Euroclear And Oliver Wyman Report Explores Blockchain Technology, Obstacles, Possibilities And More

Euroclear, the European clearing and settlement agency, together with management consulting firm Oliver Wyman have released a report that seeks to help leaders in capital markets to understand the potential of the technology, lay out the paths for its adoption, and present the decisions that are required by capital markets firms today, Finextra reported.

"In order to work together to shape a new future, the industry needs to take a collective view on the potential of the technology, which was the intention of this study. The market must embrace this potential, show patience with this development and invest in various innovative solutions to bring it to reality”, said Angus Scott, Euroclear’s head of product strategy and innovation.

The report, “Blockchain In Capital Markets: The Prize and the Journey”, said that while a broad range of innovators are developing solutions using the blockchain technology, the most prevalent are active in the cryptocurrency ecosystem. Several applications across financial services are also being explored, particularly relating to trade finance, wholesale payments/correspondent banking, and other forms of transaction banking.

It said that while collaborative efforts to shift the existing value chain to blockchains are already starting, it is likely to take more than ten years to overhaul core parts of the system.

In context of capital markets, blockchain technology has the potential to change its structure and can endow benefits across pre-trade, trade, post-trade and securities servicing.

The report outlined six major areas that need to be addressed before widespread adoption of the technology will become feasible – scalability, regulation and legislation, the need for a robust cash ledger, common standards and governance, operational risks of transition, and managing anonymity. It said that the industry needs to reach agreement on these issues and work together to overcome these challenges.

"The market must embrace this potential, show patience with this development and invest in various innovative solutions to bring it to reality," Scott continued.

Given the present situation that includes uncertainty about the technology, vaguely developed use cases and “conceptual promises of enormous saving, the report makes seven measured suggestions to the industry:

• Work on concrete proofs of concept
• Challenge service providers to innovate
• Understand current quantification of operational costs, isolating savings from blockchains
• Continue industry-wide engagement, turning hype into collective endeavour
• Participate in prototypes and embrace ‘learn by doing”
• Bring the business mind to technological start-ups
• Prepare the narrative for regulators and supervisory bodies