McKinsey Report States Blockchain Will Dramatically Reshape the Capital Markets Industry

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Consulting firm McKinsey & Company has stated in a fresh report that the wider adoption of Blockchain technology by financial incumbents will probably take place in the near future development but will require close cooperation among market participants, regulators and technologists.

Their report “Beyond the Hype: Blockchains in Capital Markets”, says that Blockchain technology will “dramatically reshape the capital markets industry”, impacting business models, cost savings and capital requirements in the sector and the adoption of Blockchain technology will have significant short term benefits, bringing faster clearing and settlement to the capital markets, while reducing the number of ledgers needed to be maintained by financial institutions and ensuring audit trails are more precise.

But they are worried about fragmentation and the chief worry appears to be that the financial industry needs work together to reap the benefits of the Blockchain, a conclusion that supports recent efforts by major banks to back efforts like distributed ledger consortium R3 and also with the more recent Linux Open Source collective – the ‘Open Ledger Project‘.

The report said blockchain technology is likely to deliver a range of benefits across the capital markets value chain, from clearing houses and exchanges to prime brokers and banks. However McKinsey also warned that the technology is still largely unproven in complex markets. Other challenges in developing applications include not being able to amend blockchain transactions after the fact, the digitization of assets, asset disposition, position netting and computing power.

“Banks will also face challenges related to market, legal and operational protocols, issues concerning adoption and route to market, and interoperability, as well as internal hurdles related to expense pressures, technology architecture design and cultural resistance,” added McKinsey.

The report said there is potential for central banks to simplify and de-risk the wholesale deposit and payments processes by facilitating digital settlement for banks. The Bank of England is conducting research on central bank–issued digital currencies.  In September Andrew Haldane, chief economist at the Bank of England and executive director, monetary analysis and statistics, said in a speech that it may be possible for government-backed currency to be issued in an electronic rather than paper form.

About Richard Kastelein

Founder, Publisher and Editor in Chief of Blockchain News and co-founder and director at Blockchain Partners in London/Amsterdam/NYC, Richard Kastelein is also an advisor with a number Blockchain startups doing ICOs including DECENT.ch, Inchain, Humaniq, Chronobank, eGaas and others.

He is regarded as one of the top journalists by the Blockchain and fintech communities – as is evident by his entry in the Top 150 Fintech journalists online and in the top 10 of the Blockchain Top 100 List. As a prominent keynote presenter, he has spoken on Blockchain at events in Gdansk, Amsterdam, Minsk, Dubai, Antwerp, Eindhoven etc, where he helped spread the cause for Blockchain technology and crypto-currency and, consequently, has built a notable network inthe scene.

In 2013, the European Commission appointed him as an expert for overseeing financing for emerging startups as a part of the European Commission’s 90 billion euro Horizon 2020 project, created in Brussels to promote innovation as a driving force of job creation and business ventures across Europe. He has also worked as an external expert for Innovate UK since 2012, judging startups for the UK government.

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