Wall Street’s clearing and settlement house, the Depository Trust & Clearing Corporation (DTCC) has, in recent times, increasingly made rapid strides in blockchain research and investment into the innovation.
Blockchain technology is fast being touted as the oncoming evolutionary leap to boost the financial industry. Stock exchanges like the Australian Securities Exchange (ASX) have gone beyond merely researching the technology, by running trials and a prolonged testing period which sees Australia’s biggest stock exchange use blockchain-based solutions for post-trade events.
Wall Street’s go-to bookkeeper, the DTCC, is among the prominent firms researching and developing blockchain solutions for the current financial industry.
One recent blockchain test saw the successful use of distributed ledger technology for credit default swaps, a market wherein outstanding contracts number up to trillions in dollars.
In a recent letter to shareholders, President and CEO of DTCC, Michael Bodson alluded to 2015 as the year that “blockchain went mainstream.”
He revealed DTCC’s Chief Technology Architect Rob Palatnick’s opinion that the blockchain ‘hype’ can be turned into reality, Bodson wrote:
We have a once-in-a-generation opportunity to modernize the post-trade environment. We need to work together to make sure we do it right the first time.
The comments echo those of former ASX CEO Elmer Funke Kupper, who claimed the technology was a “once in a 20-year opportunity” to embrace new innovation for bringing further efficiency at a lowered cost.
Bodson writes that the company’s chief technology architect, Rob Palatnick has never seen anything quite like the frenzy surrounding blockchain in over 30 years of being in the financial services space.
Although excited by the potential and opportunity that blockchain technology brings, there are limitations, according to Palatnick.
The CEO, citing the technology chief’s opinion, wrote:
Distributed ledgers are still immature and unproven, he said. They have inherent scale limitations and lack the underlying infrastructure to seamless integrate into the existing financial market environment.
Furthermore, Palatnick doesn’t expect to see a wide-scale adoption of distributed ledger technology in the short term.
The fervor for blockchain among major banks and service providers, he claims, could bring about a reality wherein a flurry of development could create a “disconnected maze of distributed ledger silos”.
With this in mind, Palatnick calls for an industry-wide collaboration for a concentrated effort in developing and re-architecting existing core processes in the financial industry, with distributed ledgers to replace them.
The call for setting global standards for blockchain development is one shared by Standards Australia, Australia’s standards authority. The body has called for the International Standards Organization (ISO) to set global standards for distributed ledger technologies.
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Last modified: March 4, 2021 4:48 PM