Distributed ledger technology will be widely used in capital markets within six years, completely changing the settlement model for securities, according to a Deutsche Bank survey of industry players.
Of 200 financial market participants quizzed by DB and FT Remark, three quarters see blockchain technology being widely used within the next three to six years, while half think that this could help the industry cope with the risk of system failure and market disruption.
A massive 87% believe that DLT may completely change the settlement model for securities. As a consequence, securities clearing and settlement will become more efficient, driving down costs. Almost two-thirds expect the introduction of blockchain technology to produce savings of between 11% and 25%.
David Rhydderch, head, alternative fund services, Deutsche Bank, says: "The entire back end would become a far more efficient, far less costly, more accurate and less risk-prone function. This has an obvious knock-on effect on the cost of service provision. In the administration space, blockchain may not be quite the disruptor. It’s more in the functional utility elements within the securities processing settlement chain. In that context, it may be totally revolutionary."
The link between blockchain and security is also highlighted by nearly a third of respondents. A director of operations at a custodian bank tells DB: "The two most crucial IT risks that blockchain technologies can help with are data disclosure and cybercrime. Many hackers are interested in making easy money these days by disclosing the data of one firm to another and, as a consequence, the number of cybercrimes has gone up significantly. Blockchain technologies would allow us to safeguard our data."
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