The impact of distributed ledger technology on post-trade

Abstract

The financial markets industry has for a long time experimented with blockchain technology and developed many use cases which the market participants over many years have tested the technology against. While there have been many projects, the broader adoption of blockchain has yet to materialise in financial markets. Other industries, notably supply chain, have successfully rolled out global blockchain networks and are seeing the benefits of this technology at a larger scale. The failure of many projects has been down to a set of common factors, for example, the lack of a solid business case or the effort required to align consortium partners to a common goal with a new network. The emergence of digital assets and central bank digital currencies (CBDCs) could be seen to be the catalysts for blockchain on a wider scale in financial markets. They have the potential to disrupt financial markets and especially post-trade as we know it today. Almost 80 per cent of central banks are experimenting with CBDC, and it is just a matter of time before this goes mainstream. Established financial institutions must adapt to this in order to face the threat from new market entrants, and the ecosystems that are being created or face disintermediation.