Blockchain: Is it hype?  65

Capital markets have grown into a complex global network of intercon-

nected banks and intermediaries to enable the flow of capital across bor-

ders globally. Due to the nature of complex global transactions and capital

flow through multiple banks and intermediaries; the probability of errors

increases. Each bank and intermediaries maintain its own data in a silo.

This leads to high costs and settlement delays due to duplication of the data

entry and unnecessary reconciliation errors.

Blockchain has a real potential to solve most of the capital markets’ exist-

ing issues as defined below:

• Cost: Reduce the cost substantially by simplifying the process, ruling

out multiple intermediaries, reducing human reconciliation/data entry

errors and minimising duplication.

• Transparency: Provide transparency across all parties that are part of

a private blockchain network.

• Speed: Provide faster cross-border transactions globally through the block-

chain network. Using Smart contracts within the blockchain consortium

could automate the whole end-to-end flow of most of the transactions.

• Security: Blockchain implementation to replace siloed traditional led-

gers maintained by multiple banks and intermediaries with single dis-

tributed ledgers with full security and transparency.

• Resilience: Blockchain technology provides distributed and immu-

table ledger (DLT), that provides a copy of approved transactions or

blocks. Each participant within the blockchain network keeps a full

copy of the ledger making the whole network resilient from a single

point of failure – infrastructure failure, data corruption or hacking.

• As per the PWC paper (https://www.pwc.co.uk/financial-services/

fintech/assets/blockchain-in-capital-markets.pdf), over $1bn was

invested in blockchain companies since the technology’s creation in

2009, with a 59% increase in the last year.

There are various use cases in Proof of Concept (POC) or live across capital

markets globally. The following is the categorisation of them across the

capital markets ecosystem:

• Debt markets

⚬

⚬Digital bond issuance platform

⚬

⚬Distributed order book for bond trading

• Equity markets:

⚬

⚬Blockchain-based platform for digitalisation of existing post-trade

infrastructure

⚬

⚬Equity token issuance on the blockchain

• Securitised products

⚬

⚬Blockchain-based end-to-end platform for securities origination,

securitisation and servicing

⚬

⚬Tokenisation of loans on a blockchain platform to facilitate ser-

vices and data management