Examining the Widely Varying Views on Blockchain and Wall Street
The technology behind Bitcoin is coming to Wall Street, but few agree how it will arrive or what exactly it will achieve. A new report from Greenwich Associates examines four of the most pressing questions about the introduction of digital ledger technologies into the complex and highly regulated world of institutional capital markets.
The report, Distributed Ledgers in Capital Markets: Answering the Big Questions, presents the results of a study conducted May through June 2015 in which Greenwich Associates interviewed 102 financial professionals to determine the level of awareness and understanding of distributed digital ledger technologies among institutional financial services firms. The report examines all sides of these questions:
- Can Bitcoin be separated from the blockchain?
- Does a private blockchain network have all the benefits of a public one?
- Can other technologies already do this just as accurately and faster?
- Will blockchain-settled transactions pass legal and compliance tests?
Complex Issues Still Outstanding
The blockchain’s utility is actually quite straightforward—it keeps databases in sync and ensures that every transaction entered into those databases is legitimate. Although the results of the Greenwich Associates study show that 70% of financial professionals think Wall Street will eventually trust asset transfers settled by distributed ledger technology, taking that simple premise and deploying it broadly within institutional capital markets is anything but straightforward.
“Exactly how the first successful implementations will look, what problems they will ultimately solve and how the technology originally created to transfer digital currency will translate in the highly regulated and complex world of Wall Street are all questions still up for debate,” says Dan Connell, Head of Greenwich Associates Market Structure and Technology practice.
Venture capitalists have poured nearly $1 billion into blockchain and bitcoin startups, assuming that Wall Street will be attracted to the idea of saving hundreds of millions of dollars in processing costs. “Before that goal is achieved, however, developers will have to tackle complex issues like incentivizing participants to keep the network operating, addressing real security concerns and getting the legal system, compliance professionals and regulators to accept blockchain-settled asset transfers,” says Kevin McPartland, Head of Research for Greenwich Associates Market Structure and Technology practice.