Blockchain in financial markets and intermediation : a qualitative exploratory study of the impact of blockchain technology on the financial market infrastructure and financial services

Abstract

A blockchain is an open, decentralized ledger that provides a cryptographically secure way of
\ntransacting without the need of trusted third parties. The technology has garnered a variety
\nof claims and perceptions regarding the future of financial institutions. Originally introduced
\nto circumvent the incumbent financial intermediaries, blockchain technology has increasingly
\nattracted interest from the very institutions that it was meant to replace.
\nIn this exploratory study, we seek to analyze the impact of blockchain technology on the
\ncurrent market infrastructure by conducting a literature review and in-depth interviews with
\nexperts and stakeholders from the financial industry. Our findings suggest that smart contracts
\ncan automate and potentially decentralize a variety of transactions. Moreover, the
\nintroduction of initial coin offerings has brought about a new means of peer-to-peer fundraising
\nin a space previously dominated by venture capital firms, but financial intermediation
\nwill likely remain to support the effective functioning of financial markets by resolving information
\nasymmetry.
\nFurthermore, we find that the distributed and immutable nature of blockchain technology
\nprovides a robust and secure infrastructure by increasing the integrity of data. This will interconnect
\ninstitutions across financial markets by streamlining settlement- and verification
\nprocesses and potentially expanding global financial services in ways previously neglected.
\nThe foundation of the financial system will, however, remain. We have considered various
\naspects such as regulatory concerns and market designs to unfold the extent of potential
\ngains and limitations provided by blockchain technology.
\nWe conclude that there are yet many unknowns with respect to the extent and speed with
\nwhich blockchain technology will impact financial services and intermediation. However,
\nthe technology will improve efficiency in current infrastructures, as well as facilitate new
\ndecentralized ways of transacting.