Blockchain Tech Has Evolved Enough to Meet Some Demands of Financial Markets: RBC Report

Asset-backed securities markets, including MBS, have a high potential for disruption, the report says.

AccessTimeIconNov 19, 2021 at 12:18 p.m. UTC
Updated May 11, 2023 at 5:51 p.m. UTC

Blockchain technology has evolved enough to meet the critical demands of at “least certain segments in the banking and financial markets,” according to a research note by the Royal Bank of Canada (RBC).

Blockchain offers distinct value propositions: “displacing trust with truth; real-time bilateral settlements; real-time servicing; enhanced security; automation; the ability to operate 24/7/365,” according to the note that looks at themes that will define the future.

The bank sees asset-backed securities (ABS) markets, including mortgage-backed securities (MBS), as having a high potential for disruption from blockchain. These types of securities pool together assets such as mortgage loans, auto loans, student loans, credit card receivables and equipment leases.

While blockchain is not new, the bank observes, the technology until recently had not developed to a level that was appropriate for banking and financial markets in “terms of scale, speed, flexibility and autonomy.”

But the “technology itself appears to have evolved enough since the Ethereum launch in 2015 to meet the critical demands of at least certain segments in the banking and financial markets.”

One of the most important advancements was the change in the “consensus mechanism” from the energy-intensive proof-of-work to the more energy efficient proof-of-stake mechanism, the note says.

Acceptance of a universe made up of multiple “interoperable blockchain protocols” has also led to the development of more specialized blockchains that bring increased scale and speed, as well as higher flexibility and autonomy.

The “regulatory landscape is very fluid” given the speed of development of blockchain technology and how it does not exactly fit into existing legal and regulatory definitions, the report adds.


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Will Canny is CoinDesk's finance reporter.

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