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Fredrik Voss, the vice president of Blockchain innovation at Nasdaq, believes mainstream adoption of Blockchain technology in capital markets is promising and inevitable.
The vast majority of financial institutions and banks which are actively looking into the potential of Blockchain technology are struggling to establish a clear vision and roadmap when it comes to the development and implementation of Blockchain-based platforms.
There is a relatively limited range of applications which Blockchain technology could realistically revolutionize and innovate within the realm of finance. Capital and stock markets are two of the few areas in traditional banking or finance in which Blockchain technology can prosper because they will depend on Blockchain technology’s immutability and transparency.
The key to operating or facilitating an efficient stock or capital market is transparency and autonomous trading. Stock markets like Nasdaq are actively experimenting with Blockchain technology with a sense of urgency because they are in need of a base protocol or platform that can eliminate human labor, manual processing and opaque operations.
Various projects including Counterparty and Overstock’s T-Zero have demonstrated the potential of Blockchain technology in capital markets. Overstock’s T-Zero, in particular, has already carried out successful tests and deployed a Blockchain-based capital markets platform with increased transparency, efficiency, real-time settlement and auditability.
As Voss notes, platforms like T-Zero or Blockchain technology, in general, are still at the very early stages and are far from being commercially implemented. Developers and researchers are still working on ways to implement Blockchain technology in capital markets for mainstream adoption. Some of the hurdles that developers must go through are regulatory conflicts and security issues.
“There is a long way to go before we see a very wide scale adoption of the technology in capital markets, but it looks more promising now than we thought three years ago.”
Currently, the structure of capital markets and stock exchanges are needlessly complex and ambiguous. It is difficult for traders to track down their shares in a company and there exists no tool or a real-time settlement network which can prove the ownership of shares in a company efficiently.
By implementing Blockchain technology in capital markets, Voss hopes to see increased transparency, particularly in the process of lending or selling shares or ownership in a company. Voss stated:
“If you own shares in that company, you’ll be given tokens equivalent to what you own and then I can transfer them to [someone] for him to vote on my behalf. We can follow the whereabouts of these votes, which solves the problems of, if you’re a proxy today, it’s hard to demonstrate to the person who delegated the votes to you that you followed the instructions.”
Recently, Nasdaq and the team of Voss began to feel more optimistic towards Blockchain technology and Blockchain development than they did three years ago when the company just began to look into the potential of Blockchain technology.
Voss is especially enthusiastic about how Blockchain technology is helping Nasdaq and other market participants to evaluate various operations and analyze their efficiency.
“It has also forced market participants to talk to each other about some of the collective utilities, like, are we happy with how the post-trade plumbing works? Are we happy about the level of transparency we provide regulators? … The technology has really encouraged the financial markets to look at some of its problems with fresh eyes,” Voss added.
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