London, May 11 (Reuters)-Blockchain has its own music industry, MP3, as regulatory and technology fragmentation hinders the development of the digital securities industry and enables it to reach its full potential. Industry officials said they needed a moment.
Blockchain, or distributed ledger technology (DLT), underpins crypto assets such as Bitcoin, allowing many stakeholders to access a single version of the data at the same time.
However, extending the application to the issuance, trading and settlement of securities such as stocks and bonds requires a common digital format for the securities themselves, said Gerd Hartung, head of the new digital market on the Deutsche Boerse. I am saying.
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“The real topic is how to reach the MP3 digital format found in the music industry. The next level is the digitization of the financial products themselves,” he said.
Poor audio quality digital MP3 file formats don’t look like a disruptive technology until the music industry has changed dramatically with the advent of MP3 players and streaming systems, with numerous middlemen and entry barriers almost eliminated. bottom. Artist.
Similar pivots in financial markets will allow products to be published in hours instead of days or weeks, targeting specific markets more accurately and leveraging a calm window to reach more investors. You will be able to reach quickly and without data errors.
However, it will also challenge the bank’s dominant position in the revenue chain for securities issuance and transactions.
A further step from the pilot project to the live market came this week with the launch of Ledger Edge, described as the first regulated DLT-based corporate bond platform.
David Nicol, Chief Executive Officer and Co-Founder of Ledger Edge, said:
But with so many elements in place, Arjun Jayaram, founder and CEO of blockchain company Baton Systems, warned that the “Big Bang” moment is unlikely.
Javier Hernani, Head of Securities Services at SIX, which operates the Zurich and Madrid stock exchanges, said banks are still using “very old” technology, making it difficult to interface with the DLT platform. Said that connecting to the blockchain is a necessary cost. It will be introduced in stages.
Hernani also pointed out the need for digital versions of currencies such as the dollar, euro and pound sterling to speed up payments and realize the full benefits of DLT. read more
Instead, he suggested that a “bridge” would be needed to be able to trade digitized assets, but would be paid in fiat currency.
Regulators also need time to understand the new technology as the European Union and the UK are preparing to test DLT on market infrastructure.
“If you tell us that we’re going to get it up and running next year and we need to update the relevant legislation, we’ll do that,” UK financial services minister John Glenn said in a speech last month.
The EU said its pilot system would allow policy makers to identify regulatory obstacles.
Parallel system
HSBC and Wells Fargo have already settled bilateral foreign currency transactions using the Button Systems blockchain, and in July the Deutsche Boerse was digitized in the Clearstream payments sector using a digital central register. We provide same-day issuance of certificates and warrants and paperless processing. read more
“We’ve done a proof of concept in the past, but now it’s important to have a real, full-fledged financial digital market infrastructure, which needs to be productive and scalable,” Hartung said. I am saying.
Rival Euroclear aims to open a payment account for tokenized assets at the Bank of England in October, a blockchain consortium Fnality backed by banks such as Santander, Barclays, Credit Suisse, MUFG and UBS. I participated in. read more
On the other hand, the US Depository Trust & Clearing Corp platform, which utilizes DLT, is currently in the development stage of same-day settlement of securities transactions, while it is currently for two days.
Consultants estimate a potential savings of 50% when used Blockchain In areas such as payments, this is primarily due to the reduction of time-consuming “adjustments” and the correction of transaction data inconsistencies.
The faster completion of a transaction also means less risk and therefore less capital bound by a backing transaction.
Looking at the derivatives market, Deloitte A “single-shared version of trade data” estimates that costs can be reduced by a third.
Combining DLT with a machine-readable blueprint on how derivatives are managed and traded could reduce the cost base of derivative dealers by $ 3.2 billion.
SIX, which launched Digital Bond in November, feels progress this year. read more
“We are slowly moving from proof of concept to the real world,” said Hernani of the company.
“We can still see real business, but it’s still a small number. I think there will be parallel systems for some time.”
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Report by Hugh Jones; edited by Kirsten Donovan
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