Opalesque Industry Update - Financial service firms and technology
providers around the world will spend more than $1 billion in 2016 in the race to
bring blockchain to capital markets, according to a new report from Greenwich
Associates. Financial service firms believe that blockchain (also referred to as distributed ledger technology (DLT)) has the potential to transform global capital markets. Blockchain technology is revolutionary because it allows, for the first time, a digital asset to be securely transferred from one party to another in near real time, without the need for a third-party intermediary.
In its latest in a series of DLT focused research, Greenwich Associates assesses the
current state of blockchain adoption across banks, brokers, asset managers,
exchanges, and leading blockchain technology companies. In March and April 2016
Greenwich Associates interviewed 134 market participants working on blockchain
technology. The results of that research are presented in the new Greenwich Report,
Blockchain Adoption in Capital
Markets
“A majority of the financial service firms and technology providers we interviewed
are convinced blockchain will enable meaningful change across capital markets within
five years,” says Richard Johnson, Vice President in Greenwich Associates Market
Structure and Technology group, and author of the
report.
Although companies have only recently begun to experiment with the blockchain, the
study results reveal that significant resources are being spent on the development
and adoption of the technology. Banks, brokers, exchanges, and central
counterparties (CCPs) are taking the lead, while many asset managers take a more
wait-and-see approach. Among firms stating their organizations have some blockchain
initiatives underway, 32% have an annual budget in excess of $5 million per year,
and a further 15% have budgets in excess of $2 million. Projected across the entire
financial services industry, that level of spending will likely top $1 billion in
2016.
Financial service firms think these investments will yield important benefits. Most
study participants believe blockchain has significant potential to reduce
operational costs and shorten settlement times. Respondents rank payments as the
most promising potential application for blockchain.
By a wide margin, study participants see vested interests in legacy technology
systems as the main impediment to blockchain adoption. Overall, the institutions do
not believe unanswered questions about regulatory treatment are holding back
innovation.
“Additionally, study participants say a move to DLT in capital markets could add
unquantifiable benefits, such as providing a catalyst for industry transformation,
creating new value chains and new markets, and improving regulatory compliance,
transparency, and information sharing,” says Richard
Johnson.
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Industry Updates
New Greenwich Associates study assesses efforts to bring blockchain to capital markets
Friday, June 24, 2016
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