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- Potential of Blockchain to bring further efficiency to the industry
- Distributed solution not fit for all challenges faced by financial industry
Looking towards the horizon, the FinTech industry is set to be a strong influencing factor on the financial industry. The role that Blockchain may play for example is intriguing – and there’s little doubt that its advantages will potentially be harnessed in the not too distant future. Within a five to ten year timeframe there’s strong potential for new business models emerging and significant increases in efficiencies. However, an important question that still needs to be answered is whether the equivalent result to current ways of operating – reducing risk and lowering cost – can be achieved with such alternative technology or by improving existing technology.
Clearstream has always been a leader in driving innovation in market infrastructure processes, leveraging its experience and expertise, and embraces technological developments to better serve the market. Blockchain does have an attractive potential to bring further efficiency to the industry, and as part of Deutsche Börse Group Clearstream is actively developing Blockchain opportunities through a range of internal development and external collaborations.
However, the current state of Blockchain technology is yet to fully materialise and mature, and has certain current limitations which would need to be overcome to be rolled out to satisfy industry standards. It needs to be aligned with principles such as safety and security, legal certainty and risk mitigation as well as cost efficiency and regulatory oversight.
“At this point of time, the industry is providing a certain level of services that the current state of Blockchain is not advanced enough to match”, says Rob Somogyi, Director Clearstream Strategic Initiatives. “It is therefore important to keep in mind that Blockchain is one of several solutions to the challenges faced by the financial industry, and for some challenges a distributed solution may not be the most ideal one.”
There are certain roles that currently will not be eliminated by Blockchain, such as the value of a financial intermediary for risk reduction, regulation efficiency, liquidity provision, infrastructure efficiency, and market know-how. To solve these issues will require more work and time.
