STOCK EXCHANGE AND DLT
Blockchain has not reached mainstream adoption in the financial services industry, but stock exchanges around the world are rapidly adopting the technology.
Payments, trade finance, and custodian services remain the most apparent use cases for distributed ledger technology (DLT) and blockchain. Stock exchanges are rapidly adopting DLT technology to improve efficiency around settlement, clearing, and collateral management.
2019 marked these developments, with Deutsche Boerse rolling out a DLT solution for frictionless collateral swaps in the securities lending market, and Boerse Stuttgart launching a first of its kind digital asset exchange platform called BSDEX.
In Switzerland, the SIX Digital Exchange (SDX) introduced in September a prototype of an end-to-end platform for digital assets. The full launch is expected in Q4 2020.
TRADITIONAL CAPITAL MARKETS
The traditional capital markets continuing to adopt blockchain technology. State Street teamed up with cryptocurrency exchange and custodian Gemini Trust to integrate Gemini’s digital asset custody solutions into State Street’s investment reporting. QME, the commodity trading platform of the Hong Kong stock exchange, partnered with Ant Financial to integrate warehousing and logistics using blockchain to provide transparency for the entire lifecycle of a commodity.
Despite these recent developments, the implementation of blockchain solutions in traditional banking will likely take three to five years and will focus on trade finance and payments.
GLOBAL PAYMENTS AND CRYPTOCURRENCIES
As the global payments landscape evolves, we see the emergence of stablecoins.
Stablecoins have the potential to grow substantially, and while “the world is ready for private money,” the need for regulatory frameworks and oversight must be resolved for stablecoins to gain rapid adoption and scale.
As for the cryptocurrency market, it further matured with increased participation by financial institutions. One of the most notable developments is the launch of options on bitcoin futures contracts by CME in January 2020. Institutional trading platform Bakkt, a subsidiary of Intercontinental Exchange, was the first to launch a regulated bitcoin options contract in December 2019.