Our privacy policy describes how Fidessa uses cookies on our website. If you continue using our website, you are consenting to our use of cookies. OK

Blockchain – the saviour of global finance?

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…

Leave a comment

Copyright © 2017 Fidessa group plc. All rights reserved.

The information contained within this website is provided for informational purposes only. Fidessa will use reasonable care to ensure that information is accurate at the time it is made available, and for the duration that it remains on the site. The information may be changed by Fidessa at any time without notice. We also reserve the right to close the website at any time. No representation or warranty, expressed or implied, is given on behalf of Fidessa or any of its respective directors, employees, agents, or advisers as to the accuracy or completeness of the information or opinions contained herein or its suitability for any purpose and, save in the case of fraud, all liability for direct, indirect, special, consequential or other loss or damages of whatever kind that may arise from use of the website is hereby excluded to the fullest extent permitted by law. Any decisions you make based on the information in this website are your sole responsibility and information on the website should not be relied upon in connection with any investment decision.

The copyright of this website belongs to Fidessa. All other intellectual property rights are reserved.

Fragulator® is a registered trademark of Fidessa group plc.

Reproduction or redistribution of this information is prohibited except with written permission from Fidessa.