A professional forum hosted by an international securities trade group in Boston earlier this week showcased how that industry is looking at potential blockchain applications – and what form those potential use cases might take in the years ahead.
The International Securities Association For Institutional Trade Communication (ISITC) event, held yesterday, featured a number of panels that offered details on how the securities trade ecosystem is reacting to interest in distributed ledgers as well as the broader FinTech movement.
The day of panels kicked off with a keynote address by Wall Street Journal reporter Paul Vigna and MIT Media Lab advisor Michael Casey. The authors of “The Age of Cryptocurrency,” Casey and Vigna painted a picture of the growth of bitcoin and blockchain in broad strokes, offering their view on both the rewards and risks of the emerging technology.
However, the major event of the day was a panel devoted to blockchain applications.
Moderated by DTCC chief technology architect Robert Palatnick, the panel featured Chris Church, chief business development officer for Digital Asset Holdings; Todd McDonald, co-founder and COO of blockchain consortium startup R3CEV; and Alistair Milne, professor of financial economics for the Loughborough University School of Business and Economics.
Among the major arguments of the day was that the next year or two will see early growth and, perhaps, the first production-scale distributed ledgers going live.
“Will it be securities markets where big change happens?” Milne asked during the panel. “I think actually retail payments might be a big development, but this depends a lot on the central banks.”
Church said that it could be as many as 10 years before the ‘tipping point’ of the technology is close to being achieved, remarking:
“If 2015 was the year we work up to blockchain, 2016 is the year people are running their proof of concepts. 2017 is when you’ll see the first live applications. 2020 is when you’ll see significant adoption, and in 2025 we’ll see a tipping point in some markets. That’s 10 years out.”
McDonald, who hinted at his firm’s work on a “shared ledger approach” for financial institutions, suggested that 2016 would be the year of foundation building, with 2017 as a year of potentially big moves.
“I don’t think you’ll see any integrations or live systems this year. Next year you’ll see a lot of activity,” he said.
Notably, some of the panel questions turned to the specific work being done by the two blockchain startups – R3CEV and Digital Asset – represented onstage.
For example, Palatnick asked McDonald about lessons learned during a recent industry experiment in which 40 banks utilized five blockchain vendors to simulate the trade of commercial debt.
“We learned a few things, most of it we learned about how to bring the banks themselves together. I think some of the challenges we said before – trying to impart change on a marketplace is a very small percentage on the technology side.”
During the panel, Church lobbied for the Hyperledger project, the open-source blockchain initiative led by the Linux Foundation to which Digital Asset is a contributor of code. He also invoked the term ‘fabric’ – a word brought up more than once over the course of the day that has emerged as nomenclature to describe the network connectivity sought by those pursuing applications of blockchain tech.
“I’d like the see the Hyperledger project become the de facto fabric preferred for the industry. Blockchain needs a standard core fabric at the base level,” he said. “The good and the great – some people – there’s a stack of really important people committed to the Hyperledger project.”
Church went on to suggest that the technology, whichever its iteration, could have a lasting impact on how financial markets operate.
“This isn’t going to change the industry we’ve been in for so many years. It’s going to transform it,” he said.
Future of utilities
While not specifically focused on blockchain tech, the subject emerged during a panel focused on the future of utilities in the securities trade ecosystem.
The panel featured Vijay Mayadas, SVP of strategy, mergers and acquisitions for Broadridge Financial Solutions; Gene Mockler, senior business manager for SWIFT North America’s market infrastructures and initiatives team; Robert Moitoso, SVP and general manager of financial markets for SS&C Technologies; and Matthew Nelson, managing director of global product and strategy for DTCC. Dayle Scher, a senior analyst for the TABB Group, served as moderator.
Moitoso, whose firm specializes in cloud-based financial services technology, divulged that a team devoted to blockchain applications at SS&C has developed an early proof of concept focused on securities.
“At SS&C we have a team that is actively working on blockchain technology. We recently completed a proof-of-concept around settlement for securitized bank loans. It’s still early, early days, and we continue to refine it.”
Mayadas said that his firm is “a long-term believer in blockchain”, a characteristic reflected in its participation in the recent $60m funding round of Digital Asset Holdings.
Nelson later spoke about the chilling effect of the Silk Road – the now-defunct dark market that utilized bitcoin as a currency – on financial services’ exploration of the technology.
“That’s still the mindset. It’s got be detached from some of these concepts that are out there, and that will take some time. I think that’s part of it, because we are dealing with a highly regulated industry,” he said, later describing it as “a lot of hand-holding with the regulators”.
Mockler said that while SWIFT North America is pushing ahead with work on the technology, the company still sees problems that require addressing – a common refrain among financial professionals, including those present at the conference.
“We’re doing a lot of work across the industry. We’ve built a technology within our own labs. We have concerns – we have questions, that’s a better way of saying it, around scalability, security, and identity management,” he said, concluding:
“There’s a number of issues and questions to be resolved.”
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Correction: This report has been updated to correct a quote misattributed to Vijay Mayadas.