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Report: The Blockchain – Capital Markets Use Cases

GreySpark Partners has just released a new report, The Blockchain: Capital Markets Use Cases, examining how investment banks and other financial markets firms could potentially utilise distributed ledger technology (DLT) in the future.

The report characterises a wide variety of different forms of blockchain applications being developed by fintech start-up companies globally, and it discusses how those applications could eventually be used by capital markets participants as a means of replacing existing front- and back-office systems and processes within the buyside and the sellside.

Despite the fact that the blockchain was initially developed as a freely-accessible, utility-like alternative to traditional means of recording and storing the transfer of assets between counterparties within a distributed, shared network, many fintech start-ups are focused on developing private blockchains in 2015 that can only be accessed by pre-approved participants.

GreySpark believes this trend shows a disconnect between the business imperatives of fintech start-ups to create blockchain solutions that garner widespread uptake and the desire of banks and buyside firms to support a DLT solution designed to service every aspect of the pre- and post-trade lifecycle.

This report defines DLT and the blockchain protocol, and it analyses how banks and exchange platform operators are testing their use within both proprietary environments and on a consortium basis. The report also analyses the potential for a raft of blockchain applications developed by fintech start-ups that could expand the functionality of those solutions within the capital markets industry in the future. These solutions aim to bridge the gap between distributed ledger systems and the world of mainstream financial infrastructure.

Camron Miraftab, GreySpark analyst consultant and co-author of the report, said:

“Blockchain and distributed ledger technology, while representing a promising alternative to existing financial markets infrastructure, presents two challenges that banks and other financial institutions must consider before deciding whether its use is applicable within their businesses. First, scalability issues must be resolved. These scalability issues are related to the trade-off that exists between the current level of transaction throughput-capacity offered by blockchain protocols, and the size of real-world transaction values and volumes. This trade-off is specifically pertinent in the use of smart contracts, wherein large-size transactions are not yet possible. Second, despite the recent creation of industry consortiums such as the R3 initiative that are designed to develop blockchain applications for real-world use, there will inevitably be winners and losers among the fintech companies competing with each other to develop an optimal capital markets DLT infrastructure or protocol.”

Bradley Wood, GreySpark partner, added:

“This research represents GreySpark’s continued commitment to bringing relevant and current fintech expertise to our client base across both the immediate and longer-term time horizons. DLT and blockchain technology represent a very real, and potentially disruptive solution to a number of problem areas in financial services, both today and in the future. With the release of this report we have equipped our clients with the information required to have an informed conversation about this technology and how it might affect their businesses.”

The Blockchain: Capital Markets Use Cases – Table of Contents

1. Unmasking Bitcoin
1.1. The Anarchic World of Cryptocurrencies
1.2. The Blockchain
1.3. Smart Contracts
2. Applying the Blockchain to Financial Markets
2.1. Payments and Remittance
2.2. Issuance, Ownership and Transfer of Financial Instruments
2.3. Servicing of Instruments
2.4. Clearing and Settlement Latency
2.5. Reconciliation
2.6. Know-your-client and Anti-money Laundering Registries
2.7. Regulatory Reporting
3. Banks and Other Financial Services Firms Usage of the Blockchain
4. Blockchain-focused Fintech Initiatives
5. Overcoming Inertia
6. Appendices
6.1. Glossary of Terms
6.2. Table of Figures
6.3. Methodology

Richard Kastelein
In his 20s, he sailed around the world on small yachts and wrote a series of travel articles called, 'The Hitchhiker's Guide to the Seas' travelling by hitching rides on yachts (1989) in major travel and yachting publications. He currently lives in Groningen, the Netherlands where he has set down his anchor to raise a family and write. Founder and publisher of industry publication Blockchain News (EST 2015) and director of education company Blockchain Partners (Oracle Partner) – Vancouver native Richard Kastelein is an award-winning publisher, innovation executive and entrepreneur. He has written over 2500 articles on Blockchain technology and startups at Blockchain News and has also published in Harvard Business Review, Venturebeat, Wired, The Guardian and a number of other publications. Kastelein has an Honorary Ph.D. and is Chair Professor of Blockchain at China's first blockchain University in Nanchang at the Jiangxi Ahead Institute software and Technology. He has over a half a decade experience judging and rewarding some 1000+ innovation projects as an EU expert for the European Commission's SME Instrument programme as a startup assessor and as a startup judge for the UK government's Innovate UK division. Kastelein has spoken (keynotes & panels) on Blockchain technology at over 50 events in 30+ cities.
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