Blockchain: No one is going to move things alone

Last week, I was on a panel at the 7th annual Future of Clearing & Settlement conference in London entitled "the next steps for Blockchain in clearing and settlement". The panel was made up of a diverse group of participants across banks, infrastructure providers and leading start-ups.

Blockchain is an interesting technology that has the potential to address certain limitations of the current processes. Its advantages lie in simplifying and streamlining the intermediated structure for asset accounting and transfers. It also has the potential to bring further cost reduction.

It’s important to bear in mind a couple of things though. Firstly, our industry operates at an extremely high level of processing capacity and efficiency – to put this in perspective, if you just take entities included in the BIS statistics, over 10 billion securities settlements took place in 2014. At Clearstream, our system already settles transaction in seconds. Secondly, irrespective of the technological evolution, certain valuable roles will continue to exist, such as financial intermediaries for risk reduction, regulation efficiency, liquidity provision, infrastructure efficiency and market know-how.

For me, the true promise of Blockchain is elsewhere – its potential lies in bringing together market participants around a common agenda: more effective and integrated markets. The key here is consensus. Blockchain by its nature is a shared solution among all market participants who need to work together to design the right solution for themselves and their clients. It is also shared across markets with diverse local practices and varied regulatory conditions. The current emerging application of Blockchain varies across a spectrum of different platforms and systems, and we need to make sure that there are standards in place, so that these diverse systems can interoperate with each other. This is also essential when anticipating consolidation, which I would expect to start happening when the technology becomes more widely used. A crucial prerequisite to the success of Blockchain will therefore be networks and communities coming to a consensus on how to implement this new technology in an efficient manner.

To sum up, no entity is going to move things alone; the full potential of Blockchain will come about through the cooperation among market participants, regulators and technologists. This is one of the major reasons that we as Deutsche Börse Group invested in Digital Asset Holdings and are participating as a premier member of Linux Foundation’s Hyperledger Project. It is also why we are actively in discussions with regulators and our clients on the development of this technology. Blockchain has the potential to bring the industry participants closer together – and it is already doing so by inspiring the industry to have this discussion, but it requires more cooperation to realise its promises.