The question of blockchain technology’s impact on financial markets and stock exchanges shouldn’t be one of ‘what’ but ‘when’, an expert says.
MIT Sloan School of Management professor of entrepreneurship Christian Catalini says distributed ledger technologies are moving in the right direction, but their impact on markets will be gradual.
“We’re slowly seeing an evolution of the ecosystem around cryptocurrencies and blockchain in the right direction, but changes don’t happen overnight,” Professor Catalini told InvestorDaily.
He said the ASX’s current work in the blockchain sector, conducted with US-based blockchain company Digital Asset Holdings, was interesting and showed that “eventually you could imagine exchanges and other sort of marketplaces running on blockchain technology”.
“When you think about settlement, in many situations it’s kind of T-plus-three, so two days, and that’s because there’s a lot of checks and balances needed when to companies settle with each other,” Professor Catalini said.
“It’s clear that if you add an efficient and effective distributed ledger, you could cut down on the time and you could cut down on the cost, because you can automate a lot of this logic.
“I think the question is how fast can we get there. There’s a lot of moving parts so you’re seeing many different approaches, from the more complementary technology to the more disruptive, but I think exchanges are definitely something that could, in the future, benefit from this.”
Professor Catalini also noted in his recent working paper Some Simple Economics of the Blockchain that distributed ledger technology would result in the emergence of “new types of transactions and marketplaces”.
“Furthermore, through the use of native cryptocurrency tokens, distributed ledger technology can be used to bootstrap networks of exchange that do not rely on traditional intermediaries,” he said.
“In this context, intermediaries can still add value to transactions by focusing on the market design layer that is not commoditised by the use of a cryptocurrency.”
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