PE Tech Report


Like this article?

Sign up to our free newsletter

Wall Street blockchain investments top USD1bn annually

Financial service firms and technology providers around the world will spend more than USD1 billion in 2016 in the race to bring blockchain to capital markets, according to a new report from Greenwich Associates.

Financial service firms believe that blockchain (also referred to as distributed ledger technology (DLT)) has the potential to transform global capital markets.  Blockchain technology is revolutionary because it allows, for the first time, a digital asset to be securely transferred from one party to another in near real time, without the need for a third-party intermediary. 
In its latest in a series of DLT focused research, Greenwich Associates assesses the current state of blockchain adoption across banks, brokers, asset managers, exchanges, and leading blockchain technology companies. In March and April 2016 Greenwich Associates interviewed 134 market participants working on blockchain technology. The results of that research are presented in the new Greenwich Report, Blockchain Adoption in Capital Markets.
“A majority of the financial service firms and technology providers we interviewed are convinced blockchain will enable meaningful change across capital markets within five years,” says Richard Johnson, Vice President in Greenwich Associates Market Structure and Technology group, and author of the report.
Although companies have only recently begun to experiment with the blockchain, the study results reveal that significant resources are being spent on the development and adoption of the technology. Banks, brokers, exchanges, and central counterparties (CCPs) are taking the lead, while many asset managers take a more wait-and-see approach. Among firms stating their organisations have some blockchain initiatives underway, 32 per cent have an annual budget in excess of USD5 million per year, and a further 15 per cent have budgets in excess of USD2 million. Projected across the entire financial services industry, that level of spending will likely top USD1 billion in 2016.
Financial service firms think these investments will yield important benefits. Most study participants believe blockchain has significant potential to reduce operational costs and shorten settlement times. Respondents rank payments as the most promising potential application for blockchain.
By a wide margin, study participants see vested interests in legacy technology systems as the main impediment to blockchain adoption. Overall, the institutions do not believe unanswered questions about regulatory treatment are holding back innovation.
“Additionally, study participants say a move to DLT in capital markets could add unquantifiable benefits, such as providing a catalyst for industry transformation, creating new value chains and new markets, and improving regulatory compliance, transparency, and information sharing,” says Richard Johnson.

Like this article? Sign up to our free newsletter