses, etc – currently involved in the financial markets food chain.

So could it work?

Technically, yes. Up to now Blockchain technology has appeared tamper-proof against even the most ardent hackers and, if it were to become ubiquitous and used by everyone, then its potential truly is vast. There are some big snags, however. The first is regulation as it is unlikely that different regulators will view it the same way or opine on it at the same time. We might even get into a regulatory tug of war as regulators in different jurisdictions try to use it as a way of expanding their own territorial horizons (ESMA has already published a call for evidence paper on virtual currencies and distributed ledgers). The second challenge is that if Blockchain use is only partial then we will still need all those pesky counterparties and intermediaries so it’s a bit of an all or nothing play. Finally, there are already a number of technology firms competing with their interpretation of Blockchain technology so, again, we may find that Blockchain’s early allure crumbles to nothing through competing standards.

Nevertheless, there is plenty of talk about it at the minute and several firms are making significant bets on its outcome. I suspect, however, that in developed, westernised countries there is simply too much vested interest against anything so radical. On the other hand maybe Blockchain gives developing countries and their markets a chance to leapfrog the global competition…

Latest blogs

Ian Johnson Marqeta

UK finance finds that 7.4 million in UK living "almost cashless" lives

These findings show that even before COVID-19 struck, digital banking was increasing exponentially. As more people adopt online and mobile banking, the demand for greater personalisation, flexibility and value that consumers expect from their Read more »

Ian Bradbury Fujitsu UK

UK Finance's UK Payment Markets Report - Comment from Fujitsu

Over the past months, businesses have had to rapidly move away from physical cash in order to provide consumers with a safer service. However, this data shows us that a gradual movement away from cash in society started long before the Read more »

James Turner Turner Little

Protecting yourself against a recession

The coronavirus outbreak has spread to businesses, leaving many around the world counting costs. Notoriously, known as the Great Lockdown, it’s been affecting the world economy since early this year. The predicted recession is considered to be the Read more »

Alan Cole JHC Financial

Every Cloud: Covid-19 and the opportunity for digital transformation

Faced with tighter regulations and changing customer needs, over the last decade Wealth Managers have not had it easy – but with the development of new technologies, many have been able to create efficiencies, reduce costs and shrink operational Read more »

Nabeel Irshad Mastercard

Two sides of the same coin: Financial and digital inclusion

The issue of how to tackle financial inclusion has long been a part of the conversation in banking and financial services circles. Regulations have ledto the UK’s biggest banks having to provide ‘basic bank accounts’ to cater for those who do not Read more »

Related Blogs

Financial IT Financial IT

Top 12 Crypto Startups to Watch in 2019

Looking forward from December 2018, one can see three reasons why the coming year will be a key one for crypto-currency companies. If nothing else, the year will mark the 10th anniversary since the birth of crypto-currency, with the introduction of Read more »

Olivier Roucloux Finoryx

Blockchain: the ideal market infrastructure for Alternative Finance?

Had a lot of positive feedback after I posted an article stating provocatively “Bitcoin may kill traditional CCPs, CSDs and Custodians... or not!” (read here if you missed it). Amongst the different returns, I regularly had the same question: “what Read more »

Free Newsletter Sign-up
+44 (0) 208 819 32 53 +44 (0) 173 261 71 47
Download Our Mobile App
Financial It Youtube channel